Maschinenfabrik Berthold Hermle : Sustainability Report 2023

Sustainability Report

of Maschinenfabrik Berthold HERMLE AG and the Group 2023

(summarised non-financial statement pursuant to Sections 289b and 315b of the

German Commercial Code (HGB))

This separately summarised non-financial statement (hereinafter referred to as "Sustainability Report") presents the summarised non-financial statement pursuant to Sections 289b and 315b of the German Commercial Code (HGB) of the HERMLE Group and Maschinenfabrik Berthold HERMLE AG. It supplements the Group Management Report and Management Report of Maschinenfabrik Berthold HERMLE AG 2023, which is part of the Annual Report and can be accessed at www.hermle.de.

The non-financial statement provides information on essential factors in the five areas concerning environmental, employee, social, human rights and anti-corruption issues. It describes for each area the concept pursued, the corresponding measures and results as well as the possible risks involved.

Essential sustainability criteria

The essential aspects for reporting on sustainability (Corporate Social Responsibility, CSR) at HERMLE are determined primarily by their importance for ensuring customer satisfaction and the long-term and sustainable success of the company. The main focus is on the direct impact of our activities on business partners, employees and the immediate business environment, as well as ensuring efficient and sustainable business operations. As such, we pursue our own concept for reporting on CSR that is suitable for small and medium-sized enterprises. We do not follow a framework of external factors, as its implementation in companies of our size would demand unreasonably high and economically unjustifiable effort. In preparation for the reporting requirements, which will be more heavily regulated in the future and which became legally binding at the end of 2023, we started initial workshops in 2023 to review our sustainability strategy together with an external service provider with the aim of adapting it where necessary and deriving suitable measures. This cooperation will continue in 2024.

EU Taxonomy

The EU Taxonomy Regulation 2020/852 Article 8 adopted by the European Commission is only of limited relevance to HERMLE. So far, the machine tool manufacturing sector has not been directly included in the EU Commission's list of environmentally sustainable economic activities. The machine tool manufacturing sector provides products that are often at the beginning of the value chain in an array of industries and contribute significantly to making production processes more efficient as well as generally preparing for the new challenges of sustainability. As such, our company could be classified as a so-called "enabler", since we enable our customers to contribute to the achievement of EU environmental targets through the use of our machines. Due to our extensive customer base from a wide range of

technological sectors (see chapter Business model), we are unable to assess the extent to which our customers are taking advantage of this opportunity.

The definition of turnover in accordance with the EU Taxonomy Regulation corresponds to the presentation in the income statement. Taxonomy-eligible or Taxonomy-aligned turnover (numerator) are presented proportional to total turnover (denominator).

The direct proportion of HERMLE's turnover from products and services generated with its own Taxonomy-eligible economic activities in accordance with the current EU Taxonomy is 0%. The longevity of HERMLE machine tools and our service business, which additionally contributes to this long usability of our machines by end customers, is not included in the current Taxonomy.

According to the EU Taxonomy Regulation, capital expenditure includes investments in intangible and tangible assets and rights of use from leases. Taxonomy-eligible or Taxonomy-aligned capital expenditure (numerator) is presented proportional to total capital expenditure (denominator). The capital expenditure corresponds to the addition to fixed assets presented in the notes to the consolidated financial statements. When determining the Taxonomy-eligible or Taxonomy-aligned proportion, double counting was avoided by checking the reporting.

The proportion of capital expenditure to be classified as Taxonomy aligned was 4% in 2023.

Operating expenses within the meaning of the EU Taxonomy Regulation are non- capitalisable expenses for research and development, building renovation measures, short-term leases, maintenance and servicing. Taxonomy-eligible or Taxonomy- aligned operating expenses (numerator) are presented proportional to total operating expenses (denominator). Operating expenses cannot be transferred directly to the income statement. When determining the Taxonomy-eligible or Taxonomy-aligned proportion, double counting was avoided by checking the reporting.

Of the 2023 operating expenses, 1.6% were classified as Taxonomy aligned.

Details on the key figures are shown in the following tables.

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Proportion of turnover from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023

Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023

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Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities - disclosure covering year 2023

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Management and Compliance System and involvement of the Management Board

The Management Board of HERMLE AG continuously addresses the key sustainability issues related to the operational business, for example during regular Management Board meetings. Our Management and Compliance System for sustainability includes the annual review by the Management Board of the various aspects included in the reporting on CSR. If key figures are set for specific targets, they can be adjusted annually if this is appropriate for the company. Further, it is monitored whether the level achieved in one aspect (performance level) is at least maintained - according to the specific area, annually, monthly or by means of random checks. If targets are not met, we identify the causes and try to remove the obstacles that prevent their achievement. For measures that are integrated into our Internal Control System (ICS), random checks are generally carried out once a year and staff refresher courses take place every two to three years. In our view, this type of Management and Compliance System is currently sufficient from a cost/benefit standpoint.

