2013/2014 - schott ag · innovative high-tech glass optical fibers under the puravis® brand,...

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KEY FIGURES SCHOT T GROUP F R O M O C T O B E R 1, 2 013 , T O S E P T E M B E R 3 0 , 2 014

(in million euros, unless otherwise stated) 2013/2014 2012/20131) Change in %

SALES 1,870 1,885 – 1

Domestic 267 272 – 2

Foreign 1,604 1,614 – 1

EBITDA 258 262 – 2

as a percentage of sales 14 14

EBIT 135 74 83

as a percentage of sales 7 4

INCOME FROM CONTINUING OPER ATIONS BEFORE INCOME TA XES 98 31 > 100

GROUP E ARNINGS 66 25 > 100

CASH FLOW FROM OPER ATING AC TIVITIES 182 151 21

CAPITAL EXPENDITURE ON PROPERT Y, PL ANT AND EQUIPMENT 135 122 11

TOTAL ASSETS 2,184 2,204 – 1

EQUIT Y 401 428 – 6

Equity ratio (%) 18 19

LONG -TERM FUNDS AVAIL ABLE 2) 1,631 1,517 8

as a percentage of total assets 75 69

NET FINANCIAL ASSETS 3) – 74 – 108 31

EXPENDITURE ON RESE ARCH AND DEVELOPMENT 86 84 3

as a percentage of total sales 5 4

EMPLOYEES AS OF BAL ANCE SHEET DATE (NUMBER) 15,445 15,444 0

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

1) The previous year’s figures have been calculated on a comparable basis.2) Equity, long-term provisions and long-term liabilities3) Cash, cash equivalents and funds, less financial liabilities

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 .

OTHER REGIONSSCHOTT generated sales of EUR 60 million

in the other regions such as Oceania and Africa in the reporting period.

26 %

EUROPEEurope remains the most important economic region for SCHOTT. The technology group’s 8,800 employees (5,100 of whom are based in Germany) generated sales of EUR 845 million here in fiscal year 2013/2014.

45 %

NORTH AMERIC ASCHOTT has production, sales and research sites in North America (U.S.A., Canada and Mexico). 2,200 employees generated EUR 375 million in sales in this region in fiscal year 2013/2014.

20 %

6 %

SOUTH AMERIC ASCHOTT has been active in this region with its own production facilities since 1954. 1,300 employees generated sales of EUR 110 million here in fiscal year 2013/2014.

A SIAThis economic region with its huge growth

potential ranks as one of the most important markets for the future. The 3,100 employees

who work for SCHOTT in this region generated sales of EUR 480 million in fiscal year 2013/2014.

3 %

SHARE OF GLOBAL SALES

BY REGION

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PUR AVIS® HIGH - PERFORMANCE GL A SS OP TIC AL F IBER S

SCHOTT offers sophisticated solutions for transmitting light and images. By developing innovative high-tech glass optical fibers under the PURAVIS® brand, SCHOTT is intro-ducing a product to the market that is manufactured in an environmentally-friendly manner and yet exhibits excellent per formance properties. The fibers are manufac-tured using a newly developed process that doesn’t require the use of lead, arsenic or antimony. At the same time, this new high-tech fiber transmits even whiter light than conventional glass optical fibers. Besides their better optical properties, the fibers offer greatly improved chemical resistance. PURAVIS® optical fibers are therefore particu-larly well suited for use in medical technology, such as endoscopy, for example. In 2014, PURAVIS® high-per formance optical fibers were presented with the SCHOTT Innova-tion Award as an outstanding product innovation.

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. SCHOTT is an innovative enabler for many industries, includ-ing the home appliance, pharmaceutical, elec-tronics, optics, automotive and aviation indus-tries. SCHOTT strives to play an important part of everyone’s life and is committed to innovation and sustainable 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

02

TABLE OF CONTENTSA N N U A L R E P O R T 2 013 / 2 014

1012 5 Y E A R S O F T H E C A R L Z E I S S F O U N D AT I O N

27 E M P L O Y E E S

03

20R E S E A R C H A N D D E V E L O P M E N T

B OA R D O F M A N AG E M E N T/

S U P E R V I S O R Y B OA R D

Board of Management 04

Foreword by the Board of Management 05

Report by the Supervisory Board 08

I N F O C U S

125 Years of the Carl Zeiss Foundation 10

Innovations Ensure Future Successes 14

SCHOTT Assumes Responsibility 16

SCH OT T AG G RO U P M A N AG E M E N T R E P O R T

Group Structure 19

Research and Development 20

Economic Report 21

Business Development and Situation

of the Group 22

Earnings, Financial and Asset Situation 22

Financial and Non-Financial Performance

Indicators 27

Report on the Forecast 28

Report on Opportunities and Risks 29

Supplementary Report 33

S C H OT T AG CO N S O L I DAT E D

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

Consolidated Statement of Income 36

Consolidated Statement

of Comprehensive Income 37


of Financial Position 38

Consolidated Cash Flow Statement 40


of Changes in Equity 42

Notes to the Consolidated Financial

Statements 44

M A J O R S H A R E H O L D I N G S 92

M E M B E R S O F E X EC U T I V E B O D I E S

AT S C H OT T AG 9 4

I M P R I N T, CO N TAC T D E TA I L S ,

D I S C L A I M E R 9 614 I N N O VAT I O N S

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

BOARD OF MANAGEMENT

KL AUS RÜ BENTHALER

Member of the Board of Management since 2003

DR . HANS - JOACHIM KONZ

Member of the Board of Management since 2008

DR . FR ANK HEINRICHT

Chairman of the Board of Management and Chief Human Relations Officer since 2013

SCHOTT managers produced a mosaic com-posed of around 15,600 pieces of glass at the 2014 Annual Corporate Conference.

05Foreword by the Board of Management

Ladies and Gentlemen,

The fiscal year 2013/2014 was above all a year dominated by change. We realigned many parts of the company in order to increase our profitability and put SCHOTT back on a long-term growth path. We are pleased to report that we succeeded in implementing important structural changes. This proved to be a huge challenge considering the difficult economic climate we faced. Overall, we are satisfied with fiscal year 2013/2014.

CHALLENGES FOR SCHOT T

The global economy developed at a weaker pace in the last fiscal year. This was true for the advanced economies as well as for key emerging nations. We managed to defend our position quite well despite the increasingly difficult general economic conditions and adverse exchange rate effects that had a negative impact on our activities.

Group sales amounted to EUR 1.87 billion in fiscal year 2013/2014. As a result of currency effects, this figure was slightly lower than last year’s level. Had the exchange rates remained stable, especially as they relate to the Japanese yen, US dollar, Brazilian real and Turkish lira, we would have generated nearly EUR 100 million in additional revenue and thus achieved sales growth of 4 %. Despite these unfavorable currency effects, we managed to increase our oper-ational results (EBIT) and our consolidated net profit.

DESIGNING THE FUTURE

A great deal of progress was made with respect to the far-reaching change process we initiated in 2013, which is aimed at turning SCHOTT into a company that achieves sustainable growth.

We developed a Strategy Framework as the basis for our company’s future development. Furthermore, we also established strategic guidelines that will provide us with a framework for taking action in making strategic decisions, for example on possible acquisitions, in the future.

We defined Strategic Business Fields as strategic planning units and devel-oped individual strategies for these areas. In light of the broad spectrum of industries and markets SCHOTT is active in and the comprehensive range of products and services we offer, it is important for us to find the right level for analyzing, developing and executing our business strategy.

We have also taken the first steps on the way to adopting a new and cut-ting-edge company culture. This will serve as an important breeding ground for our company’s skills in the area of innovations, communication, and col-laboration.

FOREWORD BY THE BOARD OF MANAGEMENT


We conducted a group-wide employee survey last year that is aimed at continuing to develop SCHOTT to be successful and supporting the change in culture that we want to achieve. The results were communicated within the group and appropriate measures were derived.

The realignment represents an important basis for designing the future and sustainably generating value, in particular. It contributes to taking per-sonal responsibility in the operational areas, encourages openness, and strengthens our focus on our customers.

RESE ARCH AND DEVELOPMENT STRENGTHENED

Innovations are our greatest growth drivers. Due to the increased com-petition we face, it is now more than ever the job of research to accelerate innovation processes and create market opportunities, increasing our abilities of achieving growth through the introduction of new products and technolo-gies. We therefore decided once again to increase our spending on Research and Development and reinforced this area by hiring new personnel in fiscal year 2013/2014. Our long-term goal is to consistently generate more than 20 % of our sales with new products by the year 2020.

We are also working to create opportunities for SCHOTT in strategic fields such as thin, extremely strong glasses, energy storage including electric mo-bility, resource efficiency in melting technology, and by offering so-called “green” glasses, which are products that do not contain any substances that are harmful to the environment. SCHOTT’s power of innovation can be seen not only in successful new product introductions, such as a patented system for prefillable pharmaceutical vials, ultra-thin glasses, and a new high-perfor-mance glass fiber, but also in our patent portfolio. We managed to expand our portfolio once again and it now includes 2,811 patents granted at the end of the fiscal year.

125 YE ARS OF THE C ARL ZEISS FOUNDATION

In 2014, the Carl Zeiss Foundation, the sole owner of SCHOTT AG and its sister company Carl Zeiss AG, celebrated its 125th anniversary. We were also able to welcome the Chancellor of Germany as a guest to our festive celebra-tion in Jena. In their speeches, all of the presenters emphasized the important role that the Statute of the Carl Zeiss Foundation has played in Germany’s economic and social history and that the corporate model developed by Ernst Abbe and supported by Otto Schott has remained successful even to this day.

07Foreword by the Board of Management

OUTLOOK FOR FISC AL YE AR 2014/2015

In their current studies, the World Bank, the International Monetary Fund, and other leading German economic research institutes expect the global economy to remain sluggish. Continuation of the upturn in the United States stands opposed to the economic stagnation that is expected in the countries of the euro zone, as well as weaker momentum in the emerging nations. The global political situation that includes numerous conflicts and the fear that the euro crisis could break out again are yet other causes of uncertainty.

In light of these basic conditions, the current fiscal year will hardly be easy. Nevertheless, we are optimistic that we will be able to master the challenges we face because we rank among the world’s leading companies in many dif-ferent fields. We are convinced that we will be able to sustainably strengthen and extend our current position thanks to our strong product portfolio, our presence in many different markets and new product introductions. Here, we will also be relying on the excellent work of our highly qualified and committed employees. They deserve our thanks for the success we achieved last year.

As a whole, we expect the SCHOTT Group to moderately increase sales compared to the previous year and continue to improve earnings in fiscal year 2014/2015.

December 2014

SCHOTT AGBoard of Management

Dr. Frank Heinricht Dr. Hans-Joachim Konz Klaus Rübenthaler


REPORT BY THE SUPERVISORY BOARD

articles of association and the rules of procedure. The decisions made by the Supervisory Board were based on the reports and resolutions proposed by the Board of Management, which we reviewed very thoroughly. Fiscal year 2013/2014 was mainly driven by the continu-ation of the reorientation of the company that began in fiscal year 2012/2013. The main focus of the advisory and monitoring activities of the Supervisory Board was on the strategic realignment of the group and the indi-vidual strategies of the Business Units.

The Supervisory Board met for seven ordinary meet-ings in the fiscal year, two of which were strategy meet-ings. The main topics included group and medium term planning through 2016/2017 and the strategic develop-ment of the Business Units.

The Audit Committee met four times. It focused mainly on monitoring the accounting process, the effi-ciency of the internal control system, risk management and the internal revision system, but also on the audit report. The Presiding Committee also held four meet-ings. Its meetings were mainly aimed at discussing the objectives, remuneration of Board members, the fur-ther development of group management and prepar-ing the resolutions to be adopted by the Supervisory Board. There was no need for the Conference Commit-tee to hold a session during the past fiscal year.

The 2013/2014 annual financial statements and the consolidated financial statements prepared in accordance with the International Financial Reporting Standards (IFRS) pursuant to section 315 a (3) of the German Commercial Code (HGB), as well as the respective management re-ports, and the Board of Management’s report disclosing relations to affiliates (“dependent company report”), were audited by Ernst & Young GmbH Wirtschaftsprü-fungsgesellschaft, Eschborn Frankfurt am Main, and each issued with an unqualified audit opinion.

Ladies and Gentlemen,

There were personnel changes on the Supervisory Board in the fiscal year 2013/2014. The employees of SCHOTT elected new employee representatives to the Board. Mr. Gerhard Greim, Mrs. Martina Mehlan, Mr. Salvatore Ruggiero and Dr. Thomas Hünlich offi-cially joined the Supervisory Board on March 17, 2014. Mr. Wolfgang Heinrich and Mr. Hartmuth Baumann were both reelected Board members. The employee representatives Mr. Markus Kraft, Mrs. Judith Krone, Dr. Helmut Olyschläger and Mr. Udo Raue stepped down from the Supervisory Board. I would like to thank all of the retiring members for their hard work and com-mitment as members of the Board. On March 17, 2014, the General Assembly also reelected the Supervisory Board members who represent the capital side, Prof. Klaus Backhaus, Dr. Eduard Kulenkamp, Dr. Stefan Marcinowski, Dr. Eckhard Müller and Dr. Richard Pott. The term of office of the Chairman of the Supervisory Board will continue. The Chairman of the Supervisory Board and his deputy were both reconfirmed in office at the constituent meeting of the Supervisory Board that followed.

The Supervisory Board performed its tasks during the 2013/2014 fiscal year in accordance with the duties incumbent upon it under the law, the articles of asso-ciation and rules of procedure. The Board of Manage-ment informed us in oral and written reports of all the main aspects of business development, the current earnings situation, the risk position, risk management, short and long-term planning, but also on investments and organizational measures. In addition, I remained in close contact with the Board of Management and re-ceived information on how the business was develop-ing and events of major significance. The Supervisory Board was involved in important decisions and took the necessary resolutions in accordance with the law,

09Report by the Supervisory Board

The Supervisory Board concurs with the proposal of the Board of Management to carry forward the group earnings of SCHOTT AG.

The Supervisory Board would like to thank the members of the Board of Management and all of SCHOTT Group’s worldwide employees for the work they did during fiscal year 2013/2014.

Mainz, December 18, 2014

On behalf of the Supervisory Board

Dr. Dieter KurzChairman

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 17, 2014, but also at the Supervisory Board meeting on December 18, 2014. The auditor took part in these discussions during both sessions. He reported on the main results of the audit and was available to answer questions and pro-vide additional information. The Chairman of the Audit Committee also reported in plenary on the results of his committee’s audit of the financial statements. Based on our own examination of these documents, the Supervi-sory Board endorsed the findings of the auditor and ap-proved the financial statements prepared by the Board of Management. The SCHOTT AG financial statements are thus adopted as of September 30, 2014.

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, 2013, through September 30, 2014. 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.

DR . DIE TER KU R Z

Chairman of the Supervisory Board

10 I N F O C U S

In May 2014, the Carl Zeiss Foundation, the owner of SCHOTT AG and Carl Zeiss AG, celebrated its 125th anniversary. The unique company model developed by Ernst Abbe and supported by Otto Schott is successful to this day.

With the Foundation Statute from 1896, Ernst Abbe created a framework for the realization of a grand vision.

A UNIQUE COMPANY MODEL

11125 Years of the Carl Zeiss Foundation

business development. Therefore, Abbe defined the legal rights of the employees in great detail in the Foundation Statute from 1896: protection against discrimination and dismissal, minimum wages, pay for working overtime, the right to sick pay, assistance in the event of long-term disability, paid vacation, profit sharing, com-pany pension payments and the right to establish a workers’ com-mittee as the precursor to today’s Workers’ Council – these were unique social rights back then. Thus, the Foundation took over a historic pioneering role, because many of these employee rights were even added to general social legislation or collective bar-gaining agreements later on and became part of German labor law starting in the 1960s.

RE SPONSIBIL IT Y FOR THE SCIENCE S AND SOCIET Y

Society as a whole also ranks among the beneficiaries of the Carl Zeiss Foundation. In the first decades these were mainly the Uni-versity and the city of Jena. After all, Abbe was firmly convinced that the success of the two founding companies was heavily de-pendent on scientific progress and he made the advancement of science at the University of Jena an essential task of the Founda-tion. The Foundation was also involved in major investments for the benefit of the city. Funds from the Foundation even made it possible to set up a number of social institutions outside the Uni-versity for the population in Jena.

REFLEC TION OF GERMAN HISTORY

Both Foundation companies developed very successfully economi-cally on the foundation of Abbe’s ideas. With a unique business model and special corporate culture, ZEISS and SCHOTT wrote German industrial and social history. Two world wars and several economic crises could not really threaten the Foundation, not the decades-long division of the Foundation and the companies in East and West in the wake of the division of Germany after

Ernst Abbe, the renowned physicist and co-owner of SCHOTT and Zeiss, established the Carl Zeiss Foundation on May 19, 1889, to honor his deceased partner Carl Zeiss. Now, 125 years later, the Foundation celebrated its birthday at its founding site in Jena. On this occasion, German Chancellor Dr. Angela Merkel acknowl-edged the historic importance and promising future direction of the Foundation and its two companies.

The cooperation of Ernst Abbe with the optician and precision mechanic Carl Zeiss and the glass chemist Otto Schott at the end of the 19th century marked the start of two dynamically growing optics and specialty glass companies in Jena in Thuringia. Abbe created his company model for ZEISS and SCHOTT that is still unique today long before principles such as responsible entre-preneurship, social partnership and sustainability had gained importance. It was strongly influenced by the idea of accepting responsibility for the companies, their employees and society. Abbe arranged for all of the shares to be transferred over to the Foundation to ensure the future of both companies irrespective of the personal interests of the owners. SCHOTT company founder Otto Schott shared Abbe’s far-reaching ideas without reservation. The Foundation entities were to assert themselves as innovation and technology leaders in the fields of optics and specialty glass in the long term and assume special responsibility for their em-ployees. And the Foundation would seek to promote the sciences and non-profit interests with the profits from the companies.

SPECIAL R IGHTS FOR EMPLOYEE S

Abbe viewed industrial activities to be a social responsibility from which special responsibility for the workers arose for its entre-preneurs. For him, this wasn’t really a matter of social benefits, but rather of legal security and a company bond between the man-agement and the workforce as the basis for a long-term positive

“The Foundation Statute is an outstanding docu-ment of German economic and social history. It describes the ideal model of responsible entre-preneurship. Ernst Abbe stood up for principles of social partnership and protection against unlawful dismissal. He was far ahead of his time and probably could not have imagined that his ideas flowed into German social legislation later on.”GERMAN CHANCELLOR DR. ANGEL A MERKEL in her ceremonial address at the festive event held to celebrate the 125th anniversary of the Carl Zeiss Foundation

12 I N F O C U S

World War II. After the fall of the Berlin Wall in 1989 and German reunification in 1990, in the end the reunification of the Carl Zeiss Foundation and its companies was also a complete success.

The Carl Zeiss Foundation received its current form as part of a comprehensive foundation reform in 2004. The Foundation com-panies were separated and transformed into stock corporations. The Foundation was converted from a Foundation that acts as the owner of the businesses to a Foundation that acts as a share-holder who possesses 100 % of the shares of SCHOTT AG and Carl Zeiss AG. As legally independent stock corporations, ZEISS and SCHOTT benefit from a modern form of corporate govern-ance and the entrepreneurial freedom they need to be able to function as globally active companies.

“In celebrating the 125th anniversary of the Carl Zeiss Foundation, we are also celebrating the success of a unique company form. Influenced by his liberal and social attitudes and his success as both an entrepre-neur and a scientist, Ernst Abbe ratified a corporate constitution aimed at securing the long-term future existence of the companies ZEISS and SCHOTT. Abbe’s vision has not lost any of its fascination or future orienta-tion to this very day.”DR. DIETER KURZ, Chairman of the Foundation Council of the Carl Zeiss Foundation and the Supervisory Boards of SCHOTT AG and Carl Zeiss AG

Carl Zeiss FoundationHeidenheim an der Brenz and Jena

Foundation acting as a shareholder100 % 100 %

Foundation Company

Carl Zeiss AGOberkochen, Germany

Foundation Company

SCHOTT AGMainz, Germany

Subsidiary

ZEISS Group

Subsidiary

SCHOTT Group

Festive atmosphere in the ballroom of the Volkshaus in Jena

The Carl Zeiss Foundation uses the divi-dends it receives from Carl Zeiss AG and SCHOTT AG to promote the sciences.

13125 Years of the Carl Zeiss Foundation

DIVIDENDS TO SUPPORT THE SCIENCE S

The shareholders’ right to a dividend is one important trait of stock corporations. In the case of SCHOTT AG and Carl Zeiss AG, however, the dividend is paid to the sole shareholder, the Carl Zeiss Foundation. The dividend payment is even laid down in the Foundation Statute: the higher the equity ratio, the higher the dividend. The Carl Zeiss Foundation uses the dividends it receives from SCHOTT and ZEISS to fulfill its purpose, “supporting the sciences.”

With the reform of 2004, the Foundation revitalized its promo-tional role. Based on stipulated dividend rules, the Foundation set up promotion programs mainly aimed at the promotion of young scientists and endowed professorships in the fields of

science and engineering at universities in Baden-Wuerttemberg, Rhineland-Palatinate and Thuringia and strengthening the re-search structures there. In other words, the German states in which the Foundation or the Foundation companies have their headquarters benefit from the promotion programs. Since 2007, the Foundation has granted 80 million euros for the promotion of science with the dividends from its companies. This figure includes a special package of 12 million euros for the promotion of young scientists, which the Foundation provided on the occasion of its 125th anniversary.

The motto of the foundation anniversary was “In keeping with the core task of promoting science.”

Dr. Dieter Kurz, Chairman of the Foundation Council of the Carl Zeiss Foundation and the Supervisory Boards of SCHOTT AG and Carl Zeiss AG, praises the unique company form.

Chairman of the Board of Management Dr. Frank Heinricht (right) explains to Germany’s Chancellor Dr. Angela Merkel (left) and Theresia Bauer, Minister of Science in Baden-Wuerttemberg and Chairman of the Foundation Administration of the Carl Zeiss Foundation (center), the advantages that SCHOTT CERAN® glass-ceramic cooktop panels offer.

“As a company owned by the Carl Zeiss Foundation, SCHOTT rests on a strong foundation. Our sole shareholder gives us the opportunity, in fact, even demands that we think and act in terms of longer periods of time. This is why we focus on a sustainable development and long-term success on the basis of innovations and technological leadership in all of our businesses.”

DR. FRANK HEINRICHT, Chairman of the Board of Management of SCHOTT AG

Promoting Science.Acting Responsibly.125 Years of the Carl Zeiss Foundation

14 I N F O C U S

INNOVATIONS ENSURE FUTURE SUCCESSES

Innovations play an extremely important role in our profitable growth and value creation. Today’s achievements by our researchers and technicians form the basis for our company’s future successes. SCHOTT therefore relies strongly on research and development.

At EUR 86 million in fiscal year 2013/2014, spending on research and development remained at a high level. By leveraging our latest insights on products and processes, we plan to continue generating benefits for the company and its customers in the future. With a new product rate of over 20 % by the year 2020, we have set ourselves a rather ambitious target.

SCHOTT HELIOJET: FEELING COMFORTABLE ABOVE THE CLOUDS

Light plays an important role in creating a feel-good atmosphere on board an airplane. Now, an LED cabin lighting solution called HelioJet that SCHOTT and Lufthansa Technik developed together helps to achieve this goal. The lighting system has been approved for use in the A320 family and can already be found in an Airbus A319 where it provides white light and creates a homogeneous and pleasant atmosphere on board. HelioJet significantly reduces maintenance costs and requires only about 1/5 as many light-emit-ting diodes as other LED solutions. These LED lights are also con-siderably more environmentally compatible than conventional fluorescent lamps.

SCHOT T SMART TOUCH: DISCRETE CONTROL

Push buttons, knobs and sliders in electronic devices are often somewhat disturbing to the eye. Minimalistic design of control elements now intuitively points the way. This is made possible by creating discrete dimples in glass surfaces. With “Smart Touch,” SCHOTT has developed a technology that allows for these to be ground and positioned so precisely that electronic switches can be applied behind them. SCHOTT “Smart Touch” makes it possible to produce attractive design and operating approaches for household appliances, entertainment electronics, as well as medical technology and industry.

