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OSRAM Q4/FY18 Earnings Release & Strategy Update

Tuesday, November 7th, 3:00 pm CET

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Corporate Speakers: Andreas Spitzauer, Head of IR OSRAM Dr Olaf Berlien, CEO OSRAM Ingo Bank, CFO OSRAM Dr Stefan Kampmann, CTO OSRAM Hans-Joachim Schwabe, Head of Automotive AM, OSRAM Wilhelm Nehring, Head of Digital DI, OSRAM

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Andreas Spitzauer: Good afternoon. Good morning. Good afternoon. Good morning. Depending on wherever you are around the world. My name is Andreas Spitzauer and I am head of investor relations of OSRAM. It is my great pleasure to welcome more than 20, even almost 30 people today at our second part of our Capital Market day here in Frankfurt. A very warm welcome. We are looking forward to spending more than three interesting hours with you here today. I will also welcome the people following us via webcast or via the phone, and I will already want to ask you, please after the event take some minutes and please answer the questionnaires which we will send around. We have done so after the first part of our Capital Market day at the OPTO in Munich and it was great value for us to get your feedback which we used by preparing today’s presentation. Coming to disclaimer, so whenever it is about kind of forward looking statements, please take the time, read it and kind of take this into consideration. Coming to the schedule today. We will start with kind of the overview of the 4th quarter results and the outlook for 2019 and strategy update given by Dr Olaf Berlien, CEO of OSRAM and Ingo Bank, CFO of OSRAM. Thereafter we will have the first Q&A session. After it, the two divisional heads of the newly set up automotive division and digital division will give you a deep dive into the markets and into the strategy given by Hans Schwabe for Automotive and Dr Wilhelm Nehring for the New Digital Division. After that we will start with the second Q&A session followed by closing remarks by Dr Olaf Berlien. All the presentations and Q&A sessions today can be followed via the phone and via webcast. At round about 6:15 to 6:30, we expect to close the event today. It is now my pleasure to hand over to Dr Olaf Berlien.

Dr Olaf Berlien: Danke. Yes, thank you Andreas. Ladies and gentlemen

a warm welcome from my side here as well in Frankfurt. For our Capital Market Day today, we have prepared a great deal of information for you, all of which I hope you find it very interesting. I will start by presenting with Ingo our results for the history of 2018 and after that, we will present our new forecast for the coming year. Finally, we will give you a strategy update describing our vision for becoming a photonic champion. Before we go into the details, let us take a look at OSRAM in 2018. As of today, OSRAM is a strong company with sales of more than EUR4 billion and an operating margin of roughly 15 percent. We have an IP portfolio with more than 17,000 patents and R&D ratio of 10.2 percent of sales and most important, we have a team of 27,000 passionate colleagues. So, let us take a look at some numbers for fiscal year 18. OSRAM performed well in a challenging environment, in total we had a solid performance. Especially in light of the increasing market headwinds and negative foreign exchange effects. The

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uncertainties in the automotive market clearly impacted our financial performance. We grew our sales by 2 percent to EUR4.1 billion. Profitability remained at a level of 14.7 percent and adjusted EBITDA reached EUR605 million. As predicted, free cash flow was negative with 183 million. This reflects the CAPEX for our capacity expansion mainly in OS and earnings per share were 144 Eurocents. On this slide you can see some important details of our earnings. We reported an adjusted EBITDA of 2018 of 605 million as I said before, and if you take out the additional foreign exchange burdens of more than EUR80 million, our adjusted EBITDA would have reached 690. And this would be the level of our prior year if you take out the one-time cost of the latest ramp up, EBITDA would have been even higher. But let me be very clear, we did not achieve the targets we aimed for the fiscal year. The market environment has changed, but let me also be clear, we have set up a performance program to be prepared for the market dynamics and the uncertainties. Ingo will provide you with some additional detail update on this program. So, ladies and gentlemen, OSRAM is a company in a transformation process. We had declining heritage businesses like Halogen, like Xenon and our traditional drivers, and we have strong growing new high-tech businesses. And as you can see from this slide, the growth rate in our new products are much higher than the loss rates of our traditional businesses, but the transformation is ongoing. When you look at 2017, our gross was more than 17 percent with LED, 17 percent. Whereas our heritage business declined by only 6 percent. Due to the recent trends in the automotive industry the effect was not that high last year. If you take a period of two years, new products generate growth rate that are almost two times higher than the shrinking rates of our traditional portfolio. Taking out our planned divestments, the rate would be almost three times higher. But you may ask, why are we not dropping the heritage businesses? That is a fair question; because our heritage products and our growing products still have the same go to market. So, I will come to this later in my strategy presentation. When we look at the market trends, we see somewhat challenging environments. Various trade conflicts around the globe affect the demand of the customers in the automotive industry. Take the trade conflicts between China and the US, or between China and South Korea. On the left hand you can see what happened to the car production during our last fiscal year. IHS just revised its forecast for the light vehicle every quarter. For example, when we started our fiscal year in October 17, IHS forecasted growth in NAFTA for more than 1 percent. Now as you can see the latest forecast is at -2.4 percent. So, we see risk that make us believe that this trend in the automotive will continue. So, in our opinion the market will remain

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challenging in 2019. On the right side, you see on this slide a grey line showing the development for the US non-residential construction growth, and the orange line showing the order book development for the US lighting equipment industry. If we take a look at the construction growth, we can see that the construction business in the US has recovered in the last month. Whereas the order intake trend for the electric lighting industry still trends down as of yet. In general, this trend has a time lag between six to eight months compared to the construction. So, it may recover as well. At this point in time, however, we remain cautious. And finally, for the general lighting market in Europe, we record an ongoing softness. Having said this, what are the market expectations for the fiscal year 2019? At the moment we must acknowledge that there are headwinds within the challenging market environment. The risk remains, the trade conflicts will intensify. The German Market Research Institute, IFO shows a slowdown. In addition, political risk are on the rise. For example, a potential hard Brexit could lead to a down turn. Also, the conflicts over the Italian budget plans is hard to predict. Due to the current environment and the sale of the business segment LS, we will not reach our former 5-1-5 targets dating back in 2015. With this in mind, I will show you our new midterm ambitions later in my strategy part. We should not lose sight that the strategy of OSRAM is intact, and we continue to execute against it. We are confident regarding our midterm development. Therefore, the board will propose a stable dividend of 111 Eurocents per share, and as you have heard, we have announced the new share buyback program up to EUR400 million. I think this shows that shareholder reward remains important for us. At the time we continue to invest in our future and as you can see, we have a balanced strategy. We use our liquidity for growth and for shareholder reward. With this, I will hand over to Ingo for the financial part.

Ingo Bank: Okay, thank you Olaf. Also, warm welcome from me here

in Frankfurt for those joining personally, but also those on the phone and the webcast. Let me provide you first with more details on the company financial results for the final quarter of the fiscal year 18 before I provide more context related for our guidance for the new fiscal year 2019. I will conclude my presentation with a brief outline of our financial strategy before Olaf then takes over back again to provide you with an update of the company’s overall strategy in the later part of this afternoon. So, moving into the financials of Q4 18 on slide number 13. On comparable growth for the company was positive with 1.1 percent in the quarter with all segments showing growth. Adjusted EBITDA came in with EUR147 million or 13.9 percent of revenue. Pre-cash flow was positive with EUR40 million in the 4th quarter. Operational cash

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flow was at a EUR109 million, CAPEX was EUR70 million. For the full fiscal year 2018, CAPEX ended up to be EUR467 million. Fiscal year 18 marked the end of a two-year period in which OSRAM stepped up investments significantly to bail out infrastructure for opto semiconductors to support mid to long term growth objectives. Special items in the quarter amounted to EUR75 million, largely in line with expectation. It includes the charge related to the head count reduction plan for Germany, which we communicated in our Q3 18 earnings call already. Let us go into a bit more detail regarding our revenue development in Q4 fiscal 18 on slide number 14. The negative impact of a weaker dollar versus last year started to ease off somewhat. With a limited impact on nominal sales and growth in the quarter. The total benefit from changes in our business portfolio contributed by with around 250 basis points for the full year over year growth. Biggest contributors were Fluence, BAG electronics, Digital Lumens and Vixar. Geographically speaking, we continue to rack up strong growth in the APAC region driven by all segments. APAC now is the biggest revenue contributor of all regions for OSRAM. Growth in the Americas picked up some momentum sequentially, also due to the aftermarket business as customers are preparing for the seasonally strong fall and winter season. Revenue growth of our DS business in the US picked up again in the last quarter of the fiscal year. Market momentum for us in EMEA declined further in the 4th quarter. Automotive growth was negative. Both for traditional as well as LED based lighting solutions. At the same time softness in the overall general lighting market continued, affected growth in LSS as well as Opto. Moving on to profitability on slide 15. The Q4 of fiscal year 18, absolute adjusted EBITDA was 147 million or 13.9 percent in margin terms. Foreign exchange in higher R&D expenses predominantly in Opto continued to be the main drivers of the 160-basis points of change compared to the prior year period. In this quarter more than 60 percent of the foreign exchange related impact was related to significant volatility in currencies of emerging markets, as well as the Malaysian Ringgit. Adjusted EBITDA in corporate items was negative with 15 million in line with our previous quarter. Summarising our Q4 performance for the business segments on slide 16, let me start with Opto. Opto’s revenue growth for the 4th quarter slowed down sequentially as expected. This slowdown was a result of softer, yet still positive demand for automotive. General lighting faced substantial market headwinds entirely driven by EMEA. Industry and mobile picked up some growth momentum sequentially, particularly driven by a strong performance in Asia-Pacific. Opto’s adjusted EBITDA profitability was good at 24.7 percent, also supported by efficiency measures taken by the business to respond to a lower growth

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trajectory when compared to last year’s development. Compared to a year ago, Opto’s margin was lower due to FX, higher R&D spend and somewhat lower degression effects given volume developments. SP comparable growth was 1 percent in the quarter. Strong growth in the aftermarket business compensated for the decline in the traditional first equipment business. LED light source growth was moderate. The reduction of SP’s profitability compared to the same period a year ago was largely related to foreign exchange. The remaining difference in margin is related to revenue mix as the LED share in the overall revenue mix of SP is now higher than a year ago. Please remember that SP only receives a low single digit handling fee for selling LED light sources to our automotive customers. The balance of the positive margin for this business is reflected in Opto’s financials. LSS comparable growth was positive due to a good performance in the US, driven by digital solutions and our service business. In APAC the dynamic lighting business continued to perform very well. Profitability remained unchanged as the market environment in the general lighting industry stayed difficult. When we look at the full financial year of 2018 on slide 17, it is clear it was a very challenging year for OSRAM. Comparable growth for the company turned out to be close to 2 percent, lower than originally planned for reasons we communicated earlier in the year. Customer supply chain corrections in our auto LED business after a period of product volume allocations, continued softness in the general lighting environment, particularly in Europe and the US. The rise of external geo-political as well as regulatory factors particularly of the ongoing disputes around tariffs, the introduction of the European car emission standard WLTP, just to name a few. Project delays in our mobile device business as well as horticulture combined with a continued shortage in electronic components were limiting factors in terms of revenue potential. Geographically speaking EMEA provided the biggest challenge to us across all segments. Profitability for the year was significantly impacted by adverse developments in foreign exchange when compared to a prior year by approximately EUR83 million. We stepped up our R&D invest largely for Opto to support a strategy of innovative growth. As a result, R&D expenses increased by EUR47 million. Overall the company deployed approximately 10 percent of its revenues into R&D in fiscal year 18. Free cash flow was negative in the first half of the fiscal year driven by infrastructure built in Opto to support growth in the forthcoming years. In the second half of 2018, free cash flow turned positive reflecting the solid underlying operational cash flow generation of the businesses. Overall for the full year, free cash flow came in with a negative 183 million in line with our guidance reflecting and overall CAPEX spend of 467 million. Now that a

