2018 Ar All e

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COMPANY LIMITED
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Fiscal Year 2018

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(January - December)
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Mission Statement
As a global corporation continually striving to be the world's largest
and most respected international manufacturer of turning centers, machining centers,
multi-axis turning centers and grinders, we will:
Enable our customers to maximize their advantages and excel in their respective markets by
continually striving to provide innovative, accurate, and trouble-free machines at competitive prices;
Increase our customers' productivity and efficiency through our latest developments in technology as manifested
by our increasingly accurate and progressive manufacturing capabilities;
Support our customers with our knowledgeable and responsive sales, applications, and service personnel.
As befits a worldwide corporation, we will:
Foster a fair and open corporate culture, utilizing appropriate management initiatives;
Emphasize company-wide communication with the recognition of earnest and enthusiastic team-oriented efforts;
Respect each other's opinions and continually develop through friendly competition in energetic and cheerful workplaces.
As profitability is a goal of all healthy business organizations

and in keeping with the true nature of the machine tool industry, we will:
Work to increase the value of our company, the investment of all shareholders knowledgeable
of the true nature of the machine tool industry and the prosperity of our partners;
Always remember that the pricing of our products and services is an integral factor of
the prosperity and perpetuity of the corporation;
Generate suitable profits to ensure the cash flow necessary to provide for the healthy operation of our corporation,
research and development, stable customer services, employee training and development,
and, the maintenance of safe and efficient manufacturing facilities.
As an industry leader and responsible corporate citizen, we will:
Contribute our fair share to our local community and society;

Conserve environmental resources at all times to preserve the global environment;
Incorporate the highest standard of ethics while still encouraging an aggressive approach to our business activities.
1 | Annual REport 2018

Glossary
Below are additional explanations to some selected vocabulary in this annual report.
Descriptions in the annual report Explanations
DMG MORI The entire DMG MORI Group consisting of DMG MORI CO., LTD,
DMG MORI Group DMG MORI AKTIENGESELLSCHAFT, and other group companies
DMG MORI CO
CO DMG MORI
DMG MORI CO., LTD.
DMG MORI AG
DMG MORI AKTIENGESELLSCHAFT
AG
Financial Calendar
DMG MORI CO., LTD. DMG MORI AKTIENGESELLSCHAFT
71st Annual General Meeting of

22 March 2019 30 April 2019 Release for the 1st Quarter 2019
Shareholders
117th Annual General Meeting of

08 May 2019 Release for the 1st Quarter 2019 10 May 2019
Shareholders
Release for the 2nd Quarter 2019

08 August 2019 30 July 2019 Release for the 2nd Quarter 2019
(plan)
Release for the 3rd Quarter 2019

07 November 2019 31 October 2019 Release for the 3rd Quarter 2019
(plan)
Reporting term
January 2018 – December 2018
Some contents include subjects that occurred outside of this term.
Disclaimer
This annual report contains targets, plans, etc. concerning the future of DMG MORI. All predictions concerning
the future are judgments and assumptions based on information available to DMG MORI at the time of writing.
There is a possibility that the actual future results may differ significantly from these forecasts, and described
plans may not be implemented. There are many factors which contain elements of uncertainty or the
possibility of fluctuation for a variety of reasons.
Annual REport 2018 | 2

Back row from left External Auditor , External Director External Director, External Director,
Dr. Eng. Dr. Eng. Ph D.
Sojiro Tsuchiya Takashi Mitachi Tsuyoshi Nomura Tojiro Aoyama
Front row from left Executive Director, J.D. Executive Vice President Vice president President,
Dr. Eng.
James Nudo Hirotake Kobayashi Christian Thönes Masahiko Mori

Annual Report 2018
Table of Contents
P5-9 Management Message
P10 Financial Summary
P11-26 Business Highlight
P27-38 Core Competence
P39-68 Business Summary
P69-72 Major Group Company
P73-76 CSR Activities
P77-84 Corporate Governance
P85-88 Risk Management
P89-92 Environment
P93-101 Human Capital
P102-105 Social Activity
P106-163 Consolidated Financial

Statements
P164 Corporate Data
This symbol indicates a video

for further information.
External Director Corporate Auditor External Auditor
Makoto Nakajima Toshio Kawayama Yoshinori Kawamura