15Innovations Ensure Future Successes

ULTR A -THIN GL A SS: FLE XIBLE AND ROLL ABLE

Ultra-thin glass is manufactured in thicknesses of between 25 and 100 μm and is available on rolls or as cut-to-size sheets. Rolled glass enables productive roll-to-roll (R2R) processes at the cus-tomer’s site. In contrast to polymers, ultra-thin glass offers many advantages for high-tech applications as it is gas-tight, resistant to high temperatures and UV light and also demonstrates high chemical stability.

SCHOT T POWER AMIC ™: NEW GL A SS - CER AMIC POWER

SCHOTT has developed a unique new class of dielectric materials for use in high voltage capacitors called POWERAMIC™. These glass-ceramics offer extremely high energy storage density and excellent dielectric properties even at high temperatures. Their storage density exceeds that of current capacitor solutions by many times. They allow for smaller and lighter capacitors with higher power density in high voltage applications. These types of components are used in excimer lasers for industrial and medical applications, for medical X-ray equipment, industrial high voltage supply systems, and power grids for renewable energy.

SCHOT T VIAL S DC: MINIMIZING RISK S

Recalls of pharmaceuticals clearly show that the problem of de-lamination is one of the top priority issues for the pharmaceutical industry. Delamination is a term used to describe the peeling of inorganic flakes from the inner glass surface of a pharmaceutical vial as a result of interaction with its contents. SCHOTT is now the first manufacturer to offer pharmaceutical vials that lower the risk of delamination, which can be determined with the help of a threshold value. SCHOTT Vials DC (DC = delamination controlled) were made possible by an optimized manufacturing technique and a patented Quicktest.

16 I N F O C U S

SCHOT T ASSUMES RESPONSIBILIT YSocial engagement, family-friendliness and responsibility for society have long been permanent fixtures of SCHOTT’s corporate culture. This engagement goes all the way back to the company founder, Otto Schott, and his partner Ernst Abbe, and is expressed in the Statute of the Carl Zeiss Foundation. Supporting economic, scientific and non-profit interests and organiza-tions is set down in binding form in the “company constitution.” The following examples illustrate specific activities that took place in 2014.

OT TO SCHOT T RESE ARCH AWARD

The geoscientist Professor Donald Bruce Dingwell received the 2014 Otto Schott Research Award valued at EUR 25,000. The Canadian experi-mental volcanologist has headed the Department of Mineralogy and Petrology at the Ludwig Maximilian University in Munich since 2000 and is Director of the Department of Earth and Environmental Sciences. Dingwell received the award that was presented for the 13th time for his many years of research in the field of physical and chemical properties of volcanic glasses. His work on glass formation under extreme conditions like those that occur during volcanic activity provides us with valuable insights for use in industrial glass melting.

SCHOT T RESTCENT – DOING GOOD DEEDS WITH SMALL AMOUNTS

In November 2013, Typhoon Haiyan ravaged the Philippines. Numerous villages and cities were completely destroyed. The Works Council of SCHOTT AG took the initiative in launching a donation campaign among the employees and SCHOTT then doubled the total amount of the dona-tions. The company was thus able to donate more than EUR 23,000 for a reconstruction project initiated by the aid organization Malteser Interna-tional. The donations from SCHOTT were used to build houses for twelve families that will be able to stand up to future typhoons much better.

AID PROJEC T FOR T YPHOON VIC TIMS

SCHOTT offers its employees at the six German sites the chance to have the cents debited from their monthly salaries. The donations that are collected over the course of a calendar year then go towards various projects, which the employees choose. Among the past recipients are “Flüsterpost e.V.,” a club that supports the children of parents who have cancer, or the initiative “Feuerkinder” that helps victims of fire in Tanza-nia by funding surgical treatment.

17SCHOTT Assumes Responsibility

COMPANY CELEBR ATIONS

To commemorate the 125th anniversary of the Carl Zeiss Foundation and 130 years of SCHOTT, the company’s six German sites organized celebrations for employees, their families and retirees. The motto was “We are SCHOTT.” The approximately 15,000 visitors enjoyed a diverse entertainment program and received a lot of information on the com-pany and its products. The tours of the plants met with particularly great interest.

SCHOTT organized the global exchange program “SCHOTT goes Family” for the first time in 2014. This international exchange program gives the children of SCHOTT employees between 14 and 19 years of age the op-portunity to visit each other for two weeks and thus get to know other cultures. SCHOTT organized and paid for the round-trip travel. 30 teen-agers from Brazil, China, Germany, France, Colombia, Malaysia, Switzer-land and the USA participated in the pilot exchange. This program is aimed at building bridges between employees and their families across national borders, career levels and departments. The experiences were so positive that the project is being continued.

SCHOT T GOES FAMILY

Employees of the Southbridge, Massachusetts, site in the US recently participated for the third year in a row in the American Cancer Society’s annual Relay for Life event. Approximately 50 employees ran in the relay race. The event fundraised around $ 5,000 to support cancer research. A core group of employees also established a C.A.R.E. (Community Awareness Responsible Employees) team that supports the activities of the Southbridge community.

DONATIONS FOR CANCER RESE ARCH

More than 3,000 runners participated in the ten-hour charity Run for Children® in Mainz. The 91 teams ran 29,000 rounds in total. The team sponsors paid at least 1 euro for each round into the donations pot. In addition, more than 60 other companies made generous donations. The event generated EUR 169,000 in total donations that were then given to 27 charitable children’s organizations. Together with these donations, the magical mark of around EUR 1.18 million in total donations was cracked since the first run in 2006.

RUN FOR CHILDREN®

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

CO N T E N T S

Group Structure 19

Research and Development 20

Economic Report 21

Business Development and Situation

of the Group 22

Earnings, Financial and Asset Situation 22

Financial and Non-Financial Performance

Indicators 27

Report on the Forecast 28

Report on Opportunities and Risks 29

Supplementary Report 33

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, 2 013 , T O S E P T E M B E R 3 0 , 2 014

SCHOTT innovations allow for industrial cultivation of algae: New oval tubes for photo bioreactors use sunlight more effec-tively and thus increase the growth rate of microorganisms.

19Group Structure

other solar activities, in fiscal year 2013/2014, we integrated the Concentrated Solar Power field into the Tubing business unit that it had originally emerged from.

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 markets, including automotive and consumer electronics, energy and medical technology, but also data and telecommunications. Pharmaceutical Packaging is one of the world’s leading suppliers of primary packaging for the pharmaceutical industry. Tubing produces glass tubing, rods and profiles from around 60 differ-ent types of special glass for use in pharmaceutical and technical applications. With its Concentrated Solar Power activities, Tubing is now the world’s leading supplier of receivers made of glass tubing for solar thermal power plants that employ parabolic trough technology.

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 offers a broad spectrum of high-tech solutions for illumination and image transmission, particularly in the transportation (auto-motive and aviation), medical technology, machine vision and security technology markets.

In the Home Appliances segment, Home Tech covers a broad range of solutions made of specialty glass and glass-ceramic. These mainly include cooktop panels made of glass-ceramic, fireplace viewing windows, and borosilicate glasses for a variety of different application possibilities, including fire protection or cover glasses for cover & touch applications (smartphones, tablet PCs). The Flat Glass business unit develops, manufactures and markets a broad portfolio of products made of processed flat glasses for the home appliance industry such as exterior panes of glass for ovens, view-ing windows for microwave ovens or shelves for refrigerators, but also for commercial presentation of refrigerated and frozen foods and even system solutions.

The most important industries that SCHOTT is active in on the basis of sales revenue are the pharmaceutical industry and the home appliance industry, as well as the semiconductor and data communications, automotive, industrial optics, sensor and con-sumer electronics industries. SCHOTT currently generates approxi-mately 75 % of its sales in these industries; therefore the ways in which these industries develop can have a significant influence on how the business develops for the various SCHOTT business units.

GROUP STRUC TURE

We are an international technology group with more than 130 years of experience in the areas of specialty glass, glass- ceramic, and advanced technologies and rank among the world’s leaders with many of our products. Our main markets include the home appliance industry, pharmaceuticals, electronics, optics, solar power and transportation. We currently employ more than 15,000 people and operate manufacturing sites and sales offices in 35 countries. In fiscal year 2013/2014, we generated total group sales of EUR 1.870 billion.

SCHOTT AG in Mainz is the parent company of SCHOTT Group (hereinafter also referred to as SCHOTT). Along with SCHOTT AG, SCHOTT Group included an additional 10 companies based in Germany (previous year: 10) and 57 foreign consolidated compa-nies (previous year: 58) 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/Transportation ■ Pharmaceutical Packaging ■ Pharmaceuticals ■ Tubing ■ Pharmaceuticals/Solar power

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

Home Appliances ■ Home Tech ■ Home appliance industry ■ Flat Glass ■ Home appliance industry

In fiscal year 2013/2014, we divided the Pharmaceutical Systems business unit into the business units Pharmaceutical Packaging and Tubing that had already been working relatively independ-ently before.

SCHOTT had decided to withdraw from the Concentrated Solar Power field at the end of the previous fiscal year and there-fore classified this field as held for sale under the regulations of IFRS 5. The sales process was stopped in the last fiscal year, how-ever, due to the fact that continuing to run the business on the basis of a reorganization proved to be the more attractive option overall for SCHOTT. Now that SCHOTT Group no longer had any


INCRE A SINGLY IN DEMAND: THIN, HIGH -STRENGTH GL A SS

Glass is unmatched when it comes to the combination of chemical and mechanical resistance, temperature stability and optical properties. Glass is therefore in much higher demand. The market is demanding increasingly thinner, yet stable, transparent materials. With this in mind, our applied research department has a clear goal: to develop glasses that are much stronger, thinner and lighter that still offer the same functionality and require that fewer resources be used. Our developers also use simulations of the manufacturing processes on the computer, build models and apply their long years of experience in producing, optimizing and combining the properties of glass and developing new processes.

High-strength glasses from SCHOTT are already proving them-selves in protective glazing in vehicles (laminates made of highly transparent glass-ceramic and BOROFLOAT®) and in touch panels for smartphones (Xensation®). Furthermore, Xensation® Cover glass demonstrates high potential as a glass laminate together with plastic for use in interior window panes in passenger aircraft. This innovative laminate received the Crystal Cabin Award, an interna-tional innovation award in the area of aircraft cabins. SCHOTT is the first supplier of this type of product that meets key fire pro-tection requirements and passes breakage tests and is yet lighter than conventional interior panes. We also manufacture one of the thinnest glasses in the world (microsheets) that is only 25 mi-crometers thick and are even able to supply it on a roll. Moreover, our application experts continue to develop innovative processing methods for ultra-thin glasses, cutting of glasses with the help of a laser, for example.

NEW MATERIAL S RE SULT IN NEW SOLUTIONS FOR OUR

CUSTOMER S

Innovative materials help us to overcome previous limitations at many different levels or explore new applications. With state-of-the-art research and development, particularly in North America, SCHOTT is active in attractive fields and has developed high-qual-ity infrared materials with excellent transmission in the infrared region such as zinc sulphide or chalcogenide glasses that will be in greater demand in high-tech applications such as night viewing cameras in vehicles or consumer optics, for example. Our latest developments also include active high-end laser glasses for cut-ting-edge high energy lasers, for the European laser research project ELI (Extreme Light Infrastructure), for example, but also for a U.S. government research project. Our eye-safe phosphate laser glass has already been introduced to the market. It makes medical and cosmetic applications possible and is also well suited for use in laser distance measurement.

With CoralPor®, we are presenting a new family of porous glass products that are known for their high chemical and me-chanical stability and offer chances in many different industries, for example in electrochemical measurement technology, as a

RESE ARCH AND DEVELOPMENT: MOTOR FOR INNOVATION AND GROW TH

The main focus of our research and development (R&D) activi-ties is on driving innovation processes forward, taking advantage of new growth opportunities, and improving our competitiveness together with the business units. This is achieved mainly by devel-oping new and improving our existing products, materials and manufacturing techniques. Our core competencies in the area of glass and glass-ceramic and how they are used, melting tech-niques, hot forming, glass processing and mathematical simula-tion of our materials and processes provide the basis for this.

PROGRE SS THANK S TO A GLOBAL R&D NET WORK

The importance of research and development for SCHOTT is manifested in the company’s R&D expenditures. The R&D figure reached 4.6 % of group sales in fiscal year 2013/2014 (previous year: 4.4 %). Our global R&D network that covers everything from applied research to product development is yet another important motor for our power of innovation. Our Otto Schott Research Center in Mainz that celebrated its 25th anniversary in the report-ing period makes an important contribution in this regard. Im-portant impulses also come from our R&D units that are based close to our customers and are directly integrated into our busi-ness units, but also R&D and application centers in specific regions such as the U.S.A., Japan, Korea and China, for example. To achieve the best possible innovations success, research and business units work together closely and collaborate on many projects involving customers or suppliers, but also universities and international research facilities.

Special expert panel discussions that approximately 100 re-searchers and experts from various countries participate in on a regular basis are also of special importance to us. In the reporting period, two newly established panel events discussed the topics of glass strength, laser processing and process simulation.

On the basis of this broad R&D foundation, our patent port-folio grew to 2,811 global patents issued (previous year: 2,765).

PROGRE SS IN THE ARE A OF MATERIAL TECHNOLOGIE S

Megatrends, such as the topics of resource efficiency, mobility or healthcare will rank among the most important drivers of inno-vation in the future and contribute to progress, mainly in the area of material technologies. This opens up great opportunities that research and development at SCHOTT Group is seeking to lever-age with respect to the following key strategic topics.

21Research and Development/Economic Report

ECONOMIC REPORT

COUR SE OF BUSINE SS AND UNDERLYING CONDITIONS

OVER ALL ECONOMIC AND INDUSTRY-SPECIFIC

CONDITIONS

The world economy showed a somewhat weak development in 20141. The economy continued to recover in the U.S.A., while the economic dynamism in the euro zone failed to meet last year’s expectations overall. The emerging economies also showed a mixed development. All in all, the economic research institutes project that global manufacturing will grow by 2.6 % in calendar year 2014 (previous year: 2.4 %).

Economic research institutes project the gross domestic prod-uct to grow by 1.2 % in 2014 in the countries of Europe in which SCHOTT Group generates close to half of its sales. Germany’s gross domestic product is projected to grow by 1.3 %. The U.S. market is expected to remain stable at last year’s level of 2.2 %. 1.0 % growth, which is slightly weaker than last year (1.5 %), is pro-jected for Japan, which remains our most important sales market in Asia. For Asia as a whole, the economic research institutes ex-pect to see growth of 4.7 % (previous year: 4.8).

The industries of relevance to SCHOTT are exhibiting growth rates of between 3 % (consumer electronics) and 7 % (semiconduc-tors and data communications, as well as industrial optics and sensors), but with significant differences with respect to the re-gions and submarkets. Market growth of around 4 % is expected for the pharmaceutical industry, with higher growth rates in countries such as China, India, South Korea and Turkey, while cost reduction measures in healthcare systems continue to dampen growth in Europe and North America. Growth will probably reach 6 % for the global household appliance market, with significant regional differences. Whereas the U.S. market is projected to grow by 7 %, the European market is expected to shrink by 1 %.

desiccant, as a component in medical technology devices, for heat-resistant coatings in aerospace, the oil and gas industry, but also in chromatography for cleaning biotechnological products.

After successful customer sampling, unique fluorescent ce-ramics are now on the verge of commercialization as optical mate-rials that have great potential. For example, SCHOTT developed materials and manufacturing processes for ceramic light con-verters that are used in light sources with high light density. These offer high energy efficiency, require no warm up time and do without mercury. Initial use is planned in beamers or next genera-tion digital projectors.

CONSERVING RE SOURCE S BY RELYING ON OP TIMIZED

PROCE SSE S AND PRODUC TS

Conserving resources in energy-intensive manufacturing pro-cesses, such as melting or hot forming, is yet another key focus for SCHOTT. We are constantly working on new techniques for manufacturing and improving “green,” environmentally compat-ible glasses. The focus here is on processes that do not use any heavy metals, but also far more energy-efficient manufacturing processes.

SCHOTT employs a unique melting technology to manufac-ture PURAVIS® high purity optical glass fibers, for example. This product developed together with research and other business units achieved its market breakthrough last year and earned the SCHOTT Innovation Award. It meets the highest demands of cus-tomers who are increasingly pursuing “green” product strategies.

ENERGY STOR AGE BENEFITS FROM NEW MATERIAL

SOLUTIONS

Storing energy securely and cost-effectively represents an ur-gent challenge in all areas of life today. New materials play a key role here, whether for electric mobility or for the integration of renewable energy sources into the power supply of the future.

For example, SCHOTT developed a special glass-ceramic pow-der that could be used as a semi-permeable membrane material for lithium-air batteries as part of a special funding project sup-ported by the BMBF (Federal Ministry of Education and Research). Installed in future battery generations, it can significantly increase the range of electric vehicles. Since the project ended in May 2014, the material protected by patents has already been put to application tests by potential users.

Innovative glass-ceramics can also help improve the perfor-mance and operational reliability of high-voltage capacitors. By in-troducing the respective products under the name POWERAMIC™, we succeeded in presenting these and provided samples to cus-tomers in the reporting period. These types of developments from SCHOTT can be put to use in the components in so-called high-voltage direct current transmission technology in the future.

1 Information according to the joint diagnosis of the leading German economic research institutes from October 9, 2014


Home Appliances SegmentHome Tech sales markets had a mixed year in fiscal 2013/2014

that varied for each of the product groups and regions. The market for CERAN® brand cooktop panels developed positively in all re-gions and we experienced strong growth in Eastern Europe, in particular. The fireplace viewing panel business with our ROBAX® brand can be characterized by weaker market growth, especially in Europe. The traditional markets for fire-resistant glass and our special float glass BOROFLOAT® also experienced stable develop-ment while the market for cover & touch applications (smart-phones, tablet PCs) continued to grow.

With respect to the Flat Glass business, general demand improved compared to the previous year. The Brazilian market showed the strongest rebound. Sales rose sharply here despite the weak market environment. Our sales figures also remained relatively stable in the two regions with the highest sales, Europe and NAFTA (U.S.A., Canada, and Mexico).

E ARNINGS, FINANCIAL AND ASSET SITUATION

E ARNINGS POSITION

(in EUR millions) 2013/2014 2012/2013 Change

Sales 1,870.3 1,885.3 – 15.0

EBIT 135.2 73.8 + 61.4

Financial result – 37.6 – 43.1 + 5.5

Income from continuing opera-tions before income taxes 97.6 30.7 + 66.9

Income taxes – 37.1 – 23.3 – 13.8

Income from continuing operations 60.5 7.4 53.1

CONSOLIDATED PROFIT 66.2 25.0 41.2

SALE S AND ORDER SITUATION

Group sales declined slightly from last year’s figure of EUR 1.885 billion by 0.8 % to EUR 1.870 billion. While the Elec-tronic Packaging, Pharmaceutical Packaging and Home Tech busi-ness units recorded growth, the other business units experienced moderate declines in sales. Changes in the exchange rate for the euro, particularly against the Japanese yen, the U.S. dollar, the Brazilian real and the Turkish lira, lowered group sales by EUR 95 million compared with last year (previous year: EUR 41 million). Adjusted for currency effects, we increased our sales by 4 %.

BUSINESS DEVELOPMENT AND SITUATION OF THE GROUP

BUSINE SS DEVELOPMENT

Precision Materials SegmentBusiness developed at different paces for the Electronic Pack-

aging business unit, depending on the applications and regions. The consumer electronics field, especially quartz housings for PCs, watches and cell phones, can be characterized by a shift in technology that is accompanied by a drop in demand. The fields automotive, energy systems, optoelectronics, thermal fuses and compressors on the other hand are developing positively or re-maining stable. In regional terms, this area of the business has experienced growth mainly in Europe.

The Pharmaceutical Packaging business unit once again man-aged to benefit from the increase in global spending on medicines during the last fiscal year. Our strongest sales markets are still located in Europe and North America, while the highest growth is currently being achieved in the so-called “pharmerging markets,” which include China and India, in particular. The Tubing business unit once again managed to increase its sales of glass tubing for the most important area of use pharmaceutical tubing compared to the previous year.

Optical Industries SegmentFor the Advanced Optics business unit, sales of optical glass,

which is used in a variety of consumer goods such as digital cameras and cell phones, remained weak. Sales of optical compo-nents also declined. Demand for ZERODUR® glass-ceramic for use in lithography and astronomical applications, on the other hand, and sales in the area of Electronics & Biotech both rose.

With respect to Lighting and Imaging, business with products that are used in machine vision applications recovered from last year’s weak level. The sales markets developed quite positively in the area of industrial equipment, while the global medical tech-nology market lost some of its momentum. This can mainly be at-tributed to weaker outlooks in the emerging nations and increased price pressure in the developed countries. In the automotive in-dustry, we continued to see higher demand for ambient lighting for premium and luxury class vehicles, which we were able to benefit from. We also saw higher demand for our products for use in interior lighting in the area of aviation.

23Business Development and Situation of the Group/Earnings, Financial and Asset Situation

Pharmaceutical Packaging and Tubing also managed to increase their sales in the most important areas of application.

The Optical Industries segment experienced a decline in sales by EUR 20 million to EUR 325 million. For the Advanced Optics business unit, sales were 7 % lower than in the previous year. Ad-justed for currency effects, they declined by 3 %. The negative market development in the area of raw glass for consumers in Asia was the main reason for the decline in sales. This unit also recorded lower sales in Europe and the Americas. In terms of prod-uct groups, both optical glass and optical components were af-fected by the declines in sales. Sales of thin glasses that are used in various consumer goods (cell phone cameras or touch panels for navigation devices, for example) remained stable at last year’s level. With respect to ZERODUR® glass-ceramic, we succeeded in increasing our sales quite significantly.

In the Lighting and Imaging business unit, adjusted for cur-rency exchange effects, we managed to increase our sales after a weak previous year. In this case, we benefited from how we repo-sitioned machine vision and in the area of industrial equipment not only from the fact that the market developed more positively, but also from the successful introduction of new product technol-ogies. Due to lower sales in the volatile project business involving products for use in cosmetics consulting, medical technology sales were lower, despite growth in the area of fiber optics-based products. Our aviation and automotive business managed to in-crease its sales by around 20 % thanks to higher demand for our LED/fiber optics product mix.

Europe’s share of total group sales was 45 % in the 2013/2014 fiscal year (previous year: 44 %). North America accounted for a lower share of 20 % compared to 23 % the previous year. Asia’s and South America’s share in total group sales remained constant at 26 % and 6 % respectively while the other regions increased their share from 1 % to 3 %.

Following reclassification of Concentrated Solar Power to con-tinued activities, the figures published under earnings for the last fiscal year and the year before include the earnings contributions from this area. Concentrated Solar Power recorded sales of EUR 48 million in fiscal year 2013/2014 (previous year: EUR 51 million).

In the Precision Materials segment, we managed to increase our sales from EUR 899 million to EUR 909 million, whereby both Electronic Packaging and Pharmaceutical Packaging contributed to the increase. Sales declined slightly for Tubing for currency rea-sons. Electronic Packaging achieved significant growth in sales in Europe, while sales were weaker in Asia mainly due to the effects of exchange rates. The region Europe also experienced strong growth in the area of Pharmaceutical Packaging. Adjusted for cur-rencies, the regions of Europe and Asia also achieved growth with respect to Tubing. Furthermore, the project business on Concen-trated Solar Power also achieved a significant increase in sales in the other regions of the world, but saw a corresponding decline in North America. In terms of products and applications, Electronic Packaging increased its sales, especially in the areas of automotive and energy technology, while consumer electronics and special glass powder recorded lower sales. Adjusted for currency effects,

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

North America 20 %

Europe 45 %

Asia 26 %

South America 6 %

Rest of the world 3 %

Total sales: EUR 1.870 billion

S A L E S (in EUR millions)

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

2013/2014 1,870

2012/2013 1,885

85.6 % 14.4 %

85.7 % 14.3 %

Sales outside of Germany Sales in Germany


EBIT in the Precision Materials segment was significantly higher thanks to operational improvements in results at Electronic Packaging, Pharmaceutical Packaging, and Tubing, but also the impairment losses on goodwill that we recorded in the area of Concentrated Solar Power the previous year. As was the case last year, this segment contributed significantly more than half of group EBIT.

In the Optical Industries segment, we succeeded in increas-ing our earnings thanks to significantly higher EBIT at Lighting and Imaging, while Advanced Optics reported lower EBIT. The seg-ment reported positive EBIT again as opposed to the previous year. At Advanced Optics, lower sales and thus lower capacity utiliza-tion, but also unfavorable developments in exchange rates had a negative impact. The Lighting and Imaging business unit suc-ceeded in increasing its earnings thanks to higher productivity and savings of structural costs, on the one hand, but also because the negative one-time effects from the previous year were no longer incurred.