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period of peak spend is behind us, we expect to show a much-improved cash flow going forward – a very important financial objective to us. I will come back later to the expected CAPEX spending level for the company in the future. Overall special items for the full fiscal year 2018, came in with EUR128 million, slightly lower than expected as we managed to execute our performance program as planned, yet as more cost effectively. Finally let me close the review of fiscal 18 with a look at our EPS numbers on slide 19. Reported diluted EPS in Q4 18 was at a negative 6 Eurocents given restructuring charges taken during the quarter as well as acquisition and integration related expenses. For the full fiscal year 2018 reported diluted EPS was 144 Eurocents compared to 278 Eurocents in fiscal year 17. Foreign exchange, higher depreciation and restructuring measures were the major reasons driving the year over year decline. Adjusted EPS was 251 Eurocents compared to 338 Eurocents in fiscal 17. Our corporate income tax rate was at approximately 28 percent for the year. To demonstrate our ongoing commitment to drive shareholder returns we announced a new share buyback program of up to EUR400 million and we will propose a stable dividend of 111 Eurocents to our AGM in February. Let us now start discussing our outlook for fiscal year 19. I am on slide 20 now. I would like to state upfront that the company’s outlook for fiscal year 19 still includes the current and complete portfolio of LSS. Before we go into the numbers, let me first speak to a number of important assumptions and considerations reflected in the outlook. I will build further on what Olaf just said in his prepared remarks. In our fiscal year 2019, a number of challenging market dynamics that had started already in the second half of our prior fiscal year, I expect it to continue. We believe that these trends can impact our financial performance especially in the first six months of our new fiscal year. We expect the overall financial performance to possibly improve in the second half of the year as the impacts of WLTP should be behind us. The US lighting market should benefit from recent increases in non-residential construction growth and China possibly shows improved momentum likely supported by stimulus measures. Currently visibility in our automotive business continues to be limited which is also reflective of the news flow and reduced business outlooks of companies in that industry in recent weeks and months. Now production estimates for 2019 from IHS still point to a growth of up to 2 percent largely depending on a recovery in Europe and China. However, rather uncertain at this point in time and requiring a momentum change. Next to these vehicle production forecasts we believe that LED content growth in cars continues to increase at a faster pace than vehicle production itself particularly in front lighting. We expect that front light penetration will continue to grow also into

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next year from around 23 percent in fiscal year 18 to about 25 to 28 percent in fiscal year 19. Olaf already spoke to the soft market environment for general lighting particularly in Europe and a possible recovery in the US general lighting market in the second half. Our 1st quarter of fiscal year 19 is expected to be substantially impacted by the implementation of the new revenue recognition standard IRFS 15. We expect revenue to be lower by up to EUR40 million when compared to the old standards. The annual impact is expected to be largely realised in the 1st quarter of our fiscal year 2019, including the corresponding negative impact on profitability of up to EUR17 million in adjusted EBITDA. In combination with the mentioned soft business outlook overall, we therefore expect possibly a high single digit revenue decline for the first three months of the new fiscal year when compared to the same prior year period. This will also translate into an adjusted EBITDA margin notably sequentially below that of the last quarter of fiscal year 2018, given negative volume, digression effects of a lowered revenue base. The financials of OSRAM Continental are consolidated within the current SP segments. For fiscal year 19 the business plan foresees to reinvest a substantial part of the operational earnings into higher upfront R&D efforts to expand the product portfolio. In addition, we will incur expenses of combining the two organisations and building the necessary company operating structure. As a result, we expect that the profitability of our new subsidiary to be dilutive to the SP segment margin as well as the overall OSRAM group margin in line with original plans. Let me also provide a brief note on the subject of Brexit. Overall the company’s direct revenue exposure to Great Britain is very limited. In fiscal year 18 less than 1 percent of the overall company’s revenue was generated there. From a procurement perspective the exposure is negligible. Mitigation actions are on their way to the extent possible. At the same time it is close to impossible to assess the indirect impact of a possible hard Brexit. Our guidance for fiscal year 19 does therefore not include the assumption of a hard Brexit. A few words on foreign exchange. The guidance provided is based on an exchange rate of EUR1.15 to the Dollar. We are using a rolling hedging strategy and consequently are partially secured for fiscal year 19. We do not anticipate material short term benefits from a currently strengthening dollar against the Euro. Our capital expenditure level is expected to come down substantially in fiscal year 19 when compared to fiscal year 18 for reasons outlined earlier. It is likely to be around EUR300 million in fiscal year 19. The impact of tariffs already in place today levied on the trade between the United States and China, and additional ones likely to be implemented in January 2019 are expected to burden the company’s financials negatively with up to EUR30 million

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unmitigated. Moving to slide 21. Gross savings from performance programs are expected to amount between EUR40 to 60 million in fiscal 19, also helping to offset some of the inflationary pressures we see increasing in fiscal year 19. These do not only include cost increases from labour, resulting from collective agreements but also ongoing pricing dynamics for certain electronic components that are still in short supply. Special items resulting from ongoing transformation measures are expected to be around 40 to 50 million in fiscal year 19 substantially down from prior years. These are largely related to further streamlining or overhead structures in our SP business to further consolidate its global footprints as part of the last man standing strategy. Special items related to integration and disposal related activities are expected to be between EUR20 to 30 million as we continue to adapt our business portfolio. In total, special items then sum up to be in an expected range of between EUR60 to 80 million in fiscal year 19. Beyond 2019, we expect to incur a normalised rate of special items of between 0.5 to 1 percent of revenues. After a challenging year 2018 combined with only short-term visibility you will appreciate that we enter the new fiscal year rather cautiously. We expect comparable revenue growth to be flat to moderate for fiscal year 19. This broad range narrows the rather limited market visibility at this point in combination with uncertainties related to external geo-political developments. As you can see on the upper right chart of this slide we expect incremental revenue from portfolio effects, i.e. from companies acquired in the course of fiscal 18 and the incremental revenue from OSRAM Continental to possibly be up to EUR200 million in fiscal year 19. Consistent with past practice this portfolio effect is excluded from our calculation of comparable revenue growth. The adjusted EBITDA margin is expected to be in a range of 12 to 14 percent. This range is largely driven by the possible variance in our revenue growth trajectory in fiscal year 19 and the corresponding operating leverage effects. Free cash flow is expected to be positive, targeted at a middle double digit level, including significant cash outflows resulting from the ongoing performance programs. Let me now change subject and provide you with a brief outline on the key elements of OSRAM’s financial strategy as a precursor to the overall company strategy update from Olaf. Unchanged to the past, it is our financial strategy to put the company on a strong financial footing, supporting the growth strategy with a solid balance sheet. Our aim is to continue to target a financial structure that would be the equivalent of an investment grade rating consistent with the past. We strive to operate the company’s finances through a strong capital structure, with good leverage potential accordingly. We have significantly de-risked our pension plans in the past few years and maintained

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financial flexibility through strong levels of liquidity. Part of our financial flexibility is safeguarded by a strong and balanced core banking structure, providing us with syndicated credit facilities of close to EUR1 billion largely until 2022. Our capital deployment priorities remain to support the growth of the company, both by internally deploying capital to support organic growth but also to add small to medium sized companies to the portfolio to fuel other means of value created growth. We remain committed to also return cash to our shareholders, our existing dividend pay-out target ratio of 30 to 50 percent on average will be maintained. Our strong balance sheet however, allows us to keep the dividend stable in fiscal year 19 nevertheless. In addition, share buybacks remain an option to us also evidenced by the buyback of up to 400 million just announced yesterday. Let me conclude by briefly touching upon an important part of the capital deployment policy of OSRAM, our targeted CAPEX ratio. The company targets to spend on average 7 to 9 percent of revenue going forward. This reflects the 12 to 14 percent ratio for Opto as communicated during our market and tech day on September 18th. Thank you, and now hand back to you Olaf.

Dr. Olaf Berlien: Yes, thank you Ingo. Yes, let me come to the second part, the strategy update and to navigate the successfully transformation that is important to have a successful and well experienced management team. Ingo, Stefan and myself together with my colleagues from the business unit, we have many years in different industries around the globe. So, I think we will be the best team to manage the transformation. So, let us talk about photonics. Ladies and gentlemen something is big happening in the lighting market: it is shifting from illumination to photonics. So, what does photonics mean? It basically means the emission, the transmission and the detection of light. In the past, you more or less only used the emission part, so to illuminate buildings or streets but then came the LED and changed everything. It changed the entire illumination business but more important, the LED has opened up to other parts of photonics. With digital light you are able to modulate, amplify and detect the photons. You can even use it to transmit information like with Li-Fi. This opens up completely new applications for us. We can use LEDs to visualise in virtual reality, headsets or in car interiors. We can use Infrared and laser light for sensing. This is the basis for autonomous driving or 3D-recognition and we can use light for what we call treatment. This refers to providing plants in vertical farms with the best lighting. It also includes the huge and big area of ‘human centric lighting’. Moving to photonic means, going beyond illumination and tapping into the entire

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potential of light: illumination, sensing, visualisation and treatment. The replacement with LEDs with what we call LEDification was the first step on that journey. The benefit of LEDs is their lifetime. It is up to ten times longer and they save up to 80 percent of energy. But there is still a large potential in and for this business. The next step which is currently happening, is that we connect these light sources to make life easier and more comfortable. In other words, we add electronics to make them IoT ready, and this is a requirement for the third step. It is about generating value for our customers with light powered IoT solutions. Here is where the music plays in terms of future growth. It opens up new revenue pool for OSRAM. Light will play an essential role in this game and there is no faster way of communicating with light. And light infrastructure is just everywhere, in every room, car or street. In the new world understanding the system and the application of our customer will be for us, the key. Otherwise, you are just only a component supplier. So, coming from a component level, you have to develop to the system level. In 2018, September we presented what that means on an LED level with our Component+ strategy at OS. Today I want to focus on the implication for the lamps and the driver’s business. For automotive lights it means, combining light sources and electronics to develop intelligent light systems like pixelate headlights. Our Advanced Smart Lighting segment was Continental in automotive is a very good example. It brings together our premium light sources with the electronics competency of Continental. For the driver’s business, it means, adding sensors and software to the control unit. We call this digital ceiling. It connects the ceiling of offices, industrial buildings with the internet and cloud-based solutions. So, let us have a look at the market potential. For the coming years, illumination will remain the biggest market for OSRAM and it will continue to grow. However, new application markets like visualisation, sensing and treatment are arising and they are growing fast. Here, we expect growth rates of over 10 percent for visualisation and treatment over the coming years, and over 20 percent for sensing. As an example, we see significant growth potential in the automotive OEM markets. New photonic applications drive our value add on the system level and increased content per car. And they act as a key enabler for autonomous driving. My colleague Hans will dive into this a little bit later on. Today we have more or less 50/50 balance between non-automotive and our automotive business. Now we are expanding into fast growing markets of consumer electronics, industrial applications and building infrastructure. By this, our automotive share will get smaller and we will better balance between our