Executive Vice President Executive Director, Dr. Eng. Senior Director
Hiroaki Tamai Makoto Fujishima Minoru Furuta

Management Message
Message from group CEO
D r. E n g . M a s a h i k o M o r i
DMG MORI Group CEO
DMG MORI CO., LTD. President
DMG MORI AG Chairman of the Supervisory Board
In 2018, in the 70th year since the company’s into our own plant in FAMOT, Poland, and celebrated the
establishment in 1948, and the 10th year since the start Grand Opening of the new facility.
of capital and business collaboration with DMG MORI
AKTIENGESELLSCHAFT in 2009, we marked sales 35% of orders we receive from the global market are for
revenue of JPY 501.2 bn., surpassing an important 5-axis machines, although they account for only 10% or
milestone of JPY 500 bn. for mid- to long-term growth. more in the Japanese market. In the 70th anniversary
year, we started loaning out 70 units of the cutting-edge
We are in the process of business model transformation. 5-axis machining center �DMU 50 3rd Generation� to
In addition to production, sales, and service of machine Japanese customers. We launched this project to help
tools, we now provide added values directly to customers more customers experience the benefits of 5-axis
worldwide. For example, we enhance our product line-up technology first-hand. We also help them train their own
of peripheral equipment on a widespread customer base machine operators through private lessons by using
of CELOS, our operating interface for machining process. installed machines. By the end of 2019, more than 10,000
We develop more applications and software such as people will be introduced to 5-axis technology through
Technology Cycle. We suggest more automation systems this program. We exhibited large-sized 5-axis machining
to customers to compensate for labor shortage, centers DMU340Gantry, DMU210Gantry, DMU160Gantry,
particularly that of skilled operators. Our new business and other models at IMTS in Chicago in September and
strategy started to bear fruits in 2018. This will continue JIMTOF in Tokyo in November. We received a lot of
to be part of the foundations for our mid- to long-term inquiries and requests for test cut. We believe that these
business growth. efforts will contribute to an expansion of 5-axis
technology and make significant changes in the
Summary of 2018 business results manufacturing process in Japan.
We established Tokyo Digital Innovation Center (DIC) to
accelerate expansion of 5-axis, mill-turn, and automation In area of automation, we launched new modularized
technologies and to develop digital products. Moreover, products MATRIS (Module Automation Transfer Robot
we incorporated all of those technologies and products Intelligence System) and MATRIS mini to reduce initial

Management Message
investment cost, shorten delivery lead time, and make

robot and other programming easier for customers. It is
our strength to deliver the entire automation solutions
from our own source, starting from design, production, Robust and flexible Simultaneous 5-axis Turning+Machining+
machining / 4+1 axes / Grinding+Inspection /
installation, operator training, after-sales service to 3+2 axes Measurement
layout changes of automation systems. Thanks to our
customers’ trust in DMG MORI, we increased the order
ratio with automation from 17% in 2017 to 24% in 2018.
This growth has a significant impact on order, sales, and Multi-axis, Big data,
gross margin increases. Our target is to raise the ratio to 5-axis, Analysis,
80% in 2030. MillTurn Utilization
Multi-axis technology allows us to machine workpieces

