SCHOTT Annual Report 2013/2014

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Annual Report 2015/2016

DISCREET L IGHT ELEMENTS L IKE SIDELIGHTS FROM SCHOT T   

ARE TR ANSFORMING C AR INTERIOR S.Sidelights are flexible since the adjustable light guides can be installed directly in or in front of edges, highlighting contours. Glass fibers illuminate their vicinity with incredible evenness. Drivers can set desired light colors themselves. And suddenly a car becomes a personal wellness retreat.

KE Y FIGURES  SCHOT T GROUP F R O M   O C T O B E R   1,   2 015 ,   T O   S E P T E M B E R   3 0 ,   2 016

(in million euros, unless otherwise stated)  2015/2016 2014/2015 Change in %

SALES 1,992 1,927 3

Domestic 280 276 2

Foreign 1,711 1,651 4

EBITDA 355 311 14

as a percentage of sales 18 16  

EBIT 223 178 26

as a percentage of sales 11 9  

INCOME FROM CONTINUING OPER ATIONS BEFORE INCOME TA XES 200 151 33

GROUP E ARNINGS 139 95 47

CASH FLOW FROM OPER ATING AC TIVITIES 246 209 18

CAPITAL EXPENDITURE ON PROPERT Y, PL ANT AND EQUIPMENT 173 156 11

TOTAL ASSETS 2,325 2,192 6

EQUIT Y 522 519 0

Equity ratio (%) 22 24  

LONG -TERM FUNDS AVAIL ABLE1) 1,802 1,654 9

as a percentage of total assets 78 75  

NET FINANCIAL ASSETS 2) 20 – 27 > 100

EXPENDITURE ON RESE ARCH AND DEVELOPMENT 74 79 – 6

as a percentage of total sales 4 4  

EMPLOYEES AS OF THE BAL ANCE SHEET DATE (NUMBER) 15,071 15,016 0

For computational reasons, rounding differences of +/– one unit (million euros, %) may occur in the table.

1) Equity, long-term provisions and long-term liabilities2) Cash, cash equivalents and funds, less financial liabilities

PART OF E VERYONE’S L IFE

SCHOTT is a leading international technology group in the areas of specialty glass and glass- ceramics. The company has more than 130 years of outstanding development, materials and technology expertise and offers a broad port-folio of high-quality products and intelligent solutions. SCHOTT is an innovative enabler for many industries, including the home appliance, pharmaceutical, electronics, optics, life sciences, automotive and aviation industries. SCHOTT strives to play an important part in everyone’s life and is committed to innovation and sustain-able success. The parent company, SCHOTT AG, is solely owned by the Carl Zeiss Foundation. As a foundation company, SCHOTT assumes special responsibility for its employees, society and the environment.

SCHOTTWE MAKE

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ContentsA N N U A L R E P O R T

2 015/ 2 016

SCHOTT wants to grow profitably and help its customers to achieve success with new and improved products and

manufacturing processes.

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In the past fiscal year, SCHOTT succeeded once again in improving group sales, earnings from operating activities (EBIT) and its consoli-dated net profit for the year.

21

With its new image campaign, SCHOTT shows what the company makes possible and actively encourages its customers to tackle new challenges by asking the question “What’s your next milestone?” See pages 08/09 and 14/15

D I S CO V E R M O R E

Board of Management/ Supervisory BoardForeword by the Board of Management 04

Report by the Supervisory Board 06

In FocusInnovations secure future successes:

– New lighting solutions for the perfect atmosphere

in the interiors of airplanes and automobiles 10

– SCHOTT CERAN® MiradurTM – the world’s first and only

scratch-resistant glass-ceramic cooktop panel 11

– SCHOTT Termofrost® Smart Access ensures better

product presentation and energy savings 12

– A new benchmark for process quality in pharmaceutical

tubing 13

View and experience 16

SCHOTT assumes responsibility 18

Carl Zeiss Foundation 20

SCHOTT AG Group Management ReportGroup Structure 22

Economic Report 23

Report on the Forecast 30

Report on Opportunities and Risks 31

Supplementary Report 35

SCHOTT AG Consolidated Financial StatementsConsolidated Statement of Income 38

Consolidated Statement of Comprehensive Income 39

Consolidated Statement of Financial Position 40

Consolidated Cash Flow Statement 42

Consolidated Statement of Changes in Equity 44

Notes to the Consolidated Financial Statements 46

Major Shareholdings 92

Members of Executive Bodies at SCHOTT AG 94

Imprint, Contact Details, Disclaimer 96

04 B O A R D O F M A N A G E M E N T / S U P E R V I S O R Y B O A R D

Ladies and Gentlemen,

Fiscal year 2015/2016 has been a successful one for SCHOTT. This continues the positive business develop-ment of the previous years. Total sales increased by 3.3 % to EUR 1.99 billion. On the basis of a constant exchange rate and after adjustment of interim sales activities, sales rose by 6 %.

The continued improvement of the result from operating activities (EBIT) is pleasing, now amounting to EUR 223 million and thus 26 % higher than the previ-ous year. The net profit for the year increased by 47 % to EUR 139 million.

FOREWORD BY THE BOARD OF MANAGEMENT

DR . HEINZ K AISER

Member of the Board of Manage-ment since 2016

HERMANN DITZ

Member of the Board of Manage-ment since 2016

DR . FR ANK HEINRICHT

Chairman of the Board of Manage-ment and Chief Human Resources Officer since 2013

DR . JENS SCH U LTE

Member of the Board of Manage-ment since 2016

05Foreword by the Board of Management

For the first time in ten years, we have positive net liquidity which in combination with existing financing lines ensures sufficient scope for future acquisitions.

Once again, the decline in capital market interest rates led to a further increase in pension provisions. Despite these additional burdens on equity, the equity ratio remained nearly unchanged. According to the statutes, we will again this year pay a dividend to our sole shareholder, the Carl Zeiss Foundation.

The positive development of the company is re-flected not only in good numbers, but also in the exter-nal perception of SCHOTT. This includes winning the German Industry Innovation Award in the category of large companies for the development of ultra-thin glass. With this product, we pave the way for innova-tions in future markets such as microelectronics and the semiconductor industry. We are also proud of the 2016 Cologne German Chemical Prize, which we received for our exemplary and long-term human resources work.

Within the scope of cultural development at SCHOTT, we regularly conduct worldwide employee surveys as an important element of feedback. The survey in June 2016 involved 84 % of the SCHOTT workforce. The overall satisfaction of our employees has increased once again, and the survey showed a good overall value. In this fiscal year, the consistent networking of the business units with central research and development testifies that we have made good progress towards being a “Connected Company.”

We thank all those who contributed to our success in fiscal year 2015/2016: our customers who placed their trust in us and our products, our suppliers and partners who reliably accompanied us through this year, and our employees for their commitment and their willingness to accelerate the processes of change together.

With strong customer loyalty, focus on core activi-ties, and consistent development of new business op-portunities, we want to continue to let SCHOTT grow sustainably and profitably. To that end, we consequently

review our structures and processes. It must always be about how we can quickly and best serve customer requirements and generate added value for our cus-tomers.

The SCHOTT brand is a flagship in the industry, and our company is a source of innovation. With such a foundation, we can tackle the challenges of 2016/2017 and beyond with optimism.

For the new fiscal year, we expect a sales increase between 3 % and 5 %.

January 2017

SCHOTT AGBoard of Management

Dr. Frank Heinricht Hermann Ditz

Dr. Heinz Kaiser Dr. Jens Schulte

06 B O A R D O F M A N A G E M E N T / S U P E R V I S O R Y B O A R D

REPORT BY THE SUPERVISORY BOARD

own activities to an efficiency review, the results of which are being discussed in the plenum and measures derived.

To perform its duties, the Supervisory Board has formed three committees. The Audit Committee met three times. It focused mainly on monitoring the ac-counting process, the efficiency of the internal control system, risk management and the internal revision system, and also on the audit report. The Presiding Committee held four meetings. Its meetings were aimed at discussing the target setting and the remu-neration of Board members, and preparing the resolu-tions to be adopted by the Supervisory Board. The Chairmen of the Audit Committee and the Presiding Committee reported regularly to the Supervisory Board in meetings on the work of the committees. There was no need for the Conference Committee to hold a ses-sion during the past fiscal year.

The 2015/2016 annual financial statements and the consolidated financial statements prepared in accor-dance with the International Financial Reporting Stan-dards (IFRS) pursuant to section 315 a (3) of the German Commercial Code (HGB), as well as the respective management reports, and the Board of Management’s report disclosing relations to affiliates (“dependent company report”), were audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Eschborn/Frankfurt am Main, and each was issued with an un-qualified audit opinion.

The documents that pertained to the financial state-ments and the auditor’s reports were submitted to all members of the Supervisory Board in a timely manner. We thoroughly examined these documents and dis-cussed the annual financial statements during the Audit Committee meeting held on December 19, 2016, and also at the Supervisory Board meeting on January 10, 2017. The auditor took part in both sessions, reported on the main results of the audit and was available to

Ladies and Gentlemen,

Fiscal year 2015/16 lies successfully behind us. Clearly demonstrating its competitiveness, SCHOTT returned to its usual level of earnings. The Supervisory Board monitored and supported the Board of Management during the 2015/2016 fiscal year in accordance with the duties incumbent upon it by law, the articles of association and rules of procedure. The Board of Man-agement informed the Supervisory Board regularly in oral and written reports on all the main aspects of business development, the current earnings situation, the risk position, risk management, short and long-term planning, and on investments and organizational mea-sures. In addition, the Chairman of the Supervisory Board remained in close contact with the Board of Management and received information about how the business was developing and significant business trans-actions.

The Supervisory Board was involved in all import-ant decisions and passed the necessary resolutions in accordance with the law, the articles of association and the rules of procedure. The decisions made by the Su-pervisory Board were based on the reports and resolu-tions proposed by the Board of Management, which were reviewed very thoroughly. Fiscal year 2015/2016 was mainly driven by the consequent continuation of the measures for reaching the goals mentioned in the SCHOTT Strategy Framework as well as strengthening innovation to generate new growth. The main focus of the activities of the Supervisory Board was therefore on monitoring and discussing the group’s strategy and the individual strategies of the business units.

The Supervisory Board held four ordinary meetings in fiscal year 2015/2016. The main topics included the establishment of the annual financial statements of SCHOTT AG and the approval of the annual financial statements for fiscal year 2014/2015, the annual budget for 2016/2017, and the strategic development of the business units. The Supervisory Board subjected its

07Report by the Supervisory Board

Dr. Hans-Joachim Konz and Klaus Rübenthaler left the Board of Management at the end of the calendar year 2015 and on March 31, 2016, respectively. Our spe-cial thanks go to both of them for their many years of service to the benefit of the company.

Hermann Ditz and Dr. Heinz Kaiser were appointed to the Board of Management effective January 1, 2016, and Dr. Jens Schulte effective July 1, 2016. We look for-ward to working with them and wish them every suc-cess in their new roles. There were no personnel chang-es in the Supervisory Board.

Mainz, January 10, 2017

On behalf of the Supervisory Board

Dr. Dieter KurzChairman

answer questions and provide additional information. The Chairman of the Audit Committee also reported in a plenary session on the results of his committee’s audit of the financial statements. Based on its own ex-amination of these documents, the Supervisory Board endorsed the findings of the auditor and approved the financial statements prepared by the Board of Manage-ment. The Supervisory Board agreed with the proposal of the Board of Management to pay a dividend of EUR 5,308 thousand from the retained earnings of SCHOTT AG in the amount of EUR 260,236 thousand and to carry forward EUR 254,928 thousand to new account. The SCHOTT AG financial statements as of September 30, 2016, are thus adopted.

In compliance with section 312 of the German Stock Corporation Act (AktG), the Board of Management pre-pared the dependent company report for the period from October 1, 2015, through September 30, 2016. The auditor issued the following opinion on the result of his audit:

“As a result of our statutory audit, we confirm that:1. The actual disclosures in the report are correct;2. The company’s payments made in connection with

legal transactions described in the report were not unreasonably high.”

The Supervisory Board was in agreement with the auditor’s results. Following the final examination of the audit findings by the Supervisory Board, the audit has not led to any reservations concerning the Board of Management’s concluding remarks in the dependent company report. SCHOTT is on the right track and again successful.

The Supervisory Board would like to thank the members of the Board of Management and all of SCHOTT Group’s employees worldwide for their work during fiscal year 2015/2016.

DR . DIE TER KU R Z

Chairman of the Supervisory Board

milestones.schott.com

By developing flexible glass fibers with modernLED light sources, we enable interior car designersto create a fascinating atmosphere for the driver.

What’s your next milestone?

Let’s lighten upthe mood.

10 I N F O C U S

Sunlight is the basis of all life and essential for being in a good mood. No question, the best light comes directly from nature. It was always man’s goal to imitate natural light as perfectly as pos-sible. SCHOTT is an expert in lighting solutions and uses special glass to stage light in the best possible way. The light from LED sources is precisely steered with the aid of optical glass fibers that are decoupled at the desired location. These technologies are used to create special lighting in aircraft and car interiors.

Besides purely functional lighting, ambient lighting plays a cen-tral role as well. The focus is on the flexible use of various light colors and light intensities. In aircraft, concepts of modern cabin lighting are gaining a foothold, combined with ambient ele-ments such as the starry sky, contour lighting at fixed edges or new forms of reading lamps.

With its HelioJet® cabin lighting, SCHOTT offers a full-color sys-tem based on LEDs that generate uniformly homogeneous light. LEDs are particularly suitable for this because they are the only electrical light source capable of displaying the complete color spectrum, i.e. the 16 million colors that the human eye can per-ceive. SCHOTT has taken advantage of this feature and installed an intelligent sensor control system that measures every single LED package and balances possible color deviations.

THE C AR BECOME S A WELLNE SS OA SIS

SCHOTT offers similar concepts for the interior lighting of vehi-cles. To create a soft light mood, functional light elements are used directly or indirectly behind edges or to emphasize con-tours. Optical fibers, which put their light out uniformly and discreetly over the entire length, creating so-called “sidelights,” are particularly suitable for this purpose.

This is how the space in the car is redefined. Existing boundaries are moved optically. The passenger compartment appears larger and more complex. The use of ambient lighting in the door, cen-ter console and footwell is thus a strategy to create perceived size. Contour illumination surrounding a large panoramic roof or exterior lighting of the footboard by means of discreet fiber optics is also possible. When the light color can be individually adjusted by the passenger, the car becomes a particularly per-sonal place of comfort.

Perfectly StagedInnovative lighting solutions for the perfect atmosphere in airplane and automobile interiors

HelioJet® SpectrumCC cabin lighting creates special mood lighting in aircraft.

11Innovations – Perfectly Staged | The Eternally Young Cooktop Panel

Nothing should go wrong when you are cooking. Thanks to SCHOTT CERAN® MiradurTM scratch resistant glass-ceramic cooktop panels, this stays true for the cooktop panel.

Everyone cooks differently. Differing cooking habits place differ-ing demands on a kitchen. But no matter where you look, scratches on the cooktop panel are not good.

Scratches, however, are more frequently noticeable than a few years ago. Surfaces are now much more minimalistic and the light sources stronger than before. Under a hood with bright halogen or LED spotlights, common usage traces on the cooktop panel are much more noticeable.

In accordance with our philosophy to “Never stop inventing,” we have developed the SCHOTT CERAN® MiradurTM scratch-resistant glass-ceramic cooktop panel. Thanks to a coating which is ap-plied to the glass- ceramic cooking surface in a special process, significant optimization regarding scratch susceptibility has been achieved. SCHOTT CERAN® MiradurTM is the first and only scratch- resistant glass-ceramic cooktop panel in the world which is nearly as hard as a diamond. This means 95 percent less scratches due to sand on the cooking surface and 70 percent less scratches due to abrasive sponges. SCHOTT CERAN® MiradurTM scratch-resis-tant glass-ceramic cooktop panels are suitable for various heat-ing technologies, whether induction, electric radiation or gas. SCHOTT’s innovation will be commercially available in 2017.

DE SIGN DIVER SIT Y THANK S TO CER AN CLE ARTR ANS®

Design and kitchen have gone hand in hand for years. So it was only fitting when designers and equipment manufacturers inte-grated the cooking surface. It doesn’t even have to be black anymore. The winner of the 2016 CERAN® Design Awards im-pressively demonstrated how a color range from ivory to anthra-cite improves the cooking area. 68 designs by students and young professionals from Germany, Austria and Switzerland were submitted. There were prizes totaling 9,000 euros for the best design ideas.

This design diversity is made possible by the transparent glass- ceramic CERAN CLEARTRANS®, which was specially developed for induction furnaces. Various base prints provide a classy look and countless design variations. The use of specially developed, environmentally compatible colors from ivory to dark gray create purist designs in stainless steel, metal and matt optics. The win-ning design of the CERAN® Design Award 2016 was produced by the home appliance manufacturer Bauknecht in a limited series and marketed exclusively by their trading partner, Otto.

The Eternally Young Cooktop PanelWith SCHOTT CERAN® MiradurTM, SCHOTT has developed the first scratch-resistant glass-ceramic cooktop panel. Innovative colors are also trending.

12 I N F O C U S

Magical Moments at the Supermarket Transparent doors ensure improved visibility of goods in refrigerated display cabinets and reduce energy consumption by up to 60 percent.

To remain competitive, brick-and-mortar grocery stores must be able to convince customers through both their product offerings and how they are presented. New store design concepts are aimed at arousing emotions because customers shop at the gro-cery store where they feel most comfortable. Today, consumers are spoiled by the number of choices among the many super-markets. To merchandise the products and thus create a good sense of orientation for the buyer, transparency is very important in designing a supermarket. Low heights for refrigerated cabi-nets or frameless doors help to implement new shop concepts.

SCHOTT Termofrost® Smart Access allows the customer to open doors automatically without even touching them thanks to the integrated sensor system. The glass doors recognize when a cus-tomer wants to remove a refrigerated product from the shelf and opens the door as if by magic. This is ensured by an integrated sensor, which is tuned to the buyer's action radius and reacts to movement in a distance of a few centimeters. If the customer extends his hand, the doors silently glide to the side within the unit saving space in the aisle. Thanks to its frameless design, this solution offers one hundred percent transparency and thus an unobstructed view of the food on the shelves. The larger visible

surface makes food retail more flexible in placing food in the refrigerator units. The buyer, on the other hand, can better orient himself and find what he is looking for more quickly. In addition, the glass is virtually invisible thanks to its anti-reflective coating. Food retailers can stand out from the competition with improved orientation at the point of sale and create an innovative shopping experience for their customers.

LOWER POWER CONSUMP TION COMPARED WITH

OPEN REFRIGER ATOR UNITS

Another key advantage of SCHOTT Termofrost® doors is that they save energy. The glass doors are available as single glazed and as an insulating glass unit solution. This means the cooling tem-peratures required by a specific product category can be main-tained much more easily and in addition, power consumption can be reduced by up to 60 percent compared with open refrig-erator units.

The German retail group REWE and the supermarket chain Migros in Switzerland are already successfully using this door system from SCHOTT.

The new, all glass automatic doors are completely frameless and present food and beverages so that they are especially visible. The doors can be opened without even touching them when the customer's hand approaches the defined location.

13Innovations – Magical Moments at the Supermarket | Quality Across the Board

Quality Across the BoardIn the production of pharmaceutical tubing, SCHOTT is setting a new industry standard towards its zero-defect philosophy: an important prerequisite for ever better packaging solutions for medicines.

In quality control, every detail counts. Particularly in the case of special glass tubing for production of pharmaceutical primary packaging such as ampoules, vials, cartridges or syringes, pro-duction-induced fluctuations in the tube geometry can have a considerable influence on the safety and reliability of the medi-cation. For example, fluctuations in wall thickness could impair the dosing accuracy of highly concentrated medications.

Up to now, manufacturers of glass tubing have, as a rule, moni-tored critical quality parameters based on random samples. SCHOTT has developed a new quality standard for production: perfeXionTM. The glass tubing, which is later processed into medical primary packaging, is measured with high-precision measuring systems, and subsequently evaluated. SCHOTT thus starts at the beginning of the value chain and enables the subse-quent processing steps to achieve better output quality.

FUTURE- ORIENTED QUALIT Y STR ATEGY

The challenge lies in the monitoring and measurement of the curved tube surface with one hundred percent accuracy in a high-speed process. This is achieved using a combination of different inspection systems that examine the glass strand online. The

measurement data is subsequently collected and evaluated by a holistic integrated IT solution.

This sophisticated system makes it possible to adapt the quality level to the specific needs of the industry. Quality information is stored in a database and can therefore be traced back even years later if necessary.

The foundation is thus laid for future requirements, such as trace-ability on a single tube basis. The perfeXionTM process has already been implemented on all FIOLAX® production lines in Europe, and roll-out has now begun in South America and Asia. SCHOTT produces more than 140,000 tons of glass tubing annually.

With perfeXionTM, SCHOTT sets a new benchmark for process quality in pharmaceutical tubing.

milestones.schott.com

By being able to produce specialty glass tubing out of 60 different glass typesin various shapes, diameters and lengths, we enable development engineersand designers to find solutions to their most demanding challenges.

What’s your next milestone?

Let’s master ambitious challenges with glass.

By being able to produce specialty glass tubing out of 60 different glass typesin various shapes, diameters and lengths, we enable development engineersand designers to find solutions to their most demanding challenges.

Let’s master ambitious challenges with glass.

16 I N F O C U S

View and ExperienceSince January 2016, the exhibition “World of SCHOTT” has invited guests to discover and explore the SCHOTT product world. For visitors, the brand space becomes a world of experience. The interactive concept is meant to stimulate communication.

At the Erich Schott Center, the visitor center on the premises of the main factory in Mainz, SCHOTT presents itself to its custom-ers, business partners and employees with a completely new design and exhibition concept. A clear representation of the busi-ness units was consciously avoided in order to focus rather on topics and applications. This is how SCHOTT can be experienced as a technology group.

For visitors, the newly designed brand space becomes an inter-active world of experience. The model for the interior design was the irregular molecular structure of glass. The arrangement of the walls, baseboards and furniture offers an unusual perspec-tive on exhibits. For example, visitors can witness how ultra-thin glass in a showcase bends up to a few millimeters at the push of a button. In business class chairs, guests can relax while immersed in the color-changing lighting scenarios of aircraft cabins. Many exhibits display touchscreens where videos, graphics and texts can be viewed.

The resulting space is intended to enable several thousand annual visitors to interact and communicate. The showroom doesn’t just invite you to look at SCHOTT products and technol-ogies. Visitors can try out the products themselves and get in touch with each other. The exhibition is another building block

in SCHOTT’s new global brand presence under the question “What's your next milestone?” With the milestone campaign, SCHOTT is focusing on the dialogue between the customer and the group.

The focus of the new concept is on innovation. This is especially evident in the Innovation Lab, a room specially designed to present the latest product innovations.

In February 2016, the “World of SCHOTT” received the presti-gious iF Design Award in the “Interior Architecture” category in Munich and in February 2017 the German Design Award 2017 in the “Retail Architecture” category.

17World of SCHOTT – View and Experience

The new, 500-square-meter exhibition at the company’s headquarters in Mainz includes products and innovations grouped by topic areas. Interactive modules stimulate conver-sation while the milestones of the company’s history can be found in the entrance area.

18 I N F O C U S

SCHOTT Assumes ResponsibilityFamily-friendliness, social commitment and responsibility for society have long been an integral part of SCHOTT’s corporate culture. These activities go back to the company founder Otto Schott and his partner Ernst Abbe. They find expres-sion in the statute of the Carl Zeiss Foundation, founded in 1889, which is still valid today.

RUNNING FOR A GOOD C AUSE

91 teams with 3,000 runners participated in this year’s 10-hour charity “Run for Children®.” Altogether the teams ran almost 27,000 laps, or 10,800 km. Theresia Bauer, Baden-Württemberg’s Minister of Science, and Chairman of the Board of Trustees of the Carl Zeiss Foundation, gave the starting shot. Team sponsors donated at least one euro per lap. Principal sponsors and part-ners donated additional funds. At the end, donations totaled 165,000 euros. The donation has been distributed to 29 non- profit organizations that support ill, disabled and socially disad-vantaged children. Since the first run was held in 2006, the total donation amount has now surpassed 1.5 million euros.

SCHOL AR SHIPS FOR AC ADEMIC TALENT

International support for young talents has been a major priority at SCHOTT for years. In the US, SCHOTT selects up to three par-ticularly talented children per year and supports their education for up to four years with 4,000 US dollars per year. One of the scholarship holders is Alexander Walker. His mother works in quality control at SCHOTT Gemtron in Sweetwater, Tennessee. The Heinrich J. Klein Foundation, which has supported young talents on their way to university qualification since 1993, is an-other example of student support. The former spokesman for the Board of Management, Heinrich J. Klein, established the founda-tion together with his wife. Its aim is to enable students to study abroad. This year, 246 students applied for this program.

19Social commitment – SCHOTT Assumes Responsibility

TEENAGER S DISCOVER THE WORLD

With the international exchange program “SCHOTT goes Family,” the company offers young people the opportunity to gain unique experience and to develop an understanding of other cultures in a globalized world. In 2016, 34 young people from 12 countries took part. Applications are open to children of SCHOTT em-ployees between 14 and 19 years of age who speak English. SCHOTT organizes the trips and bears the costs for one return journey. The program is also intended to connect employees and their families across national boundaries, occupational levels and business areas.

COMMITMENT TO INTEGR ATING REFUGEE S

Learning German is a prerequisite for the social and professional integration of refugees. In October 2015, SCHOTT in Mainz had organized five language courses for asylum seekers who have good prospects of permanent residence. In the spring of 2016, all 52 participants completed this initial course with the A1 cer-tificate. In September, the second course ended with three A2 courses for advanced students and a new A1 beginner course, from which 44 participants completed the final examination. In addition, SCHOTT offers some refugees prospects for vocational integration through training or technical pre-practical training.

WORLD’S L ARGEST SCHOT T CERAN® COOKTOP PANEL IN USE

With a length of 3.20 meters and a width of 1.20 meters, it is thir-teen times larger than the “standard” edition and has 40 cooking zones: the largest SCHOTT CERAN® cooktop panel in the world. In September 2016, it was in use in the city center of Mainz. At the invitation of SCHOTT and under the guidance of a top chef, the mayor of Mainz, the artistic director of the Staatstheater, the Managing Director of the Public Services, the chairman of the management board of the university medical center, as well as SCHOTT Board of Management members cooked for a good cause. Donations totaling 5,000 euros for the food delivered were given to the aid organization CARE.

20 Carl Zeiss Foundation

Carl Zeiss FoundationThe Carl Zeiss Foundation is the sole shareholder of SCHOTT AG. It gives the company independence and a long-term perspective. The Foundation, established in 1889, supports science and research in the fields of natural sciences and engineering.

The recipients of scholarships from the Carl Zeiss Foundation meet in Mainz and Oberkochen once a

year. They exchange views about their current research projects and the potential for innovation with

experts from the Foundation companies SCHOTT and ZEISS in panel discussions, lectures and guided tours.

The Carl Zeiss Foundation is the sole owner of Carl Zeiss AG, Oberkochen, and SCHOTT AG, Mainz. This provides the two companies with the security of long-term stable ownership. The Foundation is not permitted to sell shares in its two businesses – as defined in the Foundation Statute. The Board members can thus concentrate on sustainable development and long-term success in managing the business.

When the physicist and entrepreneur Ernst Abbe created the Foundation in 1889, he permanently established the basis for securing the future of the companies ZEISS and SCHOTT and supporting the advancement of science as its main tasks. The Foundation also fulfills its social obligations to employees and its companies.

As part of a radical reform of the Foundation in 2004, the two Foundation companies were separated from the Foundation and converted into legally independent stock corporations. At the same time, the Foundation Statute was also extensively updated.

Since then, the Carl Zeiss Foundation has been supporting the natural sciences, engineering, mathematics and computer science by paying dividends from the Foundation companies. From 2007 to 2016, the Carl Zeiss Foundation has awarded roughly 107 million euros in funding. The core of its support activity consists of a program that supports young people and a research structure program. Its activities are mainly aimed at universities located in the German states in which the Founda-tion or the two Foundation companies have their headquarters. These are universities in Baden-Württemberg, Rhineland-Palati-nate and Thuringia.

In March 2015, the Donors’ Association for the Promotion of Humanities and Sciences in Germany honored the Carl Zeiss Foundation as the “Scientific Foundation of the Year.”

Carl Zeiss FoundationHeidenheim an der Brenz and Jena

Foundation acting as a shareholder

Foundation Company

Carl Zeiss AGOberkochen, Germany

Foundation Company

SCHOTT AGMainz, Germany

Subsidiary

ZEISS Group

Subsidiary

SCHOTT Group

100 % 100 %

21G R O U P M A N A G E M E N T R E P O R T

ContentsS C H O T T A G G R O U P

M A N A G E M E N T R E P O R T

Group Structure 22

Economic Report 23

Report on the Forecast 30

Report on Opportunities and Risks 31

Supplementary Report 35

In the past fiscal year, SCHOTT managed to strengthen its position as one of the world’s leading providers of parenteral packaging for the pharmaceutical industry. The company produces 10 billion syringes, vials, ampoules and cartridges each year.

The new outdoor fireplaces equipped with SCHOTT ROBAX® fire viewing windows create a living room atmosphere on the terrace. The versatile, formable glass-ceramic allows for many different designs and offers a clear view of the protected fire and warmth for many people.

Fascinating flexibility: micrometer-thin glass is amaz-ingly bendable, stable and versatile. In the electronics and semiconductor industries, it helps speed up pro-cessors, reduces the size of chip packages, and allows for flexible smartphone displays to be manufactured.

22 G R O U P M A N A G E M E N T R E P O R T

GROUP STRUC TURE

SCHOTT is an international technology group with more than 130 years of experience in the areas of specialty glass and glass- ceramics. We rank among the world’s leaders with many of our products. Our main markets include the home appliance industry, pharmaceuticals, electronics, optics, and the automotive and aviation industries. We currently employ more than 15,000 peo-ple and operate manufacturing sites and sales offices in 35 coun-tries. In fiscal year 2015/2016, we generated total group sales of EUR 1,992 million.

SCHOTT AG in Mainz is the parent company of SCHOTT Group (hereinafter also referred to as SCHOTT). Along with SCHOTT AG, SCHOTT Group includes an additional nine companies (previous year: nine) based in Germany and 48 foreign consolidated com-panies (previous year: 52) as of the balance sheet date. The sole shareholder of SCHOTT AG is the Carl Zeiss Foundation, which has no business activities according to its statute and is based in Heidenheim an der Brenz and Jena, Germany.

Group operations are organized into three different segments and seven distinct business units. The following list matches seg-ments and businesses with their main markets:

SEGMENTS AND

BUSINE SSE S

MAIN MARKETS

Precision Materials ■ Electronic Packaging ■ Electronics/Automotive ■ Pharmaceutical Systems ■ Pharmaceuticals ■ Tubing ■ Pharmaceuticals

Optical Industries ■ Advanced Optics ■ Optics ■ Lighting and Imaging ■ Electronics/Automotive and

Aviation

Home Appliances ■ Home Tech ■ Home Appliance Industry ■ Flat Glass ■ Home Appliance Industry

The business units can be categorized mainly on the basis of the types of products they offer, the production processes they use and the areas of application that they address.