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portfolio. So, ladies and gentlemen, we saw the trend to photonics at an early stage. Accordingly, back in 2015 we started to radically align our businesses to fast growing high-tech markets and to a solid profitability. We are well on track on our transition to a high-tech photonics champion. In phase 1 we successfully split the company nearly in a half and carved out our lamps business. We established a three pillar set up all while maintaining a solid profitability. We expanded our world-wide production capacity for LEDs – visible and non-visible - with our strategic investments in OS. And we streamlined our portfolio and executed over 750 million of divestments. In the second phase we established the joint venture with Continental. We made targeted investments to improve our technology base and we initiated the divestments of the luminaires business. Now, it is time for the third step on our transformation path. This is our updated strategy for the next five years, and for this we have defined the clear action items. These are: the organisational adjustment what we start first one, then we come to a permanent portfolio management and the third one is a clear execution path. So, let us have a closer look at those three items. We are adjusting our organisational setup to the new market situation. The Opto business unit remains unchanged, as we said it in September. We are generating a pure-play unit called ‘Automotive’ out of our SP division. It focuses on moving from the component level to the system level. And in the future, this will sharpen our profile as a team for the first time they will concentrate only on automotive. Also, we will divest our luminaires business and we are pooling our digital activities in the new business unit called ‘Digital’. The new business unit bundles software, controls end solution activities and up to now, these have been in different parts of our company. Now we are bringing altogether in one place. The linking element is our open cloud based IoT platform which we call Lightelligence. This will allow OSRAM to become and enabler of digital solutions in a connected world. So, you may ask us, why we are not selling the heritage business, and as I said, it is a fair question. The answer is, because our heritage business acts as a booster for our young digital activities. With nearly 5,000 customers, it offers excellent market access. It has a strong salesforce in more than 40 countries, and in one of the best IP portfolios in the market. You see, these two puzzle pieces fit together creating everything needed to be successful. This is our clear competitive advantage over younger digital companies and my colleague Wilhelm will explain this a little bit in detail later on. That brings me to the second action item of our transformation strategy. The Portfolio management. Permanent portfolio management continues to be a

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cornerstone of our strategy. And already in the past, we have divested businesses that did not meet our high-tech and our financial ambitions like our lamps business. And we are about to divest our service business in the US as well as our luminaires business called Siteco. At the same time, we have invested in businesses that increased our system and application understanding and/or lifted us to a higher level of the value chain. So let me give you one example: in the strong-growing smart farming business, we are market leader on a component level. With our investment influence we acquired light formulas for plant growth. The start-up Motörleaf has the solutions to monitor that plant growth. So, step by step we are building our competencies to offer 360 degree solutions for our customers. A very exciting perspective in a market that is growing at rates of over 30 percent per year. So going forward, we will continue to enhance our technology portfolio and application knowhow of course. This relates to fields such as electronics, software or integrated circuits. And for this we have a clear M&A focus with defined criteria for investment targets. They have to deliver high growth rates, enhance our technology or our IP position, improve our market access, and advance our system and application expertise. I get to the third action field: execution. To make all these things happen, we have defined a clear execution path for the Group. As you can see on this slide, we have already implemented various strategic initiatives. And I can assure you today we will strictly follow the execution path. We will precisely monitor the progress and we will transparently report it. Now we come to the part that will probably interest you the most: our financial ambitions for the businesses. Moving toward photonics will be reflected in our financial profile. And as shown before, we will thereby address fast-growing high-tech markets, add value with our system approach and to improve our competitor’s position. Before we started our transformation, growth rates were in the low single-digit area, with moderate margins below 12 percent. With the new setup, our revenue target corridor lies in the mid-to-high-single digit growth rates. And we aim for an adjusted EBITDA margin of more than 15 percent. Ladies and gentlemen, let me show you how this translates to our business units. Here, you can see our new organizational setup and the financial corridors. To be very clear, this does not represent our guidance for 2019 as Ingo said, but these are our financial ambitions within the next years. Now we have three pure-play units with a clear customer and a market focus. First; our Opto unit will be a strong number 2 position in the market. For this unit we target revenue growth of around 10 percent and 23 to 29 percent

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adjusted EBITDA margin over the cycle. Second; the pure-play business unit “Automotive”. This includes the OEM as well as the aftermarket business. Automotive is the clear number 1 in its market on a component level. We target revenue growth for this business of 3 to 7 percent and an adjusted EBITDA margin of 9 to 11 percent. And our third unit is our young and promising Digital unit. It already holds a strong number 2 market position in electronics and components. And we have a number 1 position market position in the US already. However, as I explained, this is a transformation story. We have a declining traditional business and a fast-growing digital activities. So we have to distinguish between mid and longer term targets. Midterm we target revenue growth of 3 to 8 percent and 5 to 10 percent adjusted EBITDA margin. In the longer term, however, we expect rates over 10 percent in revenue and EBITDA margin. So ladies and gentlemen, let me summarize: the OSRAM story continues. We continue to transform to a high-tech photonics champion and to an enabler in a connected world. We focus on the right trends and attractive markets. And we have a clear strategy for the digital world and will continue to execute. Thank you very much!

Andreas Spitzauer: Thank you Olaf. Now coming to the first part of our Q&A session. Please raise your hand, wait for the microphone, state your name and it will be great if you could limit the number of questions to one or two. So let us start with Uwe from Deutsche Bank.

Uwe Schupp: Yeah, Uwe Schupp from Deutsche Bank, thank you very much. I will limit myself to one question then. Previously you gave us the margin guidance of 12 to 14 percent and I am sure every one of us can calculate our way through, depending on the organic growth assumptions. But we will be interested to get a bridging on an absolute scale as well because even by OSRAM standards you had a fair mode of one-time items and potentially non-recurring items headed into the year. So just I am thinking on the absolute bridging would be very helpful. Thank you.

Ingo Bank: Thank you Uwe for the question, I understand what you say and again let me say that after a difficult 2018 we entered the year in a cautious way. So, we start with the 605 million that we generated in the adjusted EBITDA in 2018. I think there are a number of headwinds that you should eliminate from that one. It’s the tariffs that I mentioned with about a 30 million IFRS 15 has a negative impact of 15 and in 2018 we

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divested our business core processes where we had a one-time income of 15 million. So if you add these three up it is 60 million, you are at 545 million. In terms of ramp up we had, as you know, ramp up expenses in Opto in the year 18, they were around 23 million higher compared to the year before. We expect the same amount of ramp up expenses as well in 2019 for ongoing build up in Wuxi for instance, so there is no benefit there that we see. From an M&A perspective, if you look at the portfolio additions that we had in 2018 including the joint venture as I said in my prepared remarks, the joint venture is dilutive because of the investments that we take. So puts and takes if you look at the joint venture its off if it generates value of acquisition that we have seen. So there is no incremental contribution in terms of absolute EBITDA if you take everything together for us in 2019 from portfolio changes. On the topic of FX, if you look at current prevailing rates and the fact that we had on average an exchange rate Dollar/Euro or Euro/Dollar of 1.19 in 2018, we should see some benefits obviously, as we mentioned before. However, I have some hedges of course already securing parts of 19 so out of the potential of exchange benefit that you could calculate roughly I think we see around 15 million or so. So that gets it to 560 million if you like which is around 13 percent or so of the adjusted EBITDA margin. So to get us to 14, I think we need to see some more growth particularly also in areas like the industry mobile, business of Opto, for instance. We then also will have more efficiencies in scale in Kulim that could get us to 14. We have a number of performance programs and I showed to you a range, so if you look to the higher end of that range, that would get us probably closer to 14. And if we are able to mitigate some of those tariff actions between the US and China, that would probably also help us to get closer to the 14. If we then look at 12 percent the lower end, one would have to consider a tougher pricing environment so it is not completely out of the question in the market that has somewhat more limited growth opportunities and inflation coming up on the other hand. There will be some margin pressure here and there and people will try to test prices to drive that volume growth. So that is not completely out of the question, that will happen of course a lower growth that would sort give us a negative operating leverage and as Olaf said, the automotive part which still resembles or is 50 percent of our revenue base. Right now to predict that in terms of volume growth is very difficult. So if there is something that is not like the 2 percent growth I just was predicting something slightly negative or so, then we have to also see how that evolves given its large share automotive in general for the total revenue base for the company. So those are

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the major drivers to get us somewhere between 12 to 14 and the 13 is roughly EUR560, 570 million.

Andreas Spitzauer: Okay, coming to the next question Mr Turnwald. Just wait for the microphone.

Markus Turnwald: Just to follow up on the last question, I mean looking at page 22 you already offered an H1 split in terms of revenue. I mean it seems like each one will be normally half-half somewhere around but now this year it will be a bit different. It will be more H2 load in terms of revenue. I mean you were talking a lot about limited visibility you guys have, but what kind of visibility do you have for H2? Is it even longer for that period? And do you think that revenues will pick up stronger in H2 compared to H1? Thanks.

Ingo Bank: Sure. I mean when you go back to what I said in my prepared remarks. A) We believe that WLTP will then be behind us or the impact of the WLFT will then be behind us again that is a big part of the automotive situation particularly here in EMEA. China has started to discuss possible stimuli by reducing the sales facts again like it did a few years ago which would stimulate the very important Chinese car market for instance. Then Olaf showed earlier in this presentation if you look at leading indicators for the North American construction market, especially the non-residential because we do not play in the residential market, that should point to growth. And is also would be consistent with the past where there is always a time like six to eight months between the growth of non-residential construction and then it slips through into lighting which obviously in construction the light moves in at the very last if you construct the building. Those are basically possible anchors for recovering in the second half.

Dr Olaf Berlien: And additionally, you know we have a discussion with the Tier Ones today and we see that new cars are coming up in the second half of the year 2019 and that will be helpful as a supporter for our confidence in this market as well.

Andreas Spitzauer: Okay, coming to the next question, Sebastian Growe. Sorry, it is the next one.

Sebastian Growe: Thank you. It is basically, I would like to start the question with a quote from one of your Opto

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executives without ceding nor feeding. It was last time I think the key message that Mr. Lex send across. I think his feed is a lot to be honest in terms of capital spend on; a) capacity, b) on armoured radios, we have been seeing investment environment going up from one and two, almost 200 million last years. Even our R&D has picked up significantly, yet we do not see any acceleration really in growth, if I may say that so bluntly. And neither will the returns be improving. The question then is, when will we really see some relaxation on our R&D spend, for example. When will we really see this feeding at the end or returns on all those money spend? Yeah, that is the first question and the second one would be on the share buyback. I think given the uncertainties that we are all confronted with, what is the right price level where you would see utmost confidence and can go nothing wrong with putting money on the table for the share price which could even slip and drop from here? Yeah those are my two questions.

Dr Olaf Berlien: Okay, first question maybe Stefan…

Stefan Kampmann: Yes, obviously Wolfgang was impressed if you at least you could remember his quote. But you could also basically remember his onion model. Where he explained okay after investing in new technologies and then you can basically harvest this technology. What we currently have, I mean for instance, look at the automotive front lighting systems, they are currently investing into new solutions which will start 2020. And so we have a continuous investing in future products and solutions and we are currently working on that together with our customers in Tier Ones and the OEMs. And that is a business where we are very confident that this will basically pay back especially in the automotive sector. Following what we have discussed before, looking into the timely behaviour of our sales and our expectation in 2019 when the sales were basically catch up in the second half and you will basically help also with the first results of investment which we currently spend or what we did spend in the last twelve months.

Dr Olaf Berlien: Maybe Ingo you come back for the share buyback?

Ingo Bank: On the share buyback, yes. If you have seen that we have not done any really large acquisition in the last two years simply for two reasons; one was that the multiples that below that especially if you look at technology as it were simply too expensive and we felt

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that we would have difficulties to drive returns or we did not execute on those. And secondly, increasingly especially in the last year, if you look at regulatory environments, it was increasingly difficult to have actually a transaction or you know that a transaction will actually materialize. And we think that bodies like (unclear 01:01:46) for instance in the United States but also increasingly in China. The Chinese government also increasingly looked more difficult on certain technology transactions. And because of all of that, we felt given our capital structure and the financial flexibility that we do have, we call it a very logical step for us to announce another share buyback. The share price itself I do not want to comment on that even if of course you will now mean that we feel that currently OSRAM is undervalued, it is not reflecting the long term strategy that we have presented and we will continue to present but exactly at what price et cetera I do not want to comment because we will ask banks to help us and they will be independently executing such a share buyback program.