with one-time clamping. More and more customers Development through
introduce automation solutions. Both factors push the learning
demand for digitalization to collect, analyze, and feedback
the data during machining and quality control processes. Single
IoT, Sensing,
Against this background, we established Tokyo DIC in chucking,
Measurement
June 2018. DIC gathers DMG MORI’s group companies’ Automation
knowledge and excellence at one place and facilitates
development of more convenient solutions for customers.
Four group companies are located at DIC: DMG MORI
B.U.G. CO., LTD. develops and upgrades the operating
system CELOS; Magnescale CO., LTD. excels in cutting-
edge sensing technologies; Saki Corporation is a
High precision / Chip and Cool ant Disposal /
specialist for quality & feature analysis and image Machining Measurement Data
processing by 3D and X-ray technologies; Technium CO.,
LTD. was established by DMG MORI and Nomura production of machines and components. We present
Research Institute to offer solutions for managing FAMOT as a model factory for customers who would like
machines’ data and service history at one stop and for to build their own cutting-edge digital factory with
preventive maintenance. Industry 4.0 solutions.
In area of production, we completed the first phase of Human resources are the most important management
production capacity increase at FAMOT in October 2018 to assets. In this area, DMG MORI has promoted TQM (Total
catch up with the growing demand for high-accuracy and Quality Management) activities. Today, each department
highly functional machine tools. FAMOT supplies key has started to identify issues and take actions for
components of machine tools such as casting parts and improvement based on the PDCA-cycle. It is gradually yet
spindles to DMG MORI’s other plants in Europe. At the visibly enhancing our productivity. We will continue TQM
same time, FAMOT assembles machines of CLX- and activities with a goal to receive a Deming Prize in the
CMX-series. FAMOT embodies the cutting-edge digital future. Leadership training was another key project for
solution factory by integrating the group companies’ human resources development. 60 employees by 2018
software solutions for maximizing productivity: and additional 30 employees in 2019 were selected from
production planning and management tools by ISTOS 13,000 global workforce to participate in the training at
GmbH, logistics and inventory management tools by DMG different locations. Some parts of the program are held
MORI Software Solutions GmbH, and maintenance tools by university professors.
by WERKBLiQ GmbH. FAMOT’s role goes beyond

Management Message
All these efforts resulted in increases of orders by 11% Development, Production, and Sales. At the same time,
year-on-year to JPY 531.2 bn. and sales revenue by 17% we intend to strengthen cooperation between
year-on-year to 501.2 bn., both exceeding the threshold departments and to strictly manage the business process
of JPY 500 bn. On one hand, we had to bear cost increase from order, design, procurement, production, sales to
due to supply shortage of key components following a collection of accounts receivables. Each Company should
surge of demand and the inevitable confusion in supply not only control its profit and assets, but also maximize
chain. On the other, we successfully increased operating cash flows, as they are the most important elements for
profit by 23% year-on-year to JPY 36.3 bn. and net profit improving the enterprise value. Each company is headed
attributable to the owners of the parent company by 21% by Directors and Operating Officers in their 30s and 40s.
year-on-year to JPY 18.5 bn. Free cash flows amounted We would like to develop them as candidates of the future
to as high as JPY 30.4 bn. As a result, we decreased net board with experience in general management and
interest-bearing debt to JPY 82.8 bn. from JPY 105.7 bn. financial controlling.
at fiscal year-end of 2017 and increased dividend per
share by JPY 10 to JPY 50.　 The machine tool demand is expected to decrease by
about 10% in 2019. Nevertheless, DMG MORI will commit
Key focus areas itself to receiving orders equivalent to 2018 results. We
DMG MORI established a system to provide sales, service, will achieve this goal by making more attractive proposals
and engineering to customers directly. Moreover, order with multi-axis and automation technologies, and by
volume is becoming stable thanks to a successful shift delivering higher values by on-time service and
from machine to automation solution including peripheral maintenance through IT solutions of Technium and
equipment and software. Nevertheless, we had to endure WERKBLiQ launched last year. Our 2019 business targets
cost increase due to instability of supply chain in 2018. are: sales revenue JPY 500 bn.; operating profit JPY 36
Although the supply chain network is going back to bn.; net profit attributable to the owners of the parent
normal in a short-term, we need to strengthen the company JPY 19 bn. We will generate free cash flows
delivery system of machine tool components once again equivalent to 2018 by earlier collection of accounts
to achieve mid- to long-term growth. receivables and inventory reduction and reduce net
interest-bearing debt to JPY 65 bn. or less. Dividend
In 2019, we introduced an internal Company system to payout per share will be JPY 60, up by JPY 10 from 2018.
clearly define the role and responsibilities of
■ Organization Chart (from January 2019)

Supervisory Board
CO Executive Board DMG MORI Board of Directors
Executive Board
CO Headquarters AG Headquarters
DMG MORI CO., Ltd. DMG MORI AG
R&D Production SSEP Group Sales & Production