In the Precision Materials segment, Electronic Packaging stands for the development and manufacturing of hermetic seals and other components for the protection of sensitive electronics. The segment addresses a number of applications and sales mar-kets, including automotive and consumer electronics, energy and medical technology, as well as data and telecommunications. Pharmaceutical Systems is one of the world’s leading suppliers of primary packaging for the pharmaceutical industry. Tubing pro-duces glass tubing, rods and profiles from approximately 60 dif-ferent types of special glass for use in pharmaceutical and techni-cal applications.

The Advanced Optics business unit that is part of the Optical Industries segment offers a portfolio of more than 120 optical glass products, special materials and components for a multitude of applications in optics, lithography, astronomy, optoelectronics, architecture, life sciences and research. Lighting and Imaging of-fers a broad spectrum of high-tech solutions for illumination and image transmission, particularly in the medical technology, auto-motive and aviation, industrial equipment and security technolo-gy markets.

In the Home Appliances segment, Home Tech covers a broad range of solutions made of specialty glass and glass-ceramics. These mainly include cooktop panels made of glass-ceramic, fire viewing windows, and borosilicate glasses for a variety of different application possibilities, including fire protection. The Flat Glass business unit develops, manufactures and markets a broad port-folio of products made of processed flat glasses for the home ap-pliance industry such as exterior panes of glass for ovens, viewing windows for microwave ovens or shelves for refrigerators, and also for commercial presentation of refrigerated and frozen foods and even system solutions.

The most important industries that SCHOTT is active in based on sales revenue are the pharmaceutical industry and the home appliance industry, as well as the life sciences, automotive, semi-conductor and data communications industries. SCHOTT currently generates close to 80 % of its sales in these industries. Therefore, the ways in which these industries develop can have a significant impact on how the business develops for the various SCHOTT business units.

GROUP MANAGEMENT REPORTF O R T H E F I S C A L Y E A R F R O M O C T O B E R 1, 2 015 , T O S E P T E M B E R 3 0 , 2 016

23Group Structure/Economic Report/Business Development and Situation of the Group

projected growth is around 4 %. The strongest growth is in Asia with a forecast of 6 % and North America with 5 %, while for Europe growth of 2 % is expected and the market in Latin America is declining.

BUSINESS DEVELOPMENT AND SITUATION OF THE GROUP

E ARNINGS POSITION

(in EUR millions) 2015/2016 2014/2015 Change

Sales 1,991.7 1,927.3 + 64.4

EBIT 223.1 177.6 + 45.5

Financial result – 23.2 – 26.9 + 3.7

Income from continuing opera-tions before income taxes 200.0 150.6 + 49.4

Income taxes – 58.9 – 55.7 – 3.2

Income from continuing operations 141.1 94.9 + 46.2

CONSOLIDATED PROFIT 139.2 94.6 + 44.6

ECONOMIC REPORT

COUR SE OF BUSINE SS AND UNDERLYING CONDITIONS

The dynamics of the global economy will continue to be lower in 2016 than in the years before the financial crisis 1. All in all, the economic research institutes project that global manufacturing will grow by 2.3 % in calendar year 2016 (previous year: 2.7 %).

Economic research institutes project the gross domestic prod-uct to grow by 1.6 % in 2016 in the countries of Europe where SCHOTT Group generates close to half of its sales. Germany’s gross domestic product is projected to grow by 1.8 %. Growth in the US market declined significantly to 1.6 % (previous year: 2.6 %). 6.5 % growth, which is slightly weaker than last year (6.9 %), is projected for China, which is now our most important sales mar-ket in Asia. For Asia as a whole, the economic research institutes expect to see growth of 4.6 % (previous year: 4.8 %).

The industries of relevance to SCHOTT are exhibiting growth rates of between 2 % (automotive) and 5 % (semiconductors and data communications), but with partly significant differences with respect to the regions and submarkets. Market growth of around 4 % is expected for the pharmaceutical industry, with growth rates of around 8 % in Asia compared to 3 % in Europe and almost 1 % in North America. In the global household appliance market, the

1 Information according to the joint opinion of the leading German economic research institutes from September 29, 2016.

S A L E S (in EUR millions)

0 0,5 1,0 1,5 2,0

2015/2016 1,992

2014/2015 1,927

85.7 % 14.3 %

85.9 % 14.1 %

Sales outside of Germany Sales in Germany

S A L E S B R O K E N D O W N BY R EG I O N

North America 23 %

Europe 45 %

Asia 26 %

South America 5 %

Rest of the world 1 %

Total sales: EUR 1.992 billion

24 G R O U P M A N A G E M E N T R E P O R T

In the Advanced Optics business unit, the business stabilized again following the difficult previous year. Overall, a moderate increase in sales was achieved, with currency effects having a supporting effect. By product groups, sales increased signifi-cantly in the areas of optical components and filters, and also for ZERODUR® glass-ceramic for use in lithography and astronomical applications. On the other hand, sales of optical glass and thin glasses, which are used in various consumer products such as mobile phones or touch panels in navigation devices, declined slightly.

In the Lighting and Imaging business unit, sales were moder-ately below last year. Adjusted for the sale of SCHOTT Moritex Corporation in the previous year, however, moderate sales growth was achieved. Here, the relevant sales markets were predomi-nantly positive or stable. On an adjusted basis, sales of medical technology, industrial equipment and aviation and automotive rose, while sales in the area of security technology remained be-low the previous year’s level for project-related reasons.

In the Home Appliances segment, sales rose by EUR 14 million to EUR 667 million.

In the Home Tech business unit, sales remained virtually un-changed compared to the previous year. The realignment of busi-ness with Cover & Touch applications and protective glazing, which had been implemented in the previous year, had a negative effect on sales development, while the other areas of the business remained stable at the previous year’s level or slightly higher. Sales of CERAN® glass-ceramic cooktop panels increased slightly com-pared to the previous year due to strong demand in the US and Europe, where the key sales markets of Germany, France and Spain developed particularly well. As a result, the declining sales in South America were more than compensated for due to the excep-tionally high demand in the previous year. The fireplace viewing panel business and the ROBAX® brand remained stable at the pre-vious year’s level in a rather subdued market environment, while sales of fire-resistant glazing and special float glass were higher thanks to good project business.

In the Flat Glass business unit, moderate sales growth was driven by growing demand in the area of home appliances, which is the largest market for Flat Glass. The markets for food display were also stable, particularly as a result of the demand for energy- saving glass covers, which can be installed in refrigeration cabi-nets by way of retrofitting. Sales of these products remained at the previous year’s level. Adjusted for the sales contributions of the food display business in North America, which was sold last year, sales growth was moderate. From a regional point of view, the division’s sales growth is mainly attributable to Europe and NAFTA, while demand in South America has tended to be rather weak due to economic factors.

COUR SE OF BUSINE SS AND DEVELOPMENT OF SALE S

Group sales increased by 3.3 % over the previous year from EUR 1,927 million to EUR 1,992 million. The increase is attributable to growth in the Electronic Packaging, Pharmaceutical Systems, Flat Glass and Advanced Optics business units, while the other business units reported slightly declining sales. Changes in the ex-change rate for the euro reduced group sales by EUR 27 million compared with last year (previous year: EUR 73 million increase in group sales). Adjusted for the changes in exchange rates and the sale of the Concentrated Solar Power business in the past fiscal year, as well as the sale of the majority stake in SCHOTT Moritex Corporation and the Food Display business in North America in the previous year, sales rose by 5.6 %.

Europe’s share of total group sales remained unchanged at 45 % in the 2015/2016 fiscal year. 26 % of group sales were gener-ated in Asia (previous year: 25 %), while North America’s share remained constant at 23 %. South and Central America achieved 5 % (previous year: 6 %) and the other regions 1 % as in the previ-ous year.

In the Precision Materials segment, we managed to increase our sales from EUR 963 million to EUR 1,004 million. Both Elec-tronic Packaging and Pharmaceutical Systems have grown, with only a slight drop in sales in Tubing. This is attributable to the sales generated in the area of Concentrated Solar Power in the previous year, which we were able to sell in the fiscal year just ended. The substantially larger application areas of pharmaceutical tubing and technical tubing remaining in Tubing after the sale of Concen-trated Solar Power have been developing stably at last year’s level.

The business situation in the Electronic Packaging business unit improved once again in the past fiscal year. Sales rose once again in all major regional markets. In terms of products and ap-plications, the highest increases in sales were achieved with auto-motive, Transistor Outlines and large-scale feedthroughs, while the Consumer Electronics segment was slightly below expecta-tions for demand-related reasons.

The Pharmaceutical Systems business unit continues to benefit from rising global spending on drugs and continued its growth trend from the past fiscal year. In the business with standard pharmaceutical packaging, we succeeded in maintaining our market position and even expanded it with respect to syringes. Sales growth was therefore driven mainly by the syringe business. In terms of regions, we also achieved sales growth, particularly in Asia and North America.

In the Optical Industries segment, we managed to increase sales by EUR 7 million to EUR 302 million.

25Business Development and Situation of the Group

Costs of goods and services rendered amounted to EUR 1,308 million (previous year: EUR 1,289 million) and resulted in gross profit from sales of EUR 684 million (previous year: EUR 638 mil-lion). The gross margin improved from 33 % in the previous year to 34 %.

Selling expenses increased by EUR 3 million to EUR 220 mil-lion. As a percentage of sales, they decreased from 11.3 % in the previous year to 11.1 %.

Research and development expenses amounted to EUR 74 mil-lion for the fiscal year (previous year: EUR 79 million). This means that our R&D ratio declined slightly from 4.1 % to 3.7 %.

General administrative expenses decreased from EUR 195 mil-lion in the previous year to EUR 182 million. This equates to an administrative expense ratio of 9.2 % (previous year: 10.1 %).

Other operating income declined by EUR 49 million from EUR 114 million the previous year to EUR 65 million. The year before, a change in the pension plan for active employees in Ger-many led to a one-time gain of EUR 25 million. There was also a decline in income from insurance compensation from EUR 39 mil-lion the previous year to EUR 24 million. Insurance compensation was recognized on the basis of a major fire in the US in the previ-ous fiscal year, whereby the calculation of the loss and settlement with the insurance covers several fiscal years due to the complexity of the damages the fire caused and the effects of having to inter-rupt operations.

Other operating expenses decreased by EUR 34 million from EUR 89 million to EUR 55 million compared with the previous year. Expenses from the fire damages in the US, which were included in other operating expenses, decreased from EUR 31 million in the previous year to EUR 10 million. The restructuring expenses also decreased from EUR 29 million in the previous year to EUR 5 mil-lion. Conversely, impairment losses on property, plant and equip-ment and intangible assets increased by EUR 14 million.

ORDER BOOK

The order book as of the balance sheet date ensures an aver-age utilization of our production capacities of between two and five months. As a rule, our customers place short-term orders due to the manageable delivery periods. Annual framework agree-ments with customers apply in some areas.

EBIT

Earnings before interest and taxes (EBIT) rose by EUR 45 million year on year to EUR 223 million. The main reason for this rise was improvements in operating earnings in nearly all business units. On a constant currency basis, EBIT growth would have been EUR 53 million.

In the Precision Materials segment, earnings were significantly higher, with all three business units contributing. The increase in earnings in the Tubing business unit was particularly significant, where the Concentrated Solar Power business was sold in the past fiscal year. It resulted in a considerable negative contribution to earnings in the previous year, particularly as a result of its restruc-turing. As in recent years, this segment contributed significantly more than half of group EBIT.

In the Home Appliances segment, we were again able to in-crease EBIT, which was contributed to by both “Home Tech” and “Flat Glass.” At Home Tech, the restructuring of the business with Cover & Touch applications as well as with protective glazing had a positive impact, which had impacted earnings negatively last year. In the area of “Flat Glass,” we benefited primarily from im-proved capacity utilization. Conversely, the difficult situation in Brazil had a negative effect on earnings.

Finally, the Optical Industries segment experienced a slight decline in EBIT, which affected both business units Advanced Optics and Lighting and Imaging. In Advanced Optics, the fiscal year was characterized by a large number of special effects, espe-cially the impact of a major fire in a plant in the US in the previous fiscal year. In the area of Lighting and Imaging, the previous year’s result was not achieved due to the profit from the sale of Moritex Group in the past fiscal year. Adjusted for this special effect, how-ever, earnings improved.

E B I T (in EUR millions)

2015/2016 223

2014/2015 178

0 50 100 150 250200

26 G R O U P M A N A G E M E N T R E P O R T

EUR 111 million or 66 % of the investments pertained to the Pharmaceutical Systems, Tubing and Advanced Optics business units in the fiscal year just ended. As in the previous year, the main investment focuses were on growth projects and expanding ca-pacities, but also on complete overhauls and conversion of melt-ing tanks. We succeeded in making all of the main investments as planned and without significant delay in the fiscal year just ended.

There was a cash outflow from financing activities in the amount of EUR 115 million (previous year: EUR 56 million). This was driven, in particular, by the investment of EUR 55 million in term deposits, the allocation of plan assets in the amount of EUR 51 million and dividend payments amounting to EUR 7 million.

This resulted in a EUR 13 million decrease in cash and cash equivalents.

Including the effects of changes in the exchange rate and in the consolidated group amounting to EUR 1 million, liquidity de-creased from EUR 106 million to EUR 94 million.

Purchase commitments for investments in fixed assets amount-ed to EUR 24 million (previous year: EUR 36 million). The largest current investment projects pertain to adjusting and expanding production capacities in the Pharmaceutical Systems, Tubing and Home Tech business units.

FINANCING INSTRUMENTS

SCHOTT can rely on a diversified and well-balanced set of in-struments to finance its business activities. These include for the most part credit lines, long-term loans and leases. The financial situation offers a solid starting position for executing the compa-ny’s strategy.

In March 2015, SCHOTT concluded a new syndicated credit line of EUR 250 million with an international banking consortium. Taking advantage of the agreed extension option, in March 2016, the term of the credit line was extended until March 2021. This credit line was not used at any time in fiscal year 2015/2016.

On the balance sheet date, there were fixed-interest loans of EUR 42 million (previous year: EUR 47 million) which are to be re-paid in installments by June 2024 in accordance with the agreed schedules.

Furthermore, there were liabilities from finance leases that totaled EUR 23 million (previous year: EUR 19 million) and mainly relate to real estate in Germany.

In addition, there is a revolving factoring program with a vol-ume of up to EUR 75 million and a remaining term until 2021. The trade receivables that SCHOTT AG sold on the basis of this pro-gram and were still open as of September 30, 2016, amounted to EUR 14 million, as in the previous year. Since SCHOTT Group no longer bears the associated credit risks, the receivables were derecognized from the statement of financial position.

NET FINANCIAL INCOME

Net financial income increased by EUR 4 million compared to the previous year to EUR – 23 million. EUR 21 million (previous year: EUR 26 million) relate to interest expenses for pension provi-sions. The decline of EUR 5 million is primarily attributable to the continuing decline in interest rates.

TA XE S

The tax expense from continued operations amounted to EUR 59 million. The tax rate decreased from 37 % the previous year to 29 %.

DISCONTINUED OPER ATIONS AND CONSOLIDATED NET

PROFIT

Consolidated net profit for the fiscal year in the amount of EUR 139 million (previous year: EUR 95 million) includes the posi-tive results of continued operations in the amount of EUR 141 mil-lion, and also a negative earnings contribution from discontinued operations in the amount of EUR 2 million (previous year: EUR 0.3 million). The deficit results primarily from the follow-up costs in the discontinued photovoltaics business unit.

FINANCIAL POSITION

(in EUR millions) 2015/2016 2014/2015 Change

Cash flow from operating activities* 246.2 208.6 + 37.6

Cash outflow from investment activities* – 144.0 – 129.2 – 14.8

Cash outflow from financing activities* – 115.3 – 56.2 – 59.1

Change in cash and cash equivalents – 13.2 23.2 – 36.4

Cash and cash equivalents at the end of the period 93.5 105.9 – 12.4

* from continued and discontinued activities

C A SH FLOW STATEMENT AND INVE STMENT ANALYSIS

Cash flow from operating activities in the fiscal year amounted to EUR 246 million, an increase of EUR 38 million compared to the previous year. The increase is due in the amount of EUR 45 million to the increase in net income, in the amount of EUR 11 million to changes in deferred taxes and in the amount of EUR 9 million to higher provisions and deferred liabilities. This was offset by an increase in working capital, including other assets and other lia-bilities, of EUR 25 million.

The cash outflow from investing activities rose by EUR 15 mil-lion to EUR 144 million. This increase mainly resulted from higher investments in property, plant and equipment and intangible as-sets in the amount of EUR 170 million (previous year: EUR 158 mil-lion) to support our growth.

27Business Development and Situation of the Group

Property, plant and equipment increased by EUR 45 million to EUR 844 million. Additions amounted to EUR 173 million (pre-vious year: EUR 156 million). Reversals of impairment losses in the amount of EUR 5 million and exchange rate differences of EUR 4 million also increased property, plant and equipment. Total depreciation of property, plant and equipment amounted to EUR 129 million (previous year: EUR 126 million), of which EUR 17 million (previous year: EUR 13 million) was related to impair-ment losses. In addition, the property, plant and equipment posi-tion decreased by asset disposals in the amount of EUR 6 million.

Deferred tax assets increased by EUR 38 million to EUR 399 mil-lion. The repeated decline in the interest rate for pension liabilities to 1.51 % (previous year: 2.48 %) increased the deferred taxes by EUR 58 million. Furthermore, deferred tax assets on loss carryfor-wards increased by EUR 9 million. This was offset by a reduction in deferred tax assets on other temporary differences totaling EUR 29 million.

Working capital, which comprises trade receivables and in-ventories less trade payables, amounted to EUR 571 million as of the balance sheet date (previous year: EUR 536 million). The in-crease is primarily attributable to trade receivables, which rose by EUR 40 million compared with the previous year.

The investment of liquidity surpluses in term deposits of EUR 55 million led to an increase from EUR 29 million in other current financial assets to EUR 74 million.

Cash and cash equivalents decreased by EUR 13 million year-on-year to EUR 94 million. In this context, please refer to the com-ments in the section entitled “Cash Flow Statement and Invest-ment Analysis.”

“Assets held for sale” relate in the previous year to land and buildings in the United States, which were sold during the fiscal year that just ended.

SCHOTT AG also has other bilateral master loan agreements at its disposal in the amount of EUR 155 million that can be used for guaranties, guaranty bonds, or cash credit lines. Of these credit lines, which were made available until further notice, EUR 107 mil-lion were freely available on the balance sheet date. In addition, SCHOTT Group also has bilateral guaranty credit lines and bilat-eral credit contracts available at the local level.

SCHOTT Group continues to finds itself in a stable financial situation overall. The company was able to meet its payment obli-gations at all times in the fiscal year 2015/2016 that just ended. Based on the company’s planning, we assume that SCHOTT Group will also have sufficient liquid funds to be able to finance its planned investments and meet its other financial obligations in fiscal year 2016/2017.

STATEMENT OF FINANCIAL POSITION

(in EUR millions)Sept. 30,

2016Sept. 30,

2015 Change

Non-current assets 1,388.7 1,307.8 + 80.9

Current assets 936.7 873.8 + 62.9

Assets held for sale 0.0 10.5 – 10.5

TOTAL ASSETS 2,325.4 2,192.1 + 133.3

Equity 521.9 519.5 + 2.4

Non-current liabilities 1,280.4 1,134.7 + 145.7

Current liabilities 523.1 537.9 – 14.8

TOTAL LIABILITIES 2,325.4 2,192.1 + 133.3

Compared with last year, intangible assets decreased by EUR 6 million to EUR 83 million. Scheduled depreciation of EUR 8 million was offset by investments of EUR 2 million.

C A S H F LO W F R O M O P E R AT I N G AC T I V I T I E S (in EUR millions)

0

0

50

50

100

100

150

150

250

250

200

200

2015/2016 246

2014/2015 209

C A P I TA L E X P E N D I T U R E O N P R O P E R T Y, P L A N T A N D EQ U I P M E N T (in EUR millions)

2015/2016 173

2014/2015 156

28 G R O U P M A N A G E M E N T R E P O R T

KEY FINANCIAL PERFORMANCE INDIC ATOR S

Besides sales and EBIT, the key figure “SCHOTT Value Added” represents an important management instrument. It refers to the difference between EBIT and the capital costs. Capital costs are calculated as the weighted average cost of capital (WACC). The goal for all units of SCHOTT Group is to make a positive contribu-tion to the group’s value.

NON - FINANCIAL PERFORMANCE INDIC ATOR S

EMPLOYEE S

SCHOTT Group had 15,071 employees worldwide as of Sep-tember 30, 2016 (previous year: 15,016). This means the company had 55 more employees than on the balance sheet date of the previous fiscal year. 9,902 employees were employed at compa-nies outside Germany, which corresponds to 66 % of the group’s workforce.

The recruitment of well-qualified skilled workers is a major investment in the future for our company and the prerequisite for our sustained success. This ambition also finds external recogni-tion. For the fifth consecutive year, we ranked first in the industry sector in the ranking of the best recruiters in Germany.

To help our new employees get off to a good start, we place great importance on having a successful onboarding process. To this end, SCHOTT has defined a globally uniform approach, the heart of which is “SCHOTT Welcome Events” in the individual re-gions, which give new employees greater insights into the com-pany and the possibility to network early on.

In the yearly survey conducted by the Association of Employed Academics and Senior Employees of the Chemical Industry (VAA), SCHOTT was able to rise from second place in 2015 to the top ranking in 2016 for satisfaction.

In fiscal year 2015/2016, SCHOTT trained an average of 244 young people (previous year: 239) in technical, scientific and com-mercial fields, as well as dual courses of study. In addition, we offer many trainees the possibility of a course of study integrated in vocational training. After successful completion of training, ap-prentices are usually offered a position.

Motivated and satisfied employees are an important prerequi-site for the sustainable success of our company. The basis is a good and modern corporate culture as well as living our SCHOTT val-ues. For this purpose, we have carried out appropriate cultural workshops across all hierarchical levels and sites. The individual measures include the international exchange program “SCHOTT goes Family” for employees’ children. In summer 2016, 34 young people at least 12 years of age spent two weeks with their ex-change partners and their families. In this way, our employees and their families come into contact with each other across national borders, career levels and departments.

SCHOTT Group’s equity as of the balance sheet date of the reporting year amounted to EUR 522 million and was therefore EUR 2 million higher than in the previous year. As a result of the increase in total assets, equity as a percentage of total assets decreased from 23.7 % to 22.4 %.

Besides annual net profit in the amount of EUR 139 million, the increase is attributable mainly to currency translation differ-ences of EUR 10 million. On the other hand, equity was reduced by changes of estimates with regard to pension and similar obli-gations, taking deferred taxes into account, in the amount of EUR 143 million as well as by dividend payments of EUR 4 million.

As of the balance sheet date, provisions for pension commit-ments increased by EUR 150 million to EUR 1,051 million. The de-cline in the interest rate and other changes in estimates in the amount of EUR 201 million, the current net interest expense of EUR 21 million and newly earned pension rights totaling EUR 21 million, in particular, contributed to the increase in provisions. In particular, the allocation of plan assets in the amount of EUR 51 million and EUR 44 million in payments to pensioners had a coun-tering effect.

The funds available on a long-term basis (equity, non-current provisions and non-current financial liabilities) amounted to EUR 1,802 million (previous year: EUR 1,654 million) as of the bal-ance sheet date or 77 % (previous year: 75 %) of total assets. Non- current assets are thus covered by 129 % (previous year: 126 %) by equity and non-current liabilities.

As of the balance sheet date September 30, 2016, SCHOTT AG had loans granted from the Carl Zeiss Foundation totaling EUR 49 million (previous year: EUR 48 million) at its disposal.

Besides the trade payables and short-term loans from the Carl Zeiss Foundation, current liabilities mainly comprise short-term provisions, for example for taxes, warranties and other preventive measures as well as accrued liabilities in the area of personnel, in particular.

COMPARISON OF BUSINE SS DEVELOPMENT WITH THE

PREVIOUS YE AR’S FOREC A STS

We increased our sales by 3.3 % compared with the previous year. Compared with last year’s expectations – an increase in group sales of between 3 % and 5 % – the sales growth we actual-ly achieved was within our forecast. On the basis of constant ex-change rates and after adjustment of the revenue contributions from the activities sold in the meantime, we achieved sales growth of 6 %.

With respect to EBIT, we once again clearly exceeded the pre-vious year’s forecast of slightly above-average growth compared to the planned sales growth. This also applies to the key perfor-mance indicators derived from EBIT, in particular “SCHOTT Value Added.” We met the forecast for investment volume, which was a moderate increase.

29Business Development and Situation of the Group

STR ATEGIC ORIENTATION FOR TOMORROW ’S

INNOVATIONS

Research and Development is of great importance to SCHOTT. Our R&D figure reached 3.7 % of group sales in fiscal year 2015/2016 (previous year: 4.1 %). We employ about 450 qualified scientists throughout the group who work on SCHOTT solutions for the future. We are guided by a customer-oriented R&D strategy with professional management, the orientation of the SCHOTT businesses and the corresponding product and technology road-maps for major target markets. In order to gain further ideas for innovations or new business, to evaluate them in detail and to im-plement those that offer successful prospects, we have created an Opportunity Laboratory. With this group-wide Opportunity Lab, each employee can submit proposals and thus actively shape SCHOTT’s future.

Our global R&D network that covers everything from applied research to product development is yet another important motor for our success. This includes the Otto Schott Research Center in Mainz and numerous R&D units that are directly integrated into our business units, and R&D and application centers in specific regions such as the US, Japan, Korea and China. Our researchers collaborate closely with the operative units, industry partners, universities and international research facilities around the world.

We also actively manage our intellectual property rights to maintain and expand our technological market position and com-petitiveness. Protecting our inventions resulted in a growing port-folio of 2,946 patents worldwide (previous year: 2,936) at the end of the fiscal year.

R&D COMPETENCIE S A S STR ATEGIC GUIDING TOPICS

Material technologies are among the innovation drivers of the future and create growing business opportunities. SCHOTT chan-nels these possibilities in key strategic topics. These include the development of ever thinner and stronger glasses and new mate-rials, the optimization of core processes and innovative material solutions for the future markets of communication, mobility, health and resource-sparing use of energy. SCHOTT seeks to leverage these topics with respect to the following R&D core competencies:

The company health management system continued to re-ceive a great deal of attention in the last fiscal year. Despite re-gional differences, we have set ourselves the goal of establishing unified standards in medical care and prevention for employees throughout the group. Under the motto “Stay healthy! You are important to me,” the focus is not only on physical, but also on mental health.

Preventive measures in cooperative hospitals in Germany were continued. The offer of a three-day stay is available to all blue col-lar employees, as well as salaried staff. A tool was developed inter-nally for use in analyzing mental stress at work and deriving de-mand-oriented measures as part of assessing risk. Psychological stress and the resulting illnesses were also the focus of the “Lead-ership and Health” training series. Materials in English were created on the topic of “Mindful and stress-free living” in order to conduct health days at our international sites. In Germany, health days were organized on the topic “For a healthy digestive system” with the aim of raising the awareness of employees for the prevention of colorectal cancer.

RE SE ARCH AND DEVELOPMENT

SCHOTT’s central research and development (R&D) is closely interlinked with the R&D resources in our business units to drive growth, innovation and competitive strength in our company. This is achieved mainly by developing new and improving our existing products, materials and manufacturing techniques. Our core competencies in the areas of materials and their applications, melting techniques, hot forming, glass processing and mathemat-ical simulation of our processes and material properties provide the basis for this.

E M P LOY E E S A S O F T H E B A L A N C E S H E E T DAT E

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000

2015/2016 15,071

2014/2015 15,016

30 G R O U P M A N A G E M E N T R E P O R T

Once again, the recurring interest rate for pension provisions had a significant negative impact on equity. However, we have still managed to maintain the equity ratio at 22.4 % on an almost stable level, compared to 23.7 % in the previous year.

REPORT ON THE FORECAST

The leading German economic research institutes expect a slight revival of the global economic expansion in the coming year. They expect production in the advanced economies to grow again and the economy in the emerging markets to stabilize. How-ever, major risks to the global economy continue to be important in the coming year. These include, for example, the many unre-solved geopolitical conflicts, or the uncertainty in Europe as a result of the decision by Great Britain to leave the European Union or problems in the banking sector in some countries. Overall, the institutes expect a rise in global production of 2.7 % in 2017 com-pared to 2.3 % this year.

Market researchers expect growth rates of between 1 % and 5 % in the industries of greatest importance to SCHOTT in calen-dar year 2017 and thus at a similar level as in 2016. The two most important industries to SCHOTT are the pharmaceutical industry and home appliances. Here, global market growth of 4 % (phar-maceuticals) and 3 % to 4 % (home appliances) is projected.

If our expectations of the economy and our estimates of the likely developments with respect to industries and technologies and the changes in exchange rates prove to be accurate, then we expect the development described below. However, significant changes in these premises could lead to considerable deviations from the expected developments.

On the basis of what we know today and taking the premises cited into consideration, we expect group sales to increase by between 3 % and 5 % in fiscal year 2016/2017 as well as a compar-atively slightly higher increase in EBIT and the financial perfor-mance indicators derived from it.

According to our financial planning, solvency is guaranteed for the forecast period. SCHOTT also intends to continue growing through its core businesses in the future. To achieve this, we will continue to invest in moderation and consider certain acquisition and cooperation opportunities. We expect to see a moderate in-crease in the level of investments in property, plant and equip-ment in the upcoming fiscal year.

MATERIAL DEVELOPMENT:

REINVENT GL A SS AGAIN AND AGAIN

For more than 130 years, SCHOTT has distinguished itself in the process of specifically altering glass recipes and thus inventing glass again and again – with a multitude of new properties or combinations of them. In this way, components and products become more powerful or enable innovative functions and fu-ture-oriented applications. A recent example of this is a special ion-conducting glass-ceramic powder for the next generation of new batteries in electric vehicles. Its development receives federal funding in Germany within the framework of the FELICIA project. Another funded project involves the development of a new mate-rial class: CERCON is aimed at mass production of innovative fluo-rescent conversion ceramics in light converters for tomorrow’s most energy-efficient digital projectors.

MELTING AND HOT FORMING:

BET TER PRODUC TS IN SIGHT

Melting and forming processes are technological pioneers for innovative and better products and thus ensure the competitive-ness of our melting operations. Their new and further develop-ment is oriented towards trends such as higher demands for quality and conservation of resources. Our focus is on determin-ing the optimal material and energy input as well as the through-put, quality improvements and cost reductions. To this end, new concepts and developments pertaining to materials and processes are assessed at laboratory and pilot plant level, upscaled using simulation at the scale of pilot production and then transferred to production. One example is the development of SCHOTT FOTURAN® II, an improved melting process, for market introduc-tion. Thus, the photostructured glass came to a higher quality level, with application possibilities ranging from microfluidics and biotechnology to high-frequency technology. The processing of promising thin and ultra-thin glasses is yet another important topic for the future.

