Report by the Supervisory Board

Dear All,

ZEISS has experienced growth for the tenth year in succession, beating both the markets and its competitors in many areas. ZEISS is on course with the ZEISS Agenda 2020 and has managed to impress both long-standing and new customers with its unbridled innovative strength. The positive development of all key performance indicators is a remarkable success – even without considering the background of increasing global uncertainties.

In the past fiscal year the Supervisory Board oversaw and advised the Executive Board in accordance with the duties entrusted to supervisory boards by law, the articles of association and rules of internal procedure. The Executive Board provided us with written and verbal information about the business situation and development, current profits, current risk factors and risk management, short-term and long-term planning, investments and organizational measures. I was in close contact with the Executive Board and received regular information about the development of the business situation and important business transactions. The Supervisory Board was involved in all decisions of importance for ZEISS and passed the resolutions required by law, the articles of association and our internal procedures. Our decisions were based on the reports and decisions proposed by the Executive Board, which we subjected to in-depth scrutiny. The Executive Board and Supervisory Board have joined forces to ensure ZEISS continues to develop successfully.

Subjects of the Supervisory Board meetings

The Supervisory Board held five meetings during fiscal year 2018/19. In December 2018, in addition to the annual financial statements, ZEISS's acquisition strategy was discussed. With this strategy, we aim to acquire highly innovative solutions, technologies and companies in a targeted manner. In particular, we intensified
the strategic expansion of the Industrial Quality & Research segment's portfolio. The exceptional meeting that followed in March 2019, for example, was also significantly shaped by the decision to acquire GOM, a leading provider of hardware and software for automated 3D coordinate-measuring technology headquartered in Braunschweig, Germany. Following the election of the employee representatives in March 2019, the Supervisory Board also reconstituted itself at this meeting.

At the meeting in May 2019, specific measures and programs were presented to make the company moren robust, reliable and resilient through innovations and a broader customer base. The resolutions will help us to act even more effectively in the future and to invest even more successfully in research and development, as well as in infrastructure such as buildings and IT. This will improve ZEISS's overall resilience to economic fluctuations.

In the July 2019 strategy meeting, the Executive Board presented a clear strategic plan that continues the longterm positive development of the individual segments with the support of the management and employees.

The budget plan for 2019/20 was approved in September 2019 at the fifth meeting of the board. The acquisition of SAXONIA Systems AG, Munich, was also approved in order to accelerate the company's increasing digitalization.

The detailed proposal for the course and schedule of the project, as well as the budget for realizing the ZEISS high-tech location project in Jena, was also approved. The Supervisory Board fully supports the clear intentions to look forward and invest in the future of ZEISS.

Changes to the Executive Board

Stability and continuity in the management of the company are central concerns of the Supervisory Board. At the last Supervisory Board meeting of fiscal year 2018/19, a resolution was passed to arrange a successor for Prof. Dr. Michael Kaschke, who will not extend his appointment as Carl Zeiss AG CEO after it expires in 2020. Dr. Karl Lamprecht, currently the Executive Board Member responsible for the ZEISS Semiconductor Manufacturing Technology segment, will become the new President & CEO effective April 1, 2020. Dr. Markus Weber has been appointed as the new Member of the Executive Board responsible for the ZEISS Semiconductor Manufacturing Technology segment, effective from October 1, 2019.

Under the leadership of Michael Kaschke, the ZEISS Group's Executive Board team has developed and implemented forward-looking strategies. These have led to above-average growth and sustainable value creation at ZEISS for an entire decade. The company has a highly attractive business portfolio and is in an excellent position. The ZEISS Group is continuing to develop from a technology leader with a global reputation to a company that actively shapes its customers' markets. For this, we would like to extend our special thanks to Michael Kaschke.