Company Company Company Company Service Plants
New Products Iga Japan Taiyo Koki Management/HD DECKEL MAHO Software
Pfronten Solutions
Elemental Techn. Nara North America Magnescale Germany/
Austria DECKEL MAHO ISTOS
Software Davis South America SAKI
Seebach
Tianjin Asia EMEA WERKBLiQ
Electrical Circuit
& Control China GILDEMEISTER GILDEMEISTER
Purchasing Israel Drehmaschinen Betteiligungen
Central Quality Iga Parts Center India
ODS/ GILDEMEISTER
(PPR) Innovative Machining
Dallas Parts Center Services Italiana
Intellectual Property
Watanabe Service FAMOT
Manual Seikosho Pleszew
Solution Center
Development Ulyanovsk MT
Management Engineering
GRAZIANO
System Development Tortona
TECHNIUM SAUER
REALIZER

Management Message
Message from CEO of DMG MORI AG
Digitization� – for customers and suppliers.
ADDITIVE MANUFACTURING is one future area with high

growth potential. With a strategic 30% share in INTECH,
DMG MORI further expanded its position.
In addition, to our five strategic future topics －

Automation, Digitization, ADDITIVE MANUFACTURING,
Technology Excellence and DMG MORI Qualified Products
(DMQP) － we are focusing on Quality and Service,
Christian Thönes Employees, Global One Business Excellence and
DMG MORI AKTIENGESELLSCHAFT Sustainability. These are further important pillars of our
Chairman of the Executive Board
strategy.
DMG MORI CO., LTD. Vice President
› �First Quality� – we drive this with numerous measures:
DMG MORI can look back on a very successful, eventful For example, since 2018 we have been offering a
year 2018. In addition to record figures for order intake, 36-month warranty period for all motor spindles of the
sales revenues, EBIT and free cash flow, we achieved a �MASTER� series – without restriction on hours.
lot and have shown our innovative power. As �Global One › �Customer First� : At DMG MORI, the increase of our
Company� , we actively lived our motto �Dynamic . customers’ service satisfaction is a top priority. We also
Excellence� . DMG MORI is the sustainable and global want to become the service champion with excellence for
innovator in the manufacturing industry. our customers!
› Our employees give 100% support to DMG MORI. That’s
DMG MORI continues to see a positive development why we do the same for them. We take our responsibility
– technologically, structurally and culturally: seriously. Together, we want to become even better. At
› technologically: Dynamically, we drive forward our this point, we want to express our special thanks to our
innovation strategy for our future topics and focus on employees. For their high commitment and great
complete solutions for Automation, Digitization and performance.
ADDITIVE MANUFACTURING. › GLOBE stands for Global One Business Excellence.
› structurally: Through the appointment of Dr. Eng. Mori Excellence in integration, innovation and performance
as the new Chairman of our Supervisory Board, we have – we apply these principles in our �Global One Company� .
sustainably strengthened our position to actively shape Every day. The harmonization of systems and processes
the future together with our customers and partners. forms the basis for this.
› culturally: As �Global One Company� , we live a modern › As innovation leader, we also think further in terms of
company culture and commit ourselves to clear values. sustainability: Our complete automation and integrated
DMG MORI is an attractive employer. The health and digitization solutions enable our customers to use their
satisfaction of our employees has also high priority. machines, tools and further production factors highly
efficiently. With numerous social projects and initiatives,
Automation is the key to flexible production systems. We we also show that we live corporate responsibility.
have continuously expanded our automation portfolio at
all locations. With modern pallet and robot-supported We have a challenging year ahead of us with changing
workpiece handling, we enable our customers optimum market conditions. We have to adapt to it. With our stable
productivity. leadership team and our unique combination of dynamic
and excellence – as �Global One Company� . We have
Digitization is changing our world quickly and radically. stable structures, a TOP management and great trust in
With CELOS, ISTOS, WERKBLiQ and ADAMOS, DMG MORI our whole team. Our employees are our biggest asset! All
now has a consistent digitization strategy – �Integrated the best!