GENER AL STATEMENT BY THE BOARD OF MANAGEMENT

ON THE E ARNINGS, F INANCIAL AND A SSET SITUATION

The fiscal year 2015/2016 ending on September 30 was suc-cessful and continued the positive development of previous years.

Sales rose by 3.3 percent and fell short of just EUR 2 billion. The further improvement in EBIT by EUR 45 million to EUR 223 million is particularly pleasing.

We increased our cash flow from operating activities once again to EUR 246 million from EUR 209 million the previous year. We also increased our investments in property, plant and equip-ment and intangible assets by EUR 12 million to the current level of EUR 170 million.

31Business Development and Situation of the Group/Report on the Forecast/Report on Opportunities and Risks

The consolidated financial statements are prepared centrally on the basis of the data reported by the subsidiaries. Central ac-counting first checks the data and then consolidates it. Further-more, the quality of the recording of the data and consolidation are ensured by using authorization and access rules while observ-ing the necessary separation of functions.

The internal auditing department monitors the functions and effectiveness of the systems and processes implemented with the help of systematic, periodic reviews as well as technical measures.

Early risk warning system The early risk warning system (RFS) is integrated into SCHOTT’s

planning and governance processes. Roles, responsibilities and processes are documented in a group-wide guideline.

In the context of the early warning system, risks include all developments and events that could have a negative effect on SCHOTT’s future development to the extent that these have not already been fully anticipated in the company’s planning. An en-try of the risks would have a negative impact on the planned de-velopment of the financial, assets and earnings position.

Accordingly, opportunities are defined in the sense of the early warning system as developments and events that can have a pos-itive impact on SCHOTT’s future development, to the extent that these have not already been fully anticipated in the company’s planning. The use of opportunities identified would have a posi-tive impact on the planned development of the financial, assets and earnings position.

Assessment of the opportunities and risks identified takes place on the basis of the assessed economic effects on planned group equity and the expected probability of their occurrence. The presentation of risks is usually based on a net consideration after implementation of risk reduction measures.

We categorize the economic effects based on the potential for damage using the characteristics low, medium, high and very high (more than EUR 15 million). We use the following qualitative criteria to determine the probability with respect to the respective planning period:

Criterion Description

LowThe likelihood of the opportunity/risk is considered to be highly improbable

MediumThe likelihood of the opportunity/risk is considered to be improbable

HighThe likelihood of the opportunity/risk is considered to be probable

Very highThe likelihood of the opportunity/risk is considered to be highly probable

REPORT ON OPPORTUNITIES AND RISKS

GROUP-WIDE RISK MANAGEMENT

SCHOTT Group’s risk management system comprises all orga-nizational measures, rules, and procedures for the early identifica-tion and management of opportunities and risks. It seeks to sys-tematically identify, analyze, and assess risks and opportunities in a uniform manner for the entire group. This enables us to achieve high transparency that allows us to select and implement effective countermeasures. The main elements of the risk management sys-tem are the established planning and governance processes, the internal control system and the early warning system.

The Board of Management is ultimately responsible for the risk management system. It sets the parameters for risk management in order to ensure that risks that could jeopardize SCHOTT as a going concern are detected early on and that the appropriate measures are implemented. The Supervisory Board’s Audit Com-mittee monitors the effectiveness of the risk management system at SCHOTT on a regular basis as part of its supervisory function.

Planning and GovernanceThe Group Function Finance works closely with the operating

units and analyzes the development of key performance for the individual business units and the group as a whole by generating monthly reports. These reports are supplemented by evaluations of the opportunities and risks within the framework of the estab-lished planning and forecasting process. Regular reports to group management, coupled with appropriate recommendations for action, ensure value-oriented portfolio management tailored to these risks and opportunities.

Decentralized controlling is responsible for planning and fore-casting and continually analyzing the results of the business units. It also coordinates the systematic identification, assessment, and documentation of corresponding opportunities and risks of the business units.

Internal control systemThe internal control and risk management system on group

accounting ensures that financial statements and financial report-ing are prepared properly. Key components include a binding chart of accounts for the group and accounting policies. Our central accounting department reviews changes in legislation and accounting standards to determine their relevance to the consoli-dated financial statements. The internal accounting policy, charts of accounts and consolidation software are then modified ac-cordingly.

32 G R O U P M A N A G E M E N T R E P O R T

The diversification of our product portfolio as well as our global presence and strong position in our target markets enables us to react early to developments in order to take advantage of opportunities and minimize risks.

Precision Materials SegmentIn the Electronic Packaging business unit, opportunities for

further profitable growth will result particularly in the automotive market and high performance data transmission in opto-elec-tronics. The market requires new solutions in many segments, for example for high-temperature applications, which offers good opportunities for differentiation from the competition. We see risks mainly as a result of increasing competition and price pres-sure as well as unfavorable developments in the economy and ex-change rates.

With respect to the Pharmaceutical Systems business unit, we continue to see opportunities due to the trend towards higher quality pharmaceutical packaging as well as increasing demand in the area of syringes. Risks arise in particular from possible delays in the expansion of the polymer syringe division as well as from our activities in the “emerging markets.”

In the Tubing business unit, we expect opportunities in the area of technical tubing from new products and projects. Risks mainly concern tougher price and competitive pressure.

Optical Industries SegmentWe expect to see opportunities in the Advanced Optics busi-

ness unit for optical components and filters as well as for ZERODUR® glass-ceramic for astronomical applications. We see risks primarily in delays in developing new business in the field of optical components and filters as well as increased pricing and competitive pressure.

In the Lighting and Imaging business unit, we expect to see good opportunities for the sustainable expansion of business in the aviation and automotive industries, especially in the field of ambient lighting for vehicle interiors, as well as in the industrial business. Risks here include delays in the project business, for example, with power transmission in the industrial sector and in cabin lighting for the aviation industry.

Home Appliances SegmentDue to the cyclical nature of most retail markets, there are

both opportunities and risks for the Home Tech business unit from the overall economic development. We also see opportunities through the successful market introduction of new products as well as in further differentiation from the competition in the prod-uct areas of glass-ceramic and fireplace panels. Risks also arise, in particular, from increased competition on the sales side as well as from rising costs for essential raw materials, for example, due to the growing global demand for lithium.

Based on the estimated probability of occurrence and its eco-nomic effects, we classify risks to three risk categories, whereby the main risks are classified to risk class 1. These include the follow-ing risks as in the previous year:

Due to SCHOTT’s international orientation, both balance sheet and profitability risks are exposed to fluctuations in exchange rates. Translation risks arise in the statement of financial position and earnings figures of foreign group companies due to foreign currency translation. A rise in value in the euro against the respec-tive local currency has an adverse effect on the group’s equity. Translation risks are basically not hedged by using derivatives at SCHOTT. The majority of our translation risks are the result of the exchange rate trend of the euro against the Chinese renminbi, the Japanese yen and the US dollar. In addition, the operating business is exposed to transaction risks as a result of exchange rate fluctua-tions. Here, we first use the possibilities of “natural hedging” through our global presence for risk reduction. The control of the remaining risk positions is managed as part of our central currency management, which is described in the section “Financial risks.”

Accounting for pension liabilities depends largely on the re-spective interest rate that is used to discount pension commit-ments. A reduction in the interest rate has a negative effect on group equity. We respond to this risk by taking a share of our pension commitments off the balance sheet by entering into con-tractual trust arrangements. The company’s management will continue to partly use liquidity surpluses for further financing of pension obligations.

SCHOTT issues guarantees on certain products with terms of duration that partly extend beyond the legal scope of guarantees and guarantee periods. Here, we have recognized risk provisions for risks in the consolidated financial statement on the basis of what is known on the balance sheet date, in addition to our quality management and insurance policies, as the prospect of future warranty and liability claims against the group cannot be ruled out. Furthermore, it cannot be ruled out that new information will lead to other assessments.

THE MARKET AND COMPETITION

As a globally active technology group, SCHOTT depends on the economic condition and development of its target markets as well as the global economy.

Planning for future fiscal years was prepared on the basis of the current state of the economy as well as the expected eco-nomic development. Due to the difficulty in forecasting economic development, considerable uncertainty remains with respect to the group’s sales and earnings targets. In this context, current political or economic events, in particular, are a significant factor of uncertainty.

33Report on Opportunities and Risks

RISK S ARISING FROM TECHNOLOGIC AL INNOVATION

SCHOTT is active in markets that are characterized by constant technological innovation. The latest scientific and research find-ings can significantly accelerate product and development cycles. In addition, it is also possible for products to be partially or com-pletely replaced by alternative technologies.

SCHOTT’s success and reputation thus depend not only on the ongoing development of innovative products that are in line with market requirements, but also on the company’s ability to recog-nize and implement new technological trends quickly. SCHOTT counters this risk through continuous investments in the areas of research and development, protection of its technical expertise through patents and other industrial property rights, and close market analysis and strategic business development. In addition, SCHOTT is actively involved in development partnerships and also cooperates with external research institutes to take advantage of opportunities at an early stage.

FINANCIAL RISK S

As an internationally active group, SCHOTT is also exposed to risks arising from market fluctuations of exchange rates, interest rates, and raw materials prices. SCHOTT Treasury is responsible for the financing and hedging activities and for managing cash on behalf of SCHOTT Group. The type and scope of financing and hedging activities are governed by a group-wide directive.

The goal of centralized currency management is to protect our business operations from risks that result from exchanging foreign currency payment flows into the respective local currency. Gener-ally speaking, our global presence that includes local manufactur-ing and global purchasing activities lowers transaction-related currency risks. Net currency positions that we determine on a regular basis using currency-differentiated liquidity forecasts serve as the basis for hedging the remaining transaction-related risks. Forward exchange transactions are used as hedging instru-ments. The majority of our currency exchange rate risks are the result of the exchange rate trend of the euro against the US dollar and the Swiss franc.

The goal of interest rate management is to protect consoli-dated net income from negative consequences arising from fluc-tuations in market interest rates. Here, an appropriate balance between fixed and variable interest rates e.g. long and short term financing agreements is sought by weighing the costs and risks.

The goal of raw materials price management is to protect our business operations from price increases. This risk is also managed with the help of primary and derivative financial instruments.

Financial liabilities owed to banks and other lenders are mostly bound by adherence to financial covenants. A violation of the covenants could lead to more stringent financing terms or even the repayment of financial liabilities. We counter this risk by con-tinuously monitoring the covenants on the basis of the respectively applicable actual, planned, and forecast values of the related key figures.

In the Flat Glass business unit, we are seeing opportunities through a market recovery in South America and the successful market introduction of new products. Risks exist mainly in terms of rising raw glass prices, missing our productivity targets, and a delay of the recovery in the South American market.

PROCUREMENT OPPORTUNITIE S AND RISK S

SCHOTT’s purchasing organization constantly monitors the relevant procurement markets and critical suppliers so that pro-curement risks and opportunities can be identified at an early stage and appropriate countermeasures developed. Within the framework of the established procurement processes, opportuni-ties arising, for example, from the bundling of procurement activ-ities are consistently used.

Supply shortages or the insolvency of a supplier, particularly in the raw materials sector, can lead to short-term production loss-es. Impending shortages or general price increases are countered by the continuous further development of the material composi-tion of our products. In addition, we are working to reduce our dependency on individual suppliers (single sourcing).

The departments Purchasing and Treasury work together closely on developing and implementing procurement strategies for electricity and gas. The processes and responsibilities for this are documented in a corporate guideline.

German SCHOTT companies make use of or have made use of the special compensation plan for electricity-intensive enterprises in accordance with sections 40 et seq. of the 2012 Renewable Energy Sources Act (2012 EEG) and 63 et seq. of the 2014 EEG. On December 18, 2013, the European Commission introduced pro-ceedings aimed at assessing the compensation discussed in sec-tions 40 et seq. of the EEG. These proceedings have since been completed by the EU Commission. Based on current knowledge, this will not have any further negative impact. However, the ruling is not yet final.

PRODUC TION RISK S

The manufacturing of our products depends mainly on the functionality of the existing manufacturing facilities. Periodic maintenance according to prescribed maintenance intervals is conducted to prevent unplanned production losses. Neverthe-less, sudden defects at manufacturing facilities cannot be ruled out due to the complex technical processes. The necessary repair work can lead to unplanned production outages.

Risks as a result of quality defects during manufacturing and filling of orders cannot be ruled out completely. SCHOTT combats these risks by constantly developing its quality management systems and by offering an extensive training program for its em-ployees.

34 G R O U P M A N A G E M E N T R E P O R T

IT R ISK S

As an international technology group, SCHOTT depends on the availability of its computer and telecommunications systems at all times. We have installed state-of-the-art protective systems that are updated on an ongoing basis and ensure the permanent availability of our IT systems. In order to guarantee information security with respect to confidentiality, integrity, and availability, SCHOTT has drafted guidelines, made emergency provisions for critical business processes and supporting IT systems, and imple-mented appropriate control mechanisms. SCHOTT orients itself today and tomorrow on the standards set forth under ISO/IEC27001:2005. These are supplemented as needed by recom-mended measures from the IT-Grundschutz Catalog of the Ger-man Federal Office for Information Security (Bundesamt für Sicher heit in der Informationstechnik). This ensures the current completeness of the regulated IT systems in accordance with these standards.

LEGAL , TA X- REL ATED AND REGUL ATORY RISK S

SCHOTT is exposed to numerous legal and regulatory risks. These include in particular risks in the areas of product liability (including liability for long-term performance guarantees), com-petition and anti-trust laws, industrial property rights, foreign trade and payments legislation, tax laws and environmental pro-tection.

The safety and health of people and the protection of the environment, as well as defending against external hazards, are important corporate objectives of SCHOTT. The integrated man-agement system for safety, security, health and environment (IMSU/EHS) sets the principles and the organizational framework for achieving these goals. IMSU/EHS is globally binding for all units and employees of SCHOTT and is part of our corporate compliance.

Furthermore, SCHOTT counters risks arising from non-compli-ance with laws and other rules of conduct through a compliance management system, group policies (for example, the SCHOTT Code of Conduct), and corresponding training measures (face-to-face and online training). Nevertheless, the risk of violating the law or rules on behavior due to an individual’s inappropriate ac-tions cannot be ruled out completely.

Changes in tax laws and regulations in individual countries could have an impact on our tax receivables, tax liabilities, and deferred tax assets and liabilities. A weaker than expected develop-ment of our taxable income could have a negative effect on our deferred tax assets.

SCHOTT AG and certain group subsidiaries are party to vari-ous judicial, arbitration, and official proceedings. The outcome of these proceedings cannot be clearly foreseen. All precautionary accounting-related measures deemed necessary for these legal

The liquidity risk of the group is the risk that a group company will not be able to meet its financial obligations. SCHOTT has suf-ficient liquidity reserves at its disposal in the form of cash and cash equivalents as well as binding credit lines. With respect to infor-mation on this topic, please refer to the information that explains our financial instruments.

Treasury activities are used to monitor and manage bank/counterparty risk by way of a diversified business transaction and investment policy. This includes regular structured measurement including individual limit allocation, in particular. Security and accessibility are more important than yield aspects when it comes to investing the funds available. Financial transactions are con-cluded only with select business partners within the framework of fixed limits. Derivative financial instruments are used only for hedging purposes.

In order to minimize the risk of non-payment on the part of our customers, we have networked our SAP-based customer credit management systems in major SCHOTT units worldwide. Our sales and finance organization thus have access to customers’ current credit limits, credit exposures as well as order and pay-ment transactions at all times. SCHOTT also uses credit insurance to mitigate customer credit and country risks. We are constantly expanding our customer relationship management efforts in or-der to strengthen our sales activities and identify and minimize market risk in a timely manner.

The intrinsic value of fixed assets and inventories recognized in the consolidated balance sheet is dependent on the future eco-nomic development of SCHOTT or our target markets. SCHOTT Group’s wide and balanced business portfolio contributes sig-nificantly to the mitigation of this risk through diversification. If SCHOTT’s future development should fall short of the planned development, there would be the risk of value adjustments and restructuring charges.

PER SONNEL RISK S

SCHOTT competes with other internationally active companies with respect to its highly qualified technical personnel and man-agers. SCHOTT offers its employees a motivating work environ-ment with targeted training and advanced education programs, international development prospects, performance-dependent compensation systems, a family-friendly personnel policy, compre-hensive programs to promote health, and flexible work schedules.

35Report on Opportunities and Risks/Supplementary Report

PROVISION FOR THE PROMOTION OF WOMEN’S

PARTICIPATION IN E XECUTIVE POSITIONS ACCORDING

TO SEC TION 76 (4) AND SEC TION 111 (5) OF THE

GERMAN STOCK CORPOR ATION AC T

Under the Act on the Equal Participation of Women and Men in Leadership Positions in the Private Sector and the Public Sector of April 24, 2015, certain companies in Germany are required to set targets for the proportion of women on the Supervisory Board, the Board of Management and the two management levels below the Board of Management and to state by when the respective proportion of women should be reached. The respective compa-nies were required to decide on their targets and periods for im-plementation by September 30, 2015. For the initial definition, the period for implementation may not legally extend beyond June 30, 2017. With the next definition of a period for implemen-tation, the time period can be up to five years.

On September 30, 2015, the Supervisory Board of SCHOTT AG decided on targets for the share of women on the Supervisory Board and the Board of Management of SCHOTT AG with the target date of June 30, 2017. The target range for the Supervisory Board corresponds to the current ratio of a share of 8 %. The target for the Board of Management was set at the level of the status quo (0 %).

On September 8, 2015, the Board of Management of SCHOTT AG decided on a target for the two management levels below the Board of Management: 6 % for the first management level and 21 % for the second management level, each with a target date of June 30, 2017.

SUPPLEMENTARY REPORT

SIGNIFIC ANT EVENTS AF TER THE BAL ANCE SHEET DATE

No reportable significant events took place after the end of fiscal year 2015/2016.

Mainz, November 29, 2016

The Board of Management of SCHOTT AG

Dr. Frank Heinricht Hermann Ditz

Dr. Heinz Kaiser Dr. Jens Schulte

disputes and official proceedings are taken into account in the consolidated financial statements based on an estimate of the respective risk. Based on the current litigation status, the Board of Management presumes that these legal disputes can be concluded without future material impact on the group’s existence. Due to judicial or official decisions or agreements regarding settlements, expenses can be incurred that are not covered or only partially covered by provisions for legal expenses or insurance settlements with potential effects on our business and its earnings.

Violations of our intellectual property rights (including our patents and other technical protective rights) can pose a risk to SCHOTT Group’s technological advantage and thus its competi-tive position. The same applies with respect to our competitive position for the infringement of our brands. Internal security rules and an actively pursued intellectual property rights strategy have hitherto been our successful response to this type of risk. Further-more, we ensure that we do not come into conflict with third party patents by regularly monitoring third party intellectual property rights. However, the violation of third party property rights in Ger-many or abroad cannot be fully ruled out, despite these measures.

OTHER E XTERNAL RISK S

The companies of SCHOTT Group are exposed to external risks, for example, natural disasters, terrorist attacks, fires, and ac-cidents. In addition, damage to the group’s buildings, manufac-turing facilities and warehouses or those of its suppliers and to goods in shipment can lead to property damage or interrupt busi-ness activities. Moreover, delays can occur in the supply process; for example, as a consequence of strikes in the transport sector. We have developed emergency plans in addition to our compre-hensive insurance protection in order to minimize potential nega-tive effects.

OVER ALL RISK SITUATION

Based on currently available information and taking planned or implemented measures into account, there are currently no identifiable risks that could individually or collectively jeopardize SCHOTT as a going concern in the current foreseeable period.

The Board of Management sees a solid foundation for the further development of SCHOTT and, with a systematic strategy, planning and governance process, provides the necessary re-sources to achieve the goals and the additional use of potential opportunities.

In light of ongoing, considerable economic, political, and in-dustry-specific risks, setbacks on the path to the long-term realiza-tion of the goals we are striving to attain cannot be fully ruled out.

36 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

ContentsS C H O T T A G CO N S O L I D AT E D

F I N A N C I A L S TAT E M E N T S

With NEXTREMA® glass-ceramic, SCHOTT is leading the application possibilities of these robust panes into a new dimension. Smart

infrared heaters heat private terraces, bathrooms and outdoor areas of restaurants.

Tooth-colored glass-plastic composites are the materials of choice in aesthetic tooth restoration today. The so-called “plastic filling”

consists of up to 80 % special glass powder.

SCHOTT offers many further customized solutions for the global house-hold appliance industry, such as its refined flat glass for use in ovens.

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37

Consolidated Statement of Income 38

Consolidated Statement of Comprehensive Income 39

Consolidated Statement of Financial Position 40

Consolidated Cash Flow Statement 42

Consolidated Statement of Changes in Equity 44

NOTE S TO THE CONSOLIDATED F INANCIAL S TATEMENT S 46

General Information 46

1 Preliminary Remarks 46

2 Changes in Accounting Standards and Application

of New and Revised Accounting Standards 46

3 Important Accounting Policies and Methods

of Consolidation 48

Notes to the Statement of Income and

the Statement of Financial Position 56

4 Sales 56

5 Selling and General Administrative Expenses 56

6 Research and Development Expenses 56

7 Other Operating Income 56

8 Other Operating Expenses 57

9 Income/Loss from Investments Accounted for Using

the Equity Method 57

10 Net Financial Income/Expense 57

11 Income Taxes 58

12 Discontinued Operations 59

13 Income/Loss Attributable to Non-Controlling Interests 60

14 Intangible Assets 60

15 Property, Plant and Equipment 62

16 Investments Accounted for Using the Equity Method 64

17 Other Financial Assets, Non-Current 64

18 Other Non-Financial Assets, Non-Current 64

19 Inventories 64

20 Trade Receivables 65

21 Other Financial Assets, Current 65

22 Other Non-Financial Assets, Current 66

23 Cash and Cash Equivalents 66

24 Assets and Liabilities Held for Sale 66

25 Equity 66

26 Pension Plans and Similar Commitments 68

27 Share-Based Payment 72

28 Other Provisions 72

29 Accrued Liabilities 73

30 Trade Payables 74

31 Other Financial Liabilities, Non-Current and Current 74

32 Other Non-Financial Liabilities, Non-Current and Current 74

Further Information 75

33 Financial Instruments and Risk Management 75

34 Leases 88

35 Contingent Liabilities and Assets 89

36 Notes to the Consolidated Statement of Cash Flow 89

37 Employees 89

38 Other Information 89

39 Related Party Disclosures 90

40 Significant Events Subsequent to the Balance Sheet Date 90

41 Remuneration of the Board of Management and

Supervisory Board 90

Auditor’s Report 91

CONSOLIDATED FINANCIAL STATEMENTSF O R T H E F I S C A L Y E A R F R O M O C T O B E R 1, 2 015 , T O S E P T E M B E R 3 0 , 2 016

38 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

CONSOLIDATED STATEMENT OF INCOMEF R O M O C T O B E R 1, 2 015 , T O S E P T E M B E R 3 0 , 2 016

(in EUR thousands) Note 2015/2016 2014/2015

SALES 4 1,991,723 1,927,261

Cost of sales – 1,307,884 – 1,289,482

GROSS PROFIT 683,839 637,779

Selling expenses 5 – 220,278 – 217,080

Research and development expenses 6 – 73,648 – 78,560

General administrative expenses – 182,343 – 194,821

Other operating income 7 65,387 114,482

Other operating expenses 8 – 55,176 – 89,445

Income from investments accounted for using the equity method 9 5,332 5,211

INCOME FROM OPER ATING AC TIVITIES 223,113 177,566

Interest income 10 1,720 1,703

Interest expense 10 – 24,788 – 30,823

Other net financial income/expense 10 – 83 2,182

NET FINANCIAL INCOME/EXPENSE – 23,151 – 26,938

INCOME FROM CONTINUING OPER ATIONS BEFORE INCOME TA XES 199,962 150,628

Income tax expenses 11 – 58,864 – 55,685

INCOME FROM CONTINUING OPER ATIONS 141,098 94,943

Income of discontinued operations (after taxes) 12 – 1,890 – 302

CONSOLIDATED PROFIT FOR THE PERIOD 139,208 94,641

of which attributable to non-controlling interests 13 6,504 3,342

of which attributable to the owner of SCHOTT AG 132,704 91,299

39Consolidated Statement of Income/Consolidated Statement of Comprehensive Income

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEF R O M O C T O B E R 1, 2 015 , T O S E P T E M B E R 3 0 , 2 016

(in EUR thousands) Note 2015/2016 2014/2015

CONSOLIDATED PROFIT FOR THE PERIOD 139,208 94,641

AMOUNTS THAT ARE NOT TO BE RECL ASSIFIED TO THE INCOME STATEMENT IN FUTURE PERIODS

Actuarial gains/losses on pension plans 25 – 201,328 – 31,721

Deferred taxes 25 58,186 9,328

– 143,142 – 22,393

AMOUNTS THAT ARE TO BE RECL ASSIFIED TO THE INCOME STATEMENT IN FUTURE PERIODS

Currency translation differences 25 9,827 – 4,607

Gain/loss from fair value measurement of securities 25 850 – 450

Deferred taxes 25 0 95

Non-controlling interests* 25 – 1,471 – 1,916

9,206 – 6,878

OTHER COMPREHENSIVE INCOME/LOSS – 133,936 – 29,271

TOTAL COMPREHENSIVE INCOME 5,272 65,370

of which attributable to non-controlling interests 5,033 1,426

of which attributable to the owner of SCHOTT AG 239 63,944

* The amounts shown for the non-controlling shares pertain mainly to currency translation differences.

40 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

A SS E T S

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONA S O F S E P T E M B E R 3 0 , 2 016

(in EUR thousands) Note Sept. 30, 2016 Sept. 30, 2015

NON- CURRENT ASSETS

Intangible assets 14 83,348 89,325

Property, plant and equipment 15 843,586 798,944

Investments accounted for using the equity method 16 55,028 51,315

Deferred tax assets 11 399,461 361,337

Other financial assets 17 5,937 5,435

Other non-financial assets 18 1,338 1,426

1,388,697 1,307,782

CURRENT ASSETS

Inventories 19 372,417 373,668

Trade receivables 20 342,008 302,884

Current tax assets 26,059 26,519

Other financial assets 21 73,661 28,692

Other non-financial assets 22 29,027 36,171

Cash and cash equivalents 23 93,503 105,914

936,675 873,848

Assets held for sale 24 0 10,478

TOTAL ASSETS 2,325,372 2,192,108

41Consolidated Statement of Financial Position

EQ U I T Y A N D L I A B I L I T I E S

(in EUR thousands) Note Sept. 30, 2016 Sept. 30, 2016

EQUIT Y

Subscribed capital 25 150,000 150,000

Capital reserve 25 322,214 322,214

Consolidated retained earnings 25 – 118,439 – 104,319

Accumulated other gains and losses 25 14,013 3,336

Non-controlling interests 25 154,080 148,225

521,868 519,456

NON- CURRENT LIABILITIES

Pension plans and similar commitments 26 1,050,889 901,126

Other provisions 28 139,529 137,423

Deferred tax liabilities 11 22,240 21,572

Other financial liabilities 31 62,829 68,330

Other non-financial liabilities 32 4,930 6,262

1,280,417 1,134,713

CURRENT LIABILITIES

Other provisions 28 94,461 100,517

Accrued liabilities 29 156,164 145,688

Trade payables 30 143,168 140,746

Current tax liabilities 11,171 15,147

Other financial liabilities 31 75,790 87,448

Other non-financial liabilities 32 42,333 48,393

523,087 537,939

TOTAL EQUIT Y AND LIABILITIES 2,325,372 2,192,108

42 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

CONSOLIDATED CASH FLOW STATEMENT*F R O M O C T O B E R 1, 2 015 , T O S E P T E M B E R 3 0 , 2 016

(in EUR thousands) 2015/2016 2014/2015

Group earnings 139,208 94,641

Depreciation and amortization/impairment reversals on non-current assets 131,793 133,331

Increase/decrease in provisions and accrued liabilities 4,033 – 5,462

Other non-cash expenses and income – 5,864 – 7,860

Gain/loss on the disposal of intangible assets and property, plant and equipment – 6,112 45

Gain/loss from financial assets – 2,086 – 5,224

Increase/decrease in inventories and prepayments made on inventories – 4,164 18,140

Increase/decrease in trade receivables – 27,120 505

Increase/decrease in other assets 18,282 – 21,479

Increase/decrease in prepayments received – 6,217 – 1,760

Increase/decrease in trade liabilities – 1,371 – 8,883

Increase/decrease in other liabilities – 15,986 1,908

Increase/decrease in deferred taxes 21,754 10,669

CASH FLOW FROM OPER ATING AC TIVITIES (A) 246,150 208,571

Cash inflow from the disposal of property, plant and equipment/intangible assets 22,950 9,695

Cash outflow for investments in property, plant and equipment/intangible assets – 169,628 – 157,926

Cash inflow from the disposal of consolidated companies and associates 0 12,851

Cash inflow from the disposal of financial assets 0 1,817

Cash outflow for the acquisition of consolidated companies and other business divisions – 65 0

Cash outflow for investments in non-current financial assets – 5 – 111

Dividends received 2,781 4,544

CASH FLOW FROM INVESTING AC TIVITIES (B) – 143,967 – 129,130

Dividends paid – 7,063 – 3,414

Increase/decrease in equity 0 16

Payment of non-controlling interests into a capital reserve 5,000 60,000

Raising of loans 12 13,132

Repayment of loans – 5,480 – 4,085

Allocation of plan assets – 51,051 – 82,613

Increase/decrease in financial receivables – 53,398 – 1,810

Repayment of financial liabilities – 3,361 – 37,434

CASH FLOW FROM FINANCING AC TIVITIES (C) – 115,341 – 56,208

CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C) – 13,158 23,233

OPENING BAL ANCE OF CASH AND CASH EQUIVALENTS 105,914 86,943

– Checks, cash on hand 750 405

– Deposits with banks 105,164 86,538

Change in cash and cash equivalents due to exchange rates 832 – 3,210

Changes in funds due to differences in the companies consolidated – 85 – 1,052

CLOSING BAL ANCE OF CASH AND CASH EQUIVALENTS 93,503 105,914

– Checks, cash on hand 338 750

– Deposits with banks 93,165 105,164

* The consolidated cash flow statement is discussed under Note 36.