Work of the Supervisory Board committees

The Audit Committee met three times as scheduled. It evaluated the efficacy of risk management and discussed subjects such as compliance, internal auditing, the internal control system, accounting and the key issues of the annual audit and the annual financial statements. The Chairman's Committee also convened three times. At the meetings, preparations for personnel decisions were made and the reallocation of business was discussed in connection with the changes to the Executive Board. The achievement of targets and Executive Board remuneration were subjected to regular review. In the Supervisory Board meetings, the Chairmen of the Audit and Chairman's Committees provided regular reports on the work of their committees. The Mediation Committee did not convene during the year under review.

Changes to the Supervisory Board

Manfred Wicht left the Supervisory Board on March 18, 2019. The long-standing Chairman of the Group Works Council and Deputy Chairman of the Supervisory Board did not stand for reelection and retired. Michael Kramer followed in his footsteps in accordance with the results of the employee elections to the Supervisory Board. Andreas Kopf, who had previously been appointed by the board, was also elected to his position. Eva-Maria Menzel also left her position on the Supervisory Board on September 30, 2019 due to her retirement. Her successor was Silke Müller. We would like to thank Ms. Menzel and Mr. Wicht for their great work on the Supervisory Board and on the committees of the Supervisory Board.

Audit of the annual and consolidated financial statements

Auditing firm Ernst & Young GmbH, Stuttgart, has audited the consolidated financial statements of Carl Zeiss AG, including the Management Report, for fiscal year 2018/19 prepared pursuant to Sec. 315e (3) of the German Commercial Code (HGB) in accordance with International Financial Reporting Standards (IFRS) and issued an unqualified auditor's report in each case. Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft, Stuttgart, also audited the dependent company report prepared by the Executive Board.

All members of the Supervisory Board received the independent auditor's documents and audit reports in good time. We closely examined the documents and discussed them in detail at the meeting of the Audit Committee on December 9, 2019 and at the Supervisory Board meeting held on December 10, 2019. The independent auditor attended both meetings, presented the major results of the audit, provided supplementary information and answered questions. At the plenary assembly, the Chairman of the Audit Committee reported on the result of the examination of the consolidated financial statements by the Audit Committee. After examining the documents, the Supervisory Board endorsed the results obtained by the auditor and approved the financial statements prepared by the Executive Board. The Carl Zeiss AG financial statements were thereby adopted, effective 30 September 2019.

Pursuant to Sec. 312 German Stock Corporations Act (AktG), the Executive Board has prepared the abovementioned dependent company report for the period from October 1, 2018 to September 30, 2019. The independent auditors have issued the following opinion on the findings of their audit of the dependent company report: "Based on our audit, which was carried out in accordance with professional standards, we confirm that

  1. The actual disclosures contained in the report are correct
  2. The payments made by the Company in the legal transactions listed in the report were not unreasonably high.”

The Supervisory Board agreed with the results of the audit presented by the independent auditors. Following the final result of the review by the Supervisory Board, there were no objections to the Executive Board’s concluding statement in the dependent company report.

In addition, the Auditing Committee was presented with a separately published non-financial Annual Report of Carl Zeiss AG. The Non-Financial Report was submitted for a voluntary audit by the auditing firm PricewaterhouseCoopers GmbH (PwC) in Munich to obtain limited assurance. As per the recommendation of the Auditing Committee, the Supervisory Board confirms the adherence of the non-financial report for the ZEISS Group to the CSR Guideline Implementation Law (EU Directive 2014/95/EU) and approves it.

The Executive Board's proposal to pay a dividend of EUR 75 million from its net income to the sole shareholder, the Carl Zeiss Foundation, was approved.

On behalf of the Supervisory Board, I would like to thank the members of the Executive Board and all ZEISS employees. Thanks to their ambitious work, courage and commitment, ZEISS is extremely well equipped for the future.

Oberkochen, December 2019
On behalf of the Supervisory Board

Prof. Dr. Dieter Kurz
Chairman of the Supervisory Board

Prof. Dr. Dieter Kurz

Prof. Dr. Dieter Kurz –
Supervisory Board Chairman of Carl Zeiss AG