MS Industrie : EXTRACTS from the Group's Management Report 2020 (NOT LEGALLY BINDING)

NOT LEGALLY BINDING

Important notes: English translation for convenience purposes only General data format is "TEUR" (Euro thousands),

i.e. TEUR 1.000 = EUR 1.000.000 or EUR 1 million

E X T R ACTS F R O M T H E G R O U P'S M A N AG E M E NT R E P O RT F O R T H E F I N A N C I A L Y E A R 2 0 2 0

MS Industrie AG

There are mountains that you have to cross over, otherwise the path will not go on.

Ludwig Thoma

Content

FOREWORD	IV
PRODUCT PORTFOLIO	VI
OVERVIEW OF KEY FIGURES	VIII

Foreword   MS INDUSTRIE AG IV

Dear shareholders, employees and business partners of MS Industrie AG!

Armin Distel and Dr. Andreas Aufschnaiter

Executive Board of MS Industrie AG

In 2020, MS Industrie AG realised a total turnover of around EUR

164.0 million. Compared to the turnover of the previous year (EUR 226.4 million), this represents a reduction of around -27,5%, on the one hand as a result of the sale of production for the Daimler "world engine" in the USA at the beginning of the second quarter of 2019 (effect -9.4%), and on the other hand due to economic downturns in connection with the global Covid-19- pandemic (effect -18,1%).

The development of the various key earnings figures was correspondingly negative with a consolidated net income after taxes of EUR -7.5 million (previous year: EUR 16.7 million) and

• despite the negative result - a slightly improved equity ratio from 37.1% to 40.0%.

We would like to highlight for the readers of this annual report a few key milestones and developments that we believe are significant in assessing the 2020 financial year and the outlook for the future:

•Business development in the MS Powertrain Technology Group ("MS PTG") was already characterised by a strong decline in demand in Europe since the middle of 2019. The year 2020 also started at this low level (around 25% below the peak year 2018) and was exacerbated in the second quarter by a number of closure weeks at the main customers, which also had a significant impact on the adjusted consolidated operating result (EUR -8.0 million). In the second half of 2020, the market recovered noticeably and led to profitable monthly operating results at the main location in Trossingen.

•The effects from the sale of the production of the Daimler world engine at the Webberville / Michigan location to the American subsidiary of the Gnutti Carlo Group (Gnutti Carlo S.p.A., Maclodio / Italy) as of the beginning of April 2019 have an impact on the year-on-year comparison, both in the MS PTG segment and for the Group as a whole. In any case, the dependence on the global key account Daimler decreased in line with the strategy. At the same time, targeted marketing measures were launched in 2020 to acquire new customers and series parts, which are already bearing fruit.

•Starting in mid-2019, the MS PTG management has carried out a far-reaching internal restructuring at the two locations in Trossingen and Zittau, which - combined with machine relocations, machine automation and space consolidation - unfortunately also led to the closure of the Zittau location at the end of 2020. As a result, the break-even threshold of the business unit with full-year effect from January 2021 is now significantly below the previous level and leads to a significantly improved competitiveness in the coming years.

•In April 2019, the contract for the series production of valve train components for a new engine platform for heavy trucks

of the Traton Group was successfully awarded. The organisational and mechanical preparations for the start of series production, which is now expected to be slightly delayed for 2022, are progressing according to plan.

•In the ultrasonic technology segment ("MS Ultrasonic Technology Group", also abbreviated to "MS UTG"), special machine construction for our customers in the passenger car industry in both Europe and North America declined significantly compared to previous years, as the number of orders decreased noticeably due to the change in product ranges at almost all passenger car manufacturers as a result of the new electric and hybrid drive systems. However, we expect a counteracting effect from mid-2021 onwards due to a series of new models whose market launch has been announced from 2023 onwards.

•In the MS UTG division, the new product range of ultrasonic series machines based on Industry 4.0 under the "MS sonxTOP" brand unfortunately only developed slightly positively, as all trade fairs worldwide were cancelled due to the measures to combat the Covid-19-pandemic and visits to customers and interested parties have been extremely limited. In sales, a series of new digital formats and communication channels were responded to with a very positive echo.

•Due to the pandemic, the MS UTG Systems and Components division for other machine manufacturers from a wide range of industries was able to record a significant boom in 2020 with sales of over EUR 5 million, including for the welding of mouth / nose masks and protective suits. This encouraged the management to strategically expand the very attractive market for nonwoven materials from 2021 onwards.

•The e-drive, developed at the electric motor plant in Grünhain (EMGR) under the "ERZMO" brand, which is used, among other things, for Deutsche Post delivery bikes, experienced a massive increase in unit sales for the first time in 2020, which was largely able to compensate for the slump in other products caused by the economic situation. As of 31 December 2020, MS Industrie AG sold a total of 80.1% of the EMGR shares to the Austrian S.I.E. System Industrie Elektronik Holding AG as withdrew to a minority position. This step is intended to focus the forces for the two main segments MS PTG and MS UTG and their further growth.

Foreword   MS INDUSTRIE AG V

At its low point in the summer of 2020, the Group's order backlog was around EUR 81 million and - after deconsolidation of the electric motor plant (with an order backlog of recently around EUR 7 million) - had recovered significantly to around EUR 95 million by the end of the first quarter of 2021. Despite the still unstable international economy as a result of the Covid-19-pandemic, we expect a positive financial year 2021 for the business segments of the MS Industrie Group and on the basis of the optimization measures successfully implemented in 2020.

In 2020, the MS Industrie share price lost significantly in March in the general downward pull of the Covid-19-pandemic on the stock market and - also due to the negative consolidated result

• unfortunately did not develop satisfactorily by a total of around -22% until December. With the positive business outlook, a noticeable recovery should be possible in the course of the 2021 financial year.

In our estimation, the MS Industrie Group will emerge significantly stronger from the crisis of 2020. We expect steady and profitable organic growth in the coming years due to the improved order situation and expanded technology offerings of the MS Industrie Group.

We would like to extend our special thanks to all employees of MS Industrie AG who, with consistency, steadfastness and team spirit, have jointly mastered the extraordinary challenges of 2020.

Yours sincerely,

Dr. Andreas Aufschnaiter

Armin Distel

Munich, 23 April 2021