43Consolidated Cash Flow Statement

(in EUR thousands) 2015/2016 2014/2015

ADDITIONAL NOTES TO THE CASH FLOW STATEMENT*

Interest paid – 5,623 – 7,963

Interest received 1,720 1,703

Income taxes paid – 43,019 – 36,495

* Included in cash flow from operating activities

44 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y*F R O M O C T O B E R 1, 2 015 , T O S E P T E M B E R 3 0 , 2 016

Attributable to the owner

Consolidated accumulated other gains and losses

(in EUR thousands)

Subscribed capital Capital reserve

Consolidated retained earnings

Currency translation differences

Measurement of securities at fair

market valueShareholder of

SCHOTT AG

Non-controlling interests

SCHOTT consolidated

equity

BAL ANCE ON OC T. 1, 2014 150,000 322,214 – 171,978 7,943 355 308,534 92,499 401,033

Consolidated profit for the period 91,299 91,299 3,342 94,641

Other comprehensive income/loss – 22,393 – 4,607 – 355 – 27,355 – 1,916 – 29,271

TOTAL COMPREHENSIVE INCOME 68,906 – 4,607 – 355 63,944 1,426 65,370

Dividends 0 0 – 3,414 – 3,414

Share-based payment 62 62 13 75

Changes in the scope of consolidation – 1,309 – 1,309 57,701 56,392

BAL ANCE AS OF SEPT. 30, 2015 150,000 322,214 – 104,319 3,336 0 371,231 148,225 519,456

BAL ANCE AS OF OC T. 1, 2015 150,000 322,214 – 104,319 3,336 0 371,231 148,225 519,456

Consolidated profit for the period 132,704 132,704 6,504 139,208

Other comprehensive income/loss – 143,142 9,827 850 – 132,465 – 1,471 – 133,936

TOTAL COMPREHENSIVE INCOME – 10,438 9,827 850 239 5,033 5,272

Dividends – 3,652 – 3,652 – 3,411 – 7,063

Share-based payment 62 62 13 75

Transactions involving non-controlling interests 0 0 5,000 5,000

Changes in the scope of consolidation – 92 – 92 – 780 – 872

BAL ANCE AS OF SEPT. 30, 2016 150,000 322,214 – 118,439 13,163 850 367,788 154,080 521,868

* Equity is discussed under Note 25.

45Consolidated Statement of Changes in Equity

Attributable to the owner

Consolidated accumulated other gains and losses

(in EUR thousands)

Subscribed capital Capital reserve

Consolidated retained earnings

Currency translation differences

Measurement of securities at fair

market valueShareholder of

SCHOTT AG

Non-controlling interests

SCHOTT consolidated

equity

BAL ANCE ON OC T. 1, 2014 150,000 322,214 – 171,978 7,943 355 308,534 92,499 401,033

Consolidated profit for the period 91,299 91,299 3,342 94,641

Other comprehensive income/loss – 22,393 – 4,607 – 355 – 27,355 – 1,916 – 29,271

TOTAL COMPREHENSIVE INCOME 68,906 – 4,607 – 355 63,944 1,426 65,370

Dividends 0 0 – 3,414 – 3,414

Share-based payment 62 62 13 75

Changes in the scope of consolidation – 1,309 – 1,309 57,701 56,392

BAL ANCE AS OF SEPT. 30, 2015 150,000 322,214 – 104,319 3,336 0 371,231 148,225 519,456

BAL ANCE AS OF OC T. 1, 2015 150,000 322,214 – 104,319 3,336 0 371,231 148,225 519,456

Consolidated profit for the period 132,704 132,704 6,504 139,208

Other comprehensive income/loss – 143,142 9,827 850 – 132,465 – 1,471 – 133,936

TOTAL COMPREHENSIVE INCOME – 10,438 9,827 850 239 5,033 5,272

Dividends – 3,652 – 3,652 – 3,411 – 7,063

Share-based payment 62 62 13 75

Transactions involving non-controlling interests 0 0 5,000 5,000

Changes in the scope of consolidation – 92 – 92 – 780 – 872

BAL ANCE AS OF SEPT. 30, 2016 150,000 322,214 – 118,439 13,163 850 367,788 154,080 521,868

* Equity is discussed under Note 25.

46 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

GENER AL INFORMATION

— 01 PRELIMINARY REMARK S

SCHOTT AG, Mainz, (short: SCHOTT) is an unlisted company incorporated under German law that operates internationally in more than 35 countries in the Advanced Optics, Electronic Pack-aging, Flat Glass, Home Tech, Lighting and Imaging, Pharmaceuti-cal Systems and Tubing segments. SCHOTT AG’s registered office is located at Hattenbergstraße 10, 55122 Mainz, Germany, and is entered in the commercial register of the local court in Mainz un-der HRB 8555. The sole shareholder of SCHOTT AG is the Carl Zeiss Foundation, Heidenheim an der Brenz and Jena.

SCHOTT is an international technology group that develops and manufactures specialized materials, components and sys-tems. It operates mainly in the home appliances, pharmaceutical, electronics, optical and transportation industries.

The consolidated financial statements of SCHOTT were pre-pared on the legal basis of section 315a (3) of the German Com-mercial Code (HGB) in accordance with International Financial Reporting Standards (IFRSs), as applicable in the European Union, supplemented by the applicable commercial law regulations un-der section 315a (1) HGB. Necessary adjustments under IFRSs have been made to the extent that the consolidated companies’ sepa-rate financial statements diverge from these principles under na-tional law. Interim financial statements are used for subsidiaries whose balance sheet date differs from the consolidated reporting date. With the exception of the changes described in Note 2, the accounting methods, presentation and disclosure requirements are the same as in the previous year.

The consolidated financial statements are prepared in euros. Unless otherwise noted, all amounts are stated in thousand euros (EUR thousand). The consolidated statement of income has been prepared according to the cost of sales (function of expense) method.

The consolidated financial statements prepared as of Septem-ber 30, 2016, and the group management report were released at the Board meeting on November 29, 2016. The plan is for the Supervisory Board to approve the financial statements at the meeting on January 10, 2017.

— 02 CHANGE S IN ACCOUNTING STANDARDS AND

APPLIC ATION OF NEW AND REVISED ACCOUNTING

STANDARDS

2.1 Standards and interpretations to be applied in the current fiscal yearThe following new and amended standards and interpreta-

tions, which were to be mandatorily applied for the first time in the fiscal year under review, have been published by the Interna-tional Accounting Standards Board (IASB). Their application has no material effect on the figures reported in the consolidated financial statements, but may affect the accounting with future transactions.

Application mandatory

for fiscal years beginning on

or after

Revised/ expanded

notes disclosures

STANDARDS

IAS 19“Defined Benefit Plans: Employee Contributions (Amendments)” July 1, 2014 No

VariousAnnual Improvement Cycle 2010 – 2012 Feb. 1, 2015 No

VariousAnnual Improvement Cycle 2011 – 2013 Jan. 1, 2014 No

2.2 Published standards and interpretations that were not yet appliedIn addition to the application of IFRSs cited as mandatory in

section 2.1, the IASB published additional IFRSs that have in some cases already completed the EU’s endorsement process, but are not required to be applied until a later date.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSF O R T H E 2 015 / 2 016 F I S C A L Y E A R

Notes to the Consolidated Financial Statements – General Information 47

■ The IASB issued the final version of IFRS 9 in July 2014. This stan-dard will replace IAS 39 and regulate the recognition and mea-surement of financial instruments in new ways in many different areas. This will affect recognition and measurement, impair-ment and the treatment of hedging relationships, in particular.

IFRS 9 is to be applied to reporting periods beginning on or after January 1, 2018. The analysis of the effects of applying IFRS 9 has not yet been completed. At present, the initial appli-cation of this standard is not expected to have any material ef-fects on SCHOTT Group’s net assets, financial position or results of operations.

■ IFRS 15 stipulates when and in what amount an IFRS reporting agent has to record revenue. In addition, the preparers of the financial statements are required to provide the recipients of the financial statements with more informative and relevant information than in the past. The standard provides a single, principle- based, five-step model to be applied to all contracts with customers.

IFRS 15 was published in May 2014 and is to be applied to reporting periods beginning on or after January 1, 2018. SCHOTT Group is currently analyzing the impact of the new regulations. At present, we do not expect the new regulations to have a significant impact on the group’s financial position and results of operations. Nevertheless, the timing of sales real-ization may change for certain orders.

■ IFRS 16 Leases was issued by the IASB in January 2016. The stan-dard mainly contains new rules for the classification of lease arrangements with the lessee. This means that the previously applicable risk and rewards approach is abandoned in favor of accounting for all leases in the form of a right-of-use asset and a corresponding leasing obligation. Exceptions to this rule apply only to leases with a maturity of up to twelve months or to low-value assets. On the other hand, lessors continue to classify leasing arrangements as operating or finance leases based on the assessment of the risks and rewards.

IFRS 16 is to be applied to reporting periods beginning on or after January 1, 2019. After an initial quantitative analysis on the basis of the existing contract portfolio, we are currently assum-ing that the new regulations will result in additional total assets in the medium double-digit million range, an increase in EBIT and a slight decline in the equity ratio.

Application mandatory

for fiscal years beginning on

or after

Adopted by the EU

Commission

STANDARDS

IFRS 9 Financial Instruments Jan. 1, 2018Yes,

Nov. 22, 2016

IFRS 14 Regulatory Deferral Accounts Jan. 1, 2016 No

IFRS 15Revenue from Contracts with Customers Jan. 1, 2018

Yes, Sep. 22, 2016

IFRS 16 Leases Jan. 1, 2019 No

Various

Amendments to IFRS 10, IFRS 12 and IAS 28 “Investment Entities: Applying the Consolidation Exception” Jan. 1, 2016

Yes, Sep. 22, 2016

IAS 1Amendments to IAS 1 “Disclosure Initiative” Jan. 1, 2016

Yes, Dec. 18, 2015

VariousAnnual Improvement Cycle 2012 – 2014 Jan. 1, 2016

Yes, Dec. 15, 2015

Various

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate/Joint Venture” Jan. 1, 2016 No

IAS 27Amendments to IAS 27 “ Separate Financial Statements” Jan. 1, 2016

Yes, Dec. 18, 2015

Various

Amendments to IAS 16 and IAS 41 “Agriculture: Bearer Plants” Jan. 1, 2016

Yes, Nov. 23, 2015

Various

Amendments to IAS 16 and IAS 38 “Clarification of Accept-able Methods of Depreciation and Amortization” Jan. 1, 2016

Yes, Dec. 2, 2015

IFRS 11Amendments to IFRS 11 “Joint Arrangements” Jan. 1, 2016

Yes, Nov. 24, 2015

IAS 12

Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses” Jan. 1, 2017 No

IAS 7

Amendments to IAS 7 “Statement of Cash Flows: Disclosure Initiative” Jan. 1, 2017 No

IFRS 15Clarifications to IFRS 15 “Revenue from Contracts with Customers” Jan. 1, 2018 No

IFRS 2

Amendments to IFRS 2 “Classifi-cation and Measurement of Share-based Payment Transac-tions” Jan. 1, 2018 No

IFRS 4

Amendments to IFRS 4: Applica-tion of IFRS 9 “Financial Instru-ments” Together with IFRS 4 “Insurance Contracts” Jan. 1, 2018 No

SCHOTT does not make use of any existing options for early application. These standards are implemented in the consolidated financial statements on the date of mandatory application. Only those standards that SCHOTT expects will or might have a signifi-cant impact over and above additional notes disclosures are de-scribed in detail as follows.

48 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Voting rights and capital shares remained unchanged com-pared to September 30, 2015.

Cumulated balance of substantial non-controlling interests:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

SCHOTT Finanzierungs- und Verwaltungs GmbH 65,443 60,016

Financial information on the subsidiary is shown below in

summarized form. This information is based on amounts before eliminations that were made between the subsidiary and other group companies.

Summarized profit and loss statement for fiscal year 2015/2016:

(in EUR thousands) 2015/2016 2014/2015

General administrative expenses – 31 – 1

Other operating income 566 0

Net financial income/expense 405 0

INCOME BEFORE TA XES FROM CONTINUING OPER ATIONS 940 – 1

Income tax expenses – 300 0

INCOME FROM CONTINUING OPER ATIONS 640 – 1

TOTAL COMPREHENSIVE INCOME 640 – 1

of which attributable to non-controlling interests 427 – 1

of which attributable to the owner of SCHOTT AG 213 0

Summarized statement of financial position as of Septem-ber 30, 2016:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Non-current financial assets 80,817 86,740

Other non-current liabilities 3,018 3,260

Other current receivables 28 0

Cash and cash equivalents 14,610 24

Non-current provisions – 300 0

Current provisions – 9 0

TOTAL EQUIT Y 98,164 90,024

Of which attributable to:

non-controlling interests 65,443 60,016

shareholders of the parent company 32,721 30,008

— 03 IMPORTANT ACCOUNTING POLICIE S AND METHODS

OF CONSOLIDATION

3.1 Consolidated group, acquisitions and divestmentConsolidated group

In addition to SCHOTT AG, 9 domestic (previous year: 9) and 48 foreign subsidiaries (previous year: 52) were included in the consolidated financial statements. A subsidiary is included using the full consolidation method from the date on which SCHOTT exercises a controlling influence. SCHOTT exercises a controlling influence if it is exposed to variable returns from its involvement in the company or has entitlements to these and may affect yields by its control over the company. Four companies (previous year: four) were included in the consolidated group as of the balance sheet date of the reporting period using equity method accounting.

In the 2015/2016 fiscal year, the scope of consolidation de-creased by four units due to their departure from the consolidated group. There were no additions to the scope of consolidation and mergers within the scope of consolidation in the year under re-view.

Disposals to the consolidated groupShare of

voting rights Date

Finance Investment Fund I, LLC, Santa Fe/USA* 0 %Dec. 31,

2015

Finance New Mexico-Investor Series I, LLC, Santa Fe/USA* 0 %

Dec. 31, 2015

SCHOTT Solar S.L., Aznalcóllar/Spanien** 100 %April 12,

2016

SCHOTT Termofrost AB, Arvika/Schweden*** 100 %Aug. 31,

2016 * Liquidated on Jan. 19, 2016** Shares sold in fiscal year*** Deconsolidated due to immateriality

Please refer to the separate list of shareholdings with respect to the disclosures required by section 313 (2) HGB.

AcquisitionsThere were no acquisitions that had any significant effect on

the assets, financial and earnings position in fiscal year 2015/2016.

Subsidiaries with substantial non-controlling interests SCHOTT Finanzierungs- und Verwaltungs GmbH was founded

on September 9, 2015. Substantial non-controlling interests are held in this company.

Ownership share of non-controlling interests:

Sept. 30, 2016

Name

Country of incorpora-tion and principal place of business

Voting rights

Equity shares

SCHOTT Finanzierungs- und Verwaltungs GmbH Germany 25 % 67 %

Notes to the Consolidated Financial Statements – General Information 49

The share of equity allocated to third parties not associated with the group is reported under equity in the consolidated state-ment of financial position as “Non-controlling interest.”

Intercompany receivables and liabilities as well as expenses and income of the consolidated companies are offset against each other as part of consolidation. Intercompany profits or losses from deliveries and services to other group companies are likewise eliminated.

If the group does not hold a majority of the voting rights or similar rights of a shareholding, it takes into account all relevant facts and circumstances when assessing whether it has control over this company. This includes:

■ a contractual agreement with the other voters, ■ rights arising from other contractual arrangements, ■ voting rights and potential voting rights of the group.

The income, assets and liabilities of significant associates are included using equity method accounting in accordance with IAS 28 Investments in Associates. Associated companies are equity investments over which the investor has significant influence. As a rule, SCHOTT’s accounting policies are also applied to its associ-ates. Companies under joint management within the meaning of IFRS 11 Joint Arrangements are also accounted for using the equity method. In the fiscal year, SCHOTT Group was not involved in joint operations as defined by IFRS 11 Joint Arrangements.

The shares are presented at cost when first recognized in the statement of financial position and adjusted during subsequent measurement by making changes in the proportionate share of the group in the equity (net assets) after the acquisition date as well as by losses resulting from impairments.

3.3 Currency translationThe separate financial statements of the foreign group compa-

nies were translated based on the functional currency concept in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. The functional currency of the relevant companies is their respective national currency, since all of their economic, financial and organizational operations are carried out independently in their national currencies.

Summarized cash flow statement for fiscal year 2015/2016:

(in EUR thousands) 2015/2016 2014/2015

Operating activities 949 – 1

Investing activities 6,165 – 90,000

Financing activities 7,472 90,025

NET INCRE ASE IN CASH AND CASH EQUIVALENTS 14,586 24

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 14,610 24

Consolidated Special Purpose EntitiesSCHOTT Group held no ownership interests in the two struc-

tured companies Finance Investment Fund I, LLC, Santa Fe/USA and Finance New Mexico-Investor Series I, LLC, Santa Fe, USA up until liquidation of these companies. The connections to the two companies arise solely in connection with public sector funding in the US and were ended as scheduled in fiscal year 2015/2016. Based on the terms of the agreement that these companies were formed under, SCHOTT Group had come to the conclusion that it controls these companies in accordance with IFRS 10. Since the ownership interests in these entities were recognized as debt by the group, no non-controlling interests were held in these companies.

3.2 Consolidation methodsIn accordance with IFRS 3 Business Combinations, capital is

consolidated using the acquisition method. The cost of a business acquisition is measured as the sum of consideration transferred, measured at fair value as of the acquisition date, and the non- controlling interest in the acquired company. For each business combination, SCHOTT decides whether to measure the non- controlling interest in the acquired company at fair value or at the corresponding share of the acquired company’s identifiable net assets. Costs incurred as part of the business combination are recorded as expense.

Goodwill is first recognized at cost, measured as the excess of the total consideration transferred and the amount of the share of non-controlling interest over the acquired identifiable assets and liabilities assumed by the group.

50 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

SCHOTT also concludes based on the program’s current struc-ture that with respect to the receivables sold the significant risks and opportunities are neither transferred nor retained and that they are to be completely removed from SCHOTT’s consolidated financial statements in accordance with IAS 39. A so-called “con-tinuing involvement” with respect to the retained late-payer risk is presented. For further information, please refer to Note 33.2.

Use of estimatesThe preparation of financial statements in accordance with

IFRSs requires estimates that influence the measurement of assets and liabilities, the type and scope of contingent liabilities, and concrete purchase commitments as of the balance sheet date, as well as the level of income and expenses in the reporting period. The assumptions and estimates mainly relate to the uniform group- wide determination of the economic life of depreciable property, plant and equipment and intangible assets (Notes 14 and 15), the impairment of goodwill (Note 14), the collectability of receivables (Note 33), and the accounting treatment and measure-ment of provisions (Notes 26 and 28) as well as the feasibility of future tax relief when recognizing and measuring deferred tax assets (Note 11). The assumptions and estimates are based on premises that are in turn based on the most current information available at the time. However, these estimates and assumptions regarding future development can be revised due to market fluc-tuation and relationships outside the group’s sphere of influence. Thus, the actual results can differ from the estimates. Changes are recognized in profit or loss as the actual results become clear.

In particular, our expectations with respect to the business trend are based on both the circumstances prevailing when the consolidated financial statements are prepared as well as our real-istic expectations regarding the future development of the indus-try and global environment.

3.5 Accounting policiesGeneral

The consolidated financial statements of SCHOTT AG were prepared on the basis of historical cost, with the exception of the remeasurement of certain financial instruments at fair value, based on uniform group accounting and valuation methods.

The main accounting policies have not changed since the pre-vious year and are described below.

Foreign currency receivables and payables in the separate financial statements of group companies are translated at the currency rates applicable on the balance sheet date. Translation differences arising therefrom are recognized in profit or loss under other operating expenses or other operating income as appro-priate.

The assets and liabilities of subsidiaries whose functional cur-rency is not the euro are translated at the mean rate of exchange on the balance sheet date, while their expenses and income are translated at the average exchange rate of the month in which the transaction took place. Equity is translated at historic rates of ex-change. Resulting translation differences are not reported in the income statement, but instead in a separate line item of equity.

The following table shows the exchange rates of the foreign currencies of greatest importance to SCHOTT Group:

Mean rate of exchange on the balance sheet date

Sept. 30Average rate

for the fiscal years

1 Euro = 2016 2015 2015/2016 2014/2015

Japanese yen 113.63 134.41 126.21 137.06

Swiss franc 1.09 1.09 1.09 1.11

Singapore dollar 1.53 1.59 1.54 1.55

Czech koruna 27.02 27.18 27.05 27.48

Hungarian forint 309.60 313.65 312.69 308.80

US dollar 1.12 1.12 1.11 1.17

3.4 Significant discretionary decisions and estimatesProperty leasing company

SCHOTT Group holds 100 % of the interest in a property leas-ing company. The properties owned by this company are used by SCHOTT in a finance lease arrangement and correspondingly rec-ognized. The carrying amount of this recognized finance lease amounted to EUR 19.1 million as of the balance sheet date Sep-tember 30, 2016, while the corresponding financial lease liability was EUR 17.0 million. Furthermore, the property leasing company has no significant material assets or liabilities. Consolidation of the property company would only have an immaterial impact on the presentation of the group’s financial position, financial perfor-mance and cash flows and for this reason is not carried out.

Sale of trade receivablesSCHOTT AG sells trade receivables on a revolving basis under

an asset-backed securities program. SCHOTT has reviewed wheth-er an obligation to consolidate could arise under IFRS 10 and came to the conclusion that no relevant activities remain with SCHOTT due to the structuring, therefore consolidation in accordance with IFRS 10 is out of the question.

Notes to the Consolidated Financial Statements – General Information 51

The fair value of an asset or a liability is measured based on the assumptions that the market participants would apply to the asset or liability when forming a price, whereby it is assumed that the market participants are acting in their best economic interests.

When measuring the fair value of a non-financial asset, the ability of the market participant is taken into account by means of the highest and best use of the asset or by means of sale to another market participant who will find the highest and best use for the asset in order to generate economic benefit.

SCHOTT applies measurement techniques that are appropri-ate under the respective circumstances and for which sufficient data is available to measure fair value, whereby the use of observ-able inputs is to be maximized while keeping unobservable inputs to a minimum.

All assets and liabilities for which fair value is determined or presented in the financial statements are categorized in the fair value hierarchy described below, based on the input parameters of the lowest level that is significant to the entire fair value mea-surement:

■ Level 1: Prices quoted (unadjusted) in active markets for identical assets or liabilities

■ Level 2: Valuation methods for which the input parameter of the lowest level that is significant to the entire fair value measure-ment can be directly or indirectly observed on the market

■ Level 3: Valuation methods for which the input parameter of the lowest level that is significant to the entire fair value measure-ment cannot be observed on the market.

For assets and liabilities that are recognized on a periodic basis in the financial statements, SCHOTT determines whether there have been any reclassifications between the hierarchy levels by re-viewing the classification at the end of each reporting period (based on the input parameter of the lowest level that is significant to the entire fair value measurement).

External appraisers are brought in as needed for the measure-ment of significant assets, such as property, as well as significant liabilities, such as contingent consideration. Selection criteria in-clude, for instance, market knowledge, reputation, independence and compliance with professional standards.

Recognition of sales revenue and other revenueSales are posted after deducting sales rebates, cash discounts

and sales-dependent taxes. They are considered to be realized when the deliveries and services due have been supplied or the significant risks and rewards of ownership have been transferred. In addition, payment must be sufficiently probable. In economic terms, the issuing of a license for an indefinite period is treated as a sale and results in the immediate realization of income, while the issuing of a license for a limited period is spread proportionately over the period of use. Interest income is recognized pro rata tem-poris. Dividends are recognized when the right to receive pay-ment arises.

Recognition of expensesCosts incurred in order to generate revenue and the purchase

prices of trading transactions are reported under cost of sales. This item also includes expenses related to the allocation of provisions to cover warranties.

Selling costs include personnel and non-personnel costs, de-preciation related to the sales function, the costs of shipping, advertising, sales promotion, market research and sales costs and outbound freight.

General administrative expenses include personnel and non- personnel costs and depreciation attributable to administrative operations.

Taxes chargeable as expenses, such as property tax and motor vehicle tax, are assigned to manufacturing, research and develop-ment, sales and administrative costs based on how they were ac-tually caused.

Fair Value MeasurementSCHOTT measures certain financial instruments, for example

derivatives and other securities, at fair value on every balance sheet date. The fair value of financial instruments measured at amortized cost is presented in Note 33.

The fair value is the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants on the measurement date. Fair value is mea-sured based on the assumption that the transaction to sell the as-set or transfer the liability takes place either in the principal market for the asset or liability or in the most advantageous market for the asset or liability in the absence of a principal market.

The group must have access to the principal market or the most advantageous market.

52 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Property, plant and equipmentProperty, plant and equipment is recognized at its cost less

accumulated depreciation and impairment losses. Subsequent measurement is carried out in accordance with the cost model (IAS 16.30). This also applies to spare parts that are used for longer than one period. Investment property that is presented under property, plant and equipment for reasons of materiality is also recognized based on the cost model. In addition to direct material and labor costs, the production cost of self-constructed property, plant and equipment also includes a share of indirect costs as well as borrowing costs as long as the requirements of IAS 23 are met. Property, plant and equipment is depreciated according to the straight-line method. Additions during the course of the year are depreciated pro rata temporis.

If significant parts of a non-current asset have different useful lives, they are recognized as separate non-current assets and de-preciated accordingly (component accounting). At SCHOTT Group, this affects in particular large machines for manufacturing special-ized glass products and buildings.

Depreciation is based on the following useful lives:

Years

Buildings 10 to 50

Technical equipment, plant and machinery 5 to 25

Other equipment, factory and office equipment 3 to 20

Maintenance and repairs are expensed, while investment in replacement and expansion as well as dismantling and waste dis-posal commitments is capitalized. Gains and losses on the disposal of non-current assets are recognized under other operating income and other operating expenses respectively.

Government grantsGovernment grants are not recognized until it is reasonably

certain that SCHOTT will be able to meet the associated terms and conditions and the grant will actually be approved. Government grants for assets are deducted from their cost. Other government grants are recognized as income over the period that is necessary to allocate the corresponding expenses against which they are to be offset.

In order to meet the reporting requirements for the fair values, SCHOTT has established groups of assets and liabilities on the basis of their nature, features, and risks as well as the level of the fair value hierarchy described above.

Research and development expensesResearch costs are always expensed.Development costs must be recognized if certain conditions

are documented and cumulatively met. For instance, it must be possible to use or sell the internally generated intangible asset, resulting in an economic benefit flowing to the company. The first-time recognition of costs is based on the estimate of verifiable technical and economic realization, which is normally the case if a product development project reaches a certain milestone in an existing product management model. In order to determine the recognizable amounts, assumptions are made regarding the future cash flow level from assets, applicable discount rates, and the pe-riod in which asset-generating cash flows are expected to accrue. Further details, including the carrying amounts, can be found un-der Notes 6 and 14.

Development costs that cannot be capitalized are expensed.

Intangible assetsIntangible assets are recognized if (a) the intangible asset can

be identified (i.e. can be separated or results from contractual or other rights), (b) it is probable that future economic benefits will flow to SCHOTT Group from the intangible asset, and (c) the costs of the intangible asset can be reliably determined. Intangible as-sets with finite useful lives are recognized at cost and amortized over the estimated useful life or a shorter contract term using the straight-line method. Amortization of intangible assets with indef-inite useful lives is recognized in the income statement under the expense category corresponding to the function of the intangible asset for the company.

Useful life of intangible assets with finite useful lives:

Years

Development cost 5

Patents and licences 2 to 20

Software 3 to 4

Notes to the Consolidated Financial Statements – General Information 53

Investments accounted for using the equity methodThe carrying amounts of investments in associated companies

accounted for using the equity method are increased or decreased by the amount of proportionate income, distributed dividends, or other changes in equity. Any losses on the part of an associate that exceed the group’s investment in the investee are recognized only to the extent that the group has entered into legal or constructive obligations or made payments for the associate.

InventoriesInventories are measured at the lower of cost or net realizable

value; i.e. the estimated selling price in the ordinary course of busi-ness, less the estimated cost of completion and the estimated costs necessary to make the sale. The costs are determined on the basis of the weighted average cost. Production costs include ma-terial and personnel costs as well as direct overheads, including depreciation, calculated based on a normal utilization of plant capacities. Financing costs are taken into account in accordance with IAS 23.

Tax refund claims and tax liabilitiesIn accordance with IAS 12 Income Taxes, current tax assets

relate solely to claims for reimbursement of taxes on income. Cur-rent tax assets are recognized if the group can expect a corre-sponding reimbursement based on the applicable laws. On the other hand, a liability on current income taxes results as soon as an obligation arises.

Deferred taxesUnder IAS 12 Income Taxes, deferred tax assets and liabilities

are recognized for all temporary differences between tax and financial (IFRS) accounts, tax credits, and tax loss carry-forwards. We use the tax rates applicable as of the balance sheet date when calculating deferred tax assets and liabilities. The effects of tax rate changes on deferred taxes are recognized when changes to rele-vant laws are enacted. Deferred tax assets are recognized only to the extent that temporary differences, tax loss carry-forwards, or tax credits can probably be offset against future taxable income. When determining the amount of deferred tax assets, manage-ment must use considerable discretion with respect to the timing and amount of future taxable income as well as future tax plan-ning strategies. In contrast to the period of three years basically used for planning, tax planning takes place for accordingly ex-tended periods of up to five years. Further details, including carry-ing amounts, can be found under Note 11.

Impairment of non-financial assetsGoodwill acquired for consideration as part of business combi-

nations is subjected to an impairment test at least annually. This takes place regardless of whether concrete facts and circum-stances (triggering events) indicate that an impairment loss may be needed. For the purposes of this impairment test, the assets are assigned to cash-generating units that benefit from their use. In accordance with the provisions of IAS 36, an impairment loss is recognized if the carrying amount of the cash-generating unit to which the goodwill is assigned exceeds its recoverable amount. The recoverable amount of a cash-generating unit is the higher of the fair value of the cash-generating unit less costs to sell and its value in use. The value in use is determined based on a discounted cash flow method for each cash-generating unit. If the carrying amount of a cash-generating unit exceeds its recoverable amount, the goodwill is impaired to its recoverable amount. Impairment losses on goodwill are not reversed in future periods.

The remaining intangible assets and property, plant and equipment are only subjected to an impairment test if there are indications that an impairment loss may be required. Assets must be adjusted for impairment if the carrying amount exceeds the net sales proceeds that would result from an arm’s length sale or the value in use. The value in use is ascertained on the basis of the ex-pected future cash flows that the asset will probably generate over the period of use. If there is any indication that reasons that led to an impairment loss in the past no longer apply, a test is conducted to determine whether the impairment is to be reversed up to the amortized carrying amount.

The planning periods used always comprise three years. This planning is based on values drawn from past experience as well as management’s best possible estimate of future development. Lon-ger planning periods of up to ten years are only used when devel-oping new business areas, as meaningful historical figures are not yet available. The long-term growth rate used in planning amounts to 1.0 % p.a.

The expected cash flows are discounted with the weighted av-erage cost of capital. These capital costs are derived from capital market-oriented models and also from the debt-equity ratios and borrowing costs of comparable companies in the industry (peer group). In the reporting period, discount rates determined in this manner ranged between 7.9 % and 9.9 % before taxes (previous year: between 8.4 % and 10.3 %), adjusted to other currency areas where necessary. Further details, including carrying amounts, can be found under Notes 14 and 15.