We also managed to significantly increase our EBIT in the Home Appliances segment. The Home Tech and Flat Glass busi-ness units both contributed to this. Besides the discontinuation of the one-time effects from the previous year – the insolvency of a major customer and expenditures for restructuring – higher pro-ductivity, cost savings and improved capacity utilization with re-spect to certain activities contributed to this.

Selling costs amounted to EUR 1.259 billion (previous year: 1.281 billion) and resulted in gross profit from sales of EUR 611 million (previous year: EUR 604 million). The gross margin im-proved by one percentage point to 33 % due to improved operat-ing results in nearly all business units.

Selling expenses declined by EUR 8 million to EUR 212 million. At 11.3 % of sales, they remained at about the same level as last year (11.7 %).

Research and development expenses amounted to EUR 86 mil-lion for the fiscal year (previous year: EUR 84 million). We were thus able to increase our R&D ratio again to currently 4.6 % (previ-ous year: 4.4 %).

General administrative expenses were reduced by EUR 16 mil-lion to EUR 196 million, in other words from 11.2 % of sales in the previous year to 10.5 % in the reporting year, as a result of cost savings measures in particular.

The Home Appliances segment reported a drop in sales of EUR 8 million to EUR 617 million. Home Tech managed to increase its sales slightly; however the increase was unable to completely compensate for the decline at Flat Glass.

In the Home Tech business unit, CERAN® achieved higher sales. Adjusted for currency effects, this area developed positively in North America and particularly in Asia, while sales in Europe were slightly weaker than last year, despite how positively business de-veloped in Eastern Europe. Sales of fireplace viewing panels dropped mainly due to lower sales in Europe. Sales of fire-resistant glass and the special float glass BOROFLOAT® developed as they did last year, while sales of vehicle glazing and cover glasses for use in cover & touch applications rose.

The Flat Glass business unit generated slightly lower sales revenue than last year. In terms of regions, sales in Europe and the NAFTA region were down, while slight growth in sales was re-corded in South America. The effects of currency exchange rates clearly had a negative impact on Flat Glass. Had exchange rates remained unchanged, we would have increased our sales by nearly 4 %.

The order book as of the balance sheet date ensures an average utilization of our production capacities of around three months (between two and four months depending on the busi-ness). As a rule, our customers place short-term orders due to the manageable delivery periods. Annual master agreements with customers apply in some areas.

EBIT

Earnings before interest and taxes (EBIT) rose by EUR 61 million to EUR 135 million compared to the previous year. The main cause of the increase, besides improved operational results in numerous areas of the business, was the fact that we no longer had to deal with EUR 50 million in total of impairment losses on goodwill and property, plant and equipment with respect to Concentrated Solar Power or Lighting and Imaging. We would have increased our EBIT by an additional EUR 10 million if exchange rates had re-mained constant.

E B I T (in EUR millions)

0 50 100 150

2013/2014 135

2012/2013 74

25Earnings, Financial and Asset Situation

C A SH FLOW STATEMENT AND INVE STMENT ANALYSIS

Cash flow from operating activities in the reporting period amounted to EUR 182 million, an increase of EUR 32 million compared to the previous year. This increase is mainly due to the fact that EUR 31 million less working capital had to be built up compared to the previous year and provisions were EUR 31 mil-lion lower but also due to the improved earnings situation (in-crease in annual net profit of EUR 41 million). Depreciations were EUR 66 million lower than in the previous year and thus had the opposite effect.

In the fiscal year just ended, there was a cash outflow from in-vestment activities in the amount of EUR 122 million (previous year: EUR 100 million). This increase mainly resulted from higher invest-ments in property, plant and equipment and intangible assets in the amount of EUR 143 million (previous year: EUR 126 million). On the other hand, cash inflows from the disposal of fixed assets declined from EUR 27 million the previous year to EUR 15 million.

63 % of the investments or EUR 90 million pertained to the business units Pharmaceutical Packaging, Tubing and Home Tech in the fiscal year just ended. The main investment focuses were on growth projects and expanding capacities, but also on complete overhauls and conversion of melting tanks. We succeeded in mak-ing 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 128 million (previous year: EUR 78 million). This cash outflow mainly resulted from the funds that were used to pay back bank loans in the amount of EUR 113 million and the allocation of plan assets in the amount of EUR 20 million. This was partly offset by the redemption of fixed-term deposits with a term of three months in the amount of EUR 15 million.

This resulted in a decrease in cash and cash-equivalents in the amount of EUR 68 million.

Including the effects of changes in the exchange rate, liquidity declined from EUR 154 million to EUR 87 million.

Purchase commitments for investments in fixed assets amount-ed to EUR 28 million (previous year: EUR 27 million). The largest current investment projects pertain to adjusting and expanding production capacities in the Pharmaceutical Packaging and Home Tech business units.

FINANCING INSTRUMENTS

SCHOTT’s financial situation continues to offer a solid starting position for realizing the company’s strategy. Here, SCHOTT can rely on a diversified and well-balanced set of instruments to fi-nance its business activities. These include for the most part long-term loans, leases and credit lines. As of September 30, 2014, financial liabilities consisted mainly of the following:

On the balance sheet date, there were fixed-interest loans of EUR 37 million, the principle of which is to be repaid when the loan matures in March 2023, as well as liabilities from finance leases that totaled EUR 46 million (previous year: EUR 48 million) and mainly relate to real estate in Germany.

Other operating income declined by EUR 18 million to EUR 53 million. This drop can for the most part be attributed to a one-time effect contained in the previous year – an advance payment recognized in profit or loss – in the amount of EUR 8 million, but also lower foreign currency gains in the amount of EUR 6 million.

Other operating expenses declined by EUR 50 million to EUR 39 million. This can essentially be attributed to last year’s impairment losses in the area of Concentrated Solar Power and Lighting and Imaging that amounted to EUR 50 million in total.

NET FINANCIAL INCOME

Net financial income increased EUR 5 million compared to the previous year to EUR – 38 million. The improvement can mainly be attributed to significantly lower average liabilities to banks.

TA XE S

The tax expense from continued operations amounted to EUR 37 million. This corresponds to a tax rate of 38 % (previous year: 76 %). The previous year’s tax rate was mainly caused by high non-deductible expenses.

DISCONTINUED OPER ATIONS AND CONSOLIDATED

NET PROFIT

Consolidated net profit for the fiscal year in the amount of EUR 66 million (previous year: EUR 25 million) included not only the positive results of continued operations in the amount of EUR 61 million, but also a surplus from discontinued operations in the amount of EUR 6 million (previous year: EUR 18 million). The discontinued operation Photovoltaics contributed a positive result of EUR 5 million. Now that we have given up our plans to sell the Concentrated Solar Power division, the results from this business unit are once again being reported as results from continued op-erations in the past fiscal year and the previous year.

FINANCIAL POSITION


Cash flow from operating activities* 182.1 150.6 31.5

Cash outflow from investment activities* – 122.2 – 100.1 – 22.1

Cash outflow from financing activities* – 127.6 – 77.9 – 49.7

Change in cash and cash equivalents – 67.7 – 27.4 – 40.3

Cash and cash equivalents at the end of the period 86.9 153.9 – 67.0

* from continued and discontinued activities


Property, plant and equipment increased by EUR 21 million to EUR 788 million. In the fiscal year just ended, SCHOTT Group in-vested EUR 135 million (previous year: EUR 122 million). Total de-preciation of property, plant and equipment amounted to EUR 115 million (previous year: EUR 132 million), of which EUR 7 million (previous year: EUR 15 million) was related to impairment losses. The property, plant and equipment position rose by EUR 6 million due to the fact that Concentrated Solar Power was reclassified to continued operations and by another EUR 3 million as a result of exchange rate differences. Disposals of property, plant and equip-ment with a carrying amount of EUR 10 million had the opposite effect.

Deferred tax assets increased by EUR 35 million year-on-year to EUR 360 million. This increase was caused by higher pension obli-gations as a result of the actuarial interest rate being lowered again to 2.76 % (previous year: 3.61 %). This in turn increased de-ferred taxes by EUR 42 million.

Working capital, which comprises trade receivables and inven-tories less trade payables, amounted to EUR 552 million as of the balance sheet date (previous year: EUR 537 million). The increase can be attributed to the improved order and overall business situ-ation at the end of the fiscal year.

“Non-current assets held for sale” include a developed plot of land in the U.S.A. In the previous year, this position also included the assets of the Concentrated Solar Power division that are no longer shown in this line item now that the decision was made not to sell these activities at the end of the fiscal year that just ended.

Cash and cash equivalents decreased by EUR 67 million year-on-year. In this context, please refer to the comments in the sec-tion entitled “Cash Flow Statement and Investment Analysis.”

SCHOTT Group’s equity as of the balance sheet date of the re-porting year amounted to EUR 401 million, compared to EUR 428 million the previous year. As a result, equity as a percentage of total assets decreased from 19.4 % to 18.4 %. EUR 101 million of the decrease resulted from actuarial losses from pensions and similar commitments (taking deferred taxes into consideration). Higher consolidated net profit of EUR 66 million and currency translation differences of EUR 10 million had a positive effect.

Compared to the previous year, provisions for pension com-mitments increased by EUR 132 million to EUR 963 million. EUR 143 million of this increase resulted from an adjustment in the actu-arial interest rate, EUR 40 million from interest expense and EUR 22 million from service costs. This was offset by payments to retirees in the amount of EUR 57 million and endowments of plan assets in the amount of EUR 20 million.

The revolving factoring program that we set up in September 2007 was extended in August 2014 with a volume of up to EUR 75 million and a remaining term until 2021. As of September 30, 2014, SCHOTT AG had sold trade receivables on the basis of this program in the amount of EUR 14 million (previous year: EUR 10 million). Since SCHOTT Group no longer bears the associated credit risks, the receivables were derecognized from the statement of financial position.

Furthermore, a syndicated credit line over EUR 300 million with a term until August 2018 was contractually agreed with an international banking syndicate. As of September 30, 2014, SCHOTT had not utilized this credit line.

In addition, a bilateral credit line was contracted with a vol-ume of EUR 30 million that can be used for guaranties, guaranty bonds, or cash credit lines. This bilateral credit line was com-pletely available on the balance sheet date. Now that the contract has been extended, it has a remaining term until April 2017.

SCHOTT AG also has other bilateral master loan agreements at its disposal in the amount of EUR 125 million that can be used for guaranties, guaranty bonds, or cash credit lines. These credit lines, which were made available until further notice, were drawn down by EUR 58 million on the balance sheet date.

In addition, bilateral guaranty credit lines and bilateral credit contracts are also available to the group at the local level.

SCHOTT Group finds itself in a stable financial situation over-all. The company was able to meet its payment obligations at all times in the fiscal year that just ended and will have sufficient liquid funds to be able to finance its planned investments and meet its other financial obligations in fiscal year 2014/2015.

STATEMENT OF FINANCIAL POSITION


Non-current assets 1,301.9 1,240.9 61.0

Current assets 872.2 921.8 – 49.6

Assets held for sale 9.5 41.2 – 31.7

TOTAL ASSETS 2,183.6 2,203.9 – 20.3

Equity 401.0 428.4 – 27.4

Non-current liabilities 1,230.3 1,088.6 141.7

Current liabilities 552.3 659.3 – 107.0

Liabilities held for sale 0.0 27.6 – 27.6

TOTAL LIABILITIES 2,183.6 2,203.9 – 20.3

Compared with last year, intangible assets rose by EUR 3 mil-lion to EUR 96 million. While investments and write-downs were at roughly the same level, this increase was mainly caused by currency translation and the reclassification of the Concentrated Solar Power division that was given up last year.

27Earnings, Financial and Asset Situation/Financial and Non-Financial Performance Indicators

FINANCIAL AND NON-FINANCIAL PERFORMANCE INDICATORS

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 15,445 employees worldwide as of Sep-tember 30, 2014. The number of employees therefore virtually remained unchanged compared to the previous year (15,444). 10,350 employees were employed at companies outside Germany, which corresponds to 67 % of the group’s workforce.

Qualified and motivated employees are an important pre-requisite for the long-term success of our company. The basis for this is a good and cutting-edge company culture and living our SCHOTT Values (Respect one another, Act responsibly, Create values, Drive innovations). To accomplish this, we initiated a com-prehensive cultural development process across all hierarchical levels and sites. Our global employee survey, which we conducted during the reporting period, also helps us to continue developing our company culture.

The funds available on a long-term basis (equity, non-current provisions and non-current financial liabilities) amounted to EUR 1,631 million (previous year: EUR 1,517 million) as of the bal-ance sheet date or 75 % (previous year: 69 %) of total assets. Non-current assets are thus covered by 125 % (previous year: 122 %) by equity and non-current liabilities. Our comments on the balance of non-current liabilities to banks can be found in the sec-tion entitled “Financing Instruments.” The “liabilities held for sell” that were reported last year pertain to the Concentrated Solar Power division.

As of the balance sheet date September 30, 2014, SCHOTT AG had loans granted from the Carl Zeiss Foundation totaling EUR 52 million (previous year: EUR 52 million) at its disposal.

COMPARISON OF BUSINE SS DEVELOPMENT WITH THE

PREVIOUS YE AR’S FOREC A STS

On the basis of constant exchange rates, we increased our sales by 4 %. Compared with last year’s expectations – an increase in group sales of between 4 % and 6 % – the sales growth we actually achieved was thus at the lower end of our forecast.

With respect to EBIT, we managed to confirm our forecast – an improvement compared to the previous year. Our expectations from the year before with respect to consolidated net profit in the double digit million euro region were fulfilled. In our forecast from the previous year, we continued to expect a negative amount in the double digit euro region from discontinued operations. The reason for the positive deviation is that we reclassified the Concen-trated Solar Power division as a continued operation and experi-enced an unplanned positive one-off effect with the Photovoltaics division that was discontinued.

With respect to investments, we even managed to exceed last year’s forecast of “investments of a similar amount as in the fiscal year that just ended.”

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 50 100 150 200

2013/2014 182

2012/2013 150

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)

0 50 100 150 200

2013/2014 135

2012/2013 122


We basically remained on track in this environment. Adjusted for currency effects, we increased our sales year-on-year by 4 %. With respect to EBIT and annual profit, we succeeded in meeting or even slightly exceeded the goals we had set for the fiscal year.

We increased our cash flow from operating activities again to over EUR 182 million from EUR 151 million the previous year. In addition, we increased our investments by EUR 17 million to the current level of EUR 143 million.

The reduced actuarial interest rate for pension provisions once again proved to be disadvantageous and resulted in a EUR 101 mil-lion decrease in equity, which we were unable to fully compensate for with our higher annual profit. As a result, the equity ratio de-creased from 19.4 % in the previous year to 18.4 %.

REPORT ON THE FORECAST

According to the leading German economic research insti-tutes, the tempo of global economic expansion is likely to remain moderate in 2015 as well. They expect the upswing in the U.S.A. to continue, while the economic momentum in the euro zone will probably continue to be somewhat sluggish. While the growth rates in the emerging countries are still higher than in the mature economies, they will remain weak over the long term. The risks for the world economy are considered to be significant overall. These include the numerous geopolitical crises, the possibility that the debt crisis in the European Union could flare up again, but also the risks that the Chinese real estate market is facing. The institutes expect to see a 3.0 % increase in world production in 2015, com-pared to 2.6 % for 2014.

In the industries of relevance to SCHOTT, the market research-ers expect growth rates of between 3 % and 7 %, thus at a similar level as in 2014. Global market growth of 5 % and 7 % respectively is projected for the two most important industries, the pharma-ceutical industry and home appliances. The looming slowdown of the economy in recent months with the risk of severe global weak-ening in the coming year also harbors the risk that individual busi-nesses will fail to meet our expectations.

As an attractive employer, we want to attract the best and brightest young minds and retain proven talent over the long-term. To accomplish this, we offer not only excellent career oppor-tunities, performance-based compensation and flexible work schedules, but also certified measures aimed at reconciling career and family even better and a broad range of further education programs. 5,500 participants in Germany took advantage of our internal and external training measures aimed at meeting the in-creasing career requirements.

In addition, we are paying greater attention to the challenges for future personnel management associated with global demo-graphic changes and are working hard to increase the diversity and internationality of our workforce. To this end, we have set concrete goals for ourselves on developing management, both in Germany and abroad.

In order to convince graduates and students of the excellent career opportunities at SCHOTT, we also conduct comprehensive university marketing activities. In doing so, we rely on personal contact as well as modern electronic media. In fact, we have al-ready received a number of awards including the “Best Recruiters Award” most recently.

We also place strong emphasis on a high-quality education. In the 2013/2014 fiscal year, 249 young people on average (previous year: 256) took advantage of the possibilities we offer to obtain an education in a technical, natural sciences or commercial career.

We also expanded our healthcare program “Stay healthy! You are important to me.” The goal here is to contribute to and preserve our employees’ health over the long term. Based on the theme “SCHOTT Health Day,” health days were held on a com-pany-wide basis. The contents were orientated towards the local needs and circumstances. Training courses and analyses on the subject of “designing workplaces ergonomically” were yet an-other important focus. Through the improvements we derived from these activities, we are also hoping to be able to employ older staff members even longer.

GENER AL STATEMENT BY THE BOARD OF MANAGEMENT

ON THE E ARNINGS, F INANCIAL AND A SSET SITUATION

The world economy continued to grow at a relatively slow pace in the last fiscal year in both the mature economies and im-portant emerging countries. The conditions essentially worsened, especially in the second half of the fiscal year.

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

2013/2014 15,445

2012/2013 15,444

29Financial and Non-Financial Performance Indicators/Report on the Forecast/Report on Opportunities and Risks

risks is added to this process on a quarterly basis. Regular monthly reports to group management on the results, coupled with appro-priate recommendations for action, ensure value-oriented port-folio management tailored to these risks and opportunities.

The internal control and risk management system on group accounting ensures that financial statements and financial re-porting are prepared properly. Key components include a binding chart of accounts for the group and accounting policies. Our cen-tral accounting reviews changes in legislation or accounting stan-dards for whether they are of relevance to the consolidated finan-cial statements and modifies the internal accounting policy, charts of accounts and consolidation software accordingly. The consoli-dated financial statements are prepared centrally on the basis of the data reported by the subsidiaries. Central accounting analyzes the plausibility of the data first and consolidates it afterwards. Furthermore, the quality of the recording of the data and consoli-dation are ensured by using authorization and access rules while observing the necessary separation of functions. The internal au-diting department monitors the functions and effectiveness of the implemented systems and processes with the help of systematic, periodic reviews as well as technical measures.

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. Accord-ingly, risks are defined in the sense of the early warning system as developments and events that can have a positive impact on SCHOTT’s future development, to the extent that these have not already been fully anticipated in the company’s planning.

Assessment of the opportunities and risks identified takes place on the basis of the assessed economic effects on planned group equity and expected probability of their occurrence. We categorize the economic effects based on the potential for dam-age using the characteristics low, medium, high and very high. 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

If our expectations of the economy and our estimates of the likely developments with respect to industries and technologies prove to be accurate, then we expect the development described below. Significant changes in these promises could lead to consid-erable deviations from the expected developments, however.

On the basis of what we know today and taking the premises cited into consideration, we project group sales to increase by be-tween 2 % and 3 % in fiscal year 2014/2015, a slight increase in EBIT and similar performance with respect to the financial performance indicators that are derived from it, each at the exchange rates planned.

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 slight increase in the level of investments in property, plant and equipment in the upcoming fiscal year.

REPORT ON OPPORTUNITIES AND RISKS

GROUP-WIDE RISK MANAGEMENT

SCHOTT Group’s risk management system includes all organi-zational 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 effec-tive countermeasures. It comprises centralized and decentralized controlling, an early warning system, and an internal control sys-tem (ICS).

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 Audit Committee of the Supervi-sory Board monitors the risk management system at SCHOTT on a regular basis as part of its supervisory function in order to ensure that it is appropriate and to monitor its functions and effectiveness.

Decentralized controlling is responsible for division planning and the systematic identification, assessment, and documentation of corresponding opportunities and risks, as well as ongoing per-formance analysis.

The Group Function Finance works closely with the operating units as part of the annual planning process and on an ongoing basis via monthly reports to generate key performance data and analyze the risks and opportunities of the individual business units and the group as a whole. An assessment of opportunities and


European currency union countries, currency risks in emerging nations, or the potential weakening of the economic situation in certain countries in our target markets. If the economy grows faster than anticipated, either overall or in specific regions, this will create additional sales opportunities.

Precision Materials SegmentWe expect the Electronic Packaging business unit to record

profitable growth that is slightly higher than the market average and a continued improvement in our competitiveness due to our sustained high innovation rate in particular. Besides unfavorable development of the general economic conditions, risks are posed for this business unit in particular by the unfavorable development of exchange rates, increasing price pressure in Asia, in particular, and increases in prices for materials.

With respect to the Pharmaceutical Packaging business unit, opportunities will arise from the ongoing trend toward higher quality pharmaceutical packaging and higher demand for sy-ringes. We currently see risks in increasing price pressure and in possible delays in further expanding our activities, especially in the emerging markets. With respect to Tubing, we expect oppor-tunities to arise as a result of new products such as glass tubing for solar receivers, for example, but also due to higher productivity. Risks exist in terms of additional costs we might incur as a result of our current efforts to restructure our site in Spain or if we fail to meet out productivity goals.

Optical Industries SegmentWe expect to see opportunities for Advanced Optics particu-

larly when it comes to interference filters for high-end applica-tions, but also the products that were introduced in the last two fiscal years such as microsheets or laser glass, for example. Risks exist primarily in the form of excess capacities and increasing price pressure in the area of optical glass.

In the Lighting and Imaging business unit, we see good op-portunities to sustainably expand our business in the field of avia-tion following the successful market entry with our products for use in interior lighting. With respect to the medical technology business, particularly in the area of digital X-rays and fiber optic components for endoscopes, further developments offer addi-tional sales potential especially in American and Asian markets. Risks exist mainly in the form of weaker project business in the area of medical technology, delays in the recovery of the machine vision business and in expanding our aviation business.

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. To start with, these in-clude foreign currency translation risks of the statement of finan-cial position and earnings figures of foreign group companies due to a rise in value in the euro. Risks arising from foreign currency translation 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 Swiss franc, U.S. dol-lar, and Japanese yen. Analogous to this, a devaluation of the euro has positive effects on group equity.

A reduction in the interest rate that is used to discount pension commitments also has a negative effect on group equity. We re-spond to this risk by taking a share of our pension commitments off the balance sheet by entering into contractual trust arrange-ments, for example. Accordingly, an increase in the interest rate would have a positive effect on equity.

In addition, potential risks exist when it comes to reaching our goals with respect to our market position in emerging countries and launching individual groups of products on the market. In ad-dition to our comprehensive planning, we also combat these risks by constantly observing market developments and by making performance-to-budget comparisons of our strategic and opera-tional goals on a regular basis as part of the established planning and forecast processes.

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, 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 leads 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. 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 or minimize risks.

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; for example, political tensions in parts of Asia and Eastern Europe, the sovereign debt and economic crisis in several

31Report on Opportunities and Risks

German SCHOTT companies make use of or have made use of the special compensation scheme for electricity-intensive enter-prises in accordance with sections 40 et seq. of the 2012 Renew-able Energy Sources Act (2012 EEG). On December 18, 2013, the European Commission introduced proceedings aimed at perform-ing a state aid assessment of sections 40 et seq. of the EEG. If the EU Commission determines during its review that sections 40 et seq. of the EEG actually represent a breach of EU aid laws, this could mean that the benefits received in the past on the basis of sections 40 es seq. EEG will need to be returned. This could have a negative impact on the group’s financial position, financial perfor-mance and cash flows.

PRODUC TION RISK S

The manufacturing of our products depends mainly on the functionality of the existing manufacturing facilities. Periodic main-tenance is conducted to prevent unplanned production losses. Nevertheless, sudden defects at manufacturing facilities cannot be ruled out due to the complex technical processes. The neces-sity for repairs can have a negative impact on the sales and earn-ings of affected areas as a result of lower productivity.

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 sys-tems further and by offering an extensive training program for its employees.

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. Thus, the financial situation, net profit or loss, and SCHOTT Group’s image depend on the ongoing development of innovative products that are in line with market requirements, but also the company’s ability to recognize 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.