Andreas Spitzauer: Okay, coming to the next question by Sven Weier.

Sven Weier: Yes, thanks for taking my questions. It would be two. The first one is on the 15 percent margin guidance. You basically just told us that 13 percent of the base case for this year and was just wondering in your planning, when you would see the 15 percent as the base case happening at the earliest. And the second question was just following up on our comment on the first quarter, I was just wondering if you could give us a kind of a magnitude of a decline that you see. Are we talking about low single digit or mid single digit or any further qualifications? Thank you.

Dr. Olaf Berlien: Okay I will go to the first one and Ingo on the second one to the 1st quarter. I know it is a little bit confusing maybe because guided that we are above 15 percent. So the long-term target we expect clearly, the profitability range above 15 percent. And if you see what we achieved last year in 18 it was already 14.7. So it is clearly it must be above 15. The year 2019 as we said we see it from different areas balanced and that is the reason as Ingo explained really, we see this range between 12 and 14. But I am quite confident, I am really quite confident that we have so many programs in place. That we will achieve the 15 percent quite early and the above 15 of course it is the longer way to go. So the guidance for 19 is the guidance for 19 but it is clearly that we would like to come back as

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soon as possible because as I said, we have a lot of programs in place. New products are coming up, maybe Stefan can talk about that later on. So we have really, I am quite confident that will happen soon.

Ingo Bank: Yeah thank you. So the 15 is not backend loaded, is that what your question? And then as I said in my prepared remarks, we expected the revenue growth that will be most likely high single digit decline.

Andreas Spitzauer: Just wait a second.

Dr. Olaf Berlien: Better for the internet, you know we -

Ingo Bank: Thank you Sven. The IFRS impact is sort of 50-50 between Opto and SP. The other two business have somewhat of an impact but not in the slightest like the other two big ones. So I do not want to give you guidance on the segments though for the quarter.

Sven Weier: Thanks.

Andreas Spitzauer: Okay, coming to the next question by Peter Reilly.

Peter Reilly: Good afternoon, it is Peter Reilley from Jefferies. When we are sitting in a year’s time, hopefully we will not have the luminaires or the US service business and you dropped into the presentation that the grace between the shrinking and the growing business would be three times rather two times when that is gone. Can you give us some assistance to understand on a forward basis how OSRAM is going to look either in terms of growth or margins? Because hopefully at some stage during the year, that business goes, so your guidance will no longer be valid and I am assuming it is going to be majorly marginally growth increase again. You may not give us any hard numbers. But can you give us some assistance so that we can understand what the core business is going to look at.

Dr. Olaf Berlien: Okay, I start with the luminaires part. As we said we are going the M&A deal in two parts. So we started up with the service business in the United States. We are very confident that we will finish this part in the end of the year 18. So that means in the next six weeks, we are expect that in the end of 2018 we can sell the

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service business. The luminaires part, the Siteco, it is on track. We just finished the data room, now we are in the process to collect possible buyer for this one. So this will take place what I expect typical M&A one. I expect another five to six months, in April, May maybe.

Andreas Spitzauer: Okay…

Ingo Bank: May I add to that? That is great interest in the business. It is great. On the pro forma question Peter, right now our systems are not yet completely set up to report in the new structure. Therefore, I took the liberty not to supply performance numbers today because I want to give you numbers, historical numbers, good numbers. Numbers that our auditors have looked at. So we expect to give you first performance numbers or new numbers on the structure somewhere probably end of December, early January. That is the current plan.

Dr. Olaf Berlien: Six weeks and we have and we are ready for that. I think Lucie had a question.

Andreas Spitzauer: Lucie.

Lucie Carrier: Thank you Lucie from Morgan Stanley. Well actually my question was if you could give us a little bit of an insight on the profile of the new divisions. I mean I understand you cannot give us the pro forma but when we are -- I think for us and especially if we want to be looking at this company a little bit more, medium to long term, today we still need to have some indication on how do specific division, that you are now talking about, have performed in 2018. Were they below you know what you are now targeting? Were they above? Just so we can start to have some sense a bit and we wait for the pro forma.

Ingo Bank: Yeah you have to wait for the pro forma I am afraid. So I think what I can say is that the good news is that all of them are profitable, okay? So that’s to start with…

Dr Olaf Berlien: And maybe to help you, I said in my guidance that we have short to midterm. I see a profitability range between 3 and 5 percent and later on up to 10. You have the turnover. What we have if you wait -- if Wilhelm is presenting his part, you will see the

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turnover of 2018 in its combination target actual you will have a good feeling where we will run. And the details are coming as Ingo said, they give us six weeks if the auditor gives us a real pro forma number because we cannot keep you if you are guessing, it just would be proper.

Lucie Carrier: No I appreciate you cannot give us a number but when we think about the level you are giving medium term, how -- are we in 2018 were we fall from this level, were we in line with this level? Were we above -- and I am asking for each division or as we know obviously that for SP and digital?

Ingo Bank: Yes for AM, let us call it AM automotive, obviously we only had one caller in for the JV so that is a bit of difficulty to compare. Against that obviously, AM was pretty much in line with what Olaf showed you. And then for the digital division it was profitable and it was probably more towards the lower end of the range that Olaf gave you.

Andreas Spitzauer: Okay, thank you. Coming to the next question by Charlotte from Berenberg.

Charlotte Friedrichs: Charlotte Friedrichs, Berenberg. Could you give us a little more detail in the JV with Conti- you said obviously 2019 it will be dilutive but you mentioned the margin target later on in your presentation, when you do you expect to reach that margin target?

Dr Olaf Berlien: Would you like to do this?

Ingo Bank: Yeah sure. So right now the team is, you know, putting the two organisations together. They are very excited. Stefan is looking after that business in the supervisory board for us. So the 12 to 14 percent is really a longer term target because simply for the reason, it is an automotive business and you need to just imagine that now that the team has to build a product roadmap that will sell its own products earliest in three years from now into the automotive circle. In that time, it will improve its profitability clearly but it will continue to return some of these profits into increased R&D spend. So I do not expect them to be there before 2022, 2023.

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Andreas Spitzauer: Okay. Now I want to conclude the first part of our Q&A session and then kind of hand over to kind of the next colleague who will provide a deep dive in the new segment automotive. Hans Schwabe and Hans, the stage is yours.

Hans-Joachim Schwabe: Thank you very much. Yeah, very warm welcome ladies and gentlemen from my side. My name is Hans-Joachim Schwabe. I am the CEO of Automotive. I also would like to introduce two colleagues of my management team, probably you can stand up. On the right hand side, Robert Baumann, the CFO. On the left side Dirk Linzmeier who is the head of the joint venture. So in a nutshell where are we in automotive? Today we have a business of EUR1.9 billion. We are a clear market leader in the industry. We are serving the market for two channels globally: OEM and aftermarket. The bigger part right now in the revenue is OEM and you see it is a complete set from lighting components, LED components, lighting systems. It is a joint venture and in the aftermarket, we typically have the light source today. But more and more we are also moving into systems and solutions as well. What makes us so strong as a market leader today? And I have to say for the OEM channel. We have a very long traditional and performance in quality and mostly innovation. If you look to the first LED, it has been introduced by OSRAM. The first laser light on the road has been introduced by OSRAM. So innovation makes us different but keeping performance and quality on the highest level. The rules we have applied for and which makes us stronger now is the electronic competence by Continental. This was a pillar, a cornerstone of our future strategy. You look to the aftermarket, it comes more to customer intimacy and brand recognition. Brand power, strong marketing. We are also leading in that market and there is a lot of awards here you see on that side, we have been recognized for many partners and customers in the past and also currently and also in the future. What are the trends in automotive? You all know them: LEDification, electric car, autonomous driving. You know the buzz words. What are we doing along these different channels? In OEM we have some major trends. Definitely we have a decline of traditional components, no doubt about that. At the same time, we have a growth of LED components replacing the conventional light source. But the most important significant growth of the future is the unique combination of light and electronical systems. This is the real big growth of the next five to ten years and that was the reason to invest the activities and form a joint venture with Continental. If you look to the aftermarket it has a total different dynamic. It is a large

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market with more than one billion cars. We have a big emerging regional APAC with the youngest car park. We have very long cycles, a typical user using a car twelve years. So it is a huge market, it is a long replacement cycle. For divisional light source but also we see now the first signals of LEDification by retrofits but also by accessories and also complete lighting systems. And last but not least, a very important fact in the aftermarket is, how we can make use of the digital services and support our customers. And this kind of telematics is very important to be a long term global partner for the big players for the aftermarket channel. And we are investing in that. What is the market about? We have heard about some headwinds we are facing right now, yeah but overall it is a stable market in car production. Every year about 2 to 3 percent a year, this is a typical range of a cycle. We typically see then that the decline of the traditional components is replaced by the LED which is no issue for us. We are driving the technology forward. And knowing that, that we have something like a two years’ visibility on the OEM programs. Knowing exactly what is designed in for 2020, we know what is coming along and we can adjust our capacities for the LED but also for the traditional light source and make the action. If you look to the aftermarket, we have a very long cycle and again, more than one billion cars are registered on the road and they all have a very strong replacement cycle even if the traditional lights source. More than 95 percent of all cars are still driving in the front lighting with halogen and LED battery. So this is a huge opportunity to replace for the next years and giving us a long cycle here to be active and to create added value. And one of the other reason is also have a marketing for motorcycling and trucks which is more than 600 million. But LEDification is also going to start and we see on the slide here that you have a change now over the years but it is much longer. Coming back to the OEM market. What is OEM market about? 10 percent is the traditional components decline you expect over years. At the same time you will see us high single digit growth for LED components. Not only by replacing type by type but we also want to create more value with new types, multi-pixel LED chips, matrix types. So, we try to be innovative and make the difference. But the biggest growth - and I will come later back to that - is the systems. There are a combination of lighting and electronics. And this is a two double digit range over the next ten years. What is our position in the market? Definitely, we want to grow and to use the opportunity of the joint venture to execute the story of combining intelligent lighting, combining electronics and lights but also be prepared for autonomous driving and be a player with regard to sensor fusion. This is the biggest opportunity in the

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growth story of automotive today. This is a double digit opportunity, then we have single digit areas with the LED components and we also have, let us say, the decline and additional components. But most important region here, to gain market share, to keep leadership is APAC. China and India will be the most important regions for us in the future. So let us come back, why is it so interesting and attractive to be still with the traditional light source? I think Olaf mentioned the heritage. You can say, why you keep it? Because it creates a hell of cash in that business and that with a constant operation and also a nice profitability. Why are we able to do that? We have a global footprint; the factory is being closed to the regional customers. We have very tough effective cost saving programs every year, even a recorder. And we track that performance programs. And we still see even in that old world some new potentials. One is APAC, I mentioned, you still can gain market share here but we also have a new LED bulb, a standardized LED bulb called the XLS. I will come to that in a minute. What is behind this cost wrecking programs? It is not just reducing the costs in the factory. It is and end to end view on all functions, on all operating elements we have in the full value chain and we make that it is very tight cost wrecking programs. Very special, very precise on each and any single unit. These programs plus the permanent adaptation of our capacity in the factories is the cornerstone that we have two double digit million Euro savings over the next year being expected. Which is normal, which we know from the past we will continue doing that. Now let us come to the new bulbs. The XLS, why is it the XLS? Because it is an exchangeable bulb, it is an LED bulb. That means, it combines the benefits of a traditional light source being standardized and also exchangeable with the benefits of LED for designer functionality and especially energy saving. This is a major contribution to reduce complexity for OEMs because you can share it across multiple platforms and cars. And knowing that, with this product is now already standardized for some specific applications. For the European regulations but also for the American regulation and we have already the first big design wins in 2018. The SLP that has happened with Toyota, the biggest sales car maker in the world and I can tell you other OEMs will follow. It is one of the nice growth stories we have on top of the so-called standardized light source. Why are we so special in the automotive industry as a light source and a component maker? I think no one can combine that strength today. We have the LED components and all the standardized light source under one roof. We have the one stop shopping, we can negotiate with all Tier Ones and OEM on that level, having the full portfolio on hand. So that one