54 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Discontinued operations are presented separately as soon as a component of an entity that represents a major line of business or geographical area of operations or a subsidiary acquired specifi-cally to be resold is available for sale and management has initiat-ed an official sales process. The first time a division is presented as a discontinued operation, the previous year’s figures are adjusted in accordance with IFRS 5.34. If the company decides not to sell a division and it is accounted for as a continuing operation again, then the information from the current and previous years with respect to the consolidated statement of income and the cash flow statement will be shown under the results and cash flows from continuing operations in accordance with IFRS 5.36. On the balance sheet date September 30, 2016, the “Photovoltaics,” “Advanced Optics Lithotec,” “Display Glass,” and “Traditional Television Glass” divisions met the requirements for discontinued operations. Lagging expenses, revenues and cash flows arise from these divisions even after they were discontinued.

Earnings from discontinued operations comprised of net cur-rent and disposal income are presented separately in the income statement.

Pension plans and similar commitmentsDefined contribution plans are expensed in the period in

which the payment obligation arises. There is no requirement to recognize an obligation in the case of pure contribution commit-ments. Defined benefit pension commitments are measured using the projected unit credit method stipulated in IAS 19 Employee Benefits, taking future salary and pension adjustments into account. Revaluations, including actuarial gains and losses, the effects of asset ceilings without taking net interest (not applicable to the group) into consideration, and income from plan assets without taking net interest into consideration, are recognized immediately in retained earnings. Pension commitments in Germany are deter-mined on the basis of the biometric bases of calculation set forth in the Heubeck Mortality Tables 2005 G.

Sales taxExpenses and assets are recognized net of sales tax. The fol-

lowing cases are exceptions:

■ If the sales tax that is incurred when assets are purchased or services are utilized cannot be reclaimed by the tax authorities, the sales tax is recognized as part of the cost of manufacturing the asset or as part of the expenses.

■ If assets and liabilities are recognized together with the amount of VAT contained therein.

■ With group companies, for which only a pro rata refund of the sales tax is possible, the non-refundable portion of the tax will not be deducted.

■ With group companies, for which no VAT refund is possible, no sales tax will be deducted.

The sales tax amount, which is to be reimbursed by or paid to the tax authorities, is reported in the statement of financial posi-tion under receivables or payables.

Other financial assets, non-currentThis item includes deferred expenses for goods or services

received that have been paid in advance, receivables from other taxes, as well as entitlements to investment grants or government subsidies. These receivables do not meet the definition of a finan-cial instrument and are measured at fair value.

Cash and cash equivalentsSCHOTT treats cash on hand, demand deposits, and time de-

posits with original maturities of up to three months as cash and cash equivalents. These cash and cash equivalent funds meet the criteria of IAS 7 Statement of Cash Flows.

Non-current assets held for sale and discontinued operationsIf non-current assets are held for sale, no further amortization

or depreciation is applied; instead, the fair value is determined. Impairment write-downs are recognized if the carrying amount of these assets exceeds the fair value less expected costs to sell. The fair value basis is an estimate of the probable sales proceeds. The operating results and write-downs on assets held for sale are reported under profit or loss from operating activities.

Notes to the Consolidated Financial Statements – General Information 55

Provisions for litigation risksProvisions are recognized for risks arising from litigation in

which a SCHOTT Group company appears as either the defendant or the plaintiff. The amount recognized corresponds to the amount likely to be paid in the event of a negative outcome. This includes in particular compensation for damages, settlements, litigation costs, and penalties.

Accrued liabilitiesAn accrued liability is recognized if a current legal or construc-

tive obligation to third parties has arisen that will result in a prob-able outflow of resources, whereby the timing or the amount of the probable outflow of resources is no longer uncertain (in con-trast to provisions). The financial debts reported are recognized at amortized purchase cost.

Other non-financial liabilitiesOther non-financial liabilities include advance payments re-

ceived for orders, other tax liabilities, and other liabilities that do not meet the definition of financial liabilities. They are recognized at cost or the respective settlement amount.

LeasingThe determination of whether an agreement includes a lease

is made on the basis of the economic content of the agreement when it is formed, whereby an assessment is made regarding whether the fulfillment of the contractual agreement depends on the use of a certain asset or certain assets and whether the agree-ment grants a right to use the asset or assets, even if this right is not expressly stated in the agreement.

The group as the lesseeSCHOTT has entered into lease transactions primarily as the

lessee. Insofar as SCHOTT substantially bears all of the risks and rewards of the use of the leased asset under leasing transactions and is thus to be seen as the economic owner (finance lease), the leased asset is recognized under non-current assets at the present value of the minimum lease payments which cannot be terminat-ed. These assets are depreciated over their useful life or the shorter term of the lease. A lease liability of equal amount is recognized. All other lease agreements in which SCHOTT is the lessee are treat-ed as operating leases; as a consequence, the lease payments are recognized as an expense.

Past service cost is recognized as an expense either at the time at which the plan adjustment/cut takes place or when the costs associated with the restructuring or termination of employment are recorded. Here the earlier shall prevail. Accordingly, the not yet vested past service costs can no longer be distributed over the future vesting period.

Pension commitments outside of Germany are determined using local parameters and bases of calculation.

The projected benefit obligation at the end of the year is com-pared with the present value of vested benefits (financing status), whereby the assets are offset by the corresponding commitments. The provisions for pension commitments also include a small amount of employee-financed pension commitments (deferred compensation).

Such estimates are subject to significant uncertainty due to the long-term nature of these plans. Further details, including carry-ing amounts, can be found under Note 26.

Other provisionsIn accordance with IAS 37 Provisions, Contingent Liabilities and

Contingent Assets, SCHOTT recognizes provisions for obligations to third parties if the company has a present obligation as a result of a past event, an outflow of resources embodying economic benefits that will probably (i.e., more likely than not) be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions with a remaining term of more than one year are recognized at their discounted settlement amount.

Restructuring provisionsRestructuring provisions are recognized if a restructuring plan

is available and restructuring has already begun or the respective parties have been informed as of the balance sheet date. The amount of the provision includes all direct expenditure necessarily incurred within the scope of restructuring which is not associated with the ongoing or future activities of the company.

Warranty provisionsWarranty provisions are reported together with other provi-

sions arising in connection with sales under sales provisions. War-ranty provisions are determined on the basis of known individual cases, historical data, and empirical values. The original estimate of costs related to warranties is reviewed annually. Due to their nature and the multi-year period of some warranties, provisions for warranties are based on estimates that are fraught with signifi-cant uncertainties.

56 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

— 05 SELLING AND GENER AL ADMINISTR ATIVE E XPENSE S

Selling costs include in particular personnel and non-person-nel costs, depreciation and impairment losses related to sales functions, and logistics, market research, shipping, advertising, and certification costs. Personnel and non-personnel costs of the management and administrative centers are reported under gen-eral administrative expenses, unless they have been charged to other functional areas as internal services.

— 06 RE SE ARCH AND DEVELOPMENT E XPENSE S

Research and development expenses decreased by EUR 5.0 mil-lion to EUR 73.6 million in fiscal year 2015/2016 (this equates to 3.7 % of sales; previous year: 4.1 %).

— 07 OTHER OPER ATING INCOME

Income reported under other operating income includes ac-crued amounts related to operating activities that are not attribut-able to other individual items.

(in EUR thousands) 2015/2016 2014/2015

Income from insurance payments 24,413 38,877

Income from reversal of provisions/accrued l iabilities 12,295 10,167

Income from commissions, rental and licensing 6,015 7,003

Income from the reversal of impairments on tangible fixed assets 4,959 0

Income from disposal of property, plant and equipment 3,011 5,891

Income from governments grants and refunds 2,821 7,255

Income from the reversal of allowance/ impairments on receivables and other assets 2,465 3,961

Proceeds from scrap sales 1,462 2,361

Income from changing the pension plan 1,117 25,085

Income from on-charging 987 3,112

Income from taxes not related to income 931 301

Income from changes in the consolidated group 720 4,372

Other 4,191 6,097

65,387 114,482

Income from insurance benefits relates primarily to services related to fire damages in Duryea, Pennsylvania, USA.

The income from write-ups of property, plant and equipment relates to SCHOTT Schweiz AG, St. Gallen/Switzerland, and can be attributed to higher expectations compared to the previous year.

As in the previous year, income from grants and reimburse-ments relates in full to public-sector grants for which the condi-tions for the collection are definitely met.

The group as the lessorThe group sometimes acts as the lessor, particularly with

buildings. Since all of the opportunities and risks associated with the ownership of the asset are not transferred from the group to the lessee under these leases, they are classified as operating leases. Initial direct costs arising during the negotiations and upon the formation of an operating lease are subtracted from the carrying amount of the leased asset and recognized as expense accordingly as rental income is earned over the term of the lease. Conditional rent payments are recognized as income in the period in which they are earned.

Contingent assets and liabilitiesThese are potential assets or liabilities which are the result of

past events and whose existence is dependent on the occurrence or non-occurrence of one or several future events over which SCHOTT does not have full control. Contingent liabilities can also be current liabilities that are the result of a past event in which a resulting outflow of resources is improbable or cannot yet be reli-ably determined. In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, they are not recognized.

NOTES TO THE STATEMENT OF INCOME AND THE STATEMENT OF FINANCIAL POSITION

— 0 4 SALE S

2015/2016 2014/2015

(in EUR

thousands) %(in EUR

thousands) %

Germany 280,330 14.1 276,143 14.3

Rest of Europe 626,078 31.4 597,741 31.0

Asia and South Pacific 508,927 25.6 473,122 24.6

North America 457,562 23.0 445,618 23.1

Central and South America 106,106 5.3 117,596 6.1

Other regions 12,720 0.6 17,041 0.9

1,991,723 100.0 1,927,261 100.0

Sales result mainly from the sale of goods.

57Notes to the Consolidated Financial Statements – General Information/Notes to the Statement of Income and the Statement of Financial Position

— 09 INCOME/LOSS FROM INVE STMENTS ACCOUNTED

FOR USING THE EQUIT Y METHOD

Please refer to the comments in Note 16 “Investments ac-counted for using the equity method.”

Net income from investments accounted for using the equity method shown under consolidated net income can be broken down as follows:

(in EUR thousands) 2015/2016 2014/2015

SCHOTT KAISHA PRIVATE LIMITED, Mumbai/India 3,091 3,088

Empha SPA, Turin/Italy 1,504 1,395

SCHOTT-Italglas S.R.L., Genua/Italy 557 452

Glaverpane S.A., Jemeppe-sur-Sambre/Belgium 180 65

SENTECH Co. Ltd., Kanagawa/Japan 0 211

5,332 5,211

— 10 NET FINANCIAL INCOME/E XPENSE

(in EUR thousands) 2015/2016 2014/2015

Interest and similar income 1,720 1,703

of which from affiliated companies 7 5

Interest and similar expenses – 24,788 – 30,823

of which from affiliated companies – 422 – 916

of which pension-related interest expense – 21,337 – 25,899

NET INTEREST EXPENSE – 23,068 – 29,120

Income from investments in associates 1,524 3,564

Income from securities 570 1,665

Foreign exchange losses realized from the sale of securities – 5 – 5

Other financial expenses – 2,172 – 3,042

OTHER NET FINANCIAL INCOME/EXPENSE – 83 2,182

TOTAL NET FINANCIAL INCOME/EXPENSE – 23,151 – 26,938

Interest expenses on pension plans are netted with the ex-pected income of plan assets and presented as net amounts. The expected return on plan assets is no longer determined on the basis of expected investment returns, but rather based on the level of the discount interest rate for pension commitments.

The pension plan for active employees was changed in the past fiscal year. This change has an impact on employees, in par-ticular, for whom the obligation extent was calculated proportion-ately before. Comprehensive transitional arrangements have been made for these employees. As a result of this change, past service costs in the amount shown above resulted, which were recog-nized in the income statement under the provisions of IAS 19. As a result of a further adjustment of the pension provisions for active employees, additional past service costs were recognized in the past financial year in a smaller amount, which were also recog-nized in the income statement.

The proceeds from the deconsolidation of SCHOTT Termo-frost AB, Arvika, Sweden, are included in income from changes in the consolidated group.

— 08 OTHER OPER ATING E XPENSE S

Other operating expenses under the cost of sales (function of expense) method include all expenses not assigned to production, sales, research and development or administrative functions, or that are disclosed separately elsewhere.

(in EUR thousands) 2015/2016 2014/2015

Impairment losses from property, plant and equipment and intangible assets 14,018 457

Expenses due to fire damages 9,613 30,856

Exchange losses 8,950 7,434

Restructuring expenses 5,032 29,449

Allowance/impairments on receivables and other assets 4,590 3,826

Expenses for write-downs of inventories 2,737 1,128

Charitable contributions 1,861 1,721

Expenses from the recognition of provisions/ accrued liabilities 1,785 5,221

Expenses from profit-independent taxes 1,776 2,521

Bank fees 1,587 1,305

Expenses for making changes to the consolidated group 497 511

Other 2,730 5,016

55,176 89,445

The expenses caused by fire damages in the past fiscal year mainly resulted from the repair of damaged assets and conse-quential costs.

A net amount of EUR 8,950 thousand (previous year: EUR 7,434 thousand) from exchange losses is reported under other operating income in fiscal year 2015/2016.

58 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The change in deferred taxes in fiscal year 2015/2016 as well as in the previous year is presented below:

2015/2016 2014/2015

(in EUR thousands)

Consolidat-ed income statement

Recognized in equity

Consolidat-ed income statement

Recognized in equity

Intangible assets – 863 – 14,439 751

Property, plant and equipment – 3,667 13,138

Inventories – 1,328 702

Current and non- current other assets – 751 3,078 – 170

Pension plans and similar commitments – 410 58,185 – 4,694 12,100

Current and non- current other provisions and accrued liabilities – 6,055 – 12,960

Current and non- current liabilities – 15,913 – 1,607

Tax loss carry- forwards 8,907 3,532

Other – 649 – 358

GROSS DEFERRED TA XES – 20,729 58,185 – 13,608 12,681

Exchange rate effects – 1,178 112

DEFERRED TA X EXPENSE – 21,907 – 13,496

of which for continu-ing operations – 20,724 – 13,988

of which for discon-tinued operations – 1,183 492

Deferred taxes on deductible temporary differences are recog-nized insofar as it is probable that the reversal of temporary differ-ences will be recognized in the tax accounts as a result of sufficient future taxable income. The same applies for deferred taxes on loss carry-forwards, considering their future application within the statutory loss carry-forward period. As a result of positive taxable earnings forecasts, in particular with respect to the tax group SCHOTT North America Inc., SCHOTT Nippon KK and SCHOTT France SAS, a deferred tax claim on loss carry-forwards and tem-porary differences totaling EUR 22,668 thousand will be recog-nized, although these companies suffered tax losses in the fiscal year just ended or in the previous year.

Based on an assessment of impairment, no deferred tax assets are recognized for certain loss carry-forwards or deductible differ-ences. There are loss carry-forwards, interest rate carry-forwards, and tax credits for which no deferred taxes are recognized totaling EUR 281,158 thousand (previous year: EUR 348,656 thousand) for corporate income tax or comparable foreign taxes, and EUR 195,182 thousand (previous year: EUR 185,832 thousand) for trade tax or comparable foreign taxes, and EUR 2,737 thousand (previous year:

— 11 INCOME TA XE S

Income taxes can be broken down according to their sources as follows:

(in EUR thousands) 2015/2016 2014/2015

Current tax – 38,140 – 41,697

Deferred tax – 20,724 – 13,988

INCOME TA X EXPENSE – 58,864 – 55,685

Deferred taxes are calculated on the basis of the tax rates that

will apply on the expected realization date, based on the legal environment in the individual countries. Trade tax together with the solidarity surcharge results in a tax rate totaling 30 % for German companies (previous year: 30 %). Tax rates outside of Germany lie between 9 % and 39 % (previous year: between 9 % and 39 %).

As of September 30, deferred tax assets and liabilities can be attributed to the following statement of financial position items:

Consolidated balance sheet

Sept. 30, 2016 Sept. 30, 2015

(in EUR thousands) Assets Liabilities Assets Liabilities

Intangible assets 17,518 8,666 18,324 8,609

Property, plant and equipment 14,210 26,822 24,669 33,614

Inventories 11,801 2,198 13,351 2,420

Current and non- current other assets 11,075 7,950 11,598 7,722

Pension plans and similar commitments 229,652 78 171,799 0

Current and non- current other provisions and accrued liabilities 24,810 9,400 26,311 4,846

Current and non- current liabilities 71,074 6,325 89,788 9,126

Tax loss carry- forwards 58,265 0 49,358 0

Other 255 0 904 0

GROSS DEFERRED TA XES 438,660 61,439 406,102 66,337

Offset amounts* 39,199 39,199 44,765 44,765

BAL ANCE SHEET STATEMENT 399,461 22,240 361,337 21,572

* Amounts offset with individual taxable entities

59Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

Effects from losses and temporary differences for which no tax claims could be recognized relate mainly to SCHOTT North America Inc. in the amount of EUR 6,823 thousand and to SCHOTT Flat Glass do Brasil Ltda. in the amount of EUR 3,279 thousand. These amounts are offset by the effects of losses recognized for the first time in the amount of EUR 4,773 thousand at SCHOTT AG. Other effects in the amount of EUR 4,629 thousand resulted from being assigned to tax audit risks.

— 12 DISCONTINUED OPER ATIONS

In fiscal year 2015/2016, the “Photovoltaics” division met the main requirements for discontinued operations. Accordingly, the “Photovoltaics” area was reclassified to income from discontinued operations in the income statement of the reporting period and the previous year in accordance with rules under IFRS 5 governing the presentation of discontinued operations.

The results of the discontinued operations are as follows:

(in EUR thousands) 2015/2016 2014/2015

Sales 0 1,002

Cost of sales 0 – 175

GROSS PROFIT 0 827

Selling and administrative expenses – 3,359 – 5,835

Other operating income 11,041 12,833

Other operating expenses – 5,550 – 5,662

Net financial income/expense – 2,239 – 2,909

INCOME BEFORE TA XES – 107 – 746

Income tax expenses – 1,783 444

INCOME AFTER TA XES – 1,890 – 302

Expenses include mainly expenses for real estate leasing and guarantees. The Photovoltaics division’s other operating income includes insurance reimbursements, a compensation payment for buildings under a leasehold contract, income from rentals and leases from sublease contracts, the reversal of provisions and ex-change rate gains from loans denominated in foreign currencies. Other operating income in the item Other relates in particular to the release of provisions for litigation costs in connection with business units discontinued in previous years.

The loss before income taxes amounted to EUR 107 thousand (previous year: EUR 746 thousand).

EUR 2,648 thousand) for tax credits. Furthermore, no deferred taxes were recognized on future deductible differences amounting to EUR 26,987 thousand (previous year: EUR 7,091 thousand). The resulting unrecognized deferred tax assets amount to EUR 99,240 thousand (previous year: EUR 107,919 thousand) on loss carry- forwards, interest rate carry-forwards and tax credits and EUR 7,247 thousand (previous year: EUR 1,774 thousand) with differences that will be deductible in the future.

EUR 2,923 thousand of the unrecognized losses carried for-ward expire after three years, EUR 2,490 thousand after four years, and an additional EUR 44,673 thousand after five years or more. There is no time limit on the use of additional unrecognized loss carry-forwards.

An increase of EUR 58,185 thousand (previous year: EUR 12,681 thousand) in deferred tax assets was recognized in other compre-hensive income in the reporting period. EUR 58,185 thousand (previous year: EUR 12,100 thousand) of this increase can be at-tributed to adjustments to pension provisions recorded directly in equity. As in the previous year, no deferred tax liabilities are taken into account in the reporting period for earnings retained by for-eign subsidiaries, since these earnings will be reinvested in the long term and no distributions are planned. If these earnings were to be distributed as dividends, this could result in an additional future tax liability of a maximum of EUR 8,090 thousand (previous year: EUR 7,477 thousand) under current tax law.

The following table shows a reconciliation from the expected to actual reported tax expense. In order to determine the expect-ed tax rate, the earnings of continuing operations before income taxes are multiplied by a tax rate of 30 % (previous year: 30 %). This comprises a tax rate of 15.8 % (previous year: 15.8 %) for cor-porate income tax, including the solidarity surcharge, and 14.2 % (previous year: 14.2 %) for trade tax:

(in EUR thousands) 2015/2016 2014/2015

E ARNINGS OF CONTINUING OPER ATIONS BEFORE INCOME TA XES 199,962 150,628

Calculated tax expense at the anticipated tax rate (30.0 %) 59,989 45,188

Effect of tax rate changes – 754 503

Non-deductible expenses 3,417 2,587

Tax-exempt components of income – 3,338 – 4,496

Tax difference due to foreign tax rates – 5,293 – 3,065

Change in valuation allowances on active deferred tax assets 4,474 8,849

Taxes relating to earlier periods – 2,751 – 608

Other 3,120 6,727

INCOME TA X ACCORDING TO THE INCOME STATEMENT 58,864 55,685

Taxation rate according to the consolidated financial statements 29.4 % 37.0 %

60 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

— 14 INTANGIBLE A SSETS

The scheduled review of the intrinsic value of goodwill was performed on June 30, 2016. The value in use served as the basis for determining the recoverable amount for the cash-generating unit that goodwill is assigned to. Further details can be found under Note 3.5.

The following table shows the main goodwill reported in the consolidated statement of financial position:

Cash- generating Unit W *

WACC after taxes

WACC before

taxes

Sept. 30, 2016 EUR

millions

Sept. 30, 2015 EUR

millions

Lighting and Imaging 1.0 % 6.3 % 8.9 % 4.1 4.1

Flat Glass 1.0 % 5.6 % 7.9 % 18.8 18.8

Pharmaceuti-cal Systems 1.0 % 6.4 % 9.1 % 28.5 29.4

Advanced Optics 1.0 % 7.0 % 9.9 % 8.1 8.1

* The growth rate that was used to extrapolate the cash flow forecasts

There were no impairment losses attributable to goodwill in the reporting year.

With all of the cash-generating units, the recoverable amount exceeds their carrying amounts. A negative change in a major assumption could, under certain circumstances, lead to an impair-ment loss for the cash-generating units “Advanced Optics” and “Flat Glass.” The weighted average cost of capital in particular and operating free cash flow (“OFCF”) following the detailed planning period (“terminal value”) are key factors in determining the recov-erable amount. With otherwise identical budget assumptions, an increase in the WACC (after taxes) of more than 1.9 percentage points (“Advanced Optics”) or 2.3 percentage points (“Flat Glass”) would lead to an impairment loss. Analogously, a failure to meet the planned OFCF in terminal value by more than 25 % (“Advanced Optics”) and 33 % (“Flat Glass”) would lead to an impairment.

The management firmly believes that no change considered reasonably possible to one of the basic assumptions used in deter-mining the utility value of the cash-generating units “Lighting and Imaging” and “Pharmaceutical Packaging” could result in the car-rying amount of the cash-generating units significantly exceeding their recoverable amount.

The impairment losses included in the depreciation shown in the following table consist of EUR 1,377 thousand (previous year: EUR 148 thousand) for other intangible assets and EUR 0 thousand (previous year: EUR 1,215 thousand) for development expenses. The impairment losses result from the fact that the value in use of the cash-generating units concerned was below the carrying amounts. These impairments are for the most part included in the statement of income in other operating expenses.

The following tables show the distribution of the results for the individual business units.

2015/2016 (in EUR thousands)

Photo-voltaics Other Total

Sales 0 0 0

Cost of sales 0 0 0

GROSS PROFIT 0 0 0

Selling and administrative expenses – 3,073 – 286 – 3,359

Other operating income 7,347 3,694 11,041

Other operating expenses – 5,550 0 – 5,550

Net financial income/expense – 2,239 0 – 2,239

INCOME BEFORE TA XES – 3,515 3,408 – 107

Income tax expenses – 1,721 – 62 – 1,783

INCOME OF DISCONTINUED OPER ATIONS – 5,236 3,346 – 1,890

2014/2015 (in EUR thousands)

Photo-voltaics Other Total

Sales 1,002 0 1,002

Cost of sales – 175 0 – 175

GROSS PROFIT 827 0 827

Selling and administrative expenses – 4,906 – 929 – 5,835

Other operating income 12,808 25 12,833

Other operating expenses – 5,662 0 – 5,662

Net financial income/expense – 2,909 0 – 2,909

INCOME BEFORE TA XES 158 – 904 – 746

Income tax expenses 173 271 444

INCOME OF DISCONTINUED OPER ATIONS 331 – 633 – 302

The discontinued operations’ cash flows are presented below:

(in EUR thousands) 2015/2016 2014/2015

Operating activities – 4,544 – 11,726

Investing activities 1,051 – 283

Financing activities – 1,063 – 233

— 13 INCOME/LOSS AT TRIBUTABLE TO

NON - CONTROLLING INTERE STS

Income attributable to non-controlling interests amounted to EUR 11,673 thousand (previous year: EUR 9,460 thousand). This was offset by losses totaling EUR 5,169 thousand (previous year: EUR 6,118 thousand).

61Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

(in EUR thousands)Development

costs

Patents, licenses and

similar rights Goodwill Total

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2014 4,475 120,898 170,737 296,110

Change in consolidated group 0 – 19,938 – 14,476 – 34,414

Additions 21 1,838 0 1,859

Disposals 0 15,099 4,157 19,256

Reclassifications – 12 690 0 678

Currency translation 0 2,614 2,208 4,822

BAL ANCE AS OF SEPT. 30, 2015 4,484 91,003 154,312 249,799

ACCUMUL ATED AMORTIZ ATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2014 3,000 93,612 103,128 199,740

Change in consolidated group 0 – 19,856 – 10,046 – 29,902

Current amortization* 1,484 6,868 0 8,352

Disposals 0 15,059 4,157 19,216

Currency translation 0 948 552 1,500

BAL ANCE AS OF SEPT. 30, 2015 4,484 66,513 89,477 160,474

CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2015 0 24,490 64,835 89,325

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2015 4,484 91,003 154,312 249,799

Change in consolidated group 0 – 1,070 0 – 1,070

Additions 0 1,687 0 1,687

Disposals 4,484 16,201 0 20,685

Reclassifications 0 1,329 0 1,329

Currency translation 0 – 267 – 1,004 – 1,271

BAL ANCE AS OF SEPT. 30, 2016 0 76,481 153,308 229,789

ACCUMUL ATED AMORTIZ ATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2015 4,484 66,513 89,477 160,474

Change in consolidated group 0 – 1,070 0 – 1,070

Current amortization* 0 7,632 0 7,632

Disposals 4,484 16,166 0 20,650

Currency translation 0 66 – 11 55

BAL ANCE AS OF SEPT. 30, 2016 0 56,975 89,466 146,441

CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2016 0 19,506 63,842 83,348

* Impairment losses are included in the accumulated amortization

62 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

— 15 PROPERT Y, PL ANT AND EQUIPMENT

Impairment losses on property, plant and equipment were recognized in the amount of EUR 16,541 thousand (previous year: EUR 13,034 thousand) in the fiscal year. These impairment losses can mainly be attributed to write-downs of property, plant and equipment at various production sites in Germany and abroad. The impairment losses attributable to technical equipment, plant and machinery amounted to EUR 6,058 thousand (previous year: EUR 7,963 thousand), EUR 6,222 thousand (previous year: 3,522 thousand) to land, land rights and buildings, EUR 1,743 thousand (previous year: EUR 1,145 thousand) to other equipment, factory and office equipment, and EUR 2,518 thousand (previous year: EUR 404 thousand) to assets under construction.

Impairment of EUR 12.834 thousand (previous year: EUR 7,398 thousand) was recognized under other operating expenses, EUR 0 thousand (previous year: EUR 6,941 thousand) of which under re-structuring expenses. Impairments of EUR 3,707 thousand (previ-ous year: EUR 5,637 thousand) were recognized in the functional areas, EUR 3,457 thousand (previous year: EUR 5,405 thousand) of which in cost of sales.

Reversals of impairment losses totaling EUR 4,983 thousand (previous year: EUR 395 thousand) relate to SCHOTT Schweiz AG, Switzerland, and are recorded primarily in other operating income.

Government grants totaling EUR 3,258 thousand (previous year: EUR 5,265 thousand) for assets in the fiscal year have been deducted from their purchase costs. These government grants can be mainly attributed to the subsidiary SCHOTT Hungary Kft., Hungary, which received government grants for manufactur-ing-related investment projects. Order commitments for non- current assets amount to EUR 24,025 thousand (previous year: EUR 35,785 thousand) as of the reporting date. As in the previous year, no significant borrowing costs as defined under IAS 23 were capitalized during the fiscal year just ended because there were no significant “qualifying assets.” Similarly, no collateral – for instance in the form of recorded liens on real property – was provided to third parties.

The column “Land, land rights and buildings” includes leased properties representing financial investments in accordance with IAS 40. For reasons of materiality, these properties are not shown separately in the statement of financial position.

63Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

(in EUR thousands)Land, land rights

and buildings

Technical equip-ment, plant and

machinery

Other equip-ment, operating

and office equipment

Assets under construction Total

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2014 657,040 1,539,694 293,926 89,910 2,580,570

Change in consolidated group – 17,950 – 4,059 – 5,790 – 3 – 27,802

Additions 8,059 48,010 10,964 89,548 156,581

Disposals 7,931 98,458 18,215 301 124,905

Reposting 11,608 57,348 6,285 – 75,919 – 678

Currency translation 4,585 3,529 – 2,196 675 6,593

BAL ANCE AS OF SEPT. 30, 2015 655,411 1,546,064 284,974 103,910 2,590,359

ACCUMUL ATED DEPRECIATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2014 414,587 1,142,652 234,363 509 1,792,111

Change in consolidated group – 12,168 – 3,046 – 5,245 0 – 20,459

Current depreciation* 21,481 83,670 20,327 410 125,888

Revaluations 294 35 66 0 395

Disposals 6,681 91,326 17,198 0 115,205

Reposting 0 52 – 51 – 1 0

Currency translation 3,786 7,830 – 1,992 – 149 9,475

BAL ANCE AS OF SEPT. 30, 2015 420,711 1,139,797 230,138 769 1,791,415

CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2015 234,700 406,267 54,836 103,141 798,944

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2015 655,411 1,546,064 284,974 103,910 2,590,359

Change in consolidated group – 2,693 – 19,476 – 4,588 0 – 26,757

Additions 18,325 58,550 17,251 78,417 172,543

Disposals 15,927 71,520 34,352 493 122,292

Reposting 20,298 48,692 9,161 – 79,480 – 1,329

Currency translation 3,828 9,280 5,267 – 204 18,171

BAL ANCE AS OF SEPT. 30, 2016 679,242 1,571,590 277,713 102,150 2,630,695

ACCUMUL ATED DEPRECIATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2015 420,711 1,139,797 230,138 769 1,791,415

Change in consolidated group – 2,693 – 19,476 – 4,588 0 – 26,757

Current depreciation* 25,396 79,878 21,352 2,518 129,144

Revaluations 490 4,088 405 0 4,983

Disposals 15,643 67,246 32,944 0 115,833

Reposting – 340 511 233 – 404 0

Currency translation 2,614 7,041 4,466 2 14,123

BAL ANCE AS OF SEPT. 30, 2016 429,555 1,136,417 218,252 2,885 1,787,109

CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2016 249,687 435,173 59,461 99,265 843,586

* Impairment losses are included in the accumulated amortization

64 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The change in equity recognized directly in equity as a result of exchange rate differences at SCHOTT KAISHA PRIVATE LIMITED amounts to EUR – 273 thousand (previous year: EUR 671 thousand). Due to the goodwill, it amounts to EUR – 89 thousand (previous year: EUR 291 thousand).