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 managing cash on behalf of SCHOTT Group. The type and scope of financing and hedging activities are regulated by the Board of Management for the entire corporate group in a binding guideline taking the functional

Home Appliances Segment Due to the fact that most of the Home Tech business unit’s end

customer markets are dependent on the economy, this creates both risks and opportunities depending on how well the economy performs in the future. In the product segments glass-ceramics and fireplace viewing panels, significant potentials still exist on standing out from the competition and consistently further devel-oping product characteristics. We will continue to see risks in the form of increased competition in the area of glass-ceramic cook-top panels and fireplace panels in the future. The market for cover & touch applications continues to face risks due to high competi-tive pressure and the extremely short product life cycles.

In the area of Flat Glass, we see opportunities mainly in in-creased demand for high margin products in our markets in Europe and Brazil. Risks result from a possibly weak economy and the re-sulting reluctance of new customers to make purchases.

PROCUREMENT OPPORTUNITIE S AND RISK S

Supply shortages or the insolvency of a supplier, particularly in the raw materials sector, can lead to short-term production losses. Independent of this, there is a general risk that we will not be able to pass on increases in the price of raw materials, consum-ables and operating supplies to our customers. Furthermore, im-pending shortages or general price increases are countered by the continuous further development of material composition. SCHOTT continuously monitors the procurement markets in order to hedge its production against risks resulting from price increases, depen-dencies on suppliers and the loss of suppliers (for instance, through insolvency) or to take advantage of opportunities that arise due to price reductions or from using alternative, more cost-effective materials.

The development of energy costs has a significant influence on SCHOTT’s manufacturing costs due to its energy-intensive pro-duction processes. For this reason, the Purchasing and Treasury departments work closely on market analysis as well as on devel-oping and implementing procurement strategies. The relevant processes and responsibilities are also documented in a guideline resolved by the Board of Management.

The Group Function Research & Development implements projects with the operating divisions to reduce specific energy consumption with the goal of increasing energy efficiency. In ad-dition, SCHOTT established a standardized DIN EN ISO 5001-based energy management system at all of its sites in Germany during the 2012/2013 fiscal year. In subsequent years, this system will be implemented at all production facilities.


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 employees thus have access to customers’ current order and payment transactions at all times. Individual credit limits are de-termined each day for each customer on the basis of realized sales, historical payment practices, and information taken from business news sources. We are constantly expanding our customer rela-tionship management efforts in order to strengthen our sales ac-tivities and identify and minimize market risk in a timely manner. SCHOTT also relies on credit insurance to mitigate customer credit and country risks.

PER SONNEL RISK S

SCHOTT competes with other internationally active compa-nies with respect to its highly qualified technical personnel and managers. SCHOTT offers its employees a motivating work envi-ronment with targeted training and advanced education pro-grams, international development prospects, performance-de-pendent compensation systems, a family-friendly personnel policy, and comprehensive programs to promote health.

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 adequate control mechanisms. SCHOTT orients itself to-day and tomorrow on the standards set forth under ISO/IEC 27001:2005. These are supplemented as needed by recommended measures from the IT-Grundschutz Catalog of the German Federal Office for Information Security (Bundesamt für Sicherheit in der Informationstechnik). This ensures the current completeness of the regulated IT systems in accordance with these standards.

LEGAL 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.

separation of trading, risk controlling and execution into account. Treasury is responsible for hedging the operating business against these risks in the short to medium term. Hedging transactions are only entered into with business partners with first-class credit ratings within the framework of established limits.

The goal of currency management is to protect our business operations from changes in results and cash flow. In the course of currency management, only those risks that result from exchang-ing foreign currency payment flows into the respective local cur-rency (transaction-related risks) are hedged. Mainly currency for-wards or currency options are used here. Risks arising from the foreign currency translation of the statement of financial position and earnings figures of foreign group companies (translation risks) are not hedged. Generally speaking, our global presence that includes local manufacturing 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. The majority of our currency exchange rate risks are the result of the exchange rate trend of the euro against the U.S. dollar, Japanese yen, and 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.

SCHOTT has sufficient liquidity reserves at its disposal in the form of cash and cash equivalents as well as binding credit lines. With respect to information on this topic, please refer to the infor-mation that explains our financial position.

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

General bank counterparty risk is mitigated by regular struc-tured measurement, limit allocation, and a diversified business transaction and investment policy. Security and accessibility are more important than yield aspects when it comes to investing the funds available. We use derivative financial instruments only for hedging purposes.

33Report on Opportunities and Risks/Supplementary Report

As a consumer of power and gas with a (maximum) annual European electricity consumption capacity in excess of 600 GWh, we will most likely be subject to the EU ordinance 1227/2011 (REMIT) that was passed on overseeing wholesale trade of energy. In this case, SCHOTT will be required to meet certain obligations on reporting electricity delivery contracts. The commission has yet to determine in an implementing regulation which electricity delivery contracts we will be required to report based on REMIT. This has yet to be ratified, however.

OTHER E XTERNAL RISK S

The companies of SCHOTT Group are exposed to external risks, for example, natural disasters, terror attacks, fires, and acci-dents. In addition, damage to the group’s buildings, manufactur-ing facilities and warehouses or those of its suppliers and to goods in shipment can lead to property damage or interrupt business activities. Moreover, delays can occur in the supply process; for instance, as a consequence of strikes in the transport sector. In addition to our comprehensive insurance protection, we have de-veloped emergency plans in order to minimize potential negative effects.

OVER ALL RISK SITUATION

The overall risk situation for SCHOTT Group is equal to the sum total of the individual risks for all business units and centralized functions. Based on currently available information and taking planned or implemented measures into account, there are cur-rently no identifiable risks that could individually or collectively jeopardize SCHOTT as a going concern in the current foreseeable period.

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.

SUPPLEMENTARY REPORT

SIGNIFIC ANT EVENTS AF TER THE BAL ANCE SHEET DATE

No reportable significant events took place after the end of fiscal year 2013/2014.

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

SCHOTT AG and its group subsidiaries are party to various judicial, arbitration, and official proceedings. The outcome of these proceedings cannot be clearly foreseen. All precautionary accounting-related measures deemed necessary for these legal disputes and official proceedings are taken into account in the consolidated financial statements based on an estimate of the re-spective risk. Based on current litigation status, the Board of Man-agement presumes that these legal disputes can be concluded without future material impact on the group’s financial position, financial performance and cash flows. Due to judicial or official decisions or agreements regarding settlements, expenses can be incurred that are not covered or only partially covered by provi-sions 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 violation of our brands. So far, internal security rules and an active property rights strategy have been our suc-cessful response to this type of risk. Furthermore, 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 Germany or abroad can-not be fully ruled out, despite these measures.

The European Market Infrastructure Regulation (EMIR) is an EU initiative on regulating over-the-counter derivatives trading. EMIR immediately became legally effective for EU member states when EU ordinance no. 648/2012 was ratified in July 2012. The EU agency European Securities and Markets Authority (ESMA) has been assigned with executing it. On the basis of the rules of the EMIR, SCHOTT AG is considered to be a Non-Financial Counter-party (NFC–). SCHOTT AG is thus subject to the general reporting obligation that pertains to its OTC derivative transactions regard-ing a transaction registry and carrying out its defined risk manage-ment techniques.

Mainz, November 24, 2014

The Board of Management of SCHOTT AG Dr. Frank Heinricht Dr. Hans-Joachim Konz Klaus Rübenthaler

34 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 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, 2 013 , T O S E P T E M B E R 3 0 , 2 014

CO N T E N T S

CONSOLIDATED S TATEMENT OF INCOME 36

CONSOLIDATED S TATEMENT

OF COMPREHENSIVE INCOME 37


OF F INANCIAL POSIT ION 38

CONSOLIDATED C A SH FLOW S TATEMENT 40


OF CHANGE S IN EQU IT Y 42 On the way to producing glass fibers: Up to 100 rod-tube systems that consist of a core rod made of optical glass and a jacket tube made of technical glass hang next to each other above the drawing furnace.

35

NOTE S TO THE CONSOLIDATED

F INANCIAL S TATEMENT S 44

Principles and methods 44

1 Preliminary Remarks 44

2 Changes in Accounting Standards and Application of New and Revised Accounting Standards 44

3 Important Accounting Policies and Methods of Consolidation 48

4 Risk Management 55

5 Financial Assets and Financial Liabilities 59

6 Derecognition of Financial Instruments 68

Notes to the statement of income 68

7 Sales 68

8 Selling and General Administrative Expenses 68

9 Research and Development Expenses 68

10 Other Operating Income 69

11 Other Operating Expenses 69

12 Income/Loss from Investments Accounted for Using the Equity Method 69

13 Net Financial Income/Expense 69

14 Income Taxes 70

15 Discontinued Operations 72

16 Income/Loss Attributable to Non-Controlling Interests 73

Notes to the consolidated statement

of financial position 73

17 Intangible Assets 73

18 Property, Plant and Equipment 75

19 Investments Accounted for Using the Equity Method 77

20 Other Financial Assets, Non-Current 77

21 Other Non-Financial Assets, Non-Current 78

22 Inventories 78

23 Trade Receivables 78

24 Other Financial Assets, Current 78

25 Other Non-Financial Assets, Current 79

26 Cash and Cash Equivalents 79

27 Assets and Liabilities Held for Sale 79

28 Equity 80

29 Pension Plans and Similar Commitments 81

30 Share-Based Payment 85

31 Other Provisions 86

32 Accrued Liabilities 86

33 Trade Payables 87

34 Other Financial Liabilities, Non-Current and Current 87

35 Other Non-Financial Liabilities, Non-Current and Current 87

Further information 88

36 Leases 88

37 Contingent Liabilities and Assets 88

38 Notes To The Consolidated Statement of Cash Flows 89

39 Employees 89

40 Other Information 89

41 Related Party Disclosures 89

42 Significant Events Subsequent to the Balance Sheets Date 90

43 Remuneration of the Board of Management and Supervisory Board 90

Auditor’s Report 91


CONSOLIDATED STATEMENT OF INCOMEF R O M O C T O B E R 1, 2 013 , T O S E P T E M B E R 3 0 , 2 014

(in EUR thousands) Note 2013/2014 2012/2013*

SALES 7 1,870,279 1,885,286

Cost of sales – 1,258,742 – 1,281,369

GROSS PROFIT 611,537 603,917

Selling expenses 8 – 211,832 – 220,068

Research and development expenses 9 – 86,316 – 83,817

General administrative expenses 8 – 195,916 – 211,872

Other operating income 10 52,609 71,836

Other operating expenses 11 – 38,867 – 88,768

Income from investments accounted for using the equity method 12 4,010 2,536

INCOME FROM OPER ATING AC TIVITIES 135,225 73,764

Interest income 13 1,665 2,225

Interest expense 13 – 38,440 – 44,325

Other net financial income/expense 13 – 871 – 1,023

NET FINANCIAL INCOME/EXPENSE – 37,646 – 43,123

INCOME FROM CONTINUING OPER ATIONS BEFORE INCOME TA XES 97,579 30,641

Income tax expenses 14 – 37,066 – 23,270

INCOME FROM CONTINUING OPER ATIONS 60,513 7,371

Income of discontinued operations (after taxes) 15 5,676 17,646

CONSOLIDATED PROFIT FOR THE PERIOD 66,189 25,017

of which attributable to non-controlling interests 16 2,957 – 5,510

of which attributable to the owner of SCHOTT AG 63,232 30,527

* Adjusted due to IFRS 5 and the retroactive application of IAS 19R; See notes.

37Consolidated Statement of Income/Consolidated Statement of Comprehensive Income

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME F R O M O C T O B E R 1, 2 013 , T O S E P T E M B E R 3 0 , 2 014

(in EUR thousands) Note 2013/2014 2012/2013*

CONSOLIDATED PROFIT FOR THE PERIOD 66,189 25,017

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

Actuarial gains/losses on pension plans 28 – 143,095 – 56,204

Deferred taxes 28 42,123 16,593

– 100,972 – 39,611

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

Currency translation differences 28 9,577 – 54,825

Gain/loss from fair value measurement of securities 28 94 – 3

Deferred taxes 28 – 39 38

Cash flow hedges 28 139 – 139

Non-controlling interests** 28 – 479 – 8,990

9,292 – 63,919

OTHER COMPREHENSIVE INCOME/LOSS – 91,680 – 103,530

TOTAL COMPREHENSIVE INCOME – 25,491 – 78,513

of which attributable to non-controlling interests 2,478 – 14,500

of which attributable to the owner of SCHOTT AG – 27,969 – 64,013

* Adjusted due to IFRS 5 and the retroactive application of IAS 19R; See notes. ** The amounts shown for the non-controlling shares pertain mainly to currency translation differences.


A SS E T S

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONA S O F S E P T E M B E R 3 0 , 2 014

(in EUR thousands) Note Sept. 30, 2014Sept. 30, 2013

(adjusted)*Oct. 1, 2012

(adjusted)*

NON- CURRENT ASSETS

Intangible assets 17 96,370 93,026 157,018

Property, plant and equipment 18 788,459 767,465 820,652

Investments accounted for using the equity method 19 48,857 45,313 45,419

Deferred tax assets 14 360,072 324,964 356,279

Other financial assets 20 6,484 8,332 8,040

Other non-financial assets 21 1,661 1,830 3,496

1,301,903 1,240,930 1,390,904

CURRENT ASSETS

Inventories 22 395,814 384,737 395,130

Trade receivables 23 315,816 305,330 368,649

Current tax assets 28,151 26,857 33,497

Other financial assets 24 12,527 28,844 38,988

Other non-financial assets 25 32,980 22,112 32,717

Cash and cash equivalents 26 86,943 153,916 184,111

872,231 921,796 1,053,092

Assets held for sale 27 9,459 41,179 11,455

TOTAL ASSETS 2,183,593 2,203,905 2,455,451

39Consolidated Statement of Financial Position

EQ U I T Y & L I A B I L I T I E S

(in EUR thousands) Note Sept. 30, 2014Sept. 30, 2013

(adjusted)*Oct. 1, 2012

(adjusted)*

EQUIT Y

Subscribed capital 28 150,000 150,000 150,000

Share premium 28 322,214 322,214 322,214

Consolidated retained earnings 28 – 171,978 – 133,514 – 124,498

Accumulated other gains and losses recognized directly in equity 28 8,298 – 1,473 53,456

Non-controlling interests 28 92,499 91,132 108,460

401,033 428,359 509,632

NON- CURRENT LIABILITIES

Pension plans and similar commitments 29 963,288 830,886 780,846

Other provisions 31 148,938 119,760 142,638

Deferred tax liabilities 14 19,655 22,204 23,234

Other financial liabilities 34 90,855 107,085 203,722

Other non-financial liabilities 35 7,503 8,705 9,981

1,230,239 1,088,640 1,160,421

CURRENT LIABILITIES

Other provisions 31 102,323 109,320 166,156

Accrued liabilities 32 131,429 130,137 137,873

Trade payables 33 159,725 152,701 177,594

Current tax liabilities 18,605 12,562 15,320


Other non-financial liabilities 35 48,683 65,130 110,414

552,321 659,297 785,398

Liabilities held for sale 27 0 27,609 0

TOTAL EQUIT Y AND LIABILITIES 2,183,593 2,203,905 2,455,451

* Adjusted retroactively due to the application of IAS 19R; See notes.


CONSOLIDATED CASH FLOW STATEMENT*F R O M O C T O B E R 1, 2 013 , T O S E P T E M B E R 3 0 , 2 014

(in EUR thousands) 2013/2014 2012/2013**

Income from operating activities 135,225 73,764

Income of discontinued operations (after taxes) 5,676 17,646

Depreciation and amortization/impairment reversals on non-current assets 121,259 187,063

Gain on the disposal of non-current assets – 5,023 – 8,765

Other non-cash expenses and income – 33,971 – 21,402

Increase/decrease in inventories, trade receivables and other receivables – 1,550 16,516

Increase/decrease in trade payables and other liabilities – 5,287 – 54,613

Increase/decrease in provisions 183 – 30,232

Interest paid – 13,564 – 19,992

Interest received 1,665 2,225

Income tax payments – 22,484 – 11,583

CASH FLOW FROM OPER ATING AC TIVITIES (A) 182,129 150,627

Cash inflow from the disposal of property, plant and equipment/intangible assets 14,556 26,502

Cash outflow for investments in property, plant and equipment/intangible assets – 142,807 – 125,563

Cash inflow from the disposal of consolidated companies and associates 2,748 224

Cash inflow from the disposal of financial assets 1,810 637

Cash outflow for the acquisition of consolidated companies and other business divisions – 14 – 2,626

Cash outflow for investments in non-current financial assets – 179 – 1,484

Dividends received 1,630 2,169

CASH FLOW FROM INVESTING AC TIVITIES (B) – 122,256 – 100,141

Dividends paid – 1,900 – 2,886

Raising of loans 173 16,416

Repayment of loans – 112,800 – 105,712

Allocation of plan assets – 20,030 – 3,372

Increase/decrease in financial receivables 15,159 6,694

Repayment of financial liabilities – 8,182 11,004

CASH FLOW FROM FINANCING AC TIVITIES (C) – 127,580 – 77,856

CHANGE IN CASH AND CASH EQUIVALENTS (A+B+C) – 67,707 – 27,370

OPENING BAL ANCE OF CASH AND CASH EQUIVALENTS 153,916 184,111

– Checks, cash on hand 553 404

– Deposits with banks 153,363 183,707

Change in cash and cash equivalents due to exchange rates 726 – 2,065

Changes in funds due to differences in the companies consolidated 8 – 760

CLOSING BAL ANCE OF CASH AND CASH EQUIVALENTS 86,943 153,916

– Checks, cash on hand 405 553

– Deposits with banks 86,538 153,363

* The consolidated cash flow statement is discussed under Note 38. ** The prior year figures were adapted primarily based on IFRS 5.

41Consolidated Cash Flow Statement


CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y*F R O M O C T O B E R 1, 2 013 , T O S E P T E M B E R 3 0 , 2 014

Attributable to owners

Consolidated accumulated other gains and losses

(in EUR thousands)

Subscribed capital Capital reserve

Consolidated retained earnings

Currency translation differences

Measurement of securities at fair value

Cash flow hedges

Shareholders of SCHOTT AG

Non-controlling interests

SCHOTT consolidated

equity

BAL ANCE AS OF OC T. 1, 2012, AS ORIGINALLY DISCLOSED 150,000 322,214 – 127,116 53,191 265 0 398,554 108,460 507,014

Effect from retroactive application of IAS 19R 2,618 2,618 2,618

BAL ANCE AS OF OC T. 1, 2012, (ADJUSTED) 150,000 322,214 – 124,498 53,191 265 0 401,172 108,460 509,632

Consolidated net loss for the period 30,527 30,527 – 5,510 25,017

Changes in value recognized directly in equity – 39,611 – 54,825 35 – 139 – 94,540 – 8,990 – 103,530

TOTAL RESULT OF THE GROUP – 9,084 – 54,825 35 – 139 – 64,013 – 14,500 – 78,513

Dividends 0 0 – 2,885 – 2,885

Share-based payment 55 55 11 66

Changes in ownership interests in subsidiaries 13 13 46 59

BAL ANCE AS OF SEPT. 30, 2013 (ADJUSTED) 150,000 322,214 – 133,514 – 1,634 300 – 139 337,227 91,132 428,359

BAL ANCE AS OF OC T. 1, 2013, AS ORIGINALLY DISCLOSED 150,000 322,214 – 135,732 – 1,657 300 – 139 334,986 91,132 426,118

Effect from retroactive application of IAS 19R 2,218 23 2,241 2,241

BAL ANCE AS OF OC T. 1, 2013, (ADJUSTED) 150,000 322,214 – 133,514 – 1,634 300 – 139 337,227 91,132 428,359

Consolidated net income for the period 63,232 63,232 2,957 66,189

Changes in value recognized directly in equity – 100,972 9,577 55 139 – 91,201 – 479 – 91,680

TOTAL RESULT OF THE GROUP – 37,740 9,577 55 139 – 27,969 2,478 – 25,491

Dividends 0 0 – 1,900 – 1,900


Changes in ownership interests in subsidiaries – 778 – 778 778 0

BAL ANCE AS OF SEPT. 30, 2013 150,000 322,214 – 171,978 7,943 355 0 308,534 92,499 401,033

* Equity is discussed under Note 28.

43Consolidated Statement of Changes in Equity

Attributable to owners

Consolidated accumulated other gains and losses

(in EUR thousands)

Subscribed capital Capital reserve

Consolidated retained earnings

Currency translation differences

Measurement of securities at fair value

Cash flow hedges

Shareholders of SCHOTT AG

Non-controlling interests

SCHOTT consolidated

equity

BAL ANCE AS OF OC T. 1, 2012, AS ORIGINALLY DISCLOSED 150,000 322,214 – 127,116 53,191 265 0 398,554 108,460 507,014

Effect from retroactive application of IAS 19R 2,618 2,618 2,618

BAL ANCE AS OF OC T. 1, 2012, (ADJUSTED) 150,000 322,214 – 124,498 53,191 265 0 401,172 108,460 509,632

Consolidated net loss for the period 30,527 30,527 – 5,510 25,017

Changes in value recognized directly in equity – 39,611 – 54,825 35 – 139 – 94,540 – 8,990 – 103,530

TOTAL RESULT OF THE GROUP – 9,084 – 54,825 35 – 139 – 64,013 – 14,500 – 78,513

Dividends 0 0 – 2,885 – 2,885


Changes in ownership interests in subsidiaries 13 13 46 59

BAL ANCE AS OF SEPT. 30, 2013 (ADJUSTED) 150,000 322,214 – 133,514 – 1,634 300 – 139 337,227 91,132 428,359

BAL ANCE AS OF OC T. 1, 2013, AS ORIGINALLY DISCLOSED 150,000 322,214 – 135,732 – 1,657 300 – 139 334,986 91,132 426,118

Effect from retroactive application of IAS 19R 2,218 23 2,241 2,241

BAL ANCE AS OF OC T. 1, 2013, (ADJUSTED) 150,000 322,214 – 133,514 – 1,634 300 – 139 337,227 91,132 428,359

Consolidated net income for the period 63,232 63,232 2,957 66,189

Changes in value recognized directly in equity – 100,972 9,577 55 139 – 91,201 – 479 – 91,680

TOTAL RESULT OF THE GROUP – 37,740 9,577 55 139 – 27,969 2,478 – 25,491

Dividends 0 0 – 1,900 – 1,900


Changes in ownership interests in subsidiaries – 778 – 778 778 0

BAL ANCE AS OF SEPT. 30, 2013 150,000 322,214 – 171,978 7,943 355 0 308,534 92,499 401,033


PRINCIPLES AND METHODS

— 01 PRELIMINARY REMARK S

SCHOTT AG (short: SCHOTT) is an unlisted company incorpo-rated under German law that operates internationally in more than 35 countries in the Advanced Optics, Electronic Packaging, Flat Glass, Home Tech, Lighting and Imaging, Pharmaceutical Packaging and Tubing segments. SCHOTT AG’s registered office is located at Hattenbergstraße 10, 55122 Mainz, Germany, and is en-tered in the commercial register of the local court in Mainz under 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, solar power and transportation industries.

The consolidated financial statements of SCHOTT AG, Mainz, were prepared on the legal basis of section 315a (3) of the German Commercial Code (HGB) in accordance with International Finan-cial Reporting Standards (IFRSs), as applicable in the European Union, supplemented by the applicable commercial law regula-tions under section 315a (1) HGB. Necessary adjustments under IFRSs have been made to the extent that the consolidated compa-nies’ separate financial statements diverge from these principles under national law. Interim financial statements are used for sub-sidiaries 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, 2014, and the group management report were released at the Board meeting on November 24, 2014. The plan is for the Supervisory Board to approve the financial statements at the meeting on December 18, 2014.