Business model

Maschinenfabrik Berthold HERMLE AG is one of the world's leading suppliers of high-quality milling machines and machining centres as well as complete automation solutions from a single source. Our 5-axis machining centres and high quality standards set benchmarks in the industry. HERMLE's

customer base includes domestic and foreign companies from high-tech industries such as tool and mould making, medical technology, the electronics and chip industries, packaging technology, the optical industry, aerospace, energy technology and the automotive industry, as well as their supplier industries.

The HERMLE Group is made up of the parent company Maschinenfabrik Berthold HERMLE AG and various domestic and foreign subsidiaries, support centres and representative offices. The corporate structure changed slightly in the reporting period. New subsidiaries were founded in France and in Romania in 2023. Otherwise, the list of Group companies remained unchanged from the previous year.

Environmental issues

Concept:

As an internationally active manufacturer of machine tools, we provide society and our customers with safe products that are not harmful to their health and ensure the efficient use of resources. Both in terms of our machines and our production processes, we traditionally pay attention to high energy efficiency and resource conservation. Our customers benefit from this approach just as much as we do.

Specific measures and results:

At HERMLE, the products and the manufacturing processes as well as the installed components are generally CE compliant, a minor source of emissions and risks, and environmentally compatible. By using materials which are as recyclable as possible, by safely storing, handling and properly disposing of hazardous materials in

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accordance with the relevant regulations, and by manufacturing highly durable and retrofittable products, we help to conserve resources.

HERMLE machines are equipped with extremely powerful and efficient drives, heat and power recovery systems, LED lighting and consumption-reducingwarm-up and standby functions. Energy-saving features also include the lightest possible construction in the area of moving masses and the optional equipment with systems for measuring and tracking energy consumption. To ensure efficient machine use, we also offer our customers training courses for maintenance personnel. This allows them to maintain their machines themselves while avoiding travel. Basically, the high degree of automation of our systems results in optimised capacity utilisation and therefore a high level of efficiency for our customers. In addition, we permanently monitor our products after delivery to customers with regard to potential hazards which could arise from their operation.

To reduce CO2 emissions, we work predominantly with local suppliers and manufacture in just one region. Our second production site in Zimmern ob Rottweil, where we manufacture mineral casting beds and components and also sheet metal parts, is located in the district neighbouring our headquarters and is close to both suppliers and the motorway, which also helps to minimise transport routes and CO2 emissions. The first section of a photovoltaic system was put into operation there during the fourth quarter of 2023. Once completed, the system will, on days with sufficient sunlight, be able to fully meet the location's daily electricity demands. This means that electricity purchased from the public grid during these times can be replaced with a completely CO2-neutral source. Moreover, our entire fleet of vehicles is equipped with modern, low-emission technology. With few exceptions, fork lift trucks and industrial trucks are operated electrically and internal transport orders are processed in a route-optimised manner. As our machines can be serviced online, this also reduces the number of trips to our customers. In addition, we also offer training courses for our customers online.

When expanding and constructing new buildings, we pay attention to minimising land use by vertical construction, high energy efficiency, e.g. by the consistent use of LED technology for lighting, as well as heat and noise protection with the aid of good insulation. Especially with the new buildings constructed at the installation location in Zimmern in recent years, we have been able to meet these requirements without any restrictions due to the existing basic fabric. The new buildings were connected to the company's own existing heating network, which was expanded to include a second, highly efficient heat pump which is used for both cooling and heating the production buildings. We also installed a heat exchanger to be able to recycle the waste heat generated and reduce cable paths and losses by extending the internal 20kV network. The new photovoltaic system installed in 2023 now enables us to generate completely CO2-neutral electricity for building air conditioning requirements on sunny days. External blinds also help to regulate the temperature inside the building. The relocation of sheet metal production from Gosheim to Zimmern ob Rottweil in 2021 has also had a positive effect on CO2 emissions, as the new location is much closer to our main supplier, thereby reducing the net transport routes for delivery of the painted, ready-to-install sheet metal to our assembly workshop.

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Our existing buildings are also being successively equipped with the latest lighting and insulation technology. For the heating and air conditioning of various production facilities at the headquarters in Gosheim, we use energy-efficient combined heat and power plants and absorption refrigeration systems and plan to replace and supplement them with new, more efficient systems over the next few years. In 2022, the installation of new, even more energy-efficient ventilation technology was also started as part of the renovation of the existing production areas. These measures were systematically continued in 2023 as part of the renovation of further areas for the new spindle production facility.