— 17 OTHER FINANCIAL A SSETS, NON - CURRENT

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Shares in unconsolidated affiliates 3,742 2,997

Loans / Loans to third parties and employees 1,117 1,805

Shareholdings 909 59

Loans to non-consolidated affiliated companies 33 33

Other financial receivables 136 541

5,937 5,435

Non-current other financial assets are divided into two mea-

surement categories, EUR 4,651 thousand (previous year: EUR 3,056 thousand) in “available for sale” and EUR 1,286 thousand (previ-ous year: EUR 2,379 thousand) in “loans and receivables” (see also the comments under Note 33.1 “Financial Assets and Financial Liabilities”).

There is no collateral on non-current financial assets.There are no non-current financial assets whose terms were

renegotiated or otherwise overdue or impaired.Shares in non-consolidated affiliates and shareholdings are

recognized as acquisition costs. No reliable market value can be determined with reasonable effort because there is no active market.

— 18 OTHER NON - FINANCIAL A SSETS, NON - CURRENT

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Prepaid expenses 318 332

Receivables from tax authorities 114 203

Other non-financial receivables 906 891

1,338 1,426

— 19 INVENTORIE S

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Raw materials and supplies 142,474 146,160

Work in progress 135,078 142,735

Finished goods and merchandise 196,789 193,620

Value adjustments – 101,924 – 108,847

372,417 373,668

— 16 INVE STMENTS ACCOUNTED FOR USING THE EQUIT Y

METHOD

Equity investments in associates and joint ventures accounted for using the equity method are shown in the following table:

Company CountryPrimary activity

Equity interest

Sept. 30, 2016

Sept. 30, 2015

Empha SPATurin, Italy Holding 50 % 50 %

Glaverpane S.A.

Jemeppe-sur-Sambre, Belgium Flat Glass 35 % 35 %

SCHOTT KAISHA PRIVATE LIMITED

Mumbai, India

Pharma-ceutical Systems 50 % 50 %

SCHOTT-Italglas S.R.L.Genua, Italy

Distribu-tion 50 % 50 %

The following overview summarizes the financial information

on investments accounted for using the equity method as of Sep-tember 30 (basis of calculation: 100 %):

2015/2016 (in EUR thousands)

Assets as of

Sept. 30

Liabilities as of

Sept. 30

Equity as of

Sept. 30 SalesNet profit

or loss

Glaverpane S.A.* 26,292 14,112 12,181 52,831 514

SCHOTT-Italglas S.R.L. 4,498 2,772 1,726 7,888 1,115

Empha SPA* 15,645 17 15,628 0 1,653

SCHOTT KAISHA PRIVATE LIMITED 68,785 33,204 35,581 52,756 6,181

115,220 50,104 65,116 113,474 9,463

* Balance sheet date: December 31, 2015 / Fiscal year from January 1, 2015, to December 31, 2015

2014/2015 (in EUR thousands)

Assets as of

Sept. 30

Liabilities as of

Sept. 30

Equity as of

Sept. 30 SalesNet profit

or loss

Glaverpane S.A.* 21,673 10,007 11,666 51,369 186

SCHOTT-Italglas S.R.L. 4,203 2,689 1,514 7,363 905

Empha SPA* 15,701 726 14,975 0 1,850

SCHOTT KAISHA PRIVATE LIMITED 61,156 31,210 29,946 50,994 6,175

102,733 44,632 58,101 109,726 9,116

* Balance sheet date: December 31, 2014 / Fiscal year from January 1, 2014, to December 31, 2014

65Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

The additions totaling EUR 3,476 thousand (previous year: EUR 3,040 thousand) comprise additions based on individual val-uation allowances totaling EUR 3.116 thousand (previous year: EUR 2,533 thousand) and general valuation allowances totaling EUR 360 thousand (previous year: EUR 507 thousand). The rever-sals include the reversal of individual valuation allowances in the amount of EUR 1,056 thousand (previous year: EUR 3,284 thou-sand) and the reversal of general valuation allowances in the amount of EUR 745 thousand (previous year: EUR 442 thousand).

Overdue receivables are written down after 90 days. A sum-mary of overdue trade receivables can be found in the risk man-agement report under the credit risk note.

The receivables portfolio does not include any receivables whose terms were renegotiated or otherwise overdue or written down. Apart from the usual title retentions, there is no loan collat-eral for trade receivables. Of the trade accounts receivable, EUR 40,294 thousand is covered by trade credit insurance.

— 21 OTHER FINANCIAL A SSETS, CURRENT

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Time deposits (term > 3 months, < 1 year) 55,000 0

Receivables from insurance companies due to fire damages 9,010 17,569

Positive market values from derivatives 4,294 6,408

Loan receivables 1,990 1,097

Other miscellaneous financial receivables 1,934 2,246

Creditors with debit balances 1,381 1,221

Factoring receivables 250 316

Other receivables from associates 9 9

Receivables from affiliates 0 154

Valuation allowance – 207 – 328

73,661 28,692

The term money deposits are money deposits with banks with a maturity of between three and four months, which bear interest on market terms.

Write-downs to the net realizable value amounting to EUR 7,000 thousand (previous year: EUR 17,059 thousand) as well as reversals due to changes in the estimated future sales volume amounting to EUR 8,714 thousand (previous year: EUR 2,937 thou-sand) were recognized on inventories in the reporting period. Fur-thermore, value adjustments in the amount of EUR 5,209 thou-sand (previous year: EUR 6,849 thousand) were made largely due to the disposal of consolidated companies. The carrying amount of inventories that were recognized at fair value less selling costs amounts to EUR 109,486 thousand (previous year: EUR 101,847 thousand).

As in the previous year, no inventories are pledged as collat-eral for liabilities as of the balance sheet date of the fiscal year just ended.

— 20 TR ADE RECEIVABLE S

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Trade receivables from third parties 332,585 293,564

Trade receivables from associates 2,529 2,506

Trade receivables from affiliates 1,225 981

Notes receivable from third parties 5,669 5,833

342,008 302,884

All trade receivables have a remaining term to maturity of less than one year. The fair value of the receivables thus corresponds to the carrying amount. Trade receivables from affiliates relate to cur-rent business relations with companies not included in the consol-idated financial statements of SCHOTT AG.

The allowance account changed as follows compared to the previous year:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

BAL ANCE AS OF OC TOBER 1 17,195 20,898

Changes in the consolidated group – 7 – 173

Currency changes – 292 – 737

Additions 3,476 3,040

Utilization – 738 – 2,107

Reversals – 1,801 – 3,726

BAL ANCE AS OF SEPTEMBER 30 17,833 17,195

66 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The capitalized surrender value of pension liability insurance does not meet the requirements for plan assets. Accordingly, it may not be netted with the associated obligations.

— 23 C A SH AND C A SH EQUIVALENTS

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Checks, cash-on-hand 338 750

Deposits with banks (terms up to 90 days) 82,777 88,666

Fixed term deposits (terms up to 90 days) 10,388 16,498

93,503 105,914

The effective interest rates for bank deposits and time deposit investments with a term to maturity of up to 90 days are close to zero in the euro region. The fair value of cash and cash equivalents corresponds to the carrying amount. As of the balance sheet date, deposits with banks included restricted cash funds in the amount of EUR 2,606 thousand (previous year: EUR 2,895 thousand).

— 24 A SSETS AND L IABIL IT IE S HELD FOR SALE

In the previous year, real estate in the USA was reported as “assets held for sale” (previous year: EUR 10,478 thousand). The sale was completed in the past fiscal year and generated income of EUR 22 thousand.

— 25 EQUIT Y

The subscribed capital of SCHOTT AG amounts to EUR 150,000 thousand and the capital reserve amounts to EUR 322,214 thou-sand. Subscribed capital consists of 150,000,000 registered shares, each with a nominal value of EUR 1.00. Each share carries a voting right and entitles the bearer to receive dividends.

Changes in the valuation allowance account are presented as follows:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

BAL ANCE AS OF OC TOBER 1 328 3,641

Additions 0 1

Utilization – 5 – 3,286

Reversals – 116 – 26

Currency changes 0 – 2

BAL ANCE AS OF SEPTEMBER 30 207 328

The results from allowance write-downs and the derecogni-tion of other financial assets are reported under other operating income as income from reversals or under other operating ex-penses as expenses from allowances.

There were no overdue and non-impaired financial assets.The other financial assets did not include any assets whose

terms need to be renegotiated or were otherwise overdue and not impaired in the reporting period.

— 22 OTHER NON - FINANCIAL A SSETS, CURRENT

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Compensation scheme of the German Renewable Energies Act 10,529 14,164

Prepaid expenses 9,538 10,029

Receivables from other taxes 1,476 3,469

Asset values from reinsurance policies 744 687

Advance payments made on inventories 299 222

Other non-financial receivables 6,441 7,600

29,027 36,171

Due to the compensation scheme of the Renewable Energy Sources Act, the company has claims for repayment of overpaid EEG cost allocations amounting to EUR 10,529 thousand (previous year: EUR 14,164 thousand) as of the balance sheet date.

67Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

Capital managementThe aim of capital management is to maximize the company’s

income by optimizing the relationship between equity and liabili-ties. It also ensures that all group companies can operate under the premise of continuing as a going concern.

The equity and outside capital relevant for capital manage-ment mainly comprises financial liabilities and equity in SCHOTT AG attributable to the Carl Zeiss Foundation. This consists of issued shares, the capital reserve, and retained earnings.

At SCHOTT, capital management measures in accordance with IAS 1 include in particular the use of borrowed capital, the optimi-zation of investment activities, dividend payments, optimizing net working capital, and capital increases and reductions.

SCHOTT’s corporate management strategy is guided, among other factors, by the value-based SCHOTT Value Added (SVA) con-cept. All strategic and operating activities are assessed based on their contribution to increasing the company’s business value. SCHOTT aims to successfully utilize its business assets and create value in excess of the group’s capital costs.

SCHOTT’s managerial planning and monthly planning both include the continuous calculation of net liquidity and operational free cash flow at the level of the individual business units as well as at the group level. Net liquidity includes all cash and cash equiva-lents as well as securities less financial liabilities. Net liquidity pro-vides information on the financial status. Operating free cash flow identifies the capital surplus remaining after deducting invest-ments in non-current assets. Surplus funds could be used, for ex-ample, to repay financial liabilities or finance investments without drawing on external sources. In this way, measures needed to in-fluence the capital structure can be identified early.

The majority of financial liabilities owed to banks and other lenders require compliance with financial covenants. We monitor the covenants continuously on the basis of current actual, plan, and expected values of the relevant key figures. Based on the cur-rent budget and projected values, SCHOTT assumes that the cov-enants will be upheld for the foreseeable intermediate future.

Income and expenses recognized directly in other comprehen-sive income (excluding non-controlling interest) developed as follows:

(in EUR thousands)

Profit/loss from

revaluation of defined

benefit pen-sion plans

Currency translation

Valuation of securities at fair market

value

Total income and

expenses recognized directly in

equity

BAL ANCE ON OC T. 1, 2014 – 195,173 7,943 355 – 186,875

Changes with no effect on income – 31,721 – 4,878 0 – 36,599

Reclassification adjustments 0 271 – 355 – 84

Deferred taxes 9,328 0 0 9,328

BAL ANCE ON SEPT. 30, 2015 – 217,566 3,336 0 – 214,230

BAL ANCE ON OC T. 1, 2015 – 217,566 3,336 0 – 214,230

Changes with no effect on income – 201,328 9,988 850 – 190,490

Reclassification adjustments 0 – 161 0 – 161

Deferred taxes 58,186 0 0 58,186

BAL ANCE ON SEPT. 30, 2016 – 360,708 13,163 850 – 346,695

The range of possible dividend distributions is determined in accordance with Article 24 of the Foundation Statute of the Carl Zeiss Foundation and depends on the consolidated equity ratio and consolidated earnings after non-controlling interest. In accor-dance with the resolution of the shareholders’ meeting held on April 4, 2016, a dividend of EUR 3,652 thousand was paid to the Carl Zeiss Foundation. The Board of Management of SCHOTT has proposed a dividend of EUR 5,308 thousand for fiscal year 2015/2016.

Non-controlling interestNon-controlling interest relates mainly to externally-held

shares of SCHOTT Finanzierungs- und Verwaltungs GmbH, Mainz, SCHOTT Flat Glass Holding B.V., Tiel/Netherlands, NEC SCHOTT Components Corporation, Shiga/Japan, SCHOTT Gemtron Corpo-ration, Sweetwater, Tennessee/USA, and of SCHOTT Xinkang Pharmaceutical Packaging Co., Ltd., Huzhen Town/China.

68 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The pension scheme “VO 2015” as well as the previously appli-cable pension scheme “VO 2000” which was replaced on Octo-ber 1, 2015, are defined contribution plans with a dynamic benefit contribution in which the defined benefit commitment is calculat-ed according to the earned pension method. These are building block schemes within the scope of which a benefit contribution is determined each year which is then converted into a pension building block using actuarial methods. This pension building block is credited to the employee’s individual benefit account. The pension contribution depends on pensionable income and also on SCHOTT’s pre-tax profits.

The currently valid “VO 2015 NEW,” which has been valid for new entrants since November 1, 2015, is a contribution-oriented benefit scheme with a dynamic pension contribution. The calcula-tion of the pension contribution is similar to that of the “VO 2015.” This is awarded to the employee as a minimum capital payment and credited to an individualized account within the framework of a CTA (Contractual Trust Arrangement).

The introduction of the pension scheme “VO 2015 NEW” in fiscal year 2015/2016 led to income of EUR 1,117 thousand, which is reported under other operating income (see Note 7).

As of October 1, 2025, the “VO 2015 NEW” pension scheme, including transitional arrangements, also applies to employees who were employed by the group by November 1, 2015, when “VO 2015 NEW” came into effect.

Outside of Germany (in particular in the USA), the committed benefits depend mainly on the length of service and the most re-cent salary. Decisions regarding the allocation of plan assets gen-erally reflect the development of plan assets and pension commit-ments. In addition, decisions outside of Germany are often shaped by requirements that pension commitments be covered by plan assets as well as tax regulations regarding the deductible amounts.

The assumptions that calculation of the DBO are based on with respect to interest rates, wage and pension trends, but also mor-tality rates, vary depending on the economic and other parame-ters of the respective country in which the plans exist. The interest rates are calculated as of a certain balance sheet date in a compa-ny-specific manner depending on the average weighted duration of the pension commitments, matching maturities and currencies.

In addition, the Board of Management reviews the capital structure continuously. This review includes an assessment of the equity ratio and the debt-equity ratio. The equity ratio corre-sponds to the ratio of equity to total assets in the statement of fi-nancial position. As of September 30, 2016, it amounts to 22.4 % (previous year: 23.7 %).

Net financial assets, which represent an important internal key figure for the financial management of SCHOTT, comprise the following:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Cash and cash equivalents 93,503 105,914

Time deposits (term > 3 months, < 1 year) 55,000 0

Liabilities from cash clearing – 55,473 – 53,887

Finance leases – 22,565 – 19,388

Liabilities to banks – 42,294 – 47,762

Other financial liabilitites – 7,894 – 12,101

NET FINANCIAL ASSETS 20,277 – 27,224

The overall strategy remained unchanged compared to fiscal year 2014/2015.

— 26 PENSION PL ANS AND SIMIL AR COMMITMENTS

EUR 12,052 thousand (previous year: EUR 11,716 thousand) was recognized as an expense for foreign defined contribution plans and EUR 24,652 thousand (previous year: EUR 24,692 thou-sand) for German defined contribution plans, including EUR 31,639 thousand (previous year: EUR 30,939 thousand) contributed to social security. Pension plans also include employee-financed pension commitments (deferred compensation) to employees in Germany totaling EUR 7,069 thousand (previous year: EUR 4,783 thousand), whereby the plan assets were netted with the corre-sponding commitments. Pension plans from defined contribution commitments include ongoing pensions as well as vested benefits financed by both the company and employees. These provisions also include post-retirement health care commitments on the part of our US companies. In accordance with IAS 19, these commit-ments are classified as defined benefit plans.

In Germany, a distinction is made between four major pension commitments:

Pension Charter “P74” is a remuneration-dependent, overall benefit scheme netted with social security, for which the defined benefit obligation (DBO) is calculated proportionately.

The “P 82 old” and “P 82 new” Pension Charters are likewise remuneration-dependent pension schemes. In these schemes, the pension benefit increases by a percentage of pensionable remuner-ation for each year of eligible service, whereby salary components in excess of the basis of calculation are more heavily weighted. The DBO is also calculated proportionately.

69Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

The calculation of the benefit commitments as well as the ac-companying plan assets in certain cases is based on the following actuarial parameters (weighted average):

2015/2016 2014/2015

(%) Total Domestic Foreign Total Domestic Foreign

Discount rate 1.51 1.40 2.03 2.48 2.40 2.82

Future salary increases 2.41 2.50 1.41 2.40 2.50 1.37

Future pension increases 1.38 1.50 0.00 1.38 1.50 0.00

Expected rate of inflation 1.52 1.50 1.63 1.52 1.50 1.62

The following actuarial parameters apply for the units based outside of Germany for each country or region:

Sept. 30, 2016 Sept. 30, 2015

(%)Discount

rate

Future salary

increases

Expected rate of

inflationDiscount

rate

Future salary

increases

Expected rate of

inflation

USA 3.05 – 3.30 N/A 2.30 3.85 – 4.10 N/A 2.30

Switzerland 0.15 1.00 0.60 0.90 1.00 0.60

Based on IAS 19, the defined contribution pension commit-ments exhibit the following financing status. The table also in-cludes the employee-financed pension commitments:

Sept. 30, 2016 Sept. 30, 2015

(in EUR thousands) Total Domestic Foreign Total Domestic Foreign

Present value of obligation not financed by a fund 77,388 47,031 30,357 64,189 38,367 25,822

Present value of obligation wholly or partly financed by a fund 1,463,052 1,225,784 237,268 1,262,492 1,046,576 215,916

TOTAL PRESENT VALUE OF BENEFIT OBLIGATION 1,540,440 1,272,815 267,625 1,326,681 1,084,943 241,738

BENEFIT OBLIGATION RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 1,540,440 1,272,815 267,625 1,326,681 1,084,943 241,738

Plan assets at fair value 489,551 309,411 180,140 425,555 254,595 170,960

PL AN ASSETS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 489,551 309,411 180,140 425,555 254,595 170,960

FUNDED STATUS 1,050,889 963,404 87,485 901,126 830,348 70,778

PENSION PROVISIONS 1,050,889 963,404 87,485 901,126 830,348 70,778

Net pension expense can be broken down as follows:

2015/2016 2014/2015

(in EUR thousands) Total Domestic Foreign Total Domestic Foreign

Service costs 20,514 14,466 6,048 26,956 21,300 5,656

Net interest costs 21,337 19,400 1,937 25,900 24,027 1,873

Past service costs 182 908 – 726 – 25,587 – 25,085 – 502

Effects from plan settlements 0 0 0 – 655 – 658 3

Administrative expenses 12 0 12 12 0 12

TOTAL EXPENSES RECOGNIZED IN THE INCOME STATEMENT 42,045 34,774 7,271 26,626 19,584 7,042

70 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Net interest expense is included in net interest income. Other expense components recognized in the income statement are pre-sented under the corresponding functional area under profit or loss from operating activities (EBIT).

The following table presents the development of defined ben-efit obligations:

2015/2016 2014/2015

(in EUR thousands) Total Domestic Foreign Total Domestic Foreign

DEFINED BENEFIT OBLIGATION AT THE BEGINNING OF THE FISCAL YEAR 1,326,681 1,084,943 241,738 1,286,931 1,083,169 203,762

Changes in the consolidated group – 273 0 – 273 3,079 0 3,079

Changes in exchange rates 661 0 661 22,093 0 22,093

Service cost 20,514 14,466 6,048 26,956 21,300 5,656

Past service cost 182 908 – 726 – 25,587 – 25,085 – 502

Interest expense 32,173 25,500 6,673 35,784 28,692 7,092

Actuarial gains (–) or losses (+) from changes in financial assumptions 227,306 197,254 30,052 28,773 17,828 10,945

Actuarial gains (–) or losses (+) from changes in demographic assumptions – 7,208 0 – 7,208 1,195 0 1,195

Actuarial gains (–) or losses (+) from changes in demographic assumptions – 7,353 – 7,334 – 19 3,147 3,139 8

Pension payments 54,082 43,251 10,831 56,734 43,982 12,752

Effect from plan settlements 0 0 0 0 – 658 3

Other changes 1,839 329 1,510 1,699 540 1,159

DEFINED BENEFIT OBLIGATION AT THE END OF THE FISCAL YE AR 1,540,440 1,272,815 267,625 1,326,681 1,084,943 241,738

of which committed without plan assets 77,388 47,031 30,357 64,303 38,367 25,936

of which partially covered by plan assets 1,463,052 1,225,784 237,268 1,262,492 1,046,576 215,916

Plan assets developed as follows in the fiscal year:

2015/2016 2014/2015

(in EUR thousands) Total Domestic Foreign Total Domestic Foreign

PL AN ASSETS AT THE BEGINNING OF THE FISCAL YE AR 425,555 254,595 170,960 323,643 173,310 150,333

Interest income from plan assets 10,837 6,100 4,737 9,884 4,665 5,219

Foreign currency exchange rate changes – 90 0 – 90 16,652 0 16,652

Changes in the consolidated group 0 0 0 – 1,437 0 – 1,437

Actuarial gains (+) or losses (–) 11,417 – 2,033 13,450 1,395 – 1,735 3,130

Employer contribution 51,051 50,924 127 82,613 76,100 6,513

Benefits paid – 9,690 – 504 – 9,186 – 11,787 – 888 – 10,899

Other changes 471 329 142 4,592 3,143 1,449

PL AN ASSETS AT THE END OF THE FISCAL YE AR 489,551 309,411 180,140 425,555 254,595 170,960

Actual return on plan assets 22,254 4,067 18,187 11,279 2,930 8,349

Plan assets in Germany were managed mainly in the form of “Contractual Trust Arrangements” (CTAs).

71Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

Under the CTAs, SCHOTT AG has transferred assets over to a trust association, which in turn transfers the funds it receives over to another trust association (custodian). This organization is obliged to manage and invest the funds it receives solely for the company in accordance with an administrative agreement. The investment takes place via special fund mandates with external asset managers. This is a mixed fund that deals with stocks and bonds and is managed by asset managers in accordance with pre-scribed investment guidelines, including a defined value protec-tion strategy.

Since fiscal year 2014/2015, a CTA invested EUR 65,016 thou-sand in a newly founded group company. The company is man-aged by SCHOTT AG, who holds the remaining equity interest in the company next to the CTA. The company generates its income by holding investments in non-consolidated companies, by enter-ing into license agreements with non-group companies and by granting loans to group companies, including SCHOTT AG. The fair value of the participation of the CTA in the group company as of the balance sheet date amounts to EUR 65,443 thousand.

The plan assets abroad mainly consist of two pension funds in the USA whose funding ratio amounts to nearly 100 %. The pen-sion fund is also managed by external asset managers based on prescribed investment guidelines, whereby control takes place on the basis of an asset/liability matching approach. Still other plan assets are managed by a dependent collective foundation based in Switzerland.

Portfolio structure of plan assets:

Sept. 30, 2016 Sept. 30, 2015

(%) Total Domestic Foreign Total Domestic Foreign

Securities quoted on active markets 14 16 10 9 9 10

Fixed-interest securities quoted on active markets 63 54 79 63 53 78

Qualified insurance 5 5 5 5 6 5

Cash and cash equivalents 3 4 1 6 8 3

Other 15 21 5 17 24 4

100 100 100 100 100 100

Allocations to plan assets are as follows:

Sept. 30, 2016 Sept. 30, 2015

(in EUR thousands) Total Domestic Foreign Total Domestic Foreign

TOTAL ALLOCATION 51,051 50,924 127 82,613 76,100 6,513

72 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

This means that a total of four options were granted in fiscal year 2011/2012 at the beginning of the contract term, which, how-ever, can only be exercised simultaneously in 2017 (“exercise date”). There were still four options at the beginning of the report-ing period. No options were exercised or expired in the reporting period. Four options still existed at the end of the reporting period.

The fair value of the options was estimated when they were granted using a Monte Carlo simulation, taking into account the terms at which the options were granted. The calculation was based on a risk-free interest rate of 4.40 % and an anticipated term of the options of 5.5 years.

The fair value of the options granted in the fiscal year was EUR 338 thousand. The share-based payment recognized as per-sonnel expense for the fiscal year amounted to EUR 75 thousand (previous year: EUR 75 thousand).

The remaining term to maturity for the options outstanding as of September 30, 2016, is 0.75 years.

The expected volatility is based on the assumption that future trends can be deduced from the historical volatility of a peer group of eight companies over a period similar to the term of the options, whereby the actual volatility can differ from the assumptions made.

— 28 OTHER PROVISIONS

Sept. 30, 2016 Sept. 30, 2015

(in EUR thousands) up to 1 year over 1 year up to 1 year over 1 year

Taxes 17,562 41,399 16,476 38,187

Sales 12,012 44,859 11,457 49,096

Personnel costs 1,274 16,772 1,808 16,319

Other 63,613 36,500 70,776 33,821

94,461 139,530 100,517 137,423

Other provisions include, among other items, provisions for legal costs in the amount of EUR 34.3 million (previous year: EUR 36.8 million), provisions for potential losses resulting from long-term contracts in the amount of EUR 31.5 million (previous year: EUR 30.8 million), and provisions for restructuring measures and discontinuation of an operation in the amount of EUR 3.8 mil-lion (previous year: EUR 9.0 million). The remaining provisions pertain mainly to various precautionary measures.

EUR 3,661 thousand in contributions to plan assets are expect-ed for the following fiscal year.

A change in the principle actuarial assumptions would have the following effects on pension obligations for Germany, the USA and Switzerland, whereby the vast share pertains to Germany:

Sept. 30, 2016

Increase byin EUR

thousands Decrease byin EUR

thousands

Discount rate+ 50 basis

points – 127,573– 50 basis

points 147,094

Future change in salaries

+ 50 basis points 17,823

– 50 basis points – 16,319

Future change in pensions

+ 50 basis points 80,431

– 50 basis points – 65,951

Life expectancy + 1 year 64,915 – 1 year – 64,674

The sensitivity analyses referred to above were performed us-ing a method that extrapolates the effect of realistic changes in the most important assumptions at the end of the reporting period onto defined benefit obligations.

The following amounts will most likely by paid out over the next few years as part of defined benefit obligations:

(in EUR thousands) 2017 2018 2019 2020 2021

2022 – 2026

Domestic 44,705 44,495 44,490 45,026 45,406 232,986

Foreign 8,202 8,355 9,079 9,257 9,593 54,249

TOTAL 52,907 52,850 53,569 54,283 54,999 287,235

The average term of the defined benefit obligation was 18 years (previous year: 16 years) at the end of the reporting period.

— 27 SHARE- BA SED PAYMENT

At one group company, there are options to repurchase shares of the company for a non-controlling shareholder who is also the company’s managing employee. According to these options, the employee has the right to repurchase up to 6 % of the company’s shares in 2017 as long as certain key performance figures are reached in the years 2013 to 2016 (with respect to sales, EBIT, and cash flow targets) and the employee is still a shareholder of the company when the options are exercised and has not violated any of the contracts formed when the company was established or its non-competition agreement. A cash settlement is barred. The achievement of the key performance figures is determined sepa-rately for each of the four years. Accordingly, an option to acquire 1.5 % of the shares can be separately exercised for every year if the requirements are met.

73Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position

Sales provisions include mainly warranty provisions in the amount EUR 49.1 million (previous year: EUR 52.6 million) as well as obligations for contractual risks and losses from supply obliga-tions.

(in EUR thousands)

Balance on Oct. 1,

2015 Utilization Reversal Addition

Change in the consoli-

dated groupCurrency changes

Balance on Sept. 30,

2016

Taxes 54,663 11,310 3,368 18,829 0 147 58,961

Sales 60,553 2,792 7,070 6,171 0 9 56,871

Personnel costs 18,127 6,168 1,786 7,762 0 111 18,046

Other 104,597 12,048 8,558 15,773 891 1,240 100,113

237,940 32,318 20,782 48,535 891 1,507 233,991

Non-current provisions were compounded by interest of EUR 1,388 thousand in fiscal year 2015/2016 (previous year: EUR 2,790 thousand). This amount is taken into consideration in the additions column.

Provisions for taxes include amounts for taxes which have not yet been finally assessed.

The anniversary obligations shown under personnel provi-sions in the amount of EUR 13.9 million (previous year: EUR 12.7 million) were measured at an actuarial interest rate of 1.4 % (previ-ous year: 2.4 %) for obligations in Germany totaling EUR 12.5 mil-lion (previous year: EUR 11.4 million). Obligations stemming from partial retirement in the amount of EUR 8.7 million (previous year: EUR 7.8 million) are determined on the basis of actuarial calcula-tions based on biometric calculation bases in accordance with the Heubeck 2005 G mortality tables applying an actuarial interest rate of 0.2 % (previous year: 1.3 %) according to the projected unit credit method. The obligations for partial retirement are secured by means of a capital preservation amount in the form of a notari-al trust account in the amount of EUR 5,460 thousand (previous year: EUR 5,140 thousand), whereby the obligations are netted with the capital preservation amount.

Amounts released from provisions recognized in the previous year are mainly presented under other operating income in the income statement.

— 29 ACCRUED L IABIL IT IE S

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Christmas bonuses 50,646 47,169

Other personnel commitments 73,389 70,053

Outstanding invoices 17,285 13,738

Commission/bonuses 14,637 14,626

Other accrued liabilities 207 102

156,164 145,688

74 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

An overview of the contractual remaining maturity of undis-counted financial liabilities is included in the comments on risk management under the notes on liquidity risk.

As in the previous year, there were no delays in redemption or interest payments in the corporate group during the 2015/2016 fiscal year.

The majority of the liabilities under finance leases relates to real estate located in Germany.

The liabilities to affiliates in the amount of EUR 53,272 thou-sand (previous year: EUR 52,244 thousand) as well as to share-holdings in the amount of EUR 2,202 thousand (previous year: EUR 1,798 thousand) relate to financial settlement liabilities in eu-ros bearing interest corresponding to the 1-month EURIBOR plus a typical premium. The line item includes loans from the Carl Zeiss Foundation in the amount of EUR 48,800 thousand (previous year: EUR 48,300 thousand).