— 02 CHANGE S IN ACCOUNTING STANDARDS AND

APPLIC ATION OF NEW AND REVISED ACCOUNTING

STANDARDS

Standards and interpretations applicable in the current fiscal year

The following new and amended standards and interpreta-tions, which were to be mandatorily applied for the first time in the fiscal year under review or voluntarily before that time, have been published by the International Accounting Standards Board (IASB). The standards that have an impact on the consolidated fi-nancial statements over and above expanded notes disclosures are described in detail below. The nature and impact of the indi-vidual new and revised standards are described below:

Mandatory application for

fiscal years beginning on

or after

Revised/ expanded

notes disclosures

STANDARDS

IFRS 1 Government Loans Jan. 1, 2013 N/A

IFRS 1

Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters Jan. 1, 2013 N/A

IFRS 7Financial Instruments: Disclosures July 1, 2013 Yes, Note 5

IFRS 13 Fair Value Measurement Jan. 1, 2013 Yes*, Note 5

IAS 12Deferred Tax: Recovery of Underlying Assets Jan. 1, 2013 N/A

IAS 19Employee Benefits (revised 2011) Jan. 1, 2013 Yes*

IAS 36Recoverable Amount Disclo-sures for Non-Financial Assets Jan. 1, 2014 Yes

VariousAnnual Improvements Cycle 2009 – 2010 Jan. 1, 2013 Yes*

INTERPRETATIONS

IFRIC 20Stripping Costs in the Produc-tion Phase of a Surface Mine Jan. 1, 2013 N/A

* See further explanations that follow

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F O R T H E 2 013 / 2 014 F I S C A L Y E A R

45Notes to the Consolidated Financial Statements – Principles and Methods

longer be recognized at the beginning of the term, but in-stead is to be accumulated proportionately from the date on which the contract is entered into until the end of the active phase and reversed over the course of the release phase. As a result of the retrospective application of IAS 19R, provisions for partial retirement decreased by EUR 3,740 thousand as of October 1, 2012. Taking into account the corresponding tax impact, this led to an increase in equity (consolidated retained earnings) of EUR 2,618 thousand as of October 1, 2012. In fiscal year 2012/2013, the retrospective application of IAS 19R re-sulted in a further decrease of EUR 419 thousand in provisions for partial retirement. This led to an increase of EUR 293 thou-sand in equity, taking deferred taxes into account.

IAS 19R was applied retroactively, taking advantage of the simplification provisions under IAS 19.173. Note 29 contains the additionally required disclosures.

Revised presentation in the consolidated statement of finan-cial position:

(in EUR thousands)

Sept. 30, 2012

As previously disclosed

Adjustment of the

valuationOct. 1, 2012 As disclosed

TOTAL ASSETS 2,456,573 – 1,122 2,455,451

NON- CURRENT ASSETS 1,392,026 – 1,122 1,390,904

of which deferred tax assets 357,401 – 1,122 356,279

FOREIGN CAPITAL 1,949,559 – 3,740 1,945,819

of which pension plans and similar commitments 780,846 0 780,846

of which other provisions (non-current) 146,378 – 3,740 142,638

EQUIT Y 507,014 2,618 509,632

(in EUR thousands)

Sept. 30, 2013

As previously disclosed

Adjustment of the

valuation

Sept. 30, 2013

As disclosed

TOTAL ASSETS 2,204,681 – 776 2,203,905

NON- CURRENT ASSETS 1,241,706 – 776 1,240,930

of which deferred tax assets 325,740 – 776 324,964

FOREIGN CAPITAL 1,778,563 – 3,017 1,775,546

of which pension plans and similar commitments 829,881 1,005 830,886

of which other provisions (non-current) 123,919 – 4,159 119,760

of which deferred taxes 22,067 137 22,204

EQUIT Y 426,118 2,241 428,359

■ IFRS 13 sets uniform guidelines for fair value measurement and defines comprehensive quantitative and qualitative disclosures on measurement at fair value. In contrast, this standard does not address the question of when assets and liabilities can or must be measured at fair value. IFRS 13 defines fair value as the price that a party would receive in an orderly transaction be-tween market participants on the measurement date for the sale of an asset or pay for the transfer of a liability.

Since the group only has a few line items that in fact are measured at fair value in the statement of financial position in accordance with IFRS 13, the effect of application is limited to these derivatives and financial assets, which however did not have a significant impact on these financial statements. Addi-tional and/or revised disclosures can be found in Note 5 regard-ing financial instruments as well as in section 18 regarding in-vestment property.

■ The amendments to IAS 19 (revised 2011) (hereinafter: IAS 19R) are to be applied retroactively in the current reporting period as required under the transitional provisions. The opening state-ment of financial position for the earliest previous period shown (October 1, 2012) and comparative figures were adjusted corre-spondingly.

Among other things, IAS 19R revises the accounting treat-ment of defined benefit pension plans. The following significant changes had an impact on the group:

– Past service costs are either recognized when the pension plan is adjusted/curtailed or when the costs associated with the restructuring or termination of the employment relation-ship are recognized, whereby the earlier date applies. Corre-spondingly, the subsequent recognition of unvested past service cost can no longer be recognized proportionately over the future vesting period. Since past service cost not yet recognized as of September 30, 2013, resulted mainly from events in fiscal year 2012/2013, the previous year’s opening statement of financial position was not adjusted. For the pre-sentation of fiscal year 2012/2013, the retroactive application of IAS 19R results in a decrease in annual net profit of EUR 670 thousand (after taxes).

– Interest expense and the expected income from plan assets were replaced in IAS 19R by a net interest amount calculated from the application of the discount rate on the liability or the asset from defined benefit plans at the beginning of every reporting period. As a consequence of this change, EUR 664 thousand was recognized in profit or loss as of September 30, 2013, with a simultaneous increase in other comprehensive income. This did not have an effect on consolidated equity.

– With respect to the provisions for partial retirement, there were adjustments from the revised measurement of additions to pension provisions. In accordance with IAS 19R, they are to be recognized as other non-current employee benefits. Ac-cordingly, the expense for the additions to provisions may no


Revised presentation in the statement of comprehensive income:

(in EUR thousands)

2012/2013 As previously

disclosed

Adjustment of the

valuation2012/2013

As disclosed

CONSOLIDATED PROFIT FOR THE PERIOD 26,058 – 1,041 25,017

AMOUNTS THAT ARE NOT TO BE RECL ASSIFIED TO THE INCOME STATE-MENT IN FUTURE PERIODS – 40,252 641 – 39,611

of which revaluations of de-fined benefit pension schemes – 57,365 1,161 – 56,204

of which deferred taxes on revaluations of defined benefit pension schemes 17,113 – 520 16,593

AMOUNTS THAT ARE TO BE RECL ASSIFIED TO THE INCOME STATEMENT IN FUTURE PERIODS – 63,942 23 – 63,919

Currency translation differences – 54,848 23 – 54,825

OTHER COMPREHENSIVE INCOME/LOSS – 104,194 664 – 103,530

TOTAL COMPREHENSIVE INCOME – 78,136 – 377 – 78,513

of which attributable to non-controlling interests – 14,500 0 – 14,500

of which attributable to the owner of SCHOTT AG – 63,636 – 377 – 64,013

The conversion had no significant impact on the statement of cash flows.

Compared to the treatment under IAS 19 in the version from 2008, EBIT decreased by EUR 156 thousand in fiscal year 2013/2014 as a result of the application of IAS 19R. The net inter-est expense decreased by EUR 1,172 thousand because the net interest amount was applied. The net tax expense rose by EUR 311 thousand. In the statement of financial position as of September 30, 2014, the application of IAS 19R led to an in-crease of EUR 804 thousand in pension provisions, whereas the provisions for partial retirement are EUR 3,802 thousand lower. The balance of deferred tax liabilities and deferred tax assets decreased by EUR 873 thousand. The overall result due to this change was an increase in equity of EUR 2,125 thousand.

■ Annual Improvements 2009/2011SCHOTT will apply the changes that pertain to this project

for the first time in fiscal year 2013/2014. Replacement parts that were previously listed under inventories are to be categorized as an item of property, plant and equipment if they meet the respective criteria. SCHOTT has reviewed the effects of this amendment and reclassified replacement parts with a carrying amount of EUR 2.9 million from inventories to property, plant and equipment as a result of this change. No significant impact on the consolidated financial statements resulted from the other amendments of the 2009/2011 Annual Improvement Project either.

Revised presentation in the income statement:

(in EUR thousands)

2012/2013 As previously

disclosed*

Adjustment of the

valuation2012/2013

As disclosed

Cost of sales – 1,280,539 – 830 – 1,281,369

GROSS PROFIT 604,747 – 830 603,917

Selling expenses – 219,883 – 185 – 220,068

General administrative expenses – 211,869 – 3 – 211,872

Other operating income 71,389 447 71,836

INCOME FROM OPER ATING AC TIVITIES 74,335 – 571 73,764

Interest expense – 43,126 – 1,199 – 44,325

NET FINANCIAL INCOME/EXPENSE – 41,924 – 1,199 – 43,123

INCOME FROM CONTINU-ING OPER ATIONS BEFORE INCOME TA XES 32,411 – 1,770 30,641

Income tax expenses – 24,014 744 – 23,270

INCOME FROM CONTINU-ING OPER ATIONS 8,397 – 1,026 7,371

Income of discontinued operations (after taxes) 17,661 – 15 17,646

CONSOLIDATED PROFIT FOR THE PERIOD 26,058 – 1,041 25,017

of which attributable to non-controlling interests – 5,510 0 – 5,510

of which attributable to the owner of SCHOTT AG 31,568 – 1,041 30,527

* After reclassification of Concentrated Solar Power to continuing operations


■ The IASB finally published IFRS 9 in July 2014. The standard will replace the existing IAS 39 and have a significant impact on the accounting treatment and measurement of financial instru-ments. In particular, recognition and measurement, impairment write-downs, and the recording of hedging relationships will be affected.

IFRS 9 is to be applied to reporting periods beginning on or after January 1, 2018. SCHOTT is currently reviewing the impact of its application on the consolidated financial statements.

■ IFRS 10, IFRS 11 and IFRS 12 (collectively: the “consolidation standards”) replace the provisions of the previous IAS 27 Sepa-rate Financial Statements, SIC-12 Consolidation – Special Purpose Entities, IAS 31 Interests in Joint Ventures, and SIC-13 Jointly Con-trolled Entities – Non-Monetary Contributions by Venturers. IFRS 10 establishes a uniform control concept to be applied to all entities, including special purpose entities.

The amendments introduced with IFRS 10 require manage-ment to exercise considerably more discretion than compared to previous legal norms with respect to determining over which group entities control is exercised and whether these entities are to be included by means of consolidation in the consolidated financial statements. As a general rule, SCHOTT’s subsidiaries are companies in which the voting rights majority represents the most important indicator for control, with no other contrac-tual arrangements.

IFRS 11 eliminates the previous option to apply proportion-ate consolidation for joint ventures. Depending on the legal structure of the joint venture, the investment must now be ac-counted for by means of proportionate consolidation or by ap-plying the equity method.

According to our previous analysis based on the current legal structure of the investments, the reforms in IFRS 10 and IFRS 11 will not change the consolidated group and therefore will not have a significant impact on the consolidated financial state-ments.

IFRS 12 uniformly governs the disclosure requirements with respect to group accounting and consolidates the disclosures for subsidiaries that were previously governed by IAS 27 and the disclosures for joint ventures and associates that were previously governed by IAS 31 and IAS 28 as well as for structured entities. In any case, the application of IFRS 12 results in expanded dis-closure requirements, in addition to the previous requirements. Insofar, the notes disclosures regarding the corporate group will be more comprehensive in the future.

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

the previous section, the IASB published additional IFRSs and IFRICs that have in some cases already completed the EU’s endorse-ment process, but are not required to be applied until a later date.

Mandatory application

for fiscal years beginning on

or after

Endorsement by the Euro-

pean Commis-sion

STANDARDS

IFRS 9 Financial Instruments Jan. 1, 2018 No

IFRS 10 Consolidated Financial Statements Jan. 1, 2013

Yes, application Jan. 1, 2014

IFRS 11 Joint Arrangements Jan. 1, 2013


IFRS 12 Disclosure of Interests in Other Entities Jan. 1, 2013


IFRS 10/11/12

Consolidated Financial State-ments, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Jan. 1, 2014 Yes

IFRS 10/12, IAS 27

Investment Entities (Amendments) Jan. 1, 2014 Yes

IFRS 14 Regulatory Deferral Accounts Jan. 1, 2016 No

IFRS 15Revenue from Contracts with Customers Jan. 1, 2017 No

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

IAS 27Separate Financial Statements (revised 2011) Jan. 1, 2013


IAS 28 IAS 28 Investments in Associates and Joint Ventures (revised 2011) Jan. 1, 2013


IAS 32

Offsetting Financial Assets and Financial Liabilities (Amendments) Jan. 1, 2014 Yes

IAS 39

Novation of Derivatives and Continuation of Hedge Accounting Jan. 1, 2014 Yes

VariousAnnual Improvement Cycle 2010 – 2012 and 2011 – 2013 July 1, 2014 No

INTERPRETATIONS

IFRIC 21 Levies Jan. 1, 2014 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 below.


Acquisitions/DivestmentsThere were no acquisitions or divestments that had any signif-

icant effect on the assets, financial and earnings position in either fiscal year 2013/2014 or in the comparative period.

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-con-trolling interest in the acquired company. For each business com-bination, SCHOTT decides whether to measure the non-controlling interest in the acquired company at fair value or at the correspond-ing 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.

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.

In accordance with SIC 12, special purpose entities are consol-idated regardless of their legal form if the company is controlled by SCHOTT.

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 IAS 31 Interests in Joint Ventures are accounted for using the equity method in accordance with the option provided under IAS 31.38.

The shares are presented at cost when first recognized in the statement of financial position and adjusted during subsequent measurement by 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.

■ IFRS 15 stipulates when and in what amount an entity prepar-ing IFRS financial statements must recognize revenue. In addi-tion, the preparers of the financial statements are required to provide the users of the financial statements with more detailed information and more relevant disclosures than before. The standard offers a single principal-based five-step model to be applied to all contracts with customers.

IFRS 15 was issued in May 2014 and is to be applied to re-porting periods beginning on or after January 1, 2017. SCHOTT is currently reviewing the impact of its application on the con-solidated financial statements.

— 03 IMPORTANT ACCOUNTING POLICIE S AND METHODS

OF CONSOLIDATION

Consolidated group, acquisitions and divestmentConsolidated group

In addition to SCHOTT AG, 10 domestic (previous year: 10) and 57 foreign subsidiaries (previous year: 58) 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 (“control concept”). As a rule, SCHOTT exercises a controlling influence if it directly or indirectly holds the majority of voting rights. Five companies (previous year: six) were included in the consolidated group as of the balance sheet date of the reporting period using equity method accounting.

In the 2013/2014 fiscal year, one subsidiary was merged within the group, so that the consolidated group decreased by a total of one unit compared to the previous year.

The changes are shown in the tables below:

Mergers within the consolidated groupShare of

voting rights Date

SCHOTT NAIGAI K.K., Osaka/Japan 100 %Aug. 30,

2014

An investment accounted for using the equity method was sold in fiscal year 2013/2014:

Disposals from investments accounted for using the equity method

Share of voting rights Date

Mainz Solar GmbH, Mainz/Germany 49 %March 14,

2014

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


SCHOTT decided in this case not to reallocate the goodwill to the divisions based on relative value, but instead on the basis of its historical development, because in our opinion such an allocation appears to be appropriate and can be achieved non-arbitrarily. This assessment is based in particular on the fact that there were no noteworthy synergies between the two divisions and the Pharmaceutical Systems business unit did not make a significant contribution to the performance of either division as a connect-ing link; as a result, the two divisions’ goodwill did not mix over time and no primary goodwill was created at the level of the Pharmaceutical Systems business unit.

The method described resulted in an allocation of goodwill in the amount of EUR 27.0 million for Pharmaceutical Packaging and EUR 2.2 million for Tubing on the allocation date. If the allocation had been carried out on the basis of relative values, the Pharma-ceutical Packaging division would have been allocated goodwill of EUR 14.7 million and the Tubing division goodwill of EUR 14.5 mil-lion.

Discontinued operationsThe Board of Management of SCHOTT AG had resolved to sell

the Concentrated Solar Power division in fiscal year 2012/2013. The goal was to sell the majority of shares in the companies that operate the division. The division was first classified as held for sale in September 2013, since at the time the division had fulfilled the criteria for being held for sale under IFRS 5 in the view of the Board of Management of SCHOTT AG.

As of September 30, 2014, the division no longer meets the criteria for being held for sale, since it was not possible to com-plete a sale within twelve months after the classification date and such a sale is no longer intended. Instead, the company plans to continue the existing operations. For this reason, the division is reported once again under continuing operations in fiscal year 2013/2014. The reclassification resulted in a negative EBIT contri-bution of EUR 43.6 million in fiscal year 2012/2013 and EUR 3.3 million in fiscal year 2013/2014.

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.

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

The assets and liabilities of subsidiaries whose functional cur-rency is not the euro are translated at the mean rate of exchange at 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 Sept. 30

balance sheet dateAverage rate

for the fiscal years

(1 Euro =) 2014 2013 2013/2014 2012/2013

Japanese yen 138.15 132.21 138.26 118.76

Swiss franc 1.21 1.22 1.22 1.22

Singapore dollar 1.61 1.70 1.71 1.62

Czech koruna 27.49 25.73 27.12 25.50

Hungarian forint 310.25 297.78 304.61 291.85

U.S. dollar 1.26 1.35 1.36 1.31

Significant discretionary decisions and estimatesAllocation of goodwill of the Pharmaceutical Systems business unit

The Pharmaceutical Systems business unit previously com-prised the two Tubing and Pharmaceutical Packaging business fields. Both divisions were originally separate, but were trans-ferred to the Pharmaceutical Systems business unit in order to establish uniform management and reporting structures and increase the potential for synergy based on the example of other business units in the SCHOTT Group. However, the synergies did not subsequently materialize as expected; consequently, a deci-sion was made in fiscal year 2013/2014 to return to managing and reporting on both divisions separately. Accordingly, the business unit’s goodwill was to be allocated once again to the two divisions and is to be tested separately in the future for impairment at the division level.


and 18), the impairment of goodwill (Note 17), the collectability of receivables (Note 5), and the accounting treatment and measure-ment of provisions (Notes 29 and 31) as well as the feasibility of future tax relief when recognizing and measuring deferred tax as-sets (Note 14). The assumptions and estimates are based on prem-ises that are in turn based on the most current information avail-able 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.

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.

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

Revenue recognitionSales 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.

In December 2013, the Thin Film division, which had been held for sale until this time, was shut down and production was discontinued. The strained market situation in the photovoltaic industry also had an impact on demand and the price trend with respect to thin film modules and prevented both the sale of the division as well as a realistic perspective for continuation. As a result of the decommissioning, the division is presented as a dis-continued operation in accordance with the rules set forth under IFRS 5 in fiscal year 2013/2014.

Property leasing companiesSCHOTT Group holds 100 % of the interest in two property

leasing companies. The properties owned by these two compa-nies are used by SCHOTT in finance lease agreements and corre-spondingly recognized. Consolidation of the property companies would only have an immaterial impact on the presentation of the group’s financial position, financial performance 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 whether an obligation to consolidate could arise under IAS 27 or SIC-12, and after observing the risks and opportunities pursuant to SIC-12 came to the conclusion that the significant risks and opportunities associated with the special purpose entity do not fall to it. Conse-quently, the special purpose entity is not being consolidated, be-cause consolidation under IAS 27 is also not necessary due to a lack of possibility for control. SCHOTT also concludes based on the program’s current structure 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 “continuing involvement” with respect to the retained late-payer risk is presented.

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 17


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 for liabilities, such as contingent consideration. Selection criteria include, for instance, market knowledge, reputation, independence and com-pliance with professional standards.

In order to meet the reporting requirements for the fair values, SCHOTT has established groups of assets and liabilities on the ba-sis 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 cumula-tively met. For instance, it must be possible to use or sell the inter-nally 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 realiza-tion, 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, assump-tions are made regarding the future cash flow level from assets, applicable discount rates, and the period in which asset-generat-ing cash flows are expected to accrue. Further details, including the carrying amounts, can be found under Notes 9 and 17. Devel-opment costs that cannot be capitalized are expensed.

Intangible assets Intangible 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.

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 5.

The fair value is the price that would be received to sell an asset or 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.

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 identi-cal assets or liabilities

■ Level 2: Valuation method 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 method 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.


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.

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.

Useful life of intangible assets with finite useful lives:

Years

Development costs 5

Patents and licenses 2 to 20

Software 3 to 4

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). Investment property that is presented under proper-ty, plant and equipment for reasons of materiality is also recog-nized 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 depreciated accordingly (component accounting). At SCHOTT Group, this affects in particular large machines for manufacturing specialized 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 in-come and other operating expenses respectively.


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 fi-nancial (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. Further details, including carrying amounts, can be found under Note 14.

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

received that have been paid in advance, receivables from other taxes and receivables from employees, as well as entitlements to investment grants or government subsidies. These receivables do not meet the definition of a financial 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.

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 8.8 % and 11.2 % before taxes (previous year: 8.7 % and 11.6 %), adjusted to other currency areas where necessary. Further details, including carrying amounts, can be found under Notes 17 and 18.

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.


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

The fair value of plan assets is compared with the present value of vested benefits at the end of the year (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 29.

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.

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

tion 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.

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 initiated 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, 2014, the “Photovoltaics,” “Advanced Optics Lithotec,” “Display Glass” and “Traditional Television Glass” divisions met the requirements for discontinued operations.

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 ac-count. Revaluations, including actuarial gains and losses, the ef-fects of asset ceilings without taking net interest (not applicable to the group) into consideration, and income from plan assets with-out taking net interest into consideration, are recognized immedi-ately in retained earnings. Pension commitments in Germany are determined on the basis of the biometric bases of calculation set forth in the Heubeck Mortality Tables 2005 G.


The group as the lessorThe group sometimes acts as the lessor in particular 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 leas-es. 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.

— 0 4 R ISK MANAGEMENT

Within the course of their business operations, the companies of SCHOTT Group are subject to various financial risks. The risks associated with financial instruments are managed by the Trea-sury Department with the goal of identifying the risks arising from market fluctuations of interest rates, exchange rates, and raw ma-terial prices in the operational business and hedging them based on the hedging strategy.

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.

Business transactions are carried out subject to strict function-al separation into trade, back office, documentation, and risk con-trolling. 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. The type and scope of underlying transactions to be hedged are regu-lated by the Board of Management for the entire corporate group in a binding financial guideline. All hedging transactions are re-corded and measured centrally in the Treasury Management Sys-tem and their risks are continuously monitored. The processes, goals, and methods of risk management were the same as in the previous year.

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 fair value.

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 treated as operating leases; as a consequence, the lease payments are recognized as an expense.


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,

2014Sept. 30,

2013

Loans and receivables 412,602 484,850

Financial instruments available for sale 3,784 4,855

Financial assets not subject to IFRS 7 48,857 45,313

Financial instruments at fair value through profit or loss: – held for trading 5,384 6,717

470,627 541,735

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)

Nether impaired nor

overdue as of the report-

ing date

Impaired as of the

reporting date

Overdue as of the reporting date and not impaired

1 to 30 days

31 to 60 days

61 to 90 days

SEPT. 30, 2014

Trade receivables* 268,803 16,789 26,711 5,200 2,656

SEPT. 30, 2013

Trade receivables 253,919 19,234 28,777 7,619 3,086

* Receivables are presented at gross value before valuation allowances. Trade receivables impaired as of the balance sheet date include specific valuation allowances of EUR 18 mil-lion. Global valuation allowances in the amount of EUR 3 million relate to the other items.

There are no other financial assets that are overdue and not impaired as of the balance sheet date (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.

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.


SCHOTT AG also has bilateral line of credit agreements at its disposal in the amount of EUR 125 million. These credit lines, which were made available until further notice, had been utilized in the amount of EUR 58 million as of 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, 2014, trade receivables from domestic companies had been sold in the amount of EUR 14 million (previous year: EUR 10 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).

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 24 months. The majority of currency risks are the result of the euro’s price performance against the U.S. dollar, the Japanese yen, and the Swiss franc.

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:

(in EUR thousands)Carrying amount

Gross outflow

Up to one year

1 to 5 years

More than 5 years

SEPT. 30, 2014

Liabilities* 284,421 287,858 236,876 33,992 16,990

Liabilities under finance leases 45,535 61,378 3,705 13,896 43,777

Financial instru-ments held for trading 12,180 12,180 12,061 119 0

SEPT. 30, 2013

Liabilities* 397,668 399,540 338,540 34,028 26,972

Liabilities under finance leases 47,719 65,375 3,998 14,478 46,899

Financial instru-ments held for trading 3,498 3,498 3,498 0 0

Hedging instru-ments 348 348 348 0 0

* Please refer to the tables in Note 5 “Financial Assets and Financial Liabilities” for a recon-ciliation of liabilities to items of the statement of financial position

The Treasury Department is responsible for the management of liquidity risk, for which an efficient cash management system is implemented. 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 300 million with a term until August 2018 that was contractually agreed with an international banking syndicate. As of September 30, 2014, SCHOTT had not yet utilized this credit line. In addition, a bilateral credit line was contracted over EUR 30 million with a term until April 2017 which can be used for guarantees, bill of exchange guarantees, or cash credit lines. All of this bilateral credit line was available on the balance sheet date.