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roof, this one goal to market is an unbelievable strength we have. And this is the reason that is more than 230 sales employees we have active in more than 40 countries. We are leading the markets and we have great contexts for more than 100 Tier Ones and 100 OEMs. So let us come to the joint venture. I think it has been mentioned several times already, for us it is a new category of light. No one has that unique combination. It is following the trend of adaptation and becoming intelligent. Adaptation you react, you respond to the environment. You get the information, the electronic helps you to make those right answer on lighting and you combine it and this is the reason that it becomes intelligent. Because you only use the light you need for the specific situation. So it is a unique combination. The company structure today is 50-50 within both companies but we will do a full consolidation at automotive. What are the advantages of this joint venture? First of all, the parallel development of lighting and electronics, which have been separate in the past. This could be done now parallel. You can talk about platforms and it could even include software elements now. Then we have a double excess to global Tier Ones but at the same time to the OEMs. So the access on both channels is a very important one to drive innovation ahead of the others. And then again, it is a unique combination of optics and electronics which nobody has in that kind of category today. And we are focusing not just on the fixture, we are focusing on module, electronics and systems but not on the component here and not on the fixtures. The market is highly attractive. You see it here on the slide, it is 12 to 14 percent growth rate over the next five to ten years. And we have an ambition to grow above the market and I think we are pretty well in the first steps of that company formation. Let us come to some examples, what we have already. Case studies and real projects. This is an integrated light module for an American big selling truck. We are serving three models of leading pickup truck family having everything. From lens, emitter, carrier, heating and even the driver module. It is everything integrated and highly going forward on the value chain. Then we have some adaptive driving beam shared by three cars, one OEM. Definitely done together with a tier one. It is 71 pixels and all these pixels will be used for different applications like low beam, high beam, adapted driving beam. So we can basically adjust the pixels according to the situation; this is also done by electronics. It is a high-end ADB. And then let us come to the last one, is a light control unit which is one of the cross elements in every headlamp today, and this is a cross car-line module. Just purely light control being shared with 13 vehicles on the road of one OEM again worldwide, globally, so

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it is a big cost contribution reducing complexity. It is a real platform project and highly standardised. So, what is the ambition and the future of the joint venture? If you look on today you have further basically the human driver looking ahead of the car, you have adaptive headlamps, you have different pixels, 100,000, probably a million now, and you can create a very harmonised light beam for you. Also, you have the first element of dynamic colour in the interior room. This is the human personal experience but if you look forward in autonomous driving, you see some new elements. Interior becomes a living zone. You can basically create lights for going into the photonics world. Influencing yourself, relaxing, good mood; where are the moods? You only have around the car projection now that means you can highlight signals, you can even highlight your name, your brand, whatever, these kind of things in all the giving information about pedestrians, other cars, other participants in the traffic is giving you an autonomous information. So, the sensor fusion I am talking about, and also the visualisation I have mentioned before, is the two major good examples that photonics is also an element of the strategy of the joint venture. What is the company about? We have about 16 locations, legal entities, we have about 1,500 employees. We have already a big share of software developers in this group, which was a major contribution especially from the Continental side. We were starting with a turnover revenue about 400 to 500 million and our target is to double that revenue within the next three to five years. This is the target, the ambition level. The target margin range has been mentioned before is 12-14 percent. So, let us come to the aftermarket. Sometimes underestimated. Why? Because of a large car park and we have a major branch. It is first of all a very long cycle to have plenty of opportunities and we see a new upcoming young car park with young users especially in China and in India. So, all this kind of things allow us to say with that long cycle still having halogen over more than 90 percent of the cars. We also have a nice replacement cycle even with sufficient light source but all that is our retrofits. Let us come to the strengths and the importance in the aftermarket and it is different than OEM. Definitely you have to fulfil the go-to market category, you must handle the different channels, retail, trades; this is very specific. Then also you have the regional differences, Europe and NAFTA, different culture, different behaviours. If you look to the brand and packaging in digital marketing which we are using already this is a powerful tool to make yourself different from all local suppliers in the market. Because brand is giving trust and our brand awareness is high. But most important for us we can even plan for that business because with the big

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players, the big retailers and trade companies we have already more than EUR1 billion under long-term contracts. It gives us visibility, also a strength in planning our future and planning our capacity and also our marketing strategy. Because this is very important; it is contribution for our customers. What is a typical criteria of creating value in the aftermarket? First of all, you have a replacement bulb, you have halogen. You can replace its original quality with the typical OEM quality we have with a high brand awareness; this is a so-called standard lamp. But if you look further than value-added products, which I will refer later on, they give you the extra, more life, more security, more lifetime. And then we also have the retrofit as a new category taking the new trend of LEDification but giving the same value like so-called value-add products we have. And the third and next category we are looking is beyond light source. We already have started to make first tuning fixtures in the aftermarket, replacing an old car with a complete refresh LED based fixture fulfilling the tuning category. But we also have lighting accessories with LED, the inspection lights. And then not forgetting the so-called digital business. Every retailer and every trader wants to know, how can I sell more on a weekend with a prime day if I get the right marketing information from your side? This is the reason that we invest in digital services and data scientists. Looking through the markets and their categories here, definitely we see a stable business still for our traditional light source especially because of the APAC region but also by expanding the portfolio partly now, and also see opportunities in value-added products and also retrofits. There we see a double digit. And if you look to the new category and beyond the light source portfolio then we also see double digit elements here. So, what is retrofit about? You will say retrofits kills somehow the general lighting market; this is not the case in automotive. Because you have a distinction of regulated market for retrofits and non-regulated markets. The regulated markets you have to comply with fit, form and function one-by-one. This is hard to achieve and that is the reason that the standardisation is still ongoing because it is not easy to make a direct replacement one-by-one in that categories for a halogen bulb, but we are in and we are driving the legislation. On the other side due to the long cycle of that market, we still have also a long range of halogen products still to do in even HR-V. I will tell you in a minute why. Look to the value-added strategy we have. This is a typical OSRAM standard lamp. One of the most prominent ones in halogen 87. Standard original packaging, OSRAM giving even proof and trust that it is an original product and no fake; this is very important to make that clear. But if you looked

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into the different categories we have and how to sell it at end-user price at dire levels you see lifetime, design, performance and even the LED retrofits. So, today if you go to the big retailers you see already that you can charge between five and ten times higher end-user price for that value-added product. These value-added products make roughly in our portfolio one third of our existing portfolio. So it is pretty important for the profitability and also the cash. Looking to the retrofits, and retrofit is not only a price game but in the so-called non-regulated markets what is called Brazil, India, China we are working with external partners to have a portfolio; we cannot leave that out. In the regulated markets we are leading. If you come to the US, if you come to Europe, especially Germany, you have to comply with the regulation otherwise you are not authorised to be on the market and this we are driving permanently on. We have introduced more than 150 retrofits products over the last three years for different regions, with a different portfolio and all the different packaging. Let us summarise the aftermarket. What are the core strengths? Brand and customer relationship, I mentioned them at the beginning, the sales networks and logistics. And be regional; this is definitely not a global market. They have to be very specific in the region. We need a strong application testing knowhow and our customers, even the consumers know and understand that we understand this technology and these applications better, this is the reason that so many tests are running and proving that our results, our proof points of the value-added products, are better than the rest. Last. Next is portfolio management. Again, we are looking beyond the light source, we look into retrofits, one-by-one replacements but also extensions and we understand the aftermarket, which is different from OEM. It is a different world; you have to understand the retailer and the trader’s world. Definitely, it is a different category. This allows us to address now new attractive growth areas: lighting fixtures, accessories with all the digital services. Let us come now to the outlook 2019. I think Ingo mentioned it already, we have some uncertainties on head. We all know the current tariff conflict of China and US, we know the WLTP discussion, which is a tough target right now for the German carmakers especially, as you have heard and seen. On top of that China is always a variable but having 25 million new cars every year there, it is an important element of having more growth or lower growth. So China is not yet clear how it will develop. This is the reason that we are very cautious on the first half of the year and expect a soft start. But we have as well the first full year now of the joint venture and we try and will keep our position as the number 1 in

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the OEM channel. Looking beyond 2020 and beyond definitely we see a constant growth in the car production as well, we see a constant increase of LED components especially with higher value types. I think Stefan mentioned it already; one of that is the multi pixel chip but also some integrated components. We see as well that interior lighting is becoming a very interesting area for making good colour, good homogeneity, making dynamic colour happening to the customers. Because it is visible, it makes the car different. Lighting and dynamic colours and colour on demand, this is a differentiator and this is the reason that we believe in a shared and connected world, not only for electric cars but also for the current ones. This interior trend will drive us forward. So we are well prepared with the joint venture, with our LED components roadmap but also with our traditional light sources in the last man standing. Let us coming back to the summary now why we are well positioned. We keep the market leadership in traditional light source and LED, this is our ambition level, this is the minimum. We want to execute the double digit growth in the joint venture OSRAM Continental; this is our execution path. We want to secure the strong cash performance we have out of the traditional standardised light source. It is our track record, we will keep it with our performance programs. And then looking into the aftermarket as a new pillar of growth, we also see a double-digit growth for the retrofits but also for the first steps beyond light source. Knowing that and knowing that the APAC region will stay dynamic, especially in the emerging aftermarket channel, we believe we are well prepared to be number 1, stay number 1 and be also the last man standing for the traditional light source. Thank you. I will hand over now to Wilhelm to guide you through the digital journey.