— 32 OTHER NON - FINANCIAL L IABIL IT IE S, NON - CURRENT

AND CURRENT

Sept. 30, 2016 Sept. 30, 2015

(in EUR thousands) up to 1 year over 1 year up to 1 year over 1 year

Advances received on orders 15,415 0 20,244 0

Income tax withheld from salaries and wages 7,860 0 7,702 0

Social security liabilities 5,216 0 5,315 0

Accrued liabilities 1,078 4,930 1,266 5,883

Other miscellaneous non-financial liabilities 12,764 0 13,866 379

42,333 4,930 48,393 6,262

— 30 TR ADE PAYABLE S

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Trade payables to third parties 142,877 138,642

Trade payables to affiliates 118 52

Trade payables to associates 173 2,052

143,168 140,746

All trade payables reported in the reporting period and the previous year have a remaining term to maturity of less than one year.

Trade payables to affiliates include liabilities from current busi-ness relationships with affiliated companies not included in the consolidated financial statements.

— 31 OTHER FINANCIAL L IABIL IT IE S, NON - CURRENT AND

CURRENT

Sept. 30, 2016 Sept. 30, 2015

(in EUR thousands) up to 1 year over 1 year up to 1 year over 1 year

Other liabilities to affiliates 53,272 0 52,244 0

Liabilities to banks 7,350 34,944 5,468 42,294

Negative market val-ues from derivatives 5,196 0 16,281 0

Factoring liabilities 2,606 0 2,895 0

Finance lease liabilities 2,333 20,232 1,602 17,786

Liabilities to associates 2,202 0 1,798 0

Debtors with credit balances 1,375 0 2,011 0

Interest on the purchase of precious metals 779 0 575 0

Liabilities to non-banks 305 7,589 475 8,049

Other financial liabilities 372 64 4,099 201

75,790 62,829 87,448 68,330

75Notes to the Consolidated Financial Statements – Notes to the Statement of Income and the Statement of Financial Position/Further Information

Shares in non-consolidated affiliated companies and associ-ates are recognized at amortized cost because there is no active market and thus their market value cannot be reliably determined with reasonable time and effort.

Lendings and trade receivables are measured at amortized cost because they belong to the category “Loans and receiv-ables.” Non-current non-interest-bearing loans and receivables are discounted to their present value.

SCHOTT categorizes derivatives that are not designated for hedge accounting under IAS 39 as “held for trading.” Derivative financial instruments are measured at fair value. This corresponds to their market value and can be both positive as well as negative. Fair value is calculated using present value or option price models. The Black-Scholes model is used for the measurement of options and the respective present value is calculated for all measure-ments on the basis of current spot prices and corresponding yield curves. Relevant market prices and interest rates observed on the balance sheet date from generally accepted sources are used as input parameters for the models. Gains or losses resulting from subsequent measurements are recognized in profit or loss.

The derivatives contracted by SCHOTT are partly subject to legally enforceable settlement agreements, which, however, do not allow for the offsetting of receivables and liabilities in the bal-ance sheet, i.e. there is no current legal claim for offsetting with simultaneous intention to compensate on a net basis, but rather a right to set off in the event of the insolvency of a contracting party. Therefore, this is shown on the balance sheet on gross basis.

The following table shows the financial assets and liabilities of SCHOTT Group that are subject to offsetting.

(in EUR thousands) 2015/2016 2014/2015

FINANCIAL ASSETS

Positive market values of derivatives 4,294 6,408

Offsettable due to framework contracts – 3,621 – 6,241

NET AMOUNT OF THE FINANCIAL ASSETS 673 167

FINANCIAL LIABILITIES

Negative market values of derivatives 5,196 16,281

Offsettable due to framework contracts – 3,621 – 6,241

NET AMOUNT OF THE FINANCIAL LIABILITIES 1,575 10,040

FURTHER INFORMATION

— 33 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

33.1 Financial assets and financial liabilitiesSCHOTT uses the following categories of financial instru-

ments, as defined in IAS 39 Financial Instruments: Recognition and Measurement:

■ Loans and receivables ■ Available-for-sale financial assets ■ Other liabilities ■ Assets and liabilities held for trading

Financial instruments are categorized at acquisition, depend-ing on their type and intended use.

Commercial purchases and sales are recognized in the group on the settlement date irrespective of their categorization. Deriva-tive financial instruments are recognized as of the trade date. Financial assets and liabilities are normally presented in gross amounts, unless there is a netting option and SCHOTT intends to settle on a net basis.

Financial assets are initially recognized at fair value. In the case of assets not measured at fair value, transaction costs directly at-tributable to their purchase are taken into account. The fair values applied in the statement of financial position normally correspond to market prices. If these cannot be directly ascertained by refer-ring to an active market, they are measured using typical measure-ment models on the basis of input factors observable in the market.

Shares and repayable bonds held by the group that are traded in an active market are categorized as “available for sale” and recognized at fair value, which corresponds to the market value. Gains and losses resulting from fair value fluctuations are recog-nized directly in equity. Changes in value recognized directly in equity in the current and previous fiscal years are described in the consolidated statement of changes in equity under Note 25. If a financial asset is sold or impaired, gains and losses that had been previously aggregated under consolidated accumulated other gains and losses are now recognized in net income for the period.

76 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

If an asset classified as “available for sale” is permanently im-paired, the accumulated loss is reclassified to financial expenses and removed from consolidated accumulated other comprehensive income. Impairment losses on equity instruments are not reversed in profit or loss; any future increase in fair value is recognized di-rectly under consolidated accumulated other comprehensive in-come. If the fair value of a debt instrument increases in a subse-quent reporting period and the increase can be attributed objectively to an event that took place after the impairment loss was recognized in profit or loss, the impairment reversal is recog-nized in profit or loss.

In the case of impairment to trade receivables, the company distinguishes between individual and general impairment write-downs. They adequately reflect default risks that are not covered by insurance and are determined on the basis of empirical values and individual risk assessments. Impairments of trade receivables are recognized in an allowance account. As soon as a receivable has verifiably defaulted, its carrying amount is impaired. Trade re-ceivables are not discounted due to their short contractual terms (less than year).

Derecognition of financial instrumentsA financial asset (or a portion thereof or a portion of a group of

similar financial assets) is derecognized if one of the three follow-ing requirements is met:

■ The contractual rights to derive cash flows from a financial asset have expired.

■ SCHOTT Group may retain the rights to derive cash flows from financial assets, but is obligated to immediately remit these cash flows to a third party under an agreement fulfilling the require-ments of IAS 39.19 (“pass-through arrangement”).

■ SCHOTT Group has assigned its contractual rights to derive cash flows from a financial asset and has either (a) assigned essentially all risks and opportunities associated with the ownership of the financial asset, or (b) has neither assigned nor retained any risks or opportunities associated with the ownership of the financial asset, yet has assigned the power of control over the asset.

Derivatives embedded in compound financial instruments are recognized separately at fair value if their economic character-istics and risks are not closely related with those of the underlying contracts and the compound financial instruments are not mea-sured overall at fair value through profit or loss. These embedded derivatives are measured at fair value, whereby changes in the fair value are recognized in profit or loss. When a contract is formed that entails significant cash flows, a determination is made as to whether the contract includes an embedded derivative. This de-termination is only reassessed when the contractual terms change if it results in a significant change in the cash flows that would have otherwise been associated with the contract.

Financial liabilities are generally assigned to the category “Other liabilities” and are recognized at amortized cost using the effective interest rate method. Liabilities under finance leases are recognized at the present value of the lease payments and dis-closed under financial liabilities.

Impairment of financial assetsOn each balance sheet date, other financial assets – with the

exception of financial assets measured at fair value – are examined for evidence of impairment. Financial assets are impaired when there are objective indications as a consequence of one or more events that there are negative changes to expected future cash flows which occurred after initial recognition of the asset. Subse-quently, the difference between the carrying amount and present value of the expected future cash flows is recorded using an allow-ance account.

Objective indicators for impairment include the following cases:

■ considerable financial difficulties on the part of the contracting party

■ interest or principal payment defaults or arrears ■ increased probability that the borrower will become insolvent

or enter into other reorganization procedures.

77Notes to the Consolidated Financial Statements – Further Information

A financial liability is removed from the statement of financial position when the obligation underlying the liability is settled, ter-minated, or cancelled. If an existing financial liability is exchanged for another financial liability owed to the same lender with sub-stantially different terms and conditions, or if the conditions of an existing liability are significantly altered, such an exchange or al-teration is treated as derecognition of the original liability and rec-ognition of a new liability. The difference between the respective carrying amounts is recognized in profit or loss.

Disclosures on financial instrumentsThe following tables outline carrying amounts and fair values

according to measurement categories and classes of financial in-struments as of September 30, 2016, and September 30, 2015:

78 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

C L A SS I F I C AT I O N , M E A S U R E M E N T C AT EG O R I E S A N D R ECO N C I L I AT I O N

O F S TAT E M E N T O F F I N A N C I A L P OS I T I O N I T E M S A S O F S E P T E M B E R 3 0, 2 016

Measurement: At amortized cost At fair value

Measurement category: Loans and receivables Financial instruments available for sale

Financial instruments at fair value through profit or loss

Class: Loans and receivables Finance leases Financial instruments available for sale Held for trading

Financial assets not subject to IFRS 7**

Statement of financial position items(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

ASSETS

NON- CURRENT ASSETS

Investments accounted for using the equity method 55,028 n/a*** 0 0 0 0 0 0 0 0 55,028 n/a***

Other financial assets 5,937 5,937 1,286 1,286 0 0 4,651 4,651* 0 0 0 0

CURRENT ASSETS

Trade receivables 342,008 342,008 342,008 342,008 0 0 0 0 0 0 0 0

Other financial assets 73,661 73,661 69,367 69,367 0 0 0 0 4,294 4,294 0 0

Cash and cash equivalents 93,503 93,503 93,503 93,503 0 0 0 0 0 0 0 0

570,137 515,109 506,164 506,164 0 0 4,651 4,651 4,294 4,294 55,028 0

Measurement: At amortized cost At fair value

Measurement category: Liabilities Financial instruments at fair value through profit or loss

Class: Liabilities Finance leases Held for tradingFinancial liabilities not subject to IFRS 7

Statement of financial position item(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

EQUIT Y & LIABILITIES

NON- CURRENT LIABILITIES

Other financial iabilities 62,829 73,019 42,597 47,791 20,232 25,228 0 0 0 0

CURRENT LIABILITIES

Accrued liabilities 156,164 156,164 0 0 0 0 0 0 156,164 156,164

Trade payables 143,168 143,168 143,168 143,168 0 0 0 0 0 0

Other financial liabilities 75,790 75,790 68,261 68,261 2,333 2,333 5,196 5,196 0 0

437,951 448,141 254,026 259,220 22,565 27,561 5,196 5,196 156,164 156,164

* Includes shares in unconsolidated subsidiaries and equity investments (EUR 4,651 thousand) that are recognized at amortized cost. Because there is no active market, their market value cannot be reliably determined with reasonable time and effort.

** Financial assets not subject to IFRS 7 also relate to EUR 489,551 thousand in plan assets at fair value that were offset by provisions for pension commitments totaling EUR 1,540,440 thousand.

*** n/a – not applicable There were no financial guaranties as of the reporting date.

79Notes to the Consolidated Financial Statements – Further Information

C L A SS I F I C AT I O N , M E A S U R E M E N T C AT EG O R I E S A N D R ECO N C I L I AT I O N

O F S TAT E M E N T O F F I N A N C I A L P OS I T I O N I T E M S A S O F S E P T E M B E R 3 0, 2 016

Measurement: At amortized cost At fair value

Measurement category: Loans and receivables Financial instruments available for sale

Financial instruments at fair value through profit or loss

Class: Loans and receivables Finance leases Financial instruments available for sale Held for trading

Financial assets not subject to IFRS 7**

Statement of financial position items(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

ASSETS

NON- CURRENT ASSETS

Investments accounted for using the equity method 55,028 n/a*** 0 0 0 0 0 0 0 0 55,028 n/a***

Other financial assets 5,937 5,937 1,286 1,286 0 0 4,651 4,651* 0 0 0 0

CURRENT ASSETS

Trade receivables 342,008 342,008 342,008 342,008 0 0 0 0 0 0 0 0

Other financial assets 73,661 73,661 69,367 69,367 0 0 0 0 4,294 4,294 0 0

Cash and cash equivalents 93,503 93,503 93,503 93,503 0 0 0 0 0 0 0 0

570,137 515,109 506,164 506,164 0 0 4,651 4,651 4,294 4,294 55,028 0

Measurement: At amortized cost At fair value

Measurement category: Liabilities Financial instruments at fair value through profit or loss

Class: Liabilities Finance leases Held for tradingFinancial liabilities not subject to IFRS 7

Statement of financial position item(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

EQUIT Y & LIABILITIES

NON- CURRENT LIABILITIES

Other financial iabilities 62,829 73,019 42,597 47,791 20,232 25,228 0 0 0 0

CURRENT LIABILITIES

Accrued liabilities 156,164 156,164 0 0 0 0 0 0 156,164 156,164

Trade payables 143,168 143,168 143,168 143,168 0 0 0 0 0 0

Other financial liabilities 75,790 75,790 68,261 68,261 2,333 2,333 5,196 5,196 0 0

437,951 448,141 254,026 259,220 22,565 27,561 5,196 5,196 156,164 156,164

80 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

C L A SS I F I C AT I O N , M E A S U R E M E N T C AT EG O R I E S A N D R ECO N C I L I AT I O N

O F S TAT E M E N T O F F I N A N C I A L P OS I T I O N I T E M S A S O F S E P T E M B E R 3 0, 2 015

Measurement: At amortized cost At fair value

Measurement category: Loans and receivables Financial instruments available for sale

Financial instruments at fair value through profit or loss

Class: Loans and receivables Finance leases Financial instruments available for sale Held for trading

Financial assets not subject to IFRS 7**

Statement of financial position items(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

ASSETS

NON- CURRENT ASSETS

Investments accounted for using the equity method 51,315 n/a*** 0 0 0 0 0 0 0 0 51,315 n/a***

Other financial assets 5,435 5,435 2,379 2,379 0 0 3,056 3,056* 0 0 0 0

CURRENT ASSETS

Trade receivables 302,884 302,884 302,884 302,884 0 0 0 0 0 0 0 0

Other financial assets 28,692 28,692 22,284 22,284 0 0 0 0 6,408 6,408 0 0

Cash and cash equivalents 105,914 105,914 105,914 105,914 0 0 0 0 0 0 0 0

494,240 442,925 433,461 433,461 0 0 3,056 3,056 6,408 6,408 51,315 0

Measurement: At amortized cost At fair value

Measurement category: Liabilities Financial instruments at fair value through profit or loss

Class: Liabilities Finance leases Held for tradingFinancial assets not subject to IFRS 7

Statement of financial position items(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

EQUIT Y & LIABILITIES

NON- CURRENT LIABILITIES

Other financial liabilities 68,330 77,111 50,544 57,306 17,786 19,805 0 0 0 0

CURRENT LIABILITIES

Accrued liabilities 145,688 145,688 0 0 0 0 0 0 145,688 145,688

Trade payables 140,746 140,746 140,746 140,746 0 0 0 0 0 0

Other financial liabilities 87,448 87,448 69,565 69,565 1,602 1,602 16,281 16,281 0 0

442,212 450,993 260,855 267,617 19,388 21,407 16,281 16,281 145,688 145,688

* Includes shares in unconsolidated subsidiaries and equity investments (EUR 3,056) that are recognized at amortized cost. Because there is no active market, their market value cannot be reliably determined with reasonable time and effort.

** Financial assets not subject to IFRS 7 also relate to EUR 425,555 thousand in plan assets at fair value that were offset by provisions for pension commitments totaling EUR 1,326,681 thousand.

*** n/a – not applicable There were no financial guaranties as of the reporting date.

81Notes to the Consolidated Financial Statements – Further Information

C L A SS I F I C AT I O N , M E A S U R E M E N T C AT EG O R I E S A N D R ECO N C I L I AT I O N

O F S TAT E M E N T O F F I N A N C I A L P OS I T I O N I T E M S A S O F S E P T E M B E R 3 0, 2 015

Measurement: At amortized cost At fair value

Measurement category: Loans and receivables Financial instruments available for sale

Financial instruments at fair value through profit or loss

Class: Loans and receivables Finance leases Financial instruments available for sale Held for trading

Financial assets not subject to IFRS 7**

Statement of financial position items(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

ASSETS

NON- CURRENT ASSETS

Investments accounted for using the equity method 51,315 n/a*** 0 0 0 0 0 0 0 0 51,315 n/a***

Other financial assets 5,435 5,435 2,379 2,379 0 0 3,056 3,056* 0 0 0 0

CURRENT ASSETS

Trade receivables 302,884 302,884 302,884 302,884 0 0 0 0 0 0 0 0

Other financial assets 28,692 28,692 22,284 22,284 0 0 0 0 6,408 6,408 0 0

Cash and cash equivalents 105,914 105,914 105,914 105,914 0 0 0 0 0 0 0 0

494,240 442,925 433,461 433,461 0 0 3,056 3,056 6,408 6,408 51,315 0

Measurement: At amortized cost At fair value

Measurement category: Liabilities Financial instruments at fair value through profit or loss

Class: Liabilities Finance leases Held for tradingFinancial assets not subject to IFRS 7

Statement of financial position items(in EUR thousands)

Total carrying amounts

Total fair values

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

Carrying amount Fair value

EQUIT Y & LIABILITIES

NON- CURRENT LIABILITIES

Other financial liabilities 68,330 77,111 50,544 57,306 17,786 19,805 0 0 0 0

CURRENT LIABILITIES

Accrued liabilities 145,688 145,688 0 0 0 0 0 0 145,688 145,688

Trade payables 140,746 140,746 140,746 140,746 0 0 0 0 0 0

Other financial liabilities 87,448 87,448 69,565 69,565 1,602 1,602 16,281 16,281 0 0

442,212 450,993 260,855 267,617 19,388 21,407 16,281 16,281 145,688 145,688

82 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Measurement of fair valueThe following table shows the measurement of fair value of the

group’s assets and liabilities by hierarchical levels:

Quantitative information on measuring the fair value of assets by hierarchical levels as of September 30, 2016:

Measurement of the fair value using

(in EUR thousands)Valuation

date Total

Quoted prices on

active markets ( Level 1)

Significant observable

input parameters

( Level 2)

Significant non-observ-

able input parameters

(Level 3)

Financial assets measured at fair value through profit and loss:

DerivativesSept. 30,

2016 4,294 0 4,294 0

Financial assets for which a fair value is recognized:

Real estate held as a financial investmentSept. 30,

2016 5,700 0 0 5,700

There were no regroupings between Level 1 and Level 2 in the valuation hierarchy in the reporting period.

Financial liabilities at fair value through profit or loss:

DerivativesSept. 30,

2016 5,196 0 5,196 0

Liabilities for which a fair value is recognized:

Non-current liabilities to banks and other non-current financial liabilitiesSept. 30,

2016 47,791 0 47,791 0

Non-current finance leasesSept. 30,

2016 25,228 0 25,228 0

There were no regroupings between the Levels in the valuation hierarchy in the reporting period.

83Notes to the Consolidated Financial Statements – Further Information

Quantitative information on measuring the fair value of assets by hierarchical levels as of September 30, 2015:

Measurement of the fair value using

(in EUR thousands)Valuation

date Total

Quoted prices on

active markets ( Level 1)

Significant observable

input parameters

( Level 2)

Significant non-observ-

able input parameters

(Level 3)

Financial assets measured at fair value through profit and loss:

DerivativesSept. 30,

2015 6,408 0 6,408 0

Financial assets for which a fair value is recognized:

Real estate held as a financial investmentSept. 30,

2015 5,700 0 0 5,700

There were no regroupings between Level 1 and Level 2 in the valuation hierarchy in the reporting period.

Financial liabilities at fair value through profit or loss:

DerivativesSept. 30,

2015 16,281 0 16,281 0

Liabilities for which a fair value is recognized:

Non-current liabilities to banks and other non-current financial liabilitiesSept. 30,

2015 57,306 0 57,306 0

Non-current finance leasesSept. 30,

2015 19,805 0 19,805 0

There were no regroupings between the Levels in the valuation hierarchy in the reporting period.

The carrying amounts of fair value financial instruments are basically determined on the basis of input factors that can be ob-served on the market. If stock market prices are not available, they are measured using the discounted cash flow method, taking mar-ket conditions in the form of typical credit ratings and/or liquidity spreads into account when calculating their present value.

Shares in non-consolidated affiliated companies and associ-ates are recognized at amortized cost because there is no active market and thus their market value cannot be reliably determined with reasonable time and effort.

For all short-term financing instruments included in the cate-gory “Loans and receivables” as well as all “Other liabilities,” it is assumed that the carrying amount corresponds to the fair value.

For all long-term financing instruments included in the cate-gory “Loans and receivables” as well as “Other liabilities” and ob-ligations from finance leasing relationships, the fair value is deter-mined by discounting the future cash flows while using the interest rates that currently apply for borrowed capital. Generally, these calculations use interest rates which would apply when renegoti-ating loans with corresponding risk structure, original currency, and maturity.

84 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

For loans and receivables as well as liabilities measured at amortized cost, a net currency loss of EUR 7,587 thousand (previ-ous year: EUR 8,359 thousand) was incurred.

All other components of subsequent measurements of finan-cial instruments are included in other net financial income.

33.2. Derecognition of financial instrumentsIn 2007, a master agreement was entered into with a purchas-

ing entity regarding the purchase of trade receivables that was extended until 2021 in financial year 2013/2014. According to this agreement, SCHOTT sells primary trade receivables on a monthly revolving basis at a discount on the purchase price to a special purpose entity up to a maximum nominal amount of EUR 75 mil-lion. SCHOTT can freely decide whether and in which volume to sell receivables. The volume of receivables sold amounted to EUR 16.5 million on September 30, 2016, and thus remained at last year’s level of EUR 16.5 million. SCHOTT already received pay-ments of EUR 2.6 million in receivables as of the reporting date and presents a corresponding obligation to forward the amounts.

The following tables present the expenses and income by measurement category:

Fiscal year 2015/2016:

(in EUR thousands)

From investment

income

From inter-est and sim-ilar income/

expenses

From subsequent measurement

At fair value

Write-downs/

reversalsFrom

disposalsNet income 2015/2016

Loans and receivables 0 1,008 0 513 0 1,521

Financial assets available for sale 1,524 0 0 0 0 1,524

Financial instruments held for trading 0 0 – 1,362 0 0 – 1,362

Financial liabilities measured at amortized cost 0 – 3,924 0 0 0 – 3,924

TOTAL 1,524 – 2,916 – 1,362 513 0 – 2,241

Net foreign exchange expense – 7,587

TOTAL – 9,828

Fiscal year 2014/2015:

(in EUR thousands)

From investment

income

From inter-est and sim-ilar income/

expenses

From subsequent measurement

At fair value

Write-downs/

reversalsFrom

disposalsNet income 2014/2015

Loans and receivables 0 951 0 3,710 0 4,661

Financial assets available for sale 3,564 307 0 0 3,337 7,208

Financial instruments held for trading 0 0 – 15,793 0 0 – 15,793

Financial liabilities measured at amortized cost 0 – 5,471 0 0 0 – 5,471

TOTAL 3,564 – 4,213 – 15,793 3,710 3,337 – 9,395

Net foreign exchange expense – 8,359

TOTAL – 17,754

Interest on financial instruments is presented under interest income and includes interest income from financial instruments categorized as “loans and receivables” and “available for sale” as well as interest expense from liabilities.

Write-downs and impairment reversals on loans and receiv-ables are presented in other operating income and expenses. In-come and expenses from financial instruments held for trading that are recognized in profit or loss are also recognized in other operating income and expenses. This applies to derivative finan-cial instruments.

In the fiscal year, there was an increase in the fair value of an equity instrument classified as “available for sale” in the amount of EUR 850 thousand, which was recognized directly in the cumula-tive other comprehensive income according to IAS 39.69.

No financial instruments whose fair value previously could not be reliably determined have been derecognized.

85Notes to the Consolidated Financial Statements – Further Information

The type and scope of underlying transactions to be hedged are regulated by the Board of Management for the entire corpo-rate group in a binding treasury guideline. Derivative financial instruments are employed exclusively for hedging purposes; i.e. only in connection with corresponding underlying transactions arising from primary business activities that display a risk profile contrary to the hedging transaction. Business transactions are carried out subject to strict functional separation into trade, back office, documentation, and risk controlling and measured centrally in the Treasury Management System and their risks are continu-ously monitored. The processes, goals, and methods of risk man-agement were the same as in the previous year.

For further information on risk management, please refer to the risk report in the management report.

Credit riskCredit risk arises when a business partner of a financial instru-

ment is unable to meet his contractual obligations. Consequently, the maximum amount receivable corresponds to the gross carry-ing amount owed by each counterparty.

Most of SCHOTT’s credit risks can be attributed to trade receiv-ables from third parties. SCHOTT reduces credit risks with respect to the receivables portfolio by constantly monitoring the credit rating and payment history of its business partners. Each business partner is assigned an individual credit limit on the basis of these criteria. SCHOTT does not see any noteworthy credit risk for the company, as it continuously monitors credit limits for a large and heterogeneous customer base. In addition, SCHOTT also uses fac-toring and credit insurance in individual cases to mitigate custom-er credit risk.

The credit risk arising from cash and cash equivalent funds, derivatives, and financial instruments available for sale is limited by working exclusively with selected contracting parties and credit institutions. Furthermore, general bank counterparty risk is miti-gated by periodic structured measurement, limit allocation, and a diversified business transaction and investment policy. In addi-tion, SCHOTT only employs marketable instruments authorized under the financing guideline with sufficient market liquidity.

Insofar, trade receivables are reduced by the sale of receivables in the net amount of EUR 13.9 million reflected on the balance sheet as of the reporting date.

The relevant risk for the risk assessment with respect to the receivables sold is the risk of default on the part of the customers. The maximum loss to be carried by SCHOTT based on this credit risk is limited to 1.19 %, the discount on the purchase price re-ceived by the special purpose entity at the time of the sale and reimbursed in proportion to the unconsumed portion.

Retransfer of overdue or defaulted receivables to SCHOTT by the special purpose entity is barred. The continuing involvement serves to partially cover late-payer risks from the receivables sold. The inherent risk from the continuing involvement is covered in SCHOTT AG’s risk management by the periodic monitoring of credit risks, dunning runs, etc. Defaulted amounts from trans-ferred receivables are primarily carried by the purchasing entity. SCHOTT bears the risk of late payments on the part of the debtors.

In order to hedge the other miscellaneous defaults resulting from credit risk representing nearly all of the risks and opportuni-ties associated with the receivables, the special purpose entity has taken out separate credit insurance.

The carrying amount of the reserve account for defaults on receivables in the amount of EUR 76 thousand recognized under other current receivables represents the continuing involvement in the receivables that was removed from the balance sheet as part of the ABS transactions. The fair value essentially corresponds to the carrying amount. The maximum risk of loss from the continu-ing involvement essentially corresponds to the carrying amount cited above.

Losses amounting to EUR 166 thousand were incurred during the transfer of the receivables outstanding as of the balance sheet date. SCHOTT recognized a total of EUR 536 thousand as expense, including program fees, from its continuing involvement in fiscal year 2015/2016; EUR 9,911 thousand has accumulated since fiscal year 2006/2007.

33.3. Risk managementWithin the course of their business operations, the companies

of SCHOTT Group are subject to various financial risks arising from market fluctuations of exchange rates, interest rates, and raw ma-terial prices in the operational business. The Treasury of SCHOTT AG manages the financing and hedging activities and controls the group’s cash management centrally.

Risk exposures are regularly identified by Risk Controlling. The maximum accepted market risk is continuously monitored by the Treasury Committee on the basis of specified limits. In addition, Risk Controlling informs the Treasury Committee each month about the transactions and their current fair values as well as the result of hedging activities. Hedging strategies are reviewed by the Treasury Committee at least every quarter.

86 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

(in EUR thousands)

Carrying amount

Gross outflow

Up to 1 year

1 to 5 years

More than 5 years

SEPT. 30, 2016

Liabilities 254,026 255,659 211,875 35,359 8,425

Liabilities under finance leases 22,565 26,451 3,072 10,931 12,448

Financial instruments held for trading 5,196 5,196 5,196 0 0

SEPT. 30, 2015

Liabilities 260,855 261,909 210,311 33,380 18,218

Liabilities under finance leases 19,388 23,262 2,150 7,097 14,015

Financial instruments held for trading 16,281 16,281 16,281 0 0

The following table outlines the carrying amounts of the finan-cial assets. They are broken down into classes and are equivalents of SCHOTT Group’s maximum default risk and credit exposure as of the balance sheet date:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Loans and receivables 506,164 433,461

Financial instruments available for sale 4,651 3,056

Financial assets not subject to IFRS 7 55,028 51,315

Financial instruments at fair value through profit or loss: – held for trading 4,294 6,408

570,137 494,240

As of the balance sheet date (as in the previous year), no collat-eral was held that may either be sold or provided as the company’s own collateral if the debtor has not defaulted.

The following table outlines overdue trade receivables from third parties. The values of financial assets are adjusted if they are more than 90 days overdue.

(in EUR thousands)Gross

receivables

Impaired receivables

(gross)

Valuation allowances

on these

Non- impaired

receivables

Of which neither

impaired nor overdue

Of which overdue and not impaired as of the balance sheet date

1 to 30 days

31 to 60 days

61 to 90 days

SEPT. 30, 2016

Trade receivables 359,841 44,481 – 17,833 333,193 301,656 22,654 7,134 1,749

SEPT. 30, 2015

Trade receivables 320,079 46,452 – 17,195 290,822 256,775 22,848 6,966 4,233

There are no other financial assets that are overdue and not impaired as of the balance sheet date (as in the previous year).

Liquidity riskLiquidity risk describes the risk that a company is unable to

sufficiently meet its financial obligations. SCHOTT’s financial lia-bilities mainly consist of trade payables and liabilities to banks. Within the financial instruments held for trading, only derivatives with negative market prices are presented to the extent that they result in a net outflow of funds. The following table outlines the contractual remaining term to maturity of undiscounted financial liabilities:

87Notes to the Consolidated Financial Statements – Further Information

Generally speaking, our global presence, including local man-ufacturing and global purchasing activities, mitigates transaction risks. The net currency positions that we calculate on a regular basis using currency-specific liquidity forecasts form the basis for hedging the remaining transaction risks. Currency forwards and currency options are employed to hedge transaction risks. The vast majority of our derivatives are due within one year. The max-imum remaining term for derivatives is 17 months. The majority of currency risks are the result of the euro’s price performance against the US dollar and the Swiss franc.