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. Fixed-interest financial instruments are not taken into ac-count, as changes in market interest rates would only affect fair value. However, SCHOTT measures fixed-interest financial instru-ments at amortized cost; therefore, changing interest rates do not lead to changes in equity or profit.

On the basis of market data from September 30, 2014, a 100 basis point parallel shift of the euro yield curve would have led to a EUR 0.1 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 0.1 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. SCHOTT’s purchas-ing department is responsible for the operational management of commodity price risks, which is carried out based on internal guidelines and limits established at corporate headquarters. For instance, in order to hedge commodity price risks, long-term con-tracts were concluded with various suppliers. In addition, the group also holds a small amount of primary and derivative finan-cial instruments. In 2013 and 2014, commodity price risks for fi-nancial instruments were of minor significance to SCHOTT. As a result, SCHOTT has not conducted a sensitivity analysis for these financial instruments.

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 and hedging instruments in foreign cur-rencies and is shown in the table below. Transaction risks were hedged mainly in the currencies listed.

(in EUR thousands)

Exposure Sept. 30,

2014

Exposure Sept. 30,

2013

Japanese yen 16,422 3,397

Swiss franc – 40,847 – 37,382

Singapore dollar – 13,980 – 14,417

Czech koruna – 12,851 – 11,718

Hungarian forint – 7,802 – 9,116

U.S. dollar 135,001 136,578

Other – 63,026 – 22,641

Value-at-risk represents the expected maximum loss of the exposure based on an observation period of 250 trading days, a confidence interval of 95 %, and a holding period of 1 month. The value-at-risk calculation is based on a Monte Carlo simulation, with whose help various exchange rates can be simulated. The cal-culation takes correlations between the examined transactions into account.

As of September 30, 2014, the value-at-risk amounted to EUR 4.0 million (previous year: EUR 3.1 million). This value-at-risk analysis as of the balance sheet date is a representative analysis of SCHOTT’s currency risk.

Interest rate riskFinancial liabilities also include loans with a remaining term of

12 months or less bearing variable interest (rollover risk). In addi-tion, short-term deposits with variable interest rates are used as part of cash management. Thus, future interest rate changes lead to changes in net interest income as well as future cash flows.

The 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.


Lendings and trade receivables are measured at amortized cost because they belong to the category “Loans and receivables.” Non-current non-interest-bearing loans and receivables are dis-counted 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.

Derivatives embedded in compound financial instruments are recognized separately at fair value if their economic characteristics and risks are not closely related with those of the underlying con-tracts and the compound financial instruments are not measured overall at fair value through profit or loss. These embedded deriv-atives 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.

— 05 F INANCIAL A SSETS AND FINANCIAL L IABIL IT IE S

SCHOTT 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 mea-surement 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 28. 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.

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.


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 essential-ly 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 fi-nancial asset, yet has assigned the power of control over the asset.

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.

Cash flow hedgesSCHOTT applied hedge accounting in the form of cash flow

hedges for the first time in the past fiscal year that expired in the current year. The effective portion of the gain or loss from a hedg-ing instrument was recognized under other comprehensive in-come in the reserve for the hedging of cash flows, whereas the ineffective portion was recognized immediately in profit or loss under other operating expenses.

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

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 comprehen-sive income. Impairment losses on equity instruments are not reversed in profit or loss; any future increase in fair value is recognized directly under consolidated accumulated other com-prehensive income. If the fair value of a debt instrument increases in a subsequent 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).


The group uses currency forwards as hedging instruments to hedge the currency risk resulting from expected transactions.

The amounts recognized under other comprehensive income are reclassified to the income statement in the period in which the hedged transaction influences net profit for the period; for exam-ple, when an expected sale is carried out. If a hedge results in the recognition of a non-financial asset or a non-financial liability, the amounts recognized under other comprehensive income are treated as part of the cost of the non-financial asset or non-finan-cial liability on the acquisition date.

If the expected transaction or fixed obligation is no longer ex-pected to take place, the accumulated gains or losses previously recognized in equity are reclassified to profit or loss. If the hedging instrument expires or is sold, ended, or exercised without being replaced or rolled over into another hedging instrument, or the criteria for recognition as a hedge are no longer met, the accumu-lated gains or losses previously recognized under other compre-hensive income remain in other comprehensive income until the expected transactions or fixed obligations influence net profit for the period.

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, 2014, and September 30, 2013:


CL A SSIF IC ATION, ME A SUREMENT C ATEGORIE S AND RECONCIL IATION OF S TATEMENT OF F INANCIAL POSIT ION ITEMS A S OF SEP TEMBER 30, 2014

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 Hedging instruments

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






ASSETS

NON- CURRENT ASSETS

Investments accounted for using the equity method 48,857 n/a*** 0 0 0 0 0 0 0 0 0 0 48,857 n/a***

Other financial assets 6,484 6,484 2,700 2,700 0 0 3,784 3,784* 0 0 0 0 0 0

CURRENT ASSETS

Trade receivables 315,816 315,816 315,816 315,816 0 0 0 0 0 0 0 0 0 0

Other financial assets 12,527 12,527 7,143 7,143 0 0 0 0 5,384 5,384 0 0 0 0

Cash and cash equivalents 86,943 86,943 86,943 86,943 0 0 0 0 0 0 0 0 0 0

470,627 412,602 412,602 0 0 3,784 3,784 5,384 5,384 0 0 48,857


Measurement category: Liabilities Financial instruments at fair value through profit or loss

Class: Liabilities Finance leases Held for trading Hedging instrumentsFinancial liabilities not subject to IFRS 7



Total fair values






EQUIT Y & LIABILITIES


Other financial liabilities 90,855 99,086 47,579 49,100 43,276 49,986 0 0 0 0 0 0

CURRENT LIABILITIES

Accrued liabilities 131,429 131,429 0 0 0 0 0 0 0 0 131,429 131,429

Trade payables 159,725 159,725 159,725 159,725 0 0 0 0 0 0 0 0

Other financial liabilities 91,556 91,556 77,117 77,117 2,259 2,259 12,180 12,180 0 0 0 0

473,565 481,796 284,421 285,942 45,535 52,245 12,180 12,180 0 0 131,429 131,429

* Includes shares in unconsolidated subsidiaries and equity investments (EUR 3,259 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 323,643 thousand in plan assets at fair value that was offset by provisions for pension commitments totaling EUR 1,286,931 thousand.

*** n/a – not applicable

There were no financial guaranties as of the reporting date.










Total fair values







ASSETS

NON- CURRENT ASSETS



CURRENT ASSETS




470,627 412,602 412,602 0 0 3,784 3,784 5,384 5,384 0 0 48,857






Total fair values









CURRENT LIABILITIES


Trade payables 159,725 159,725 159,725 159,725 0 0 0 0 0 0 0 0


473,565 481,796 284,421 285,942 45,535 52,245 12,180 12,180 0 0 131,429 131,429










Total fair values







ASSETS

NON- CURRENT ASSETS



CURRENT ASSETS




541,735 484,850 484,850 0 0 4,855 4,855 6,717 6,717 0 0 45,313






Total fair values









CURRENT LIABILITIES


Trade payables 152,701 152,701 152,701 152,701 0 0 0 0 0 0 0 0


579,370 587,310 397,668 401,823 47,719 51,504 3,498 3,498 348 348 130,137 130,137

* Includes shares in unconsolidated subsidiaries and equity investments (EUR 4,351 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 280,349 thousand in plan assets at fair value that was offset by provisions for pension commitments totaling EUR 1,111,283 thousand.

*** n/a – not applicable

There were no financial guaranties as of the reporting date.










Total fair values







ASSETS

NON- CURRENT ASSETS



CURRENT ASSETS




541,735 484,850 484,850 0 0 4,855 4,855 6,717 6,717 0 0 45,313






Total fair values









CURRENT LIABILITIES


Trade payables 152,701 152,701 152,701 152,701 0 0 0 0 0 0 0 0


579,370 587,310 397,668 401,823 47,719 51,504 3,498 3,498 348 348 130,137 130,137


The group took advantage of the simplification option that IFRS 13.C3 offers in presenting the fair values based on IFRS 13. The fair value hierarchy for the financial instruments assessed at fair value is being stated on September 30, 2013, because this was also shown in the consolidated financial statements for the fiscal year 2012/2013 based on the provisions of IFRS 7.27A that applied at the time. This information was only needed for financial instru-ments assessed at fair value.

The carrying amounts of fair value financial instruments are determined on the basis of input factors that can be observed on the market. If stock market prices are not available, they are mea-sured using the discounted cash flow method, taking market con-ditions in the form of typical credit ratings and/or liquidity spreads into account when calculating their present values.

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.

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, 2014:

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:

Other securities Sept. 9, 2014 525 467 58 0

Derivatives Sept. 9, 2014 5,384 0 5,384 0

Financial assets for which a fair value is recognized:

Real estate held as a financial investment Sept. 9, 2014 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:

Derivatives Sept. 9, 2014 12,180 0 12,180 0

Liabilities for which a fair value is recognized:

Non-current liabilities to credit institutes and other non-current financial liabilities Sept. 9, 2014 49,100 0 49,100 0

Non-current finance leases Sept. 9, 2014 49,986 0 49,986 0

There were no regroupings between Level 1 and Level 2 in the valuation hierarchy in the reporting period

The hierarchy of fair values for financial instruments assessed at fair value on September 30, 2013:

(in EUR thousands) Level 1 Level 2 Level 3 Total

SEPT. 30, 2013

Assets measured at fair value recognized in other compre-hensive income:

Securities 444 60 0 504

Assets measured at fair value recognized in profit or loss:

Derivatives 0 6,717 0 6,717

Liabilities measured at fair value through profit or loss:

(in EUR thousands) Level 1 Level 2 Level 3 Total

SEPT. 30, 2013

Derivatives 0 3,846 0 3,846


No financial instruments whose fair value previously could not be reliably determined have been derecognized.

For loans and receivables as well as liabilities measured at amortized cost, a net currency gain of EUR 5,261 thousand (previ-ous year: currency loss of EUR 2,029 thousand) was incurred.

All other components of subsequent measurements of finan-cial instruments are included in other net financial income.

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.

The following tables present the expenses and income by measurement category:

Fiscal year 2013/2014:

(in EUR thousands)

From investment

income

From interest

and similar income/

expenses

From subsequent measurement

From disposals

Net income 2013/2014At fair value

Write-downs/

reversals

Loans and receivables 0 562 0 – 779 0 – 217

Financial assets available for sale 750 9 0 0 500 1,259

Financial instruments held for trading 0 0 – 6,935 0 0 – 6,935

Financial liabilities measured at amortized cost 0 – 9,342 0 0 0 – 9,342

TOTAL 750 – 8,771 – 6,935 – 779 500 – 15,235

Net foreign exchange expense 5,261

TOTAL – 9,974

Fiscal year 2012/2013:

(in EUR thousands)

From investment

income

From interest

and similar income/

expenses

From subsequent measurement

Net income 2012/2013At fair value

Write-downs/

reversals

Loans and receivables 0 51 0 881 932

Financial assets available for sale 1,049 12 0 – 31 1,030

Financial instruments held for trading 0 0 8,120 0 8,120

Financial liabilities measured at amortized cost 0 – 14,817 0 0 – 14,817

TOTAL 1,049 – 14,754 8,120 850 – 4,735

Net foreign exchange expense – 2,029

TOTAL – 6,764

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.


NOTES TO THE STATEMENT OF INCOME

— 07 SALE S

2013/2014 2012/2013

in EUR

thousands %in EUR

thousands %

Germany 267,141 14.3 271,520 14.4

Rest of Europe 578,930 31.0 561,512 29.8

Asia and South Pacific 476,244 25.5 480,650 25.5

North America 376,027 20.1 432,481 22.9

Central and South America 113,055 6.0 116,050 6.2

Other regions 58,882 3.1 23,073 1.2

1,870,279 100.0 1,885,286 100.0

Sales result mainly from the sale of goods. The previous year’s figures were adjusted due to reclassification of the Concentrated Solar Power business to continuing operations.

— 08 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.

— 09 RE SE ARCH AND DEVELOPMENT E XPENSE S

Research and development expenses rose by EUR 2.5 million to EUR 86.3 million in fiscal year 2013/2014 (4.6 % of sales; previ-ous year: 4.4 %)

— 06 DERECOGNITION OF FINANCIAL INSTRUMENTS

In 2007, a master agreement was entered into with a purchas-ing entity over the purchase of trade receivables that was extend-ed until 2021 in the last fiscal year. 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 million. SCHOTT can freely decide whether and in which volume to sell receivables. The volume of receivables sold amounted to EUR 16 million on September 30, 2014, and thus remained at last year’s level of EUR 16 million. SCHOTT already received payments of EUR 2.7 million in receivables as of the reporting date and pres-ents a corresponding obligation to forward the amounts. Insofar, trade receivables are reduced by the sale of receivables in the net amount of EUR 14 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 must purchase separate credit insurance.

The carrying amount of the reserve account for defaults on receivables in the amount of EUR 169 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 134 thousand were incurred during the transfer of the receivables outstanding as of the balance sheet date. SCHOTT recognized a total of EUR 679 thousand as expense, including program fees, from its continuing involvement in fiscal year 2013/2014; EUR 8,813 thousand has accumulated since fiscal year 2006/2007.

69Notes to the Consolidated Financial Statements – Principles and Methods/Notes to the Statement of Income

A net amount of EUR 1,674 thousand in price losses is reported under other operating income in fiscal year 2013/2014 and a net amount of EUR 6,092 thousand in gains on exchange in the previ-ous year.

— 12 INCOME/LOSS FROM INVE STMENTS ACCOUNTED

FOR USING THE EQUIT Y METHOD

Please refer to the comments in Note 19 “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) 2013/2014 2012/2013

SCHOTT KAISHA PRIVATE LIMITED, Mumbai/India 1,547 567

Empha SPA, Turin/Italy 1,308 1,190

SCHOTT-Italglas s.r.l., Genua/Italy 477 582

SENTECH Co. Ltd. (formerly Sensor Technology Co., Ltd.), Kanagawa/Japan 379 312

Glaverpane S.A., Jemeppe-sur-Sambre/Belgium 299 90

Moritex Precision Corporation, Asaka-Shi/Japan 0 – 205

4,010 2,536

Moritex Precision Corporation was sold last year.

— 13 NET F INANCIAL INCOME/E XPENSE

(in EUR thousands) 2013/2014 2012/2013

Interest and similar income 1,665 2,225

of which from affiliated companies 27 21

Interest and similar expenses – 38,440 – 44,325

of which to affiliated companies – 766 – 999

of which pension-related interest expense – 29,212 – 29,189

NET INTEREST EXPENSE – 36,775 – 42,100

Income from investments in associates 750 1,049

Income from securities 1,211 859

Foreign exchange losses realized from the sale of securities – 5 – 41

Other financial expenses – 2,827 – 2,890

OTHER NET FINANCIAL INCOME/EXPENSE – 871 – 1,023

TOTAL NET FINANCIAL INCOME/EXPENSE – 37,646 – 43,123

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.

— 10 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) 2013/2014 2012/2013

Income from reversal of provisions/ accrued liabilities 15,851 15,958

Income from commissions, rental and licensing 6,551 8,182

Income from government grants and refunds 4,909 3,876

Income from the reversal of allowance/ impairments on receivables and other assets 4,489 2,702

Income from on-charging 3,992 4,602

Income from disposal of property, plant and equipment 2,939 5,970

Proceeds from scrap sales 2,572 3,263

Income from compensation payments 1,800 10,855

Income from insurance payments 1,758 1,880

Income from the disposal of property, plant and equipment 1,102 4,010

Other 6,646 10,538

52,609 71,836

Income from government grants and reimbursements for ex-penses are solely related to government contributions to costs (previous year: EUR 2.1 million).

In the previous year, a net amount of EUR 6,092 thousand in price gains is shown under other operating income. In the current fiscal year, netted price losses in the amount of EUR 1,074 thou-sand are shown under other operating expenses.

— 11 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 are disclosed separately elsewhere:

(in EUR thousands) 2013/2014 2012/2013

Restructuring expenses 14,413 9,327

Expenses from the recognition of provisions/ accrued liabilities 4,645 6,110

Allowance/impairments on receivables and other assets 4,330 13,546

Expenses from profit-independent taxes 2,529 1,023

Charitable contributions 1,739 1,592

Exchange losses 1,674 0

Bank fees 1,510 1,576

Impairment losses from property, plant and equipement and intangible assets 1,162 51,057

Losses on the disposal of property, plant and equipment 208 204

Other 6,657 4,333

38,867 88,768


The change in deferred taxes in fiscal year 2013/2014 as well as in the previous year is presented below:

2013/2014 2012/2013

(in EUR thousands)

Consolidat-ed income statement

Recognized in equity

Consolidat-ed income statement

Recognized in equity

Intangible assets – 5,944 2,546

Property, plant and equipment 2,131 – 2,580

Inventories 236 365

Current and non- current other assets – 4,420 1,705 10,292

Pension plans and similar commitments 2,143 42,122 – 4,077 16,196

Current and non-cur-rent other provisions and accrued liabilities 446 – 821

Current and non- current liabilities 2,592 – 8,912 397

Tax loss carry-forwards – 4,615 – 40,254

Other 1,261 – 3,437

GROSS DEFERRED TA XES – 6,170 43,827 – 46,878 16,593

Exchange rate effects – 791 8,189

DEFERRED TA X EXPENSE – 6,961 – 38,689

of which for continu-ing operations – 3,481 – 32,367

of which for discon-tinued operations – 3,480 – 6,322

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 of the tax group of SCHOTT Corporation (U.S.A.), as well as the group companies SCHOTT Gemtron Corporation, SCHOTT Solar PV LLC, SCHOTT Ibérica, SCHOTT Flat Glass Brasil, Gemtron de México and others, a deferred tax claim on loss carry-forwards and temporary differ-ences totaling EUR 11,709 thousand will be recognized, although these companies suffered tax losses in the fiscal year just ended or in the previous year.

— 14 INCOME TA XE S

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

(in EUR thousands) 2013/2014 2012/2013

Current tax – 33,585 9,097

Deferred taxes – 3,481 – 32,367

INCOME TA X EXPENSE – 37,066 – 23,270

Deferred taxes are calculated on the basis of the tax rates that will apply at the expected realization date, based on the legal en-vironment 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, 2014 Sept. 30, 2013

(in EUR thousands) Assets Liabilities Assets Liabilities

Intangible assets 31,470 8,067 37,758 8,411

Property, plant and equipment 24,816 46,899 27,283 51,497

Inventories 12,544 2,315 12,479 2,486

Current and non- current other assets 9,396 8,428 10,547 6,864

Pension plans and similar commitments 164,393 274 119,854 0

Current and non-cur-rent other provisions and accrued liabilities 38,284 3,859 40,079 6,100

Current and non- current liabilities 82,544 275 82,351 2,674

Tax loss carry-forwards 45,826 0 50,441 0

Other 1,261 0 0 0

GROSS DEFERRED TA XES 410,534 70,117 380,792 78,032

Offset amounts* 50,462 50,462 55,828 55,828

BAL ANCE SHEET STATEMENT 360,072 19,655 324,964 22,204

* Amounts offset within individual taxable entities

71Notes to the Consolidated Financial Statements – Notes to the Statement of Income

The following table shows a reconciliation from the expected to actual reported tax expense. In order to determine the expected 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) 2013/2014 2012/2013

E ARNINGS OF CONTINUING OPER ATIONS BEFORE INCOME TA XES 97,579 30,641

Calculated tax expense at the anticipated tax rate (30.0 %) 29,274 9,192

Effect of tax rate changes 578 1,240

Non-deductible expenses 3,754 22,727

Tax-exempt components of income – 2,711 – 1,352

Tax difference due to foreign tax rates – 9,417 – 13,701

Change in valuation allowances on active deferred tax assets 16,321 43,218

Taxes relating to earlier periods – 536 – 33,044

Other – 197 – 5,010

INCOME TA X ACCORDING TO THE INCOME STATEMENT 37,066 23,270

Taxation rate according to the consolidated financial statements 38.0 % 75.9 %

EUR 6,750 thousand in effects from losses and temporary dif-ferences for which no tax claims could be recognized relate mainly to SCHOTT North America Inc., EUR 3,586 thousand to SCHOTT Ibérica S.A., EUR 3,454 thousand to SCHOTT Moritex Corporation, EUR 1,415 thousand to Gemtron Corporation, and EUR 2,000 thousand to the respective effects of group entries that pertain to indi-vidual companies that reported losses. These amounts are offset by the effects of losses recognized for the first time and temporary differences at various group companies.

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 total-ing EUR 307,485 thousand (previous year: EUR 296,931 thousand) for corporate income tax or comparable foreign taxes, and EUR 211,684 thousand (previous year: EUR 159,543 thousand) for trade tax or comparable foreign taxes, and EUR 1,382 thousand (previous year: EUR 500 thousand) for tax credits. Furthermore, no deferred taxes were recognized on future deductible differenc-es amounting to EUR 9,741 thousand (previous year: EUR 11,846 thousand). The resulting unrecognized deferred tax assets amount to EUR 100,301 thousand (previous year: EUR 89,817 thousand) on loss carry-forwards, interest rate carry-forwards and tax credits and EUR 3,180 thousand (previous year: EUR 2,386 thousand) with differences that will be deductible in the future.

EUR 3,086 thousand of the unrecognized losses carried for-ward expire after one year, EUR 39,438 thousand after two and three years, EUR 3,959 thousand after four years, and an additional EUR 27,032 thousand after five years or more. There is no time lim-it on the use of additional unrecognized loss carry-forwards.

An increase of EUR 42,084 thousand (previous year: EUR 16,593 thousand) in deferred tax assets was recognized in other compre-hensive income in the reporting period. EUR 42,123 thousand (previous year: EUR 16,593 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 foreign subsidiaries, since these earnings will be reinvested in the long term or the timing and amount of potential distributions is not yet known. Recognition as deferred taxes could result in an additional future tax liability of a maximum of EUR 10.3 million under current tax law if these earnings were later distributed as dividends or if the group were to sell its investment in the subsidiaries.


The results of the discontinued operations are as follows:

(in EUR thousands) 2013/2014 2012/2013

Sales 2,457 20,323

Cost of sales* – 3,312 – 27,914

GROSS PROFIT – 855 – 7,591

Selling and administrative expenses – 5,709 – 16,846

Research and development expenses 0 – 115

Other operating income* 34,281 76,749

Other operating expenses – 15,916 – 23,859

Income from investments accounted for using the equity method 2,024 – 322

Net financial income/expense* – 4,669 – 4,003

INCOME BEFORE TA XES 9,156 24,013

Income tax expenses – 3,480 – 6,367

INCOME AFTER TA XES 5,676 17,646

* Previous year adjusted due to IAS 19R

The Photovoltaics division’s expenses include mainly restruc-turing expenses for closing thin film production and for disposal of modules. The Photovoltaics division’s other operating income in-cludes the collection of advance payments from customers recog-nized in profit or loss in the double-digit millions due to the early termination of a long-term supply agreement.

The profit before income taxes amounts to EUR 9,156 thousand (previous year: EUR 24,013 thousand).

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

2013/2014 (in EUR thousands)

Photovoltaics Other Total

Sales 2,457 0 2,457

Cost of sales – 3,312 0 – 3,312

GROSS PROFIT – 855 0 – 855

Selling and administrative expenses – 5,631 – 78 – 5,709

Research and development expenses 0 0 0

Other operating income 32,950 1,331 34,281

Other operating expenses – 15,930 14 – 15,916

Income from investments accounted for using the equity method 2,024 0 2,024

Net financial income/expense – 4,674 5 – 4,669

INCOME BEFORE TA XES 7,884 1,272 9,156

Income tax expenses – 3,098 – 382 – 3,480

INCOME OF DISCONTINUED OPER ATIONS 4,786 890 5,676

— 15 DISCONTINUED OPER ATIONS

In fiscal year 2013/2014 as well as in the previous year, the “Photovoltaics,” division met the main requirements for discontin-ued operations. The “Photovoltaics” area was reclassified to in-come 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 “Concentrated Solar Power” division was reclassi-fied to continuing operations and the previous year was adjusted accordingly.

(in EUR thousands)

2012/2013 As previously disclosed

Reclassification of CSP

Adustments IAS 19R

2012/2013 As disclosed

SALES 1,834,672 50,614 0 1,885,286

Cost of sales – 1,245,272 – 35,267 – 830 – 1,281,369

GROSS PROFIT 589,400 15,347 – 830 603,917

Selling expenses – 213,523 – 6,360 – 185 – 220,068

Research and develop-ment expenses – 78,863 – 4,954 0 – 83,817

General administrative expenses – 204,953 – 6,916 – 3 – 211,872

Other operating income 69,083 2,306 447 71,836

Other operating expenses – 45,729 – 43,039 0 – 88,768

Income from invest-ments accounted for using the equity method 2,536 0 0 2,536

INCOME FROM OPER ATING AC TIVITIES 117,951 – 43,616 – 571 73,764

Interest income 2,209 16 0 2,225

Interest expense – 42,942 – 184 – 1,199 – 44,325

Other net financial income/expense – 1,023 0 0 – 1,023

NET FINANCIAL INCOME/EXPENSE – 41,756 – 168 – 1,199 – 43,123

INCOME FROM CONTINUING OPER ATIONS BEFORE INCOME TA XES 76,195 – 43,784 – 1,770 30,641

Income tax expenses – 27,171 3,157 744 – 23,270

INCOME/LOSS FROM CONTINUING OPER ATIONS 49,024 – 40,627 – 1,026 7,371

Income/loss of dis-continued operations (after taxes) – 22,966 40,627 – 15 17,646

CONSOLIDATED PROFIT/LOSS FOR THE PERIOD 26,058 0 – 1,041 25,017

73Notes to the Consolidated Financial Statements – Notes to the Statement of Income/Notes to the Consolidated Statement of Financial Position

NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

— 17 INTANGIBLE A SSETS

The scheduled review of the intrinsic value of goodwill was performed on June 30, 2014. 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.

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

Cashgenerating unit W*

WACC after taxes

WACC before

taxes

Sept. 30, 2014

in EUR millions

Sept. 30, 2013

in EUR millions

Lighting and Imaging 1.0 % 7.9 % 11.2 % 8.3 8.2

Flat Glass 1.0 % 6.2 % 8.8 % 18.8 18.8

Pharmaceuti-cal Packaging 1.0 % 7.0 % 9.9 % 28.4 27.9

Tubing 1.0 % 6.6 % 9.4 % 2.2 2.2

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

There were no impairment losses attributable to goodwill (previous year: EUR 46,888 thousand). Of the impairment losses attributable to intangible assets, EUR 37,210 thousand pertained to discontinued operations in the previous year.

The cash-generating units Flat Glass’s and Lighting and Imag-ing’s recoverable amount exceeds their carrying amounts. A neg-ative change in a major assumption could, under certain circum-stances, lead to an impairment loss. The weighted average cost of capital in particular is a key factor in determining the recoverable amount. With otherwise identical budget assumptions, an in-crease in the WACC (after taxes) of more than 1.7 percentage points (Flat Glass) and 3.3 % (Lighting and Imaging) would lead to an impairment loss.

The goodwill of the former “Pharmaceutical Systems” division was divided up between the two business fields “Pharmaceutical Packaging” and “Tubing” and subjected to impairment tests at this level. The management firmly believes that no change consid-ered reasonably possible to one of the basic assumptions used in determining the utility value of the cash-generating units “Phar-maceutical Packaging” and “Tubing” could result in the carrying amount of the cash-generating units significantly exceeding their recoverable amount.

Impairment losses consisted of EUR 34 thousand (previous year: EUR 1,080) for other intangible assets and EUR 479 thousand (previous year: EUR 272 thousand) for development expenses. These are for the most part included in the research and develop-ment expenses in the amount of EUR 479 thousand (previous year: EUR 272 thousand) and production costs in the amount of EUR 33 thousand (previous year: EUR 984 thousand).


Photovoltaics Other Total

Sales 20,323 0 20,323

Cost of sales* – 26,811 – 1,103 – 27,914

GROSS PROFIT – 6,488 – 1,103 – 7,591

Selling and administrative expenses – 16,580 – 266 – 16,846

Research and development expenses – 115 0 – 115

Other operating income* 76,264 485 76,749

Other operating expenses – 23,832 – 27 – 23,859

Income from investments accounted for using the equity method – 322 0 – 322

Net financial income/expense – 4,021 18 – 4,003

INCOME/LOSS BEFORE TA XES 24,906 – 893 24,013

Income tax expenses – 6,635 268 – 6,367

INCOME/LOSS OF DISCONTINUED OPER ATIONS 18,271 – 625 17,646

* adapted due to IAS 19R

The discontinued operations’ cash flows are presented below:

(in EUR thousands) 2013/2014 2012/2013*

Operating activities – 17,007 326

Investing activities 13,606 16,100

Financing activities – 407 – 751

* The previous year's figures were adapted primarily based on IFRS 5.

— 16 INCOME/LOSS AT TRIBUTABLE TO NON CON

TROLLING INTERE STS

Income attributable to non-controlling interest amounts to EUR 8,277 thousand (previous year: EUR 9,626 thousand). This was offset by losses totaling EUR 5,320 thousand (previous year: EUR 15,136 thousand).


(in EUR thousands)Development

costs

Patents, licenses and similar

rights Goodwill Total

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2012 53,265 133,963 171,938 359,166

Change in the consolidated group 0 – 10 0 – 10

Additions 1,165 2,573 0 3,738

Disposals 27,468 8,843 0 36,311

Reclassifications 0 910 3,455 4,365

Reposting* – 4,185 – 605 – 36,842 – 41,632

Currency translation – 10 – 9,895 – 5,695 – 15,600

BAL ANCE AS OF SEPT. 30, 2013 22,767 118,093 132,856 273,716

ACCUMUL ATED AMORTIZ ATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2012 51,849 97,627 52,672 202,148

Change in the consolidated group 0 – 10 0 – 10

Current amortization 636 11,960 46,888 59,484

Revaluations 0 0 0 0

Disposals 27,468 8,839 0 36,307

Reclassifications 0 – 156 3,455 3,299

Reposting* – 2,242 – 498 – 36,842 – 39,582

Currency translation – 8 – 8,141 – 193 – 8,342


CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2013 0 26,150 66,876 93,026

HISTORICAL COSTS

BAL ANCE AS OF OC T. 1, 2013 22,767 118,093 132,856 273,716

Additions 294 3,843 0 4,137

Disposals 22,767 5,739 0 28,506

Reclassifications 0 3,811 0 3,811

Reposting* 4,185 605 36,842 41,632

Currency translation – 4 285 1,039 1,320


ACCUMUL ATED AMORTIZ ATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2013 22,767 91,943 65,980 180,690

Current amortization 757 7,199 0 7,956

Revaluations 0 0 0 0

Disposals 22,766 5,738 0 28,504

Reclassifications 0 33 0 33

Reposting* 2,242 498 36,842 39,582

Currency translation 0 – 323 306 – 17


CARRYING AMOUNT


* Reposting to assets held for sale pursuant to IFRS 5

75Notes to the Consolidated Financial Statements – Notes to the Consolidated Statement of Financial Position

— 18 PROPERT Y, PL ANT AND EQUIPMENT

Impairment losses on property, plant and equipment were recognized in the amount of EUR 6,976 thousand (previous year: EUR 15,149 thousand) in the fiscal year. These impairment losses can mainly be attributed to restructuring a site. The impairment losses attributable to technical equipment, plant and machinery amounted to EUR 3,977 thousand (previous year: EUR 3,854 thou-sand), EUR 1,384 thousand (previous year: 5,297 thousand) to land, land rights and buildings, EUR 1,614 thousand (previous year: EUR 343 thousand) to other equipment, factory and office equipment, and EUR 1 thousand (previous year: EUR 5,655 thou-sand) to assets under construction.

Impairment of EUR 1,160 thousand (previous year: EUR 4,884 thousand) was recognized under other operating expenses, EUR 198 thousand (previous year: EUR 1,315 thousand) of which under restructuring expenses. Impairments of EUR 5,815 thou-sand (previous year: EUR 7,216 thousand) were recognized in the functional areas, EUR 4,907 thousand (previous year: EUR 7,172 thousand) of which mainly in the cost of sales.

The changes in inventories of precious metals compared to the balance sheet date of the previous year are presented in net amounts in the statement of changes in non-current assets under technical equipment and machinery.

Government grants totaling EUR 3,505 thousand (previous year: EUR 2,611 thousand) for assets have been deducted from their purchase costs, reducing their respective carrying amounts reported in the statement of financial position in the fiscal year. These government grants can be mainly attributed to the subsidiary SCHOTT forma vitrum Kft., Hungary, which received govern-ment grants for manufacturing-related investment projects. Order commitments for non-current assets amount to EUR 27,783 thou-sand (previous year: EUR 26,632 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.” Simi-larly, 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.


(in EUR thousands)Land, land rights

and buildings

Technical equip-ment, plant and

machinery

Other equip-ment, operating

and office equip-ment

Assets under construction Total

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2012 720,632 1,784,088 323,799 53,164 2,881,683

Change in the consolidated group – 102 – 3,638 – 234 – 15 – 3,989

Additions 6,159 37,470 11,869 66,327 121,825

Disposals 14,806 243,878 33,740 173 292,597

Reclassifications 4,976 35,647 5,858 – 46,506 – 25

Reposting* – 31,717 – 29,492 – 7,568 – 1,262 – 70,039

Currency translation – 18,831 – 41,561 – 12,193 – 1,936 – 74,521

BAL ANCE AS OF SEPT. 30, 2013 666,311 1,538,636 287,791 69,599 2,562,337

ACCUMUL ATED DEPRECIATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2012 437,484 1,364,072 257,212 2,263 2,061,031

Change in the consolidated group – 95 – 3,528 – 227 0 – 3,850

Current depreciation 24,483 82,023 20,031 5,655 132,192

Revaluations 4,432 179 1 0 4,612

Disposals 12,844 240,404 33,051 20 286,319

Reclassifications 853 1,759 50 – 1,621 1,041

Reposting* – 22,443 – 26,583 – 6,672 0 – 55,698

Currency translation – 9,787 – 29,374 – 9,701 – 51 – 48,913


CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2013 253,092 390,850 60,150 63,373 767,465

HISTORICAL COST

BAL ANCE AS OF OC T. 1, 2013 666,311 1,538,636 287,791 69,599 2,562,337

Additions 5,814 42,318 12,919 77,618 138,669

Disposals 23,435 125,212 22,512 91 171,250

Reclassifications 5,943 43,521 5,714 – 58,989 – 3,811

Reposting* 2,615 29,492 7,568 1,262 40,937

Currency translation – 208 10,939 2,446 511 13,688


ACCUMUL ATED DEPRECIATION AND IMPAIRMENT

BAL ANCE AS OF OC T. 1, 2013 413,219 1,147,786 227,641 6,226 1,794,872

Current depreciation 19,078 76,096 19,966 1 115,141

Revaluations 564 1,181 93 0 1,838

Disposals 18,524 121,438 21,570 56 161,588

Reclassifications 185 5,424 – 47 – 5,596 – 34

Reposting* 1,359 26,583 6,672 0 34,614

Currency translation – 166 9,382 1,794 – 66 10,944

BAL ANCE AS OF SEPT. 30, 2014 414,587 1,142,652 234,363 509 1,792,111

CARRYING AMOUNT

BAL ANCE AS OF SEPT. 30, 2014 242,453 397,042 59,563 89,401 788,459

* Reposting to assets held for sale pursuant to IFRS 5



Assets as of

Sept. 30

Liabilities as of

Sept. 30

Equity as of

Sept. 30 SalesNet profit

or loss

Glaverpane S.A.* 24,970 14,342 10,628 59,575 256

SCHOTT-Italglas s.r.l. 4,192 2,406 1,786 8,117 1,164

Empha SPA* 9,664 3,979 5,685 0 1,038

Mainz Solar GmbH 41,303 39,140 2,163 2,639 – 693

SENTECH Co. Ltd.** 14,962 4,223 10,739 17,984 1,681

SCHOTT KAISHA PRIVATE LIMITED 42,886 25,281 17,605 35,915 1,133

137,977 89,371 48,606 124,230 4,580

* Balance sheet date: December 31,2012 / Fiscal year from January 1, 2012, to December 31, 2012

** Balance sheet date: June 30, 2013 / Fiscal year from July 1, 2012, to June 30, 2013

The change in equity recognized directly in equity as a result of exchange rate differences at SCHOTT Kaisha Private Limited amounts to EUR 863 thousand (previous year: EUR – 2,140 thou-sand), while the change in equity recognized directly in equity based on changes in goodwill amounts to EUR 368 thousand (pre-vious year: EUR – 1,021 thousand).

— 20 OTHER FINANCIAL A SSETS, NON - CURRENT


2014Sept. 30,

2013

Shares in affiliates 3,115 4,077

Loans/loans to third parties and employees 1,046 1,068

Loans to non-consolidated affiliated companies 0 1,000

Securities 525 504

Shareholdings in associates 144 274

Other miscellaneous financial receivables 1,654 1,409

6,484 8,332

Non-current other financial assets are divided into two mea-surement categories, EUR 3,784 thousand (previous year: EUR 4,855 thousand) in “available for sale” and EUR 2,700 thousand (previous year: EUR 3,477 thousand) in “loans and receivables” (see also the comments under Note 5 “Financial Assets and Finan-cial 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.

— 19 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, 2014

Sept. 30, 2013

Empha SPATurin, Italy Holding 50 % 50 %

Glaverpane S.A.

Jemeppe-sur-Sam-bre, Bel-gium Flat Glass 35 % 35 %

Mainz Solar GmbH*Mainz, Germany Solar 0 % 49 %

SCHOTT KAISHA PRIVATE LIMITED

Mumbai, India

Pharma-ceutical Packaging 50 % 50 %

SCHOTT-Italglas S.r.l.Genua, Italy

Distribu-tion 50 % 50 %

SENTECH Co. Ltd. (previously Sensor Technology Co. Ltd.)

Kanagawa, Japan

Lighting and Imaging 21 % 21 %

* sold on March 14, 2014

The following overview summarizes the financial information on investments accounted for using the equity method as of Sep-tember 30 (basis of calculation: 100 %):


Assets as of

Sept. 30

Liabilities as of

Sept. 30

Equity as of

Sept. 30 SalesNet profit

or loss

Glaverpane S.A.* 23,521 12,041 11,480 54,534 853

SCHOTT-Italglas s.r.l. 3,960 2,398 1,562 7,494 955

Empha SPA* 15,781 2,656 13,125 0 2,239

SENTECH Co. Ltd.** 17,311 5,290 12,021 18,536 1,808

SCHOTT KAISHA PRIVATE LIMITED 52,309 29,880 22,429 36,480 3,093

112,882 52,265 60,617 117,044 8,948

* Balance sheet date: December 31, 2013 / Fiscal year from January 1, 2013, to December 31, 2013

** Balance sheet date: June 30, 2014 / Fiscal year from July 1, 2013, to June 30, 2014


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


2014Sept. 30,

2013

BAL ANCE AS OF OC TOBER 1 21,493 20,793

Currency changes 166 – 1,245

Additions 6,289 13,638

Utilization – 1,805 – 9,622

Reversals – 5,245 – 2,071

BAL ANCE AS OF SEPTEMBER 30 20,898 21,493

The additions totaling EUR 6,289 thousand (previous year: EUR 13,638 thousand) comprise additions based on individual valuation allowances totaling EUR 5,614 thousand (previous year: EUR 10,577 thousand) and general valuation allowances totaling EUR 675 thousand (previous year: EUR 3,081 thousand). The rever-sals include the reversal of individual valuation allowances in the amount of EUR 2,506 thousand (previous year: EUR 1,162 thou-sand) and the reversal of general valuation allowances in the amount of EUR 2,739 thousand (previous year: EUR 909 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. Trade credit insurance was taken out for a portion of the trade receivables.

— 24 OTHER FINANCIAL A SSETS, CURRENT


2014Sept. 30,

2013

Positive market values from derivatives 5,384 6,717

Other miscellaneous financial receivables 4,989 4,591

Receivables from affiliates 2,895 2,196

Loan receivables 1,325 1,311

Creditors with debt balances 1,200 2,362

Factoring receivables 344 484

Other receivables from associates 31 0

Time deposit investments (term > 3 months, < 1 year)/Securities 0 15,003

Valuation allowance – 3,641 – 3,820

12,527 28,844

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


2014Sept. 30,

2013

Prepaid expenses 417 710

Receivables from tax authorities 352 351

Prepayments on inventories 0 0

Other non-financial receivables 892 769

1,661 1,830

— 22 INVENTORIE S


2014Sept. 30,

2013

Raw materials and supplies 147,564 148,311

Work in progress 149,344 149,151

Finished goods and merchandise 200,480 197,223

Value adjustments – 101,574 – 109,948

395,814 384,737

Write-downs to the net realizable value amounting to EUR 10,627 thousand (previous year: EUR 18,913 thousand) as well as reversals due to changes in the estimated future sales vol-ume amounting to EUR 8,205 thousand (previous year: EUR 3,838 thousand) were recognized on inventories in the reporting peri-od. Furthermore, value adjustments in the amount of EUR 10,796 thousand (previous year: EUR 25,422 thousand) were made large-ly due to the reduction in inventories in the area of photovoltaics. The carrying amount of inventories that were recognized at fair value less selling costs amounts to EUR 103,279 thousand (previ-ous year: EUR 93,527 thousand).

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

— 23 TR ADE RECEIVABLE S


2014Sept. 30,

2013

Trade receivables from third parties 302,265 291,302

Trade receivables from associates 5,707 7,229

Trade receivables from affiliates 1,946 1,001

Notes receivable from third parties 5,898 5,798

315,816 305,330

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 effective interest rates for bank deposits and time deposit investments with a term to maturity of up to 90 days lie between 0.08 % and 0.35 % (previous year: 0.15 % and 0.25 %) in the euro region. The fair value of liquid assets corresponds to the carrying amount. As of the balance sheet date, deposits with banks in-cluded restricted cash funds in the amount of EUR 2,715 thousand (previous year: EUR 6,054 thousand).

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

As of September 30, 2014, the following assets and liabilities are held as available-for-sale:


2014Sept. 30,

2013

Inventories 0 12,689

Trade receivables 0 10,041

Tax assets 0 1,720

Other financial assets 0 11

Other non-financial assets 0 76

Cash and cash equivalents 0 8

CURRENT ASSETS 0 24,545

Intangible assets 0 2,050

Property, plant and equipment 9,459 14,341

Other financial assets 0 243

NON- CURRENT ASSETS 9,459 16,634

Other provisions 0 435

Accrued liabilities 0 1,316

Trade payables 0 2,728

Tax liabilities 0 266

Other financial liabilities 0 281

Other non-financial liabilities 0 264

CURRENT LIABILITIES 0 5,290

Pension provisions and similar commitments 0 4,036

Other provisions 0 18,283

NON- CURRENT LIABILITIES 0 22,319

The previous year’s figures related to assets and liabilities on the part of SCHOTT Solar CSP GmbH and SCHOTT Solar S.L. in the amount of EUR 5,551 thousand as well as properties owned by SCHOTT Solar CSP LLC, U.S.A.. The assets and debts of SCHOTT Solar CSP GmbH and SCHOTT Solar S.L. are being reported under continuing operations again as of the balance sheet date Septem-ber 30, 2014. For further information, we refer you to section 3.4.

The assets reported here on September 30, 2014, relate to real estate in the U.S.A. for which a sales contract was signed in the last fiscal year.

Changes in the valuation allowance account are presented as follows:


2014Sept. 30,

2013

BAL ANCE AS OF OC TOBER 1 3,820 3,630

Additions 9 229

Utilization – 42 0

Reversals – 146 – 39

BAL ANCE AS OF SEPTEMBER 30 3,641 3,820

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.

— 25 OTHER NON - FINANCIAL A SSETS, CURRENT


2014Sept. 30,

2013

Receivables from other taxes 11,865 4,335

Prepaid expenses 8,876 7,759

Asset values from reinsurance policies 3,106 2,631

Advance payments made on inventories 591 229

Grant entitlements 522 49

Other non-financial receivables 8,020 7,109

32,980 22,112

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.

— 26 C A SH AND C A SH EQUIVALENTS


2014Sept. 30,

2013

Checks, cash-on-hand 405 553

Deposits with banks (terms up to 90 days) 63,460 61,167

Fixed term deposits (terms up to 90 days) 23,078 92,196

86,943 153,916


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

shares of SCHOTT Flat Glass Holding B.V., Tiel/Netherlands, of NEC SCHOTT Components Corporation, Shiga/Japan, of SCHOTT Gemtron Corporation, Sweetwater, Tennessee/U.S.A., of SCHOTT Moritex Corporation, Asaka-shi/Japan, and of SCHOTT Xinkang Pharmaceutical Packaging Co., Ltd., Huzhen Town/China.

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

income by optimizing the relationship of equity and outside capi-tal. 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 con-sists of issued shares, share premiums, 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. Operational free cash flow identifies the capital surplus remaining after deducting in-vestments in non-current assets. Surplus funds could be used, for example, to repay financial liabilities or finance investments with-out drawing on external sources. In this way, measures needed to influence the capital structure can be identified early.

— 28 EQUIT Y

The subscribed capital of SCHOTT AG amounts to EUR 150,000 thousand and the additional paid-in capital amounts to EUR 322,214 thousand. 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 divi-dends.

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

(in EUR thousands)

Profit/Loss from reval-

uation of defined benefit

pension plans

Currency translation

Valuation of securi-

ties at fair market

valueCash flow

hedges

Total in-come and expenses

recog-nized

directly in equity

BAL ANCE ON OC T. 1, 2012 – 54,590 53,191 265 0 – 1,134

Changes with no effect on income – 56,204* – 54,474* – 3 – 139 – 110,820

Reclassification adjustments 0 – 351 0 0 – 351

Deferred taxes 16,593* 0 38 0 16,631

BAL ANCE ON SEPT. 30, 2013 – 94,201 – 1,634 300 – 139 – 95,674

BAL ANCE ON OC T. 1, 2013 – 94,201 – 1,634 300 – 139 – 95,674

Changes with no effect on income – 143,095 9,960 94 0 – 133,041

Reclassification adjustments 0 – 383 0 139 – 244

Deferred taxes 42,123 0 – 39 0 42,084

BAL ANCE ON SEPT. 30, 2014 – 195,173 7,943 355 0 – 186,875

* Adjusted due to changes in valuation pursuant to IAS 19R

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 March 17, 2014, the balance sheet result for the 2012/2013 fiscal year of SCHOTT AG will be carried forward to new account. No dividends are expected to be distributed for the 2013/2014 fiscal year.


In Germany, a distinction is made between three major pen-sion 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 one percent 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.

The currently applicable pension scheme 2000 is a defined contribution plan with a dynamic benefit contribution in which the defined benefit commitment is calculated according to the earned pension method. This is a building block scheme within the scope of which a benefit contribution is determined each year which is then converted into a pension building block using actu-arial 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. There are comprehensive transitional arrangements for employees who were already working for SCHOTT when the new scheme was introduced on January 1, 2000.

Outside of Germany (in particular in the U.S.A.), the commit-ted benefits depend mainly on the length of service and the most recent salary. Decisions regarding the allocation of plan assets generally reflect the development of plan assets and pension commitments. 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.

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.

In addition, the Board of Management reviews the capital structure continuously. This review includes an assessment of the equity ratio and debt-equity ratio. The equity ratio corresponds to the ratio of equity to total assets in the statement of financial posi-tion. As of September 30, 2014, it amounts to 18.4 % (previous year: 19.4 %).

Net financial assets, which represent an important internal key figure for the financial management of SCHOTT, comprise the fol-lowing:


2014Sept. 30,

2013

Cash and cash equivalents 86,943 153,916

Liabilities from cash clearing – 57,534 – 56,927

Finance leases – 45,535 – 47,719

Liabilities to banks – 42,359 – 156,576

Other financial liabilities – 15,241 – 15,230

Time deposit investments (terms > 3 months, < 1 year)/Securities 0 15,003

NET FINANCE ASSETS – 73,726 – 107,533

The overall strategy remained unchanged compared to fiscal year 2012/2013.

— 29 PENSION PL ANS AND SIMIL AR COMMITMENTS

EUR 9,344 thousand (previous year: EUR 10,531 thousand) was recognized as an expense for foreign defined contribution plans and EUR 23,747 thousand (previous year: EUR 25,117 thousand) for German defined contribution plans, including EUR 28,947 thousand (previous year: EUR 30,117 thousand) contributed to social security. Pension plans also include employee-financed pen-sion commitments (deferred compensation) to employees in Ger-many totaling EUR 4,308 thousand (previous year: EUR 2,985 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 U.S. companies. In accordance with IAS 19, these commit-ments are classified as defined benefit plans.