Management Message Management Message
DMG MORI's high-quality and high-efficiency total production solutions

generate values for customers and society.
Message from Executive Vice President

The employees are the most important management resource for innovation.
DMG MORI mixes central management, moderate alignment, and authority
delegation policies in recruitment and talent development activities. For instance,
the headquarters oversee senior managers of each location, while entry- to
mid-level employees are locally managed.
CO makes long-term investment in human resources. In order to mitigate the

dependency on our Japanese and German workforce, we started hiring new
graduates based in each region and have offered them both task-specific hands-
on trainings and group-wide trainings. Since the recruitment system was
launched in 2017, 20 local graduates from 5 countries decided to join us by 2019.
H i r o a k i Ta m a i
DMG MORI CO., LTD. The leadership training for selected employees, initiated in the U.S. in 2018,
Executive Vice President reflects our �moderate harmonization� policy. The training was later made
available to those who work/live in Europe and Asia, and now the number of
applicants surpasses 200. 60 were chosen and have completed the course so far
and another 30 will participate this year, hopefully bringing back leadership skills
and making a change in their home bases.
In FY 2018, DMG MORI generated more profit than in the previous term: sales
revenue of JPY 501.2 bn. (up by 16.7% year-on-year), operating profit of JPY 36.3
bn. (up by 23.4% y-o-y), and net profit attributable to owners of the parent
company of JPY 18.5 bn. (up by 21.3% y-o-y). Free cash flows exceeded JPY 30 bn.
for 2 years straight so that we successfully decreased net interest-bearing debt to
JPY 82.8 bn. at fiscal year-end 2018. Equity ratio attributable to owners of the
parent company as of December 31st amounted to 21.0%, up by 2.0% y-o-y.
In FY 2019, we expect a shift towards an adjustment phase, although the overall

order volume will remain high. Considering also the impact from weak Euro, our
business targets for FY 2019 are: sales revenue of JPY 500 bn.., operating profit of
H i r o t a ke K o b a y a s h i JPY 36 bn.., and net profit attributable to owners of the parent company of JPY 19 bn.
DMG MORI CO., LTD.
Executive Vice President Annual dividend payout in FY 2018 increased by JPY 10 to JPY 50 per share with
the dividend payout ratio being 34.7%. In FY 2019, we will once again increase
dividend payout to JPY 60 per share for the sake of stable shareholder return.
We will further strengthen our financial structure, share the generated values
with our shareholders and investors, and build sound relationships based on
constructive dialogue and mutual trust. We appreciate your continued support for
our business.

Financial Highlights Financial Highlights
Financial Highlights
DMG MORI Group adopts IFRS since fiscal year 2015 to improve international comparability of financial
information in the capital market, and to consolidate accounting policy throughout the group.
In billion JPY In million EUR

Changes in Changes in
2018 2017 Changes 2018 2017 Changes
% %
Order intake 531.2 478.4 52.8 11.0 4,072 3,776 296 7.8
Sales revenue 501.2 429.7 71.6 16.7 3,844 3,391 452 13.3
Operating profit / EBIT 36.3 29.4 6.9 23.4 278 232 46 19.8
（Operating profit margin） 7.2% 6.8% 7.2% 6.8%
Profit before taxes / EBIT 31.3 24.8 6.5 26.1 240 196 44 22.5
Net profit 19.4 15.7 3.7 23.6 149 124 25 20.0
Net profit attributable to the

18.5 15.3 3.3 21.3 142 120 21 17.8
owners of the company
Cash flow from operating activity 49.4 31.4 18.0 379 248 131
Cash flow from investment activity －19.0 －1.4 －17.6 －146 －11 －135
Free cash flow 30.4 30.0 0.3 233 237 －4
January – December 2017: 1 EUR = 126.7 JPY (average rate for the period)
January – December 2018: 1 EUR = 130.4 JPY (average rate for the period)
2018 2017 Changes
Employees 13,042 12,375 667
*Employees at the end of each period
■ Machine tool ■ Sales revenues ■ Operating profit ■ Dividends per Share

　 related order intake Ratio of operating
profit to sales revenues
(Billions of yen) (Billions of yen) Operating profit (Billions of yen) (Yen)
497.0 501.2 Ratio of operating profit to 50
sales revenues (%)
448.3 36.3
429.7
40
381.7 376.6 9.8%
357.3 31.1 29.4
318.4
26 26
6.8% 7.2%
2.0
0.5%
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018

Business Highlight
Machine tools
involved in our life
Machine tools are fundamental to technological