Currency risk is determined on the basis of a value-at-risk analysis in accordance with internal risk reporting. This analysis is based on open positions in non-functional currencies. The expo-sure (shown in the table below) includes a forecast of cash flows over the next 12 months (previous year: 18 months) and hedging instruments in foreign currencies and is shown in the table below. Transaction risks were hedged mainly in the currencies listed:

(in EUR thousands)

Exposure Sept. 30,

2016

Japanese yen 8,789

Malaysian ringgit – 16,367

Swiss franc – 91,823

Singapore dollar – 29,480

Thai baht – 19,914

Czech koruna – 32,938

Hungarian forint – 21,271

US dollar 179,148

Other – 45,895

SCHOTT’s exchange rate risk is analyzed based on a value-at-risk analysis. The value-at-risk calculation is performed using a stochastic simulation; based on observed changes in exchange rates on the last 250 days of trading, possible future developments in exchange rates are simulated taking their correlations into ac-count. Value-at-risk represents the expected maximum loss of exposure based on a confidence interval of 95 % and a holding period of 1 month. As of September 30, 2016, the value-at-risk amounted to EUR 6.7 million.

Interest rate riskThe aim of interest management is to protect consolidated

earnings from the negative effects of fluctuating market interest rates. Attention is paid here to an appropriate ratio between fixed and variable interest rates and short-term and long-term financing arrangements while taking costs and risks into consideration.

The Treasury Department is responsible for the management of liquidity risk, for which an efficient cash management system is used. SCHOTT ensures its solvency and liquidity supply through rolling liquidity planning and by maintaining liquidity reserves.

The company has a syndicated credit line over EUR 250 million with a term until March 2020 as part of its liquidity reserve that was contractually agreed with an international banking syndicate. As of September 30, 2016, SCHOTT had not yet utilized this credit line. In addition, bilateral credit lines were contracted by SCHOTT AG over EUR 155 million which can be used for guaran-tees, bill of exchange guarantees, or cash credit lines. These can also be transferred to the local level through bilateral loan agree-ments. EUR 107 million of these credit lines which are available until further notice were freely available on the balance sheet date.

The group also has other bilateral bill of exchange guarantee credit lines and bilateral credit agreements at its disposal at the local level.

Furthermore, the company also has a revolving factoring pro-gram with a volume of EUR 75 million and a term until 2021. As of September 30, 2016, trade receivables were decreased by the rec-ognized sale of receivables in the amount of EUR 13.9 million (pre-vious year: EUR 13.6 million).

Market riskMarket risks are the result of changing market prices that lead

to fluctuations of fair value or future cash flows of financial instru-ments. SCHOTT is an international corporate group and therefore particularly susceptible to currency, interest rate, security price, and commodity price risks.

Currency riskCurrency risks arise from investments, financing measures,

and business operations not conducted in the functional currency. The aim of currency management is to hedge business operations against earnings and cash flow fluctuations. Generally, only risks resulting from an exchange of foreign currency cash flows into the respective local currency (transaction risks) are hedged as part of currency management. SCHOTT does not generally hedge risks arising from the foreign currency translation of the statement of financial position and earnings figures of foreign group companies (translation risks).

88 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

SCHOTT rents or leases land, buildings, technical equipment and machinery. Depending on their structure, the contracts are either finance leases or operating leases. The leasing obligations are redeemed over the corresponding contractual term. Individual leases include options for early notice of termination, extension, and purchase.

Future obligations under rental contracts and leases can be broken down as follows:

Finance leases (in EUR thousands)

Up to 1 year 1 to 5 years

More than 5 years Total

SEPT. 30, 2016

Minimum lease payments 3,072 10,931 12,448 26,451

less interest portion 739 1,823 1,324 3,886

PRESENT VALUE OF LE ASING LIABILIT Y 2,333 9,108 11,124 22,565

SEPT. 30, 2015

Minimum lease payments 2,151 7,097 14,015 23,263

less interest portion 549 1,673 1,653 3,875

PRESENT VALUE OF LE ASING LIABILIT Y 1,602 5,424 12,362 19,388

Operating leases (in EUR thousands)

Up to 1 year 1 to 5 years

More than 5 years Total

SEPT. 30, 2016

Leasing obligation 20,260 47,878 69,486 137,624

SEPT. 30, 2015

Leasing obligation 20,208 46,945 53,982 121,135

The finance leases recognized under property, plant and equipment relate almost entirely to German property leases.

EUR 26,916 thousand (previous year: EUR 30,744 thousand) was recognized as rental and leasing expenses in the fiscal year. The expected future minimum payments for sub-leases which cannot be terminated as of the balance sheet date amount to EUR 2,213 thousand (previous year: EUR 2,513 thousand) with a due date within one year and EUR 744 thousand (previous year: EUR 2,957 thousand) due between one and five years.

Interest rate risk is identified consistent with internal reporting by means of a sensitivity analysis, whereby the yield curve is shifted parallel by 100 basis points. This illustrates the effects of a change in interest rates on net financial income. This analysis only takes financial instruments with variable interest rates into ac-count, as changes in market interest rates would affect the fair value. In addition, fixed-rate financial assets and financial liabilities are recognized with a residual maturity less than or equal to twelve months because they are considered to be variable interest due to the potential refinancing risk.

SCHOTT measures fixed-interest financial instruments at amor-tized cost; therefore, changing interest rates do not lead to changes in equity or profit.

On the basis of market data from September 30, 2016, a 100 basis point parallel shift of the euro yield curve would have led to a EUR 0.5 million (previous year: EUR 0.1 million) gain in profit or loss. Inversely, a 100 basis point parallel negative shift of the EUR yield curve would have led to a EUR 0.5 million (previous year: EUR 0.1 million) loss in profit or loss. This sensitivity analysis as of the balance sheet date is a representative analysis of SCHOTT’s interest rate risk.

Commodity price risksSCHOTT continues to be exposed to risks associated with

changes in commodity prices resulting from the procurement of capital goods. The aim of commodity price management is to pro-tect business operations from price increases. The purchasing de-partment is responsible for the operational management of com-modity price risk at SCHOTT and performs this task on the basis of internal, centrally determined directives and limits. Among other measures, long-term contracts were concluded with various sup-pliers to manage commodity price risks. In addition, the group may also hold a small amount of primary and derivative financial instruments, if necessary. Commodity price risks for financial in-struments were of minor significance to SCHOTT in 2015 and 2016. As a result, SCHOTT has not conducted a sensitivity analysis for these financial instruments.

— 34 LE A SE S

Leased assetsThe following net carrying amounts were recognized for fi-

nance leases under property, plant and equipment:

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015

Land and buildings 19,145 19,865

Technical equipment, plant and machinery 5,220 1,053

24,365 20,918

89Notes to the Consolidated Financial Statements – Further Information

Cash and cash equivalents disclosed in the cash flow state-ment include cash holdings and bank deposits as well as checks in the amount of EUR 93,503 thousand (previous year: EUR 105,914 thousand), EUR 2,606 thousand (previous year: EUR 2,895 thou-sand) of which were restricted on the balance sheet date.

— 37 EMPLOYEE S

Average number of employees for the year 2015/2016 2014/2015

Germany 4,955 4,911

Europe (excluding Germany) 3,669 3,638

America 3,349 3,478

Asia 2,754 2,827

14,727 14,854

Apprentices 244 239

TOTAL 14,971 15,093

SCHOTT’s employees include the employees of the companies

included in the consolidated financial statements, whereby first-time consolidation during the course of the fiscal year is presented pro rata temporis. As of the balance sheet date September 30, 2016, the number of employees increased by 55 employees (+ 0.4 %) to 15,071 employees (previous year: 15,016).

— 38 OTHER INFORMATION

The following personnel expenses were incurred during the fiscal year:

(in EUR thousands) 2015/2016 2014/2015

Personnel expenses 711,480 712,750

Personnel expenses are contained in the functional areas and are not disclosed separately in the income statement according to the cost of sales (function of expense) method.

The total fees invoiced by the auditor of the consolidated fi-nancial statements are as follows:

(in T €) 2015/2016

Audit 693

Other certification and appraisal services 11

Tax advisory services 97

Other services 14

TOTAL 815

Assets leased outIn Germany, SCHOTT is the lessor under operating leases. The

agreements are related to property in SCHOTT’s possession. Min-imum lease payments with a nominal value of EUR 2,463 thousand with a due date of less than one year are expected from lease agreements that cannot be terminated, of EUR 8,692 thousand due between one and five years and with a nominal volume of EUR 6,633 thousand due in over five years.

The investment properties have a carrying amount of EUR 5,100 thousand (previous year: EUR 5,100 thousand) and a fair value of EUR 5,700 thousand (previous year: EUR 5,700 thousand) as of the balance sheet date.

With respect to the building held as a financial investment, this is commercial real estate located in Germany. The valuation was conducted in accordance with the principles of orderly real estate valuation. The valuation date was September 30, 2016.

— 35 CONTINGENT L IABIL IT IE S AND A SSETS

As of the balance sheet date, there are no unrecognized con-tingent liabilities (previous year: EUR 0 million).

Provisions have been formed in sufficient amount by the group companies to account for possible financial burdens arising from further legal disputes.

There are contingent claims against insurance companies to regulate the fire damage in the US in the high single-digit millions as of the balance sheet date.

— 36 NOTE S TO THE CONSOLIDATED STATEMENT OF

C A SH FLOW

In the statement of cash flows, cash flows are broken down into cash inflows and outflows from operating activities, investing activities, and financing activities. Cash flow is derived indirectly on the basis of earnings from business operations. Cash flow re-sults from operating activities adjusted for non-cash expenses and income – primarily depreciation on non-current assets – and changes in working capital.

Investing activity comprises the receipts and disbursements from the disposal of and investments in non-current assets.

Financing activity summarizes the cash inflows and outflows arising from the raising and repayment of financing liabilities and contributions to equity as well as the payment of dividends.

Changes in statement of financial position items contained in the statement of cash flows cannot be derived directly from the statement of financial position, as they have been adjusted for non-cash transactions, exchange rate effects, and changes in the consolidated group.

90 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The receivables and liabilities to joint ventures and associated companies are shown as follows:

Receivables Liabilities

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015Sept. 30,

2016Sept. 30,

2015

Joint ventures 1,219 1,313 66 68

Associated companies 1,299 1,222 43 1,851

2,518 2,535 109 1,919

No allowances for doubtful receivables from associates were recognized (previous year: EUR 37 thousand). No allowances for doubtful receivables from joint ventures were recognized as in the previous year.

As in the previous year, there were no other significant transac-tions between companies of SCHOTT Group and members of the Board of Management or the Supervisory Board of SCHOTT AG and their close family members as well as the pension plans in fiscal year 2015/2016.

— 40 S IGNIFIC ANT EVENTS SUBSEQUENT TO THE

BAL ANCE SHEET DATE

No significant events took place between the balance sheet date (September 30, 2016) and the date on which the annual financial statements were prepared (November 29, 2016).

— 41 REMUNER ATION OF THE BOARD OF MANAGEMENT

AND SUPERVISORY BOARD

The total remuneration of members of the Board of Manage-ment in fiscal year 2015/2016 comprises payments due in the short term amounting to EUR 5,417 thousand (previous year: EUR 5,472 thousand) as well as post-employment benefits amounting to EUR 3,341 thousand (previous year: EUR 1,165 thousand). The company took advantage of the protective clause contained in section 286 (4) of the German Commercial Code HGB in the previ-ous year.

The members of the Supervisory Board received EUR 607 thou-sand (previous year: EUR 604 thousand) for their work on the Board in fiscal year 2015/2016.

Additional disclosures in accordance with section 314 (1) no. 6 HGB

Former members of the Board of Management or their surviv-ing dependents received remuneration amounting to EUR 2,607 thousand (previous year: EUR 2,326 thousand) in fiscal year 2015/2016. A total of EUR 67,813 thousand (previous year: EUR 44,176 thousand) was added to provisions for pension com-mitments to this group of individuals.

— 39 REL ATED PART Y DISCLOSURE S

Parties related to SCHOTT AG include the Carl Zeiss Foundation, Heidenheim an der Brenz and Jena, the sister company Carl Zeiss AG, Oberkochen, and its subsidiaries. Generally, related parties within the meaning of IAS 24 also include direct and indirect subsidiaries of SCHOTT AG as well as its associated companies and joint ven-tures and pension plans that are classified as defined benefit plans in accordance with IAS 19. In addition, related parties include the Board of Management of SCHOTT AG, and the members of the Supervisory Board, as well as their close family members.

As of September 30, 2016, there are liabilities to the Carl Zeiss Foundation from loans totaling EUR 48,800 thousand (previous year: EUR 48,300 thousand) and interest in the amount of EUR 153 thousand (previous year: EUR 224 thousand). Loan agreements were entered into at arm’s length in accordance with the master loan agreement from fiscal year 2015.

Deliveries by SCHOTT AG to companies of Carl Zeiss Group in fiscal year 2015/2016 amounted to EUR 8,208 thousand (previous year: EUR 6,027 thousand). In the same period, services totaling EUR 11 thousand (previous year: EUR 290 thousand) were ren-dered. Companies of Carl Zeiss Group only provided a small amount of deliveries or other services to SCHOTT in fiscal year 2015/2016. All transactions entered into with companies of Carl Zeiss Group were entered into at arm’s length. There were no sig-nificant outstanding amounts as of the reporting date.

Transactions with significant subsidiaries were eliminated as a result of consolidation and therefore not explained in detail. Dis-closures on pension funds classified as defined benefit plans in accordance with IAS 19 can be found under disclosures on plan assets under Note 26 “Pension plans and similar commitments.” In the past fiscal year, a CTA invested in a newly founded subsidiary, SCHOTT Finanzierungs- und Verwaltungs GmbH. Further details on this company can be found in Note 3.1. There were no other significant transactions with pension funds or companies not in-cluded in the consolidated financial statements.

In the 2015/2016 fiscal year, SCHOTT companies engaged in the following transactions with joint ventures and associated com-panies:

Sale of goods Purchase of goods

(in EUR thousands)Sept. 30,

2016Sept. 30,

2015Sept. 30,

2016Sept. 30,

2015

Joint ventures 5,108 5,262 – –

Associated companies 13,325 17,010 1,139 11,835

18,433 22,272 1,139 11,835

91Notes to the Consolidated Financial Statements – Further Information/Auditor’s Report

AUDITOR’S REPORT

and significant estimates made by management, as well as evalu-ating the overall presentation of the consolidated financial state-ments and group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the con-solidated financial statements comply with IFRSs, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the group in accordance with these requirements. The group man-agement report is consistent with the consolidated financial state-ments and, as a whole, provides a suitable view of the group’s position and suitably presents the opportunities and risks of future development.

Eschborn/Frankfurt/Main, November 29, 2016

Ernst & Young GmbHWirtschaftsprüfungsgesellschaft

Eckl EichenauerGerman Public Auditor German Public Auditor

We have audited the consolidated financial statements pre-pared by SCHOTT AG, Mainz, consisting of the statement of financial position, the statement of income, the statement of rec-ognized income and expense, the statement of cash flows, and the notes to the financial statements, and the group management report for the fiscal year from October 1, 2015, through Septem-ber 30, 2016. The preparation of the consolidated financial state-ments and the group management report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB [Handels-gesetzbuch/German Commercial Code], is the responsibility of the company’s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit.

We conducted our audit of the consolidated financial state-ments in accordance with § 317 HGB and German generally ac-cepted standards for the audit of financial statements promul-gated by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the group and ex- pectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence sup-porting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used

92

MAJOR SHAREHOLDINGST H E L I S T O F A L L S H A R E H O L D I N G S P U R S U A N T T O T H E R E Q U I R E M E N T S O F S E C T I O N 313 ( 2 ) H G B [ H A N D E L S G E S E T Z-

B U C H “ G E R M A N C O M M E R C I A L C O D E ” ] I S P U B L I S H E D I N T H E E L E C T R O N I C F E D E R A L G A Z E T T E [ B U N D E S A N Z E I G E R ] .

1) Pursuant to section 264 (3) and/or 264b HGB, this company is exempted from the duty to disclose its financial statements and also from the preparation of an annual report.

Position as of September 30, 2016

E U R O P E

GERMANY

LIB Industrie Beteiligung GmbH Mainz 100 %

SCHOTT Technical Glass Solutions GmbH1) Jena 100 %

SCHOTT Glas Mainz Grundstücks-GmbH & Co. KG1) Mainz 100 %

SCHOTT Glaswerke Beteiligungs- und Export GmbH1) Mainz 100 %

SCHOTT Jenaer Glas GmbH1) Jena 100 %

SCHOTT Solar AG Mainz 100 %

SCHOTT Solar CSP GmbH Mainz 100 %

Silicium Grundstücksverwaltungsgesellschaft mbH & Co. Vermietungs KG1) Mainz 100 %

C ZECH REPU BLIC

SCHOTT CR, s.r.o. Lanškroun 100 %

SCHOTT Solar CR, k.s. Valašské Mezirící 100 %

SCHOTT Flat Glass CR, s.r.o. Valašské Mezirící 100 %

FR ANCE

SCHOTT France SAS Clichy 100 %

SCHOTT France Pharma Systems SAS Pont-sur-Yonne 100 %

SCHOTT SFAM Société Française d’Ampoules Mécaniques S.à.r.l. Casteljaloux 100 %

SCHOTT VTF SAS Troisfontaines 100 %

H U NG ARY

SCHOTT Hungary Kft. Lukácsháza 100 %

ITALY

SCHOTT Italvetro S.R.L. Borgo a Mozzano 80 %

THE NE THERL ANDS

SCHOTT Benelux B.V. Tiel 100 %

SCHOTT Flat Glass B.V. Tiel 75 %

SCHOTT Flat Glass Holding B.V. Tiel 66.7 %

NORWAY

SCHOTT Termofrost AS Oslo 100 %

RUSSIA

SCHOTT Pharmaceutical Packaging OOO Zavolzhye 100 %

SPAIN

SCHOTT Glass Ibérica S.L. Barcelona 100 %

S WITZERL AND

SCHOTT forma vitrum holding ag St. Gallen 100 %

SCHOTT Schweiz AG St. Gallen 100 %

T U RKE Y

SCHOTT Orim Cam Sanayi ve Ticaret A.S. Çerkezköy 100 %

U NITED K INGDOM

SCHOTT UK Ltd. Stafford 100 %

93Major Shareholdings

T H E A M E R I C A S

ARGENTINA

SCHOTT Envases Argentina S.A. Buenos Aires 100 %

BR A ZIL

SCHOTT Brasil Ltda. São Paulo 100 %

SCHOTT Flat Glass do Brasil Ltda. São Paulo 100 %

C ANADA

Baron Glass Sealing & Assembly, Inc. Midland 100 %

SCHOTT Gemtron Canada Corporation Midland 56 %

COLOMBIA

SCHOTT Envases Farmaceuticos S.A.S. Bogotá 72.7 %

ME XICO

SCHOTT de México, S.A. de C.V. Cordoba 100 %

Gemtron de México S.A. de C.V. San Luis Potosí 100 %

USA

SCHOTT Gemtron Corporation Sweetwater 51 %

SCHOTT Corporation Elmsford 100 %

SCHOTT North America, Inc. Elmsford 100 %

A S I A

CHINA

SCHOTT Glass Technologies (Suzhou) Co., Ltd. Suzhou 100 %

SCHOTT (Shanghai) Precision Materials & Equipment International Trading Co., Ltd. Shanghai 100 %

SCHOTT Xinkang Pharmaceutical Packaging Co., Ltd. Huzhen Town 83 %

SCHOTT Glas China Ltd. Hong Kong 100 %

INDIA

SCHOTT Glass India Pvt. Ltd. Mumbai 100 %

INDONE SIA

PT. SCHOTT Igar Glass Bekasi 100 %

JAPAN

NEC SCHOTT Components Corporation Shiga 51 %

SCHOTT Nippon K.K. Tokyo 100 %

MAL AYSIA

SCHOTT Glass (Malaysia) Components Sdn. Bhd. Perai 100 %

SCHOTT Glass (Malaysia) Sdn. Bhd. Perai 100 %

S ING APORE

SCHOTT Singapore Pte. Ltd. Singapore 100 %

SOU TH KORE A

SCHOTT Korea Co. Ltd. Seoul 100 %

TA IWAN

SCHOTT Taiwan Ltd. Taipei 100 %

94

MEMBERS OF EXECUTIVE BODIES AT SCHOTT AG

B OA R D O F M A N AG E M E N T

Dr. Frank Heinricht

MainzChairman and Chief Human Resources OfficerMember of the Board of Management responsible for Pharmaceutical Systems, Tubing, Compliance/Legal, Human Resources, Marketing & Communication, Strategic Development, Research & Development (as of January 1, 2016)Until December 31, 2015:Advanced Optics, Electronic PackagingFrom April 1 until June 30, 2016:Finance, SCHOTT Solar AG

Hermann Ditz (as of January 1, 2016)

LandshutMember of the Board of Management responsible for Advanced Optics, Electronic Packaging, Lighting & Imaging, Defense, Technical ServicesFrom April 1 until June 30, 2016: Purchasing

Dr. Heinz Kaiser (as of January 1, 2016)

MainzMember of the Board of Management responsible for Home Tech, Flat Glass, Market DevelopmentFrom April 1 until June 30, 2016:Information Technology

Dr. Hans-Joachim Konz (until December 31, 2015)

Bad KreuznachMember of the Board of Managementresponsible for Home Tech, Flat Glass, Lighting & Imaging, Defense, Research & Development, SCHOTT Solar AG, Technical Services

Klaus Rübenthaler (until March 31, 2016)

MainzMember of the Board of Managementresponsible for Finance, Information Technology, PurchasingUntil December 31, 2015: Market DevelopmentFrom January 1 until March 31, 2016: SCHOTT Solar AG

Dr. Jens Schulte (as of July 1, 2016)

FrankfurtMember of the Board of Management responsible for Finance, Information Technology, Purchasing, SCHOTT Solar AG

S U P E R V I S O R Y B OA R D

Dr. Dieter Kurz

LindauChairmanChairman of the Presiding Committee and the Conference Committee, Member of the Audit Committee, Chairman of the Shareholder Council of the Carl Zeiss Foundation, Heidenheim an der Brenz and JenaFormer Chairman of the Board of Management of Carl Zeiss AG, Oberkochen

Prof. Dr. Klaus Backhaus

MünsterMember of the Conference CommitteeDirector of the Institute of Industrial Plant and Systems Technologies at the University of Münster, Münster

Hartmuth Baumann 1)

WackersdorfMember of the Audit CommitteeRegional Manager of the Industrial Trade Union of Mining, Chemicals and Energy (IG BCE), Northeast Bavaria, Weiden

Gerhard Greim 1)

Mitterteich Deputy Chairman of the Employee Council of SCHOTT AG, Mitterteich

Wolfgang Heinrich 1)

MaisbornVice ChairmanMember of the Presiding Committee and the Conference Committee, Chairman of the Employee Council of SCHOTT AG, Mainz site

Dr. Thomas Hünlich 1)

WindesheimMember of the Presiding CommitteeDirector of Environmental Engineering at SCHOTT AG, MainzChairman of the Board of Management of the VAA Plant Group Mainz (Association of Employed Academics and Executives in the Chemical Industry e. V.)

Dr. Eduard Kulenkamp

Bad DürkheimChairman of the Supervisory Board of Gebr. Pfeiffer SE, Kaiserslautern

Dr. Stefan Marcinowski

MannheimMember of the Presiding CommitteeFormer Member of the Board of Management of BASF SE, Ludwigshafen

Martina Mehlan 1)

GrünenplanMember of the Conference CommitteeChairwoman of the Employee Council of SCHOTT AG, Grünenplan site

Dr. Eckhard Müller

MunichChairman of the Audit CommitteeFormer Head of the Finance Division of BASF SE, Ludwigshafen

Dr. Richard Pott

LeverkusenChairman of the Supervisory Board of Covestro AG, Leverkusen

Salvatore Ruggiero 1)

MainzMember of the Audit CommitteeVice President of Marketing and Communication, SCHOTT AG, Mainz

95Members of Executive Bodies at SCHOTT AG

1) Workers’ representative

CO M M I T T E E S

Presiding Committee

Dr. Dieter Kurz (Chairman)Wolfgang Heinrich 1)

Dr. Thomas Hünlich 1)

Dr. Stefan Marcinowski

Audit Committee

Dr. Eckhard Müller (Chairman)Dr. Dieter KurzHartmuth Baumann 1)

Salvatore Ruggiero 1)

Conference Committee

Dr. Dieter Kurz (Chairman)Prof. Dr. Klaus BackhausWolfgang Heinrich 1)

Martina Mehlan 1)

96

IMPRINT, CONTACT DETAILS, DISCL AIMER

PublisherSCHOTT AG

Hattenbergstrasse 1055122 MainzGermanyPhone: + 49 (0)6131/66-0Fax: + 49 (0)6131/66-2000e-mail: [email protected]: www.schott.com

Editorial staffSCHOTT AG

Finance Marketing and Communication

Design3st kommunikation GmbH, Mainz

Typesetting and LithographyKnecht GmbH, Ockenheim

PrinterSchmidt printmedien GmbHGinsheim-GustavsburgPaper: 350 g/m2 MaxiSilk FSC of Igepa

150 g/m2 MaxiSilk FSC of Igepa

Product names marked with ® or TM have been registered or applied for as SCHOTT brands in many countries.

DisclaimerThis Annual Report contains forward-looking statements. They take into account estimates about future developments on the date of the report. Such statements are subject to risks and uncertainties that are beyond SCHOTT’s ability to control or estimate precisely to a high degree, such as future market and economic conditions, the behavior of other market participants, the ability to achieve an-ticipated synergies and the actions of government regulators.

Should one of the mentioned or other factors materialize or the assumptions on which the forward-looking statements are based prove to be inaccurate, the actual results could differ from the expectations described in the Annual Report. SCHOTT will not correct or update the forward-looking statements to adapt them to current developments and events after the report date.

Product designations and names that are the property of SCHOTT are marked. Other product and company names mentioned in this report may be trademarks of their respective owners.

This Annual Report has been published in German and English. Both versions are also available for downloading from the Internet under www.schott.com. In the event that translation results in deviations, the German version shall take precedence.

This Annual Report has been produced in a carbon neutral manner. The CO2 emissions caused by its production were compensated for by certified climate protection projects.

 45% 23 %

5 % 1 %

SOUTH AMERIC A

SCHOTT has been active in this region with its own production facilities since 1954. 1,350 employees generated sales of EUR 106 million in fiscal year 2014/2015.

OTHER REGIONS

SCHOTT generated sales of EUR 13 mil-lion in the reporting period in other regions such as Oceania and Africa.

            S H A R E   O F   G L O B A L   

          Sales                               by region

N O R T H   A M E R I C A

SCHOTT has production, sales and research sites in North America (USA, Canada and Mexico). 2,000 employ-ees generated EUR 458 million in sales in this region in fiscal year 2015/2016.

E U R O P E

Europe remains the most important economic region for SCHOTT. Here, the technology group generated sales of EUR 906 million in fiscal year 2015/2016 with its 8,900 employees (5,169 of whom are based in Germany).

A S I A

This economic area with its huge growth potential ranks as one of the most important markets for the future. The 2,800 employees who work for SCHOTT realized EUR 509 million in sales in fiscal year 2015/2016.

SCHOT T WORLDWIDE    T H E   C O M PA N Y   M A I N TA I N S   C L O S E   R E L AT I O N S H I P S   W I T H   I T S   C U S T O M E R S   I N   A L L   

M A J O R   M A R K E T S   T H R O U G H   H I G H - P E R F O R M A N C E   M A N U FA C T U R I N G   A N D   S A L E S   U N I T S . 

26 %

ANNUAL REVIEW

N OV E M B E R

Brand of the Century

SCHOTT CERAN® was honored in Berlin as “Brand of the Century 2016.” The innovative glass-ceramic material, which has now been sold more than 130 million times in over 140 countries, has become a global brand.

D EC E M B E R

New SCHOTT Product World

With the “World of SCHOTT” exhibition at its headquarters in Mainz, the company now presents itself to its customers, business part-ners and employees with a completely new design and exhibition concept.

2 016F E B R UA R Y

Fit for the Future

A new melting tank and a state-of-the-art  palletizing line were put into operation at the Mitterteich plant, the competence center for special glass tubing. SCHOTT has invested  approximately 100 million euros in Mitterteich in the last five years alone.

M A R C H

40 Years of SCHOTT UK

SCHOTT’s Sales Office in Stafford, UK, cele-brated its 40th anniversary. Its main sales markets include the home appliance industry, the pharmaceutical industry, and the auto-motive and aerospace sectors.

A P R I L

“Oscar” from German Business

SCHOTT received the German Industry Inno-vation Award in the large company category for developing its ultra-thin glass. This high-tech material is intended for use in futuristic products in the electronics and semiconduc-tor industries.

2 015O C TO B E R

Hunting for Neutrinos with Specialty Glass

Two scientists from Japan and Canada were awarded the Nobel Prize for Physics for  their research on neutrinos. A detector with photomultipliers made of optical glass from SCHOTT is the heart of the neutrino observa-tory that is buried two kilometers deep.

F I S C A L   Y E A R   2 015/ 2 016

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50 Years of SCHOTT Nippon

SCHOTT opened its first sales office in Asia in 1966. Since then, SCHOTT Nippon in Tokyo has contributed directly to the success of its Japanese customers. This was celebrated in the presence of the German Ambassador in Japan along with customers and employees.

J U LY

A Special Success Story

SCHOTT celebrated its 75th anniversary in Landshut by holding various events and a major “World of Experience.” At this site, SCHOTT develops and manufactures vacuum- tight enclosures and other components for the protection of sensitive electronics.

S E P T E M B E R

On the Trail of the Super Glass 

The Otto Schott Research Prize has been awarded for 25 years for pioneering insights into glass as a material. In Sheffield, UK,  Dr. Jean-Pierre Guin, Dr. Sheldon M. Wieder-horn and Professor Satoshi Yoshida (from left to right) were honored for their work in the field of glass strength.

2 016 O C TO B E R

The Chemistry Is Right

The Managers’ Association of the Chemical Industry VAA awarded SCHOTT with the 2016 Cologne German Chemical Prize for its exem-plary and long-term human resources work. The jury based its decision on an annual satis-faction survey comprising 7,000 executives from 24 chemical and pharmaceutical com-panies from which SCHOTT arose the winner.

Production Start at the Expanded Facility

With the extension of its CERAN® Technology Center in Mainz, SCHOTT has strengthened its position as an innovation leader in glass- ceramic cooktop panels. With the launch  of SCHOTT CERAN® MiradurTM, SCHOTT has become the first and only supplier of scratch- resistant cooktop panels to the market.

AU G U S T

New Images of the Planet Jupiter

NASA’s Juno probe flew closer to the planet Jupiter than ever before. Some spectacular new shots of the planet and especially its  polar regions were taken. Specialty glass from SCHOTT protected the camera lens  from cosmic radiation.

F I S C A L   Y E A R   2 015/ 2 016 F I S C A L   Y E A R   2 016 / 2 017

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SCHOTT AG

Hattenbergstrasse 1055122 MainzGermanywww.schott.com