The findings from previous energy audits were incorporated into the development of a new energy concept. Further, we have also derived measures to further reduce our level of consumption in the future and to smooth out peaks of demand. At the Gosheim site, for example, various transformer stations have been renewed or supplemented in recent years in order to reduce line losses, increase efficiency and at the same time reduce CO2 emissions by using vegetable oil instead of mineral oil for their operation. Other measures include the use of high-speed doors to reduce heat loss, the replacement of older heating pumps with highly efficient modern systems, and the ongoing conversion of other areas to LED lighting.

We design access routes to our sites as directly as possible in order to reduce traffic congestion in the local area and always encourage delivery drivers to use bypasses and relief routes. Since 2020, we have been using a new access road to our largest employee car park at the site in Gosheim. This access road runs exclusively through the industrial estate, thereby helping to reduce the amount of traffic in the town and in residential areas.

In order to avoid waste and save raw materials, our production is always optimised in terms of structure, order and offcuts. We use specialist companies to recycle chips and sheet metal waste produced during operation. Any accumulating old cardboard boxes are used on site for the repackaging of parts. Where possible, we also use recyclable transport packaging for shipping. In addition, we are planning to introduce a transport container recycling system between us and parts suppliers for the procurement of suitable series parts in order to reduce the use of disposable packaging.

Risks:

To avoid environmental risks, we have embraced a preventive approach. Overall compliance is monitored by, among others, the Technical Law Department. This department carries out technical risk analyses, for example, and ensures compliance with protection standards. Our testing department carries out EMC tests on machines and components to determine the effects of electromagnetic radiation. Environmental risks and the resulting rights of recourse and damage to the company's image are therefore highly unlikely at HERMLE.

Employee issues

Concept:

The more than 1,500 highly qualified workers of the HERMLE Group are key to the company's level of success. It is for this reason that we attach great importance to

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the concerns and interests of our employees. Attractive, safe workplaces and conditions, a high level of individual responsibility in performance-oriented teams as well as regular upskilling opportunities are, in our view, important prerequisites for a motivated, loyal, experienced and productive workforce, as well as the success of our company on the labour market. Our human resources concept is designed for the long term with the aim of retaining jobs even during difficult phases. In order to recruit the best employees out there for the HERMLE team and to bring as many different skills and experiences as possible into the company, we promote diversity and tolerance with regard to gender, nationality and age, as well as towards people with disabilities.

Specific measures and results:

By making tasks as interesting and responsible as possible and working in efficient, self-organising teams, HERMLE helps to ensure that employees are highly motivated and identify fully with the company. Flat hierarchies and a culture of open communication ensure a lively exchange among staff and with the management team throughout the Group. Roughly 75% of the employees in the Group are represented by the works council, which works constructively and shares a relationship of trust with the management team.

Workplace safety and preventive health measures to avoid accidents are also a top priority at HERMLE. To ensure this, we comply with all relevant workplace regulations and employ two in-house safety engineers as well as an occupational health service. Their tasks include, for example, conducting first-aid courses, initial instructions for apprentices and supporting training courses on occupational health and safety, fire protection monitoring and advice on hazardous substances.

Noise protection, excellent ventilation, cleanliness and ergonomics, for example through the use of manipulators, lifting equipment or pre-assembly activities, are also part and parcel of a healthy and safe workplace at HERMLE. Together with an external specialist, we examined the main production areas with regard to their ergonomic design and potentials for improvement. To ensure the derived measures and individually suitable practical exercises for the prevention of musculoskeletal disorders are implemented sustainably, so-calledergo-scouts were specifically trained to support and motivate their colleagues.

In 2023, we offered various forums, fitness exercises and health checks as part of a Health Week to arouse a sense of personal responsibility for health among our employees. It was possible to attend these events during normal working hours and they proved very popular. Moreover, we promote the health of our employees, for example through discounts on gym or pool admission fees and, since 2023, also by offering tax-efficient leasing rates on job bikes. We will continue to offer flexible retirement options by implementing a new company agreement on partial retirement that was concluded in 2023, thereby providing a financially viable solution, particularly for older employees with health impairments.

The number of occupational accidents at HERMLE has remained at a low level for many years. Last year, there were 22 notifiable accidents at HERMLE AG (previous year 22), most of which were classified as minor. Of these, four were commuting

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accidents (previous year 7) which are not within the direct sphere of influence of the company.