Wilhelm Nehring: So, a very warm welcome also from my side. I have the

pleasure to lead the new business unit OSRAM digital together with my colleague Frits van Staa who is with us here today as well in the audience. But please allow me to take you first on a short journey. So, let us go back to the 18th century. We have seen the invention of a steam engine triggering industrialisation and that has changed the way that we produce and manufacture goods. It has made us so much more efficient, it has change the world as we know it: a real game-changer. About a 100 years later, think about the light bulb an electrification, that was really the birth of urbanisation of modern cities as we know it. For the first time in our history, it was possible to live and work in cities as never before, changing the way that we build cities, that we build buildings. And now just look a few years back - not a few years - but how the

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internet has changed us in our private life, in our professional life. And since a few years now you have IoT, a wonderful buzzword flying around. We all know that it is big, that it has the potential to change things. We do not know exactly when and how much. But let me show you some figures and you all know that there are different studies about how big it can be. We have an estimation of roughly 400 billion as a global IoT market, as a potential until 2020. And out of that 400 billion, 300 billion will be professional IoT. And if you break that down into what is really interesting for us, you have a potential of 100 billion in building an industrial IoT. So, there is something huge coming, a huge potential that we want to tap into. Let me show you one slide that Olaf mentioned in his presentation. What we have seen so far in the light industry is LEDification. LEDification is really all about energy saving; it is a huge step but it is all about energy. What has happened already and it is something very dominant these days is connected lighting. It is still all about lights but we talk about adding a smartness to light in terms of being able not only to have it on/off but also to dim it, to control it, to manage it, also to manage it remotely. We call that also what Olaf mentioned digital ceiling or a digital infrastructure but the next step, and that is really the interesting part, is adding intelligence to that digital ceiling. Intelligence in terms of data that you collect and provide valuable insights of that data to your clients. Because if you do not create a value out of that data, data alone is nothing and this is really the big combination of that digital ceiling with intelligence. Let me just elaborate on one example because this is not only the future, part of that is already happening right now. If you look at a company that we have acquired last year Digital Lumens this is what we are doing already so we have connected LED luminaires. Then we have sensors and smart controls in the production facilities of our clients. And out of that we generate valuable data that goes beyond lighting. So you can have valuable insights about what is happening in your warehouse, in your production facility. We talk about space optimisation, we talk about value stream mapping. So this is already happening today. You can root materials and goods between different work stations to give you real insight about your warehouse, about your production facility. And that is already happening right now. And if I may ask you just for one second to look up at this beautiful ceiling here in this room. What you see is light and this is exactly the key point; we are everywhere, we are in every single room. So, if you talk about smart cities, smart buildings think about the impact that the lighting infrastructure can have. Because when you talk about creating value out of data, first of all you need to be able to collect that data. And we have a quite good view in every room because normally we are at the ceiling. And what we can do is we can provide power to

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every sensor there is, every sensor needs power and you can provide that power with the lighting infrastructure. And we can also collect the data out of those sensor and transmit this data to a cloud solution, to a server for a client wherever you need that data. So that is a very, very important step. Some of you may know that I have worked in the elevator industry before and I have to admit on our IT journey we always struggled with the moment that you leave an elevator, you do not have data anymore. So, imagine how lucky I feel now being in OSRAM having a digital ceiling where you are ubiquitous; we are everywhere and we can collect this data. But that is not the only reason why I have to admit I consider myself a very lucky guy, because what differentiates us from digital start-ups, our mother gave us some very, very valuable key success factors. Just think about what Olaf mentioned before, we have already a very, very strong market access; we have nearly 5000 clients already. We have a sales force in more than 40 countries already. When I will talk about intelligent drivers, we have an installed base already with smart drivers that we are selling of more than 18 million of an annual basis. We are very lucky because of our IP portfolio so when you talk about patents and the backbone of R&D we already have that strong portfolio. We have also been very lucky, if you look on the right side, these are just a few examples where we have been recognised by our clients and by the industry so for our products winning multiple awards and these are just a few of them. So we have already a very, very nice starting point on that journey. If you look at the markets that we are concentrating in, in commercial industry and entertainment on the right side you see the photonic scope that Olaf introduced before. So, in commercial buildings it is mainly all about not only the illumination but going beyond in terms of sensing, understanding what is going on in your buildings. If you go into the industry market, you also have treatment. Think of horticulture how you can treat plants for example. And in the entertainment part of course which is a very beautiful segment because they have visualisation. Why are these markets so interesting for us? First of all we see a very high growth potential in these markets, we talk about non-consolidated markets and also where we have the ability as a technology company to differentiate because of our technology. And I will also elaborate a little bit later why we do see a huge potential and opportunity for new business models in these markets. So, if you take that together into the new OSRAM digital business unit, we talk about roughly 900 million in sales. The market that we are currently addressing is roughly around EUR11 billion; we estimate that to grow to more or less 17 million in the next five years. And what you can see here below, roughly 80 percent of our current business is electronics and components. And in

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electronics and components we have a very, very strong position globally. What Olaf mentioned before if you look at the drivers business in the years we are even the number 1 already. But the very charming part is, we already have now today 20 percent of our business in systems and digital solutions. Let me show you a bit what do we see or what do we talk about when we say, electronic components and systems and solutions. What you see here on the left side, the smartware layer, what we call smartware, so we talk about intelligent hardware drivers. A driver is enabling light, enabling in terms of every modern luminous or if you talk about LEDs, there will be a light module, a light engine and that needs a driver that enables the light engine. So that is the intelligent hardware. Also a sensor is in the smartware layer. Think about an occupancy sensor that you can have. The next layer is the connectivity layer because you need a control manager but you also need some sort of gateway or an IoT gateway to transmit that. This is all in electronics and components where it is really our core business where we are very strong already. If you go to the next stage and we talk about systems and solutions, this is really where you move into the software area. So, the platform layer what you can see here with our lightelligence that I will explain a bit later, is really the first step to have a platform and collect that data out of your electronics and your components; not only collecting the data, also providing first basic analytics. And then on top we talk about the software applications, the software applications in terms of software that enables you to control, manage not only light but also beyond. If you look at the market that I mentioned in the very beginning, we see the following; it should be light grey on the bottom left. That is a traditional market so we see that the traditional market is declining depending on the product, we talk about a decline in the market between 5 and 15 percent. The dark grey area is where we see a very healthy growth between 5 and 10 percent so this is where you talk about not the traditional electronics and components but where you talk about connected, smart electronics but we still talk about hardware. And then the light blue part, this is where we see the biggest growth that is beyond 10 percent, currently we estimate 10 to 15 percent. Here we really talk about system solutions and mainly software driven growth. If you transfer that into our business and also from digital - as you can see here in the light grey part - we still have a large exposure to traditional business. Give or take 40 percent of our current business is still in traditional, which is also very charming because there we talk about cash generation, we talk about of course very limited R&D investments. And this is where, similar to also what Hans mentioned in automotive, we drive our performance programs and ensure that we have a cash generator which we then also can use to invest into future businesses. The dark

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grey part, which is the other 40 percent of our business, is where we talk about the smart electronics. This is really the enabling part having connected electronics that enable the light blue part. And the light blue part, that is the 20 percent of our current business already where we talk about software and solutions, where we want to be a technology leader in some very attractive focus markets. Let me give you one example. You can see here is a DEXAL Driver and as I know that it is late I brought you something to touch. So please feel free to hand it around. So, this is a product that we have launched in the Light & Building in Frankfurt early this year. That is a prime example of a driver that enables light but that goes beyond just enabling light. Why am I saying that? Because that driver is also able to provide power to sensors and to collect data from sensors, but not only that, the driver itself does also collect data. So, we have more than 50 data points already in that driver so that the driver knows where he is located, he knows how many drivers are around him, he knows how often have I been switched on and off. So, that gives you insights about the usage of the driver which then is of course very attractive also for our clients to understand how their products are being used. Going back to the chart we have seen from LEDification towards the digital ceiling, this is really the first step where we talk about power and data, the digital ceiling, the enabler of IoT use cases. Let me go to the next product that is slightly smaller. This one I brought too so you can have one. This is our latest sensor called SensiLUM. SensiLUM is a very small sensor as you can see when you hand it around and that is exactly that plug-and-play that we talk about that you can connect it to a driver. It does not only provide you occupancy if the room is used or not, but it also gives you daylight data. So, you can also use it for a smart, intelligent, in rooms and maybe you feel or you can see that there is a very small antenna in that sensor and that is why designers and architects love it because that provides you wireless connectivity. We see that in the mid long-term future, we will go more and more from wired solutions into wireless solution and that small sensor enables you to have a wired sensor, a wired driver, also to transmit data wireless via that small antenna. And the beauty of it, it is completely flat, you do not see the small antenna when it is in the ceiling, so also from a design perspective it does not change your luminaire, the appearance of it. So, having said that, moving into systems and solution part, so now we go into the commercial industry and entertainment focus markets for our systems and solutions. I know it is still PowerPoint but let me go a little bit beyond PowerPoint and showing you some examples. What you see on the top here that is a SensiLUM sensor that you just have in your hands and on the upper left side you see the DEXAL Driver. This why what Olaf mentioned these

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components, these hardware are still so crucial for selling software solutions because these are the enabler of the digital ceiling. What we have here is our light management system; with that light management system, of course first of all we are able to provide energy savings. What you can see here, as an example is more than 70 percent in energy savings. But on top we have the possibility to give insights about how the office building is used. On the upper left side you see the software of that light management system and that software has the ability to provide you with a three dimensional mapping of buildings creating heat maps to show you exactly which room is used how often, when et cetera. And this is all via the software but enabled with a digital solutions on the smart connected hardware. As you can see, the global trend that we currently see is encouraging us - if you look at the user sensors in commercial buildings - but this is a very attractive market to be in in the future. If you move towards the industry part, please just have a look at these numbers. This is urban farming, horticulture; 25 percent increase in output, 50 percent increase in efficiency, 75 percent reduction in land use. If you think about urban farming, how important and how expensive space is in cities, just imagine what that does to your project if you are in urban farming. And additionally of course the reduction of water and fertilizer that is used, the ability to stack it, what you can see on that picture, and still have the same efficiency and the same quality is absolutely crucial. This is an example of the company Fluence that we have bought where Olaf and Ingo already mentioned, where we want to become a clear leader in the field of urban farming and horticulture. I am not going to comment about recent legislation in the US and Canada, let me just say so much, we are welcoming the current situation and we foresee a positive growth here. The global trend is also speaking for itself, so this is really a booming market where we have a core product. We will also go beyond just the illumination, really going then also into insights by sensing and also beyond sensing in terms of recipes. So we have a clear path for our horticulture business. This is an example of the company Digital Lumens, I mentioned another example in the beginning of my presentation. So, this is a warehouse of one of our clients where we could not only reduce their energy for print by more than 80 percent but also increase the productivity. Productivity in terms of process transparency because of the intelligent overhead that we could install. What could also happen in that specific case, in terms of health and safety norms and to comply with them, so you can really see because of the insights that you can generate from the data that comes from your digital ceiling, you go beyond lighting. Beyond lighting really in terms of creating - and that is the ultimate dream - really a digital trend of your production

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facility, of your warehouse via the digital infrastructure, the digital lighting infrastructure. As you can see here, where we talk about professional IoT devices, also the global trend here is very, very attractive for us. Let me come to something more beautiful, pleasing the eye, going into the entertainment segment. What you can see here is the Zhuhai Theatre in China and that very project we have installed more than 51,000 pixels. But it is not only about the lighting equipment, it is much more about the controls. So, we are a leader when it comes to the light management systems and the controls in architainment, in architectural lighting. We are also benefitting of course from the city beautification that you can see especially in China. Three of the largest buildings in China are done by us, so we have made the architectural lighting with our company. But not only in architecture, also in the middle you can see one of our core equipment from Clay Paky. So this is really about entertainment stage lighting, an absolute high-end product where we have a leading position and also here we see a very, very interesting market. As you can see, the global trend is also showing in the right direction in that part. Again, this is beyond just the lighting, really talking about the controls, the software that is behind us that is absolutely key. If you look on the left or maybe it may be a little bit black and white from what we have today but the truth is today we sell a product, we sell a product and we get a certain amount of money for that product; that is the current business model. What we clearly see and where we want to go to in the future is recurring revenue. You can call that software as a service, whatever is your preferred term. But to get that currently we really talk about a lot of hardware and local controls but we see that the future is very clearly in software, it goes more and more into software and also into cloud based solutions. And the example that you can see here we are already preparing the launch in our Digital Lumens business. What you see is the SiteWorx software where we want to offer our clients additional services by having the intelligence overhead, the smart lighting infrastructure already, to offer additional services. Like for example tracking of assets and goods and that you can have then recurring revenue models where you pay for the software. If you go into the entertainment part, I mentioned these high-end devices for stage lighting in entertainment. You can imagine that they are quite expensive. Because when you talk about big shows, you have to ensure that everything goes perfectly fine. Here we talk about predictive maintenance. Think about how valuable an insight is if you know how often the device has been used, how likely is it that the device needs to be maintained or replaced? So, that is then really valuable information that you can provide to your clients. So, you see a lot of different applications of IoT in our business. So, how do