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):

2013/2014 2012/2013

(%) Total Domestic Foreign Total Domestic Foreign

Discount rate 2.76 2.70 3.08 3.61 3.60 3.64

Future salary increases 2.90 3.00 1.77 2.90 3.00 1.78

Future pension increases 1.63 1.75 0.00 1.64 1.75 0.08

Expected rate of inflation 1.76 1.75 1.84 1.76 1.75 2.00

The following actuarial parameters apply for the units based outside of Germany for each country or region:

Sept. 30, 2014 Sept. 30, 2013

(%)Discount

rate

Future salary

increases

Expected rate of

inflationDiscount

rate

Future salary

increases

Expected rate of

inflation

USA 3.90 – 4.15 5.00 2.50 4.40 – 4.65 5.00 2.50

Switzerland 1.60 1.00 0.80 2.30 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, 2014 Sept. 30, 2013*

(in EUR thousands) Total Domestic Foreign Total Domestic Foreign

Present value of obligation not financed by a fund 84,936 64,477 20,459 72,599 54,081 18,518

Present value of obligation wholly or partly financed by a fund 1,201,995 1,018,692 183,303 1,042,805 890,407 152,398

TOTAL PRESENT VALUE OF BENEFIT OBLIGATION 1,286,931 1,083,169 203,762 1,115,404 944,488 170,916

BENEFIT OBLIGATION RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 1,286,931 1,083,169 203,762 1,115,404 944,488 170,916

Reclassification of the liabilities held for sale in accordance with IFRS 5 0 0 0 4,169 3,966 203

BENEFIT OBLIGATION RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION FOLLOWING RECL ASSIFICATION 1,286,931 1,083,169 203,762 1,111,235 940,522 170,713

Plan assets at fair value 323,643 173,310 150,333 280,482 148,422 132,060

PL AN ASSETS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION 323,643 173,310 150,333 280,482 148,422 132,060

Reclassification of the assets held for sale in accordance with IFRS 5 0 0 0 133 133 0

PL ANT ASSETS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION FOLLOWING RECL ASSIFICATION BASED ON IFRS 5 323,643 173,310 150,333 280,349 148,289 132,060

FUNDED STATUS 963,288 909,859 53,429 834,922 796,066 38,856

FUNDED STATUS FOLLOWING RECL ASSIFICATION IN ACCORDANCE WITH IFRS 5 963,288 909,859 53,429 830,886 792,233 38,653

PENSION PROVISIONS 963,288 909,859 53,429 834,922 796,066 38,856

PENSION PROVISIONS FOLLOWING RECL ASSIFICATION IN ACCORDANCE WITH IFRS 5 963,288 909,859 53,429 830,886 792,233 38,653

* changed due to IAS 19R


Net pension expense can be broken down as follows:

2013/2014 2012/2013*


Service costs 21,628 16,953 4,675 17,196 12,630 4,566

Net interest costs 29,244 27,940 1,304 29,242 28,003 1,239

Past service costs – 2,065 0 – 2,065 410 1 409

Effect from plan settlements – 161 0 – 161 – 93 0 – 93

Administrative expenses 12 0 12 46 0 46

TOTAL EXPENSES RECOGNIZED IN THE INCOME STATEMENT 48,658 44,893 3,765 46,801 40,634 6,167

* adjusted due to IAS 19R

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 benefit obligations:

2013/2014 2012/2013*


DEFINED BENEFIT OBLIGATION AT THE BEGINNING OF THE FISCAL YE AR 1,115,404 944,488 170,916 1,073,277 883,238 190,039

Changes in exchange rates 7,838 0 7,838 – 7,607 0 – 7,607

Service cost 21,628 16,953 4,675 17,196 12,630 4,566

Past service cost – 2,065 0 – 2,065 410 1 409

Interest expense 39,733 33,266 6,467 39,248 33,684 5,564

Actuarial gains (–) or losses (+) from changes in financial assumptions 157,416 141,537 15,879 40,657 53,834 – 13,177

Actuarial gains (–) or losses (+) from changes in demographic assumptions 5,873 0 5,873 414 0 414

Actuarial gains (–) or losses (+) from experience-related adjustments – 9,267 – 10,212 945 2,236 3,128 – 892

Pension payments 51,081 42,746 8,335 52,352 42,199 10,153

Effect from plan settlements – 161 0 – 161 – 93 0 – 93

Other changes 1,613 – 117 1,730 2,018 172 1,846

DEFINED BENEFIT OBLIGATION AT THE END OF THE FISCAL YE AR 1,286,931 1,083,169 203,762 1,115,404 944,488 170,916

Reclassification to liabilities held for sale pursuant to IFRS 5 0 0 0 4,169 3,966 203

DEFINED BENEFIT OBLIGATION AT THE END OF THE FISCAL YE AR AFTER IFRS 5 RECL ASSIFICATION 1,286,931 1,083,169 203,762 1,111,235 940,522 170,713

of which committed without plan assets 84,936 64,477 20,459 68,626 50,311 18,315

of which partially covered by plan assets 1,201,995 1,018,692 183,303 1,042,609 890,211 152,398



Plan assets developed as follows in the fiscal year:

2013/2014 2012/2013*


PL AN ASSETS AT THE BEGINNING OF THE FISCAL YE AR 280,482 148,422 132,060 292,363 145,936 146,427

Interest income from plan assets 10,489 5,326 5,163 10,006 5,681 4,325

Foreign currency exchange rate changes 6,455 0 6,455 – 4,557 0 – 4,557

Actuarial gains (+) or losses (–) 10,927 1,782 9,145 – 12,897 – 4,761 – 8,136

Employer contribution 20,030 17,650 2,380 3,372 1,800 1,572

Benefits paid – 6,284 – 186 – 6,098 – 8,955 – 418 – 8,537

Other changes 1,544 316 1,228 1,150 184 966

PL AN ASSETS AT THE END OF THE FISCAL YE AR 323,643 173,310 150,333 280,482 148,422 132,060

Reclassification to assets held for sale in accordance with IFRS 5 0 0 0 133 133 0

PL AN ASSETS AT THE END OF THE FISCAL YE AR FOLLOWING RECL ASSIFICATION IN ACCORDANCE WITH IFRS 5 323,643 173,310 150,333 280,349 148,289 132,060

Actual return on plan assets 21,416 7,108 14,308 – 2,936 920 – 3,856


Plan assets in Germany were managed mainly in the form of “Contractual Trust Arrangements” (CTAs).

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. The plan assets abroad mainly consist of two pen-sion funds in the U.S.A. whose funding ratio amounts to nearly 100 %. The pension fund is also managed by external asset man-agers based on prescribed investment guidelines, whereby con-trol takes place on the basis of an asset/liability matching ap-proach. Still other plan assets are managed by a dependent collective foundation based in Switzerland.

Portfolio structure of plan assets:

Sept. 30, 2014 Sept. 30, 2013

(%) Total Domestic Foreign Total Domestic Foreign

Securities quoted on active markets 16 21 10 15 20 10

Fixed-interest securities quoted on active markets 69 63 76 66 63 70

Qualified insurances 6 7 6 7 8 7

Cash and cash equivalents 7 9 4 6 9 2

Other 2 0 4 6 0 11

100 100 100 100 100 100


— 30 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.

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 65 thousand (previous year: EUR 66 thousand).

The remaining term to maturity for the options outstanding as of September 30, 2014, is 2.75 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.

The adoption of IFRS 13 had no significant effect on the fair values of the assets.

Allocation to plan assets:

Sept. 30, 2014 Sept. 30, 2013


TOTAL ALLOCATION 20,030 17,650 2,380 3,372 1,800 1,572

EUR 1,316 thousand in contributions to plan assets are ex-pected for the following fiscal year.

A change in the principle actuarial assumptions would have the following effects on pension obligations for Germany, the U.S.A. and Switzerland, whereby the vast share pertains to Ger-many:

Sept. 30, 2014

Increase byin EUR

thousands Decline byin EUR

thousands

Discount rate+ 50 basis

points – 95,855– 50 basis

points 109,532

Future change in salaries

+ 50 basis points 16,044

– 50 basis points – 14,544

Future change in pensions

+ 50 basis points 63,527

– 50 basis points – 54,223

Life expectancy + 1 year 49,347 – 1 year – 50,376

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) 2015 2016 2017 2018 2019

2020 – 2024

Domestic 44,662 45,314 44,676 45,168 45,366 229,620

Foreign 6,129 6,704 7,161 7,780 8,394 47,884

TOTAL 50,791 52,018 51,837 52,948 53,760 277,504

The average term of the defined benefit obligation was 16 years (previous year: 15 years) at the end of the reporting period.


trust account in the amount of EUR 5,540 thousand (previous year: EUR 6,720 thousand), whereby the partial retirement 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.

— 32 ACCRUED L IABIL IT IE S


2014Sept. 30,

2013

Christmas bonuses 43,277 33,966

Other personnel commitments 61,976 65,559

Outstanding invoices 14,185 17,103

Commission/bonuses 11,727 13,310

Other accrued liabilities 264 199

131,429 130,137

— 31 OTHER PROVISIONS

Sept. 30, 2014 Sept. 30, 2013

(in EUR thousands) Up to 1 year Over 1 year Up to 1 year Over 1 year

Taxes 13,047 32,721 10,709 28,718

Sales and purchase risks 10,176 41,337 15,226 23,786

Personnel costs 1,723 16,608 2,099 16,034

Other 77,377 58,272 81,286 51,222

102,323 148,938 109,320 119,760

Because IAS 19R has been applied, non-current provisions for personnel amounted to EUR 19,091 thousand on October 1, 2012.

Other provisions include, among other items, provisions for potential losses resulting from long-term contracts in the amount of EUR 41.9 million (previous year: EUR 47.2 million), provisions for legal costs in the amount of EUR 37.8 million (previous year: EUR 40.4 million) and provisions for restructuring measures and discontinuation of an operation in the amount of EUR 14.5 million (previous year: EUR 12.0 million). The remaining provisions per-tain mainly to various precautionary measures.

Sales provisions include warranty provisions, obligations for contractual risks, as well as losses from supply obligations.

(in EUR thousands)

Balance on Oct. 1,

2013 Utilization Reversal AdditionReclassifi-

cation*Currency changes

Balance on Sept. 30,

2014

Taxes 39,427 8,011 795 14,979 0 168 45,768

Personnel costs 39,012 5,707 7,625 7,466 18,015 352 51,513

Sales and purchase risks 18,133 6,363 463 6,715 342 – 33 18,331

Other 132,508 22,912 14,406 39,934 362 163 135,649

229,080 42,993 23,289 69,094 18,719 650 251,261

* Reclassifications to assets and liabilities held for sale pursuant to IFRS5

Non-current provisions were compounded by interest of EUR 2,458 thousand in fiscal year 2013/2014. This amount is taken into consideration in the allocations column.

Provisions for taxes include amounts for taxes which have not yet been finally assessed.

The anniversary obligations shown under other provisions in the amount of EUR 12.8 million (previous year: EUR 11.8 million) were measured at an actuarial interest rate of 2.7 % (previous year: 3.7 %) for obligations in Germany totaling EUR 11.8 million (previ-ous year: EUR 10.8 million). Obligations stemming from partial retirement in the amount of EUR 8.8 million (previous year: EUR 10.9 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 1.3 % (previous year: 2.3 %) 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 notarial


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 2013/2014 fiscal year.

The majority of liabilities under finance leases relate to real estate located mainly in Germany.

The liabilities to affiliates in the amount of EUR 58,477 thou-sand (previous year: EUR 57,785 thousand) as well as to share-holdings in the amount of EUR 1,929 thousand (previous year: EUR 2,337 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 51,800 thousand (previous year: EUR 51,800 thousand).

— 35 OTHER NON - FINANCIAL L IABIL IT IE S, NON - CURRENT

AND CURRENT

Sept. 30, 2014 Sept. 30, 2013


Advances received on orders 22,802 72 40,395 75

Income tax withheld from salaries and wages 8,423 0 7,228 0

Social security liabilities 5,334 0 4,912 0

Accrued liabilities 1,120 6,959 954 8,039

Other miscellaneous non-financial liabilities 11,004 472 11,641 591

48,683 7,503 65,130 8,705

— 33 TR ADE PAYABLE S


2014Sept. 30,

2013

Trade payables to third parties 156,046 146,306

Trade payables to affiliates 129 1,113

Trade payables to associates 3,550 5,282

159,725 152,701

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.

— 34 OTHER FINANCIAL L IABIL IT IE S, NON - CURRENT AND

CURRENT

Sept. 30, 2014 Sept. 30, 2013


Other liabilities to affiliates 58,477 0 57,785 0

Negative market prices from derivatives 12,180 0 3,846 0

Liabilities to banks 8,484 33,875 108,592 47,984

Factoring liabilities 2,715 0 6,054 0

Finance lease liabilities 2,259 43,276 2,184 45,535

Debtors with credit balances 2,134 0 4,353 0

Liabilities to non-banks 2,069 8,577 1,896 8,954

Liabilities to associates 1,929 0 2,337 0

Interest on the pur-chase of precious metals 667 0 1,006 0


91,556 90,855 189,447 107,085


The finance leases recognized under property, plant and equipment relate almost entirely to German property leases.

EUR 26,930 thousand (previous year: EUR 26,036 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 1,255 thousand (previous year: EUR 717 thousand) with a due date within one year and EUR 2,947 thousand (previous year: EUR 1,189 thousand) due between one and five years.

SCHOTT as lessorIn 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 2,132 thousand with a due date of less than one year are expected from lease agreements that cannot be terminated of EUR 3,239 thousand due between one and five years and with a nominal volume of EUR 2,015 thousand due in over five years.

The investment properties have a carrying amount of EUR 5.1 million (previous year: EUR 5.1 million) and a fair value of EUR 5.7 million (previous year: EUR 5.7 million) 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, 2014.

Valuation method

Significant non-observable input parameters

Commercial real estate

Discounted cash flow method

Estimated rent per m² and month EUR 5.00 – EUR 11.50

Increase in rent per year 1.50 %

Inflation rate 1.50 %

Discount rate 7.50 %

— 37 CONTINGENT L IABIL IT IE S AND A SSETS

As of the balance sheet date, there are unrecognized contingent liabilities from tax risks involving foreign group companies in the amount of EUR 3.7 million. The probability of this becoming a pay-ment obligation is considered to be low.

Provisions have been formed in sufficient amount by the group companies to account for possible financial burdens arising from further legal disputes.

As of the balance sheet date, there are no contingent claims as in the previous year.

FURTHER INFORMATION

— 36 LE A SE S

SCHOTT as lesseeThe following net carrying amounts were recognized for fi-

nance leases under property, plant and equipment:


2014Sept. 30,

2013

Land and buildings 44,510 45,907

Technical equipment, plant and machinery 2,073 1,928

46,583 47,835

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, 2014

Minimum lease pay-ments 3,705 13,896 43,776 61,377

less interest portion 1,445 4,961 9,436 15,842

PRESENT VALUE OF LE ASING LIABILIT Y 2,260 8,935 34,340 45,535

SEPT. 30, 2013

Minimum lease pay-ments 3,709 14,479 46,899 65,087

less interest portion 1,525 5,276 10,567 17,368

Present value of leas-ing liability 2,184 9,203 36,332 47,719

Operating leasing (in EUR thousands)

Up to 1 year

1 to 5 years

More than 5 years Total

SEPT. 30, 2014

Leasing commitment 20,045 49,057 55,180 124,282

SEPT. 30, 2013

Leasing commitment 24,897 55,927 68,085 148,909

89Notes to the Consolidated Financial Statements – Notes to the Consolidated Statement of Financial Position/Further Information

— 40 OTHER INFORMATION

The following personnel expenses were incurred during the fiscal year:

(in EUR thousands) 2013/2014 2012/2013*

Personnel expenses 694,514 684,846

* Previous year adjusted due to IAS 19R

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 EUR thousands) 2013/2014

Audit 772

Tax advisory services 266

Other services 55

TOTAL 1,093

— 41 REL ATED PART Y DISCLOSURE S

Parties related to SCHOTT AG include the Carl Zeiss Founda-tion, Heidenheim an der Brenz and Jena, the sister company Carl Zeiss AG, Oberkochen, and its subsidiaries. Generally, related par-ties within the meaning of IAS 24 also include direct and indirect subsidiaries of SCHOTT AG as well as its associated companies and joint ventures and pension plans that are classified as defined benefit plans in accordance with IAS 19. In addition, related par-ties 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, 2014, there are liabilities to the Carl Zeiss Foundation from loans totaling EUR 51,800 thousand (previous year: EUR 51,800 thousand) and interest in the amount of EUR 300 thousand (previous year: EUR 427 thousand). Loan agreements were entered into at arm’s length in accordance with the master loan agreement from fiscal year 2011.

Deliveries by SCHOTT AG to companies of Carl Zeiss Group in fiscal year 2013/2014 amounted to EUR 4,915 thousand (previous year: EUR 5,796 thousand). In the same period, mainly IT-related services totaling EUR 228 thousand (previous year: EUR 152 thou-sand) were rendered. Companies of Carl Zeiss Group only pro-vided a small amount of deliveries or other services to SCHOTT in fiscal year 2013/2014. All transactions entered into with compa-nies of Carl Zeiss Group were entered into at arm’s length. There were no significant outstanding amounts as of the reporting date.

— 38 NOTE S TO THE CONSOLIDATED STATEMENT OF C A SH

FLOWS

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. Dis-bursements for the acquisition of consolidated companies and other business units (EUR 14 thousand) represent payments for capital increases carried out by a consolidated company.

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. The non-cash transactions mainly comprise interest costs for pension commitments and the reclassification of deferred tax expense from the discontinued “Photovoltaics” oper-ation.

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 86,943 thousand (previous year: EUR 153,916 thousand), EUR 2,715 thousand (previous year: EUR 6,054 thou-sand) of which were restricted on the balance sheet date.

— 39 EMPLOYEE S

Average number of employees for the year 2013/2014 2012/2013

Germany 4,938 5,076

Europe (without Germany) 3,612 3,603

America 3,501 3,443

Asia 3,103 3,083

15,154 15,205

Apprentices 249 256

TOTAL 15,403 15,461

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, 2014, the number of employees increased by 1 year-on-year to 15,445 employees (previous year: 15,444).


— 43 REMUNER ATION OF THE BOARD OF MANAGEMENT

AND SUPERVISORY BOARD

The total remuneration of members of the Board of Manage-ment in fiscal year 2013/2014 comprises payments due in the short term amounting to EUR 4,800 thousand (previous year: EUR 2,760 thousand) as well as post-employment benefits amounting to EUR 932 thousand (previous year: EUR 1,057 thousand).

The members of the Supervisory Board received EUR 562 thou-sand (previous year: EUR 460 thousand) for their work on the Board in fiscal year 2013/2014.

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 2,455 thousand (previous year: EUR 1,902 thousand) in fiscal year 2013/2014. A total of EUR 45,306 thousand (previous year: EUR 40,208 thousand) was added to provisions for pension commit-ments to this group of individuals.

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 29 “Pension plans and similar commitments.” There were no other significant transactions with pension funds or companies not included in the consolidated financial statements.

In the 2013/2014 fiscal year, SCHOTT companies engaged in the following transactions with joint ventures and associated com-panies:

The sale of goods The purchase of goods


2014Sept. 30,

2013Sept. 30,

2014Sept. 30,

2013

Joint ventures 16,024 15,277 100 72

Associated companies 7 741 12,386 11,981

16,031 16,018 12,486 12,053

The receivables and liabilities to joint ventures and associated companies are shown as follows:

Receivables Liabilities


2014Sept. 30,

2013Sept. 30,

2014Sept. 30,

2013

Joint ventures 5,697 3,044 605 91

Associated companies – 4,173 3,342 3,166

5,697 7,217 3,947 3,257

Allowances for doubtful receivables from joint ventures amount to EUR 27 thousand (previous year: EUR 18 thousand). No allowances for doubtful receivables from associates were recog-nized 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 fis-cal year 2013/2014.

— 42 S IGNIFIC ANT EVENTS SUBSEQUENT TO THE BAL-

ANCE SHEET DATE

No significant events took place between the balance sheet date (September 30, 2014) and the date on which the annual financial statements were prepared (November 24, 2014).

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 24, 2014

Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

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, 2013, through Septem-ber 30, 2014. 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 ] .

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 AG1) Mainz 100 %

SCHOTT Solar CSP GmbH1) Mainz 100 %

SCHOTT Solar Thin Film GmbH1) Jena 100 %

SCHOTT Solar Wafer GmbH1) Jena 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.p.A. 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 Ibérica S.A. Barcelona 100 %

SCHOTT Solar S.L. Aznalcóllar 100 %

S WEDEN

SCHOTT Termofrost AB Arvika 100 %

S WITZERL AND

SCHOTT forma vitrum Europe ag St. Gallen 100 %

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 %

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, 2014

93Major Shareholdings

T H E A M E R I C A S

U. S . A .

SCHOTT Government Services, LLC Boothwyn 100 %

SCHOTT Gemtron Corporation Sweetwater 51 %

SCHOTT Corporation Elmsford 100 %

SCHOTT North America, Inc. Elmsford 100 %

SCHOTT Solar CSP, LLC Elmsford 100 %

SCHOTT Solar PV, LLC Elmsford 100 %

C ANADA

Baron Glass Sealing & Assembly, Inc. Midland 100 %

SCHOTT Gemtron Canada Corporation Midland 56 %

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 99.7 %

COLOMBIA

SCHOTT Envases Farmaceuticos S.A. 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 %

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 Moritex Technologies (Shenzhen) Co., Ltd. Shenzhen 100 %

SCHOTT Glas China Ltd. Hong Kong 100 %

Moritex Asia Co., 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. Asaka-Shi 100 %

SCHOTT Moritex Corporation Asaka-Shi 71.6 %

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 Relations OfficerMember of the Board of Management responsible for Advanced Optics & Materials, Electronic Packaging, Pharmaceutical Systems, Compliance/Legal, Human Resources, Marketing & Communication, Strategic Development

Dr. Hans-Joachim Konz

Bad KreuznachMember of the Board of Management responsible for Home Tech, Flat Glass, Lighting & Imaging, Defense, Research & Development, SCHOTT Solar AG, Technical Services

Klaus Rübenthaler

MainzMember of the Board of Management responsible for Finance, Information Technology, Market Development, Purchasing

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. 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) (as of March 17, 2014)

MitterteichDeputy 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) (as of March 17, 2014)

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.)

Markus Kraft 1) (until March 17, 2014)

LünenMember of the Presiding CommitteeSecretary of the Industrial Trade Union of Mining, Chemicals and Energy (IG BCE), Hanover

Judith Krone 1) (until March 17, 2014)

MitterteichMember of the Conference CommitteeChairwoman of the Employee Council of SCHOTT AG, Mitterteich site

Dr. Eduard Kulenkamp

Bad DürkheimVice Chairman 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

95Members of Executive Bodies at SCHOTT AG

CO M M I T T E E S

Presiding Committee

Dr. Dieter Kurz (Chairman)Wolfgang Heinrich 1)

Dr. Thomas Hünlich 1) (as of March 17, 2014)Markus Kraft 1) (until March 17, 2014)Dr. Stefan Marcinowski

Audit Committee

Dr. Eckhard Müller (Chairman)Dr. Dieter KurzHartmuth Baumann 1)

Dr. Helmut Olyschläger 1) (until March 17, 2014)Salvatore Ruggiero 1) (as of March 17, 2014)

Conference Committee

Dr. Dieter Kurz (Chairman)Prof. Klaus BackhausWolfgang Heinrich 1)

Judith Krone 1) (until March 17, 2014)Martina Mehlan 1) (as of March 17, 2014)

Martina Mehlan 1) (as of March 17, 2014)

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. Helmut Olyschläger 1) (until March 17, 2014)

MainzMember of the Audit CommitteeVice President of Services in Mainz for SCHOTT AG,Member of the Managerial Staff Committee at SCHOTT AG, Mainz

Dr. Richard Pott

LeverkusenFormer Member of the Board of Management of BAYER AG, Leverkusen

Udo Raue 1) (until March 17, 2014)

JenaChairman of the Employee Council of SCHOTT, Jena site

Salvatore Ruggiero 1) (as of March 17, 2014)

MainzMember of the Audit CommitteeMember of the Managerial Staff Committee at SCHOTT AG

Vice President Marketing and Communication, SCHOTT AG, Mainz

1) Workers’ representative

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.

SCHOTT AG

Hattenbergstrasse 1055122 MainzGermanywww.schott.com

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