Through the use of various measures, we are continuously increasing the attractiveness of jobs at HERMLE. The modern production hall for the new sheet metal production at the Zimmern site, for example, is significantly higher and better ventilated, thereby providing our employees with a quieter and cooler working environment. Once the modernisation has been completed in the first quarter of 2024, the spindle assembly department will move into the rooms in Gosheim that have been freed up by the move, so that the employees in this area will soon also have considerably improved environmental conditions with spacious rooms which are lit and air-conditioned according to the latest standards.

The extensive know-how of the HERMLE team, which is often based on vocational training completed at the company, is continuously expanded through regular training and further education measures. In 2023, our employees completed around 1,125 training days (previous year 785) with mainly technical content. In the reporting year, the focus was on events concerning the topics of combating corruption and bribery as well as IT security, etc. In addition, there were management training courses, recruiting workshops and further training options for training officers (AEVO). There were also regular training sessions in the areas of electrical safety and handling hazardous substances. The training courses were partly held online.

To boost harmony among the HERMLE team after the COVID-19 pandemic, we again organised a large summer party in Gosheim in 2023 and invited all our employees in Germany and neighbouring countries.

The financial incentive systems applied at HERMLE include a profit-sharing scheme for HERMLE AG employees, provided the company performs well, and performance bonuses on top of the basic wage. There is also a reward system for suggestions that lead to improvements. Roughly 55% of the many suggestions made by our employees were implemented in 2023. Suggestions for improvement are rewarded with gifts in kind or cash bonuses of up to 10% of the savings achieved in that year.

In order to secure jobs even during less than favourable periods and at the same time be able to react flexibly to peaks in demand, HERMLE installed an innovative working time system back in 2002. The core of this "concept of the breathing company" is a very efficient flexitime regulation. This enabled us to cope with the economic downturn associated with the COVID-19 crisis without making compulsory redundancies, while continuing to take on apprentices who have passed their exams and filling vacant apprenticeship positions. In 2022 and 2023, we again specifically recruited specialists in critical areas to meet rising demand, to implement our digitalisation projects and to manage and cope with the surge in legal regulations and reporting obligations. Thanks to a new employee referral programme launched in 2023, we are now able to communicate advertised vacancies to a wider audience.

Information on the current status of the working time accounts and the 2023 bonus can be found in the Employee chapter of the Group Management Report. This chapter also describes our activities to enhance diversity within the workforce.

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Risks:

In theory, the risks in the area of employee issues result from the wilful disregard of regulations and the corresponding penalties or claims for damages. Further, there is a risk of no longer being seen as an attractive employer and thus no longer being able to fill vacancies ideally. Due to the extensive expertise and high motivation of our employees, as well as our intensive efforts to secure HERMLE's outstanding reputation as an employer, such risks can be classified as low overall.

Social issues

Concept:

HERMLE is a key employer and taxpayer in the Schwarzwald-Baar-Heuberg region and is committed to investing in Germany as a business location. We make our contribution by securing the company's long-term success and earning power, training a large number of young people and collaborating with local training institutions.

Measures and results:

Of the 1,511 employees actively working for the HERMLE Group on 31 December 2023, we employed the vast majority (1,132) at the company headquarters in Gosheim or at the new installation location in Zimmern ob Rottweil. On average, 87

• of the workforce worked in Germany (previous year 88%) and 13 % abroad (previous year 12%). Through our business policy, which is designed to secure the company's long-term future, and our clear commitment to investing in Germany as a business location, we want to secure as many jobs as possible in Germany and especially in our local region.

HERMLE also contributes indirectly to securing the location by participating in various trade and industry associations. For example, we are a member of VDMA (German Mechanical Engineering Industry Association), VDW (German Machine Tool Builders' Association), WVIB (Trade Association of Industrial Companies in Baden) and the Heuberg Business Association.

HERMLE's commitment to supporting junior staff is above average. We meet our responsibility to the local region by offering young people interesting training opportunities, thereby also helping to prevent an increasing shortage of skilled workers in Germany. At the end of 2023, 111 young people were completing vocational training courses at HERMLE AG (previous year 87), this corresponds to a rate of 9.5% (previous year 8.1%). The young professionals learn a modern and future-oriented profession either as part of a classic apprenticeship or a dual study programme. At an early stage of their training, they are taught to work on selected projects independently in teams and to think outside the box. The young people are supervised by seven full-time trainers. In addition, there are around 140 training supervisors available throughout the various departments.

We currently offer ten different training courses in the industrial and commercial sectors. In 2022, the range was expanded to include the occupational profiles of precast concrete worker, metal technology specialist and machine and plant operator. In addition, there is the possibility for our industrial mechanics to acquire an additional qualification in the field of electrical engineering with a Chamber of Industry

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