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we want to bring this all together? Now we will talk a little bit about long-term future because we really want to be proactive when we look at this market, how do we get into those models? What you see here, is what we call Lightelligence. Lightelligence, we introduced that also here in Frankfurt at the Light & Building this year. The key differentiator of our platform is really a complete openness. So if you look at some of our competitors who are looking into IoT, we do believe that it has to be an absolute open platform. Our clients need to have the ability to pick and choose the products that they want and the services that they want. And that means, as much as it hurts, it will not only be OSRAM devices that will be able to connect to the platform, it will also be third-party devices. And we want to do that on purpose, so that the client can choose. Same for applications. We will have basic applications coming from OSRAM, but we will encourage also third party applications and third party developers. So that our clients can develop their applications. But also third parties can do that for our clients. And that means, the key benefit of that platform will be the ability not only to scale but also how easy we have made it for third party developers to jump on that platform and add on additional functionalities. So, that is really a completely different enabler for new business models in the future. What you see here on the right side is just some examples of some of our core clients that we are piloting the Lightelligence currently with which is RZB, Beckhoff and Steinel, to give just a few examples. And we also see already a very interesting amount of traffic going over our Lightelligence platform. Again, I know I have to, you call that manage expectations, so this is really when we talk about the future. You all know, I think it is fair to say, that in IoT we will not see a tremendous amount of revenue and profit within the next couple of months. But this is really something where we want to prefer for the long-term future if you think beyond two years because that really enables us also to go into the platform business beyond the enabling of IoT solutions, also to tap into the software potential. So having said that, I think you can see our go to market we feel quite comfortable with, we have a very strong footprint in the lighting electronics, we are leaders with our light management systems and we have already developed our IoT platform. So, if you look at the buy and build approach where do we want to grow? If of course the generous funds are given to us by our mother, we look into selected M&As especially in the software area. We do have a strong competence in software, also in the electronics hardware part but that is really then the software is, let us say firmware in the electronics. But we want to go beyond and that is why this is really a key area for us to invest in. And then also sensing in terms of understanding what is happening in rooms, in horticulture. Because if you want to go beyond

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just good illumination, if you want to understand what do plant needs? First of all you need to sense and then you can provide with artificial intelligence also the right recipes. So this is really a very well, as I said, interesting market. But we will also need to have a partner ecosystem there. The ecosystem will become more and more important when we talk about the digital future of OSRAM. And I hope that you can see when you talk about new business models, I just gave you a few example but this is just the beginning. I strongly believe that there will be business models in the next five years that we currently do not even know them or understand that, they will be coming. So, having said that, let me give you a brief outlook what we expect in the next year to happen. First, looking at the market in 2019, we see a further decline in traditional business; I think that is not only fair to say. At the same time, we see a very healthy growth when we talk about the connected electronics; we are not the only ones talking about that. And it is the first time that we see a picking up of pilot installations, not only talking about IoT solutions but really having pilots out there. If you go 2020 beyond, it is just a question of time, when and how quickly the traditional business will fade out. The digital infrastructure will continue to grow because well, we are not the only ones looking at the ceiling and understanding that that is quite a good place to be at but we also do believe that IoT will be the key driver when we talk about these new business models in 2020 beyond. What does that mean for us within OSRAM? Of course looking at the traditional business we focus on our performance program, so it is very much about productivity, et cetera. We will execute our existing roadmaps for our connected electronics and of course, what I showed you before, we are currently ramping up our digital business really going into the systems and solution part. In the future we see that we will not only have selected M&A activities but we will also need to partner more with other companies. So, some of you may have followed that on LinkedIn, on our press releases, we see more and more that there are very interesting opportunities out there to partner with to really then scale with the ability that we have and maybe a technology that a data analytics house has. Going beyond then, that is really transforming us as OSRAM digital because you can see we still have a big share of the traditional business. We still have a big share of hardware, and even though you see a modest growth of OSRAM digital that Olaf and Ingo have shown, there is a huge transformation happening below that top line. And then of course when we talk about beyond 2020 extend our offerings and focussing on recurring revenue streams. So, with that you can see that we will not only benefit from, let us say, an ongoing LEDification, because in fairness, it is still a very strong market but the digitalisation is really where we see the next big

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potential. And we do see ourselves as the key enabler of IoT use cases by providing the infrastructure, by providing the smart hardware. Having said that, we are not going to stop there this is why this 20 percent we see is so interesting in our business because we also want to tap into the potential beyond really going into systems and solutions. And with that we can give you quite a solid financial outlook and without giving any details, we will also of course look into the selected M&As in the future. Thank you very much for your attention. And I hand back to you.

Andreas Spitzauer: Yes. Thank you, Wilhelm. So, with this I like to open the

second part of our Q&A session. To mention once again, please raise your hand, wait for the microphone, state your name; and if you would limit it to one or two questions, it would be great. So, let us start with Karsten from Bankhaus Lampe. Over there in the middle.

Karsten Iltgen: Yes, thanks. I am Karsten Iltgen, Bankhaus Lampe. A

question on the new divisions. Olaf, there you were saying that the new divisions achieved on a pro forma basis the margin target at the lower end of the range in Q4 already; I think in automotive you said it was the case, right?

Dr Olaf Berlien: Correct. Karsten Iltgen: The same for digital? Dr Olaf Berlien: Yes. Karsten Iltgen: Because if I make a simple model of the new divisions

and take all the divisionary targets into this, I get to a much higher EBITDA than the 14 percent target for next year (unclear 02:10:14) and also much higher than 15 percent you mentioned for the group level overall so…

Dr Olaf Berlien: I think it is better to move to Ingo. Then I am going out of

that. Ingo Bank: What was your question then? Ingo Bank: No, you did - on the envelope, back on the envelope? Karsten Iltgen: Yes. Ingo Bank: Yes. So, I think what we have to consider of course first

of all I do not have the performer numbers because we did not report internally and on the second definition that Olaf has now given to you. I think when you look at the projections that Olaf gave earlier for the three segments, I think they are looked at very carefully going forward. I do not want to comment on what you just said about Q4 because I cannot even give you performer numbers for

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those segments for the full fiscal year. So in that respect I think you should stick with what Olaf gave earlier on the guidance and then see how that develops.

Andreas Spitzauer: Okay, second question to Mr Ries in the first row. Johannes Ries: Maybe two questions on digitalisation. First, is the impact

on the margin right to see that if you are partnering and also you need more external products especially into sensoring? There is a negative impact on the cross margins, the others that you have a positive impact from software, how it balances out and going forward you come to the 10 percent operating margin. And second question partnering, how much placement your old mother company Siemens which is very active in IoT might play a role in the strategy as a partner?

Dr Wilhelm Nehring: Thank you very much for the question. So, first of all it is

very difficult currently to comment about margins because a lot of the future business models that we talk about you see all the companies are trying and testing models, what is really working. I think it is fair to say that at a certain point in the future, the hardware will have less importance and the software will have a significant higher importance. I cannot give you a good estimate when that will happen because we still see how important the hardware itself is, so all the clients that we talk about they need to have the end-to-end solution. The market is not standardised at all so we really say please provide me with a complete solution. To your second question, yes we are aware that we are not the only ones looking into that. First of all, I think we will see much more let us say so-called coopetition in the future but also I think it is fair to say that the markets that we are focussing on, is not naturally something where we will compete with companies like Siemens because we do not want to go into HVAC or anything similar to that. Of course I cannot comment too much about Siemens but we really think about our current position where we are and how we can enhance that, and we see a lot of clients of course, of our existing clients who are embracing exactly that. So we really like to move around our core competencies and then building on those.

Andreas Spitzauer: Okay, thank you. Next question from Sven in the first row. Sven Weier: A question maybe for Mr Schwabe. On the client reaction

on the Conti joint venture I think some of your Tier Ones were not so happy about it, maybe in France for example. So, I was just wondering if that dust has now settled and you do not see any negative consequences of that anymore.

Hans-Joachim Schwabe: First of all, I can tell you, and thank you for the question,

that reaction from all customers through the formation of

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the joint venture has been widely positive across Tier One, across OEMs, and even the one who were more concerned told us, it is a smart move. So, understanding that it is just a unique combination; you can either compete or can collaborate. If you compete only, you have probably limited opportunities. If you say some partners in Tier One we are selling electronic models as well but at the same time buying lighting models from us. So, this is a high dynamic in this value chain as you have seen before. So selective collaborations are always possible and even for specific regions I can tell you we have ongoing business on all sides with focus on components but also have already first ideas of collaborating systems.

Dr Olaf Berlien: And as Hans said, you know, it is a coopetition. In some

projects you are in competition, in the next one you cooperate. And the decision maker is usually the Tier One and not always our client. So, it is not that our clients had freedom to say who is the partnering. So in this case I can - what you said ideally that road-wide and Hans and me, we visit customers in Japan, in Taiwan, in Korea - so we got everywhere good feedback about that.

Ingo Bank: Maybe I would like to add because it is a very important

question. And I think it is important to understand this transformation in the technology; it is similar to radio. 15 years ago, the radio was a product, a component; standardised, very much standardised. Today there is no radio anymore but there is a radio function and it is similar with the light. In the past, we had the H7 highly standardised product, in the future there is a light function but it is integrated in a domain which is electronics. And therefore, I think it is very important that we make the first move and this is highly appreciated by the OEMs because now we can innovate with them in their ideas of the future domain of light in electronics. And the joint venture is really supporting these ideas and we get a major pull from the OEM side to innovate in this direction.

Dr Olaf Berlien: And do not forget this cross colour and modular

presented before. The perfect example that it is even a reduction of complexity, even supplying and helping the Tier One because it is a standardised platform being used for all but all can interface with it. At least all the opportunities for the Tier One to do optical customisations in that respect.

Ingo Bank: So, it is an interest of the OEM; they have really - Tier

One, they have the interest. Andreas Spitzauer: Okay, thank you. Next question from Peter. Peter Reilly: Peter Reilly from Jeffrey’s. Can we get slide 55 up, is that

possible?

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Dr Olaf Berlien: Of course. Peter Reilly: The reason I am interested is, you had this very

interesting slide showing the market - Dr Olaf Berlien: If he is going back 55 that may be a little bit long time but

- Peter Reilly: Okay. I thought that was a really interesting slide

because you have got three different markets all living at very different rates. You have not given us any idea of the size of the different markets view, which is very important for us so we can try and understand what the markets are doing from your perspective. And I am also interested related to that with what is happening in Xenon because I get the impression that Xenon it is been dying more rapid than you anticipated, maybe one or two years ago and it is obviously quite a valuable market in terms of revenue and profitability, which is presuming it hurts you in the short-term. So, maybe you can talk about the market structure mix and so we can understand a bit more about the headwinds you are facing for the next couple of years.

Hans-Joachim Schwabe: Yes. We are very glad by the way to have this team on

business still because it is a profitable business. And do not forget after the OEM cycle you have a long cycle of aftermarkets. I can tell you one of the biggest sellers over the last two years has been Xenon aftermarket business. So the share and structure of that kind of business turning more and more from OEM business into aftermarket business. And here you can also create added value with more light, more lifetime and so on and this is only OEM. This is only OEM business.

Dr Olaf Berlien: But as he said 1.3 billion cars are on the road with

halogen and Xenon so they need aftermarket business so there is a huge potential for that. But can you give us a split on that?

Hans-Joachim Schwabe: on the market for OEM? Dr. Olaf Berlien: That was his question. I think if you go back to the

beginning slide, I think you see there is a little bit - Peter Reilly: We have got the split of the whole market and I am

assuming you do not look like that and actually you are more over wake, standardised and less active in some of the (unclear 02:18:49) because you have got such a long legacy of success in the traditional business. I am just trying to understand how you would look in a world where you do not gain market share, what your structural growth is like because of the split of your technology and products currently in the OEM business.

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Hans-Joachim Schwabe: Yes. The biggest potential we definitely have in the so-

called lighting systems market because our share today contributing into the value chain in a very strong growing market is still at a lower level compared to light source. Light source you typically have market shares above 30 percent and even above 40 in LED. So, definitely the potential of growing further and beyond is in the lighting systems market.

Peter Reilly: Thank you. Andreas Spitzauer: Okay, next question coming from Lucie. Lucie Carrier: Thank you. Lucy from Morgan Stanley. I have two

questions actually. The first one is on the utility side and apologies to go away a little bit from the products but just coming back on what we have seen during 2018. I wanted to ask you, which type of visibility do you have today in terms of the inventory situation for your product or similar products at your largest customer? And when we think about the way your products are distributed, I think there was maybe some surprise for us to kind of discover that not everything was sold to OEMs or Tier One suppliers, there was also some distributors, you know, in between. And so, I am just trying to join the dot in terms of your warning back end of June and all of the most recent warning we have seen trying to understand if you would see the weakness earlier or if you see the weakness after? So, trying to understand this value chain in the automotive business.

Hans-Joachim Schwabe: Yes. I think the visibility in the OEM business as you

know is rather short-term because we have EDI connections with most of the Tier Ones. So, typically you have long-term contracts which has been done at the end of the year so this is a negotiation process we are in right now, also negotiating higher shares definitely. And then you have typically for all this kind of Tier Ones every three, four weeks a permanent updating round on short-term deviations of let us say what we have agreed and planned on. What we see as a first signal is that they have a little bit reduced over the last two, three months their initial ordering behaviour. I think they are more cautious, all the noise and all the problems about WLTP, especially one who is serving German carmakers right now. But overall I would say we are in fact with the expectations. So, what you have heard on the Opto side, on the LED component side, that we are pretty much in line in the current state of the next year forecast. The variable is China; no one can tell you right now, whether China is growing by a single digit, high single digit or even zero. This is an ongoing issue and this is, knowing that it has 25 to 30 percent of the total market, a high variable. And if you look to the aftermarket business they are a

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very stable market. It is more on our portfolio and I will go to market what kind of new product, what kind of added value we can contribute? On the OEM side definitely every three, four weeks we have updates and the most variable or the most critical is China right now.

Ingo Bank: And maybe a word on the distributors because I am a bit

surprised about your comment Lucy. I think what we have said in the opto day is that we do not sell to distributors, distributors fulfil a very important fulfilment function for the Tier Ones, so that is - yes, but that is different than selling to distributors, distributors are asked by our Tier Ones to fulfil for them logistically.

Lucie Carrier: Yes, but my question around that and where we see I am

still trying to get the answer, is how much visibility do you have on the inventories? So, I understand you do not sell to distributors, you are an intermediary but how much visibility do you have on inventories in the channels? That is my first question; and then that is number one. And then, how should we think about the what are called the phasing of ordering for deliveries ultimately on the car? Because I think, when you warned end of June, no one else had warned and everyone was surprised and everyone thought it was a company specific issue. In the meantime, we have seen numerous Tier One suppliers, OEMs warning. I am just trying to understand, how shall we think in terms of phasing in the value chain? Which is quite important for us as we get more news flow on automotive and mostly it does not come from you or your direct competitor because they are not listed, like Nichia or Lumileds, it comes from your customers. So we need to understand the phasing of operations here.

Ingo Bank: So, if you look at the distributor piece, which is a big part

of Opto, we do have some visibility with inventories for our distributors, not with all of them. Some of them we track with selling-in, selling-out that we know whether there is a balance or whether we start stocking. What we have also seen certainly in fiscal year ‘18 is that some of the distributors not just fulfil on the LED side but they also fulfil on semiconductors and other parts and sometimes the ordering behaviour of the distributors then is basically, they buy everything in packages if you like so they add and they get something on the semiconductor side they also start adding somewhat on the LED side. So, it is very hard for us to sometimes see exactly, what was going on. We do not have that visibility with all the distributors so what we try to monitor instead is in sense, of is there a change in the ordering behaviour in the sense that people start shifting orders over time, even a customer typically orders once a quarter or once a month, is he or she changing that? And we are also very much closely monitoring, whether people push out orders that they once put in because they have that flexibility

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and whether that changes over time. And that is what we saw in the summer and that basically was the reason why we were maybe the first ones to sort of articulate something happening, if something is happening in the supply chain. I think, it is fair to say that right now, in some markets we have seen somewhat higher inventory levels for LEDs particularly in China, we have seen that, we also monitor in the United States they have good data, dealer inventory, we know exactly what dealers have on hand and they are selling-in and selling-out; Hans and the team are on top of that So, we do have it in some markets but in many cases, as you may know, it is also depending very much on the distributor willing to show us his real data and not with all of them can be directly sort of have a sight from an EDI perspective on their own warehouse status. Some allow that and some others do not.

Dr Olaf Berlien: and if they allow, we have a four week visibility. Lucie Carrier: Thank you. And then I had a question for digital. We have

heard for a long time, the contacts connected lighting software systems and it was presented at OSRAM Light & Building already over the last few years. When you look at yourself or a lot of your competitors, you often report strong growth on the connected side or the software system side but the rest is declining so much and also with price decline that it is difficult to generate that strong growth overall for the portfolio. And so I just trying to understand, in which measure all of this new technology that are being pushed, also accelerating the cannibalisation over the legacy businesses and considering that you are not a pure play on all of those new technology; how do we think about the growth profile? I see, you gave us a growth target but when you look over the last few years of all of those businesses, none of them in the market with that type of portfolio has delivered even close that growth level.

Dr Wilhelm Nehring: First of all, you are absolutely right when it comes to the

traditional business where we of course still have quite a huge exposure. So that is going down, so we really have to transform the company if we want to keep up on the growth side of the business to find the right balance with what we are losing on the traditional business. I am not seeing it too negative though because the traditional business in the end of the day was the business that is first of all giving us the access to our customers. And let us also not forget we would not be doing that if it would not be generating cash and if you want to invest into future businesses. So, a lot of the software businesses that we talk about it is very often really about growth and about investing into revenues that will not come now, that will not come in the next year but that will come in the long-term future. So, I think without that traditional

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business, we would have a very weak position to have but let us say necessary cash to invest into future business. In terms of cannibalisation I think it is a difficult question or difficult to answer. I do not believe that the, let us say, connected drivers or let us say the IoT solutions on top of that are really the reason for the decline or let us say, the commoditisation of hardware. That is simply something that we can see in the world that we are today and how we can produce goods, where we can produce goods. But basic products simply become cheaper and become commodities. So, that is something that we will face anyhow as everybody else in the industry. So, it is really a new potential that we had when we talk about connectivity and IoT solutions.

Dr Olaf Berlien: I think Wilhelm, what is also important to add is when we

talk about cannibalisation, when you have a basic driver today, basic electronics and we basically in the next generation added with additional sensing capabilities connectivity capabilities it is running in the same manufacturing, it is running in the same plan. So, from the function it is a new product but the content is more or less the same; we add some sensor and some connectivity, some more electronics but it is running in the same factory, and therefore it is not really a cannibalisation of our business, it is a new functionality add-on on old functions which are as drivers in luminaires.

Andreas Spitzauer: Okay, Mr Turnwald. Just one second for the microphone. Markus Turnwald: In early August we also showed the top nine customers

in the deviation from the previous ordering pattern. I mean, there at least in August there were some green arrows also included; the question is whether there would be still green arrows included and whether things have well, been changing since then? Thank you.

Ingo Bank: We monitor it really on a monthly base and every two

weeks we talk about in detail through the list but maybe Hans, you can explain that still this is valid.

Hans-Joachim Schwabe: You probably talk about automotive customers now? Markus Turnwald: Yes. Hans-Joachim Schwabe: Yes. Markus Turnwald: The top. Hans-Joachim Schwabe: Definitely it is having this high share already some Tier

One, it is not so easy to increase further and other -

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Markus Turnwald: No, I know what you mean, you meant the overview? Yes, there are some green still in there, there are greens but there are also red still in there.

Hans-Joachim Schwabe: But definitely we have out of these nine definitely we

know also for the forecast on 2019, we have definitely some green arrows. We are definitely growing at some customers where we had lower shares before so with new design wins but we have other reach and some customers are kind of saturation having an extreme high share. And this is all the normal effects so the main reach for the main area of dynamic developments and the share is definitely focusing stronger in the APAC region.

Dr Olaf Berlien: But what he meant was that, do we have more lights in

green or red and the answer is we have maybe more lights in red but still some greens on. So, really the automotive industry is declining, that is a fact.

Andreas Spitzauer: Okay, Mr Ries, please? Johannes Ries: A very brief question on a topic, which was more

highlighted some months ago but it is still here on the list on the negative component shortage. If it is still a topic had it eased so much, how much it is still a burden?

Ingo Bank: Well, it is a burden but Wilhelm knows all about it. Dr. Olaf Berlien: Wilhelm, maybe you talk about shortages and maybe you

can explain it much better. Dr Wilhelm Nehring: Yes, it is still a concern. We do believe that we have the

peak or that we have seen the peak already but it is not that we now are in a very relaxed situation and everything is fine. So, we still see in certain components a very critical situation in the market. Of course, everyone is trying to prepare as good as possible to accommodate that so that we can also deliver to our clients but it is not over yet.

Hans-Joachim Schwabe: I think what you will see in the next weeks is that you will

see more and more headlines that the situation on electronics in general is getting more relaxed. Shortage will still be power electronics and these are also some of the critical components we will immensely use in these products.

Andreas Spitzauer: Okay, next question coming from Sven. Sven Weier: Yes. I have a follow-up question please on chart, what is

that 53, where you show the LED penetration of the new vehicles. First of all, I was just wondering how you come up with a 25 percent penetration in the new registrations, that looks quite high to me to be honest with you, given that it is still I would say it is still a premium car

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phenomenon, still not so standard on mass market. And the other question I had was, just when we think about this longer-term obviously in the general lighting market we saw that mid power LEDs were replacing high power. Do you see that potential on the headlamp side as well that in five years down the road you can also do this more with mid power solutions?

Hans-Joachim Schwabe: Probably I will start with the first question. For us 25

percent is not as high because we see a lot of end of programs running now for premium cars still having been equipped in the past with Xenon. So the first generations now replacing Xenon with a so-called optional package for the premium package you have for cars; this is done with LED. The next generation will be halogen being replaced so that is really we believe in 45 percent very soon. It is more cost driven, more on the functionality side. And if you look to the discussion on the mid power, high power range it is definitely if you come to simple functions, let us say in interior, then you have all the capability of low and mid power elements. But if you look to the new designs they are looking, then you look into this place and you have - you can rate the animation and graphics in big, big areas for being illuminated. So, this gives also room for new LEDs to play a very important role here. So, we believe also in the so-called upgrade capability driven by the new interior designs in cars.

Ingo Bank: But we do not see that mid power would be strong

enough even in five years for the headlights, for the headlamps, no.

Sven Weier: And the last question I had was just on the tariff impact,

Ingo that you talked about the 30 million. Is that already based on the increase to 25 percent from January, so if it goes out better maybe then you would have…?

Ingo Bank: Yes. Sven Weier: Well, what is the difference there, are we talking about

10 million or…? Ingo Bank: It would be yes, a third less probably. Yes. Sven Weier: Thank you. Andreas Spitzauer: Okay. Okay, then thank you very much for your

questions. I hope it was valuable insight for you, today’s event and yes, thank you very much and have a nice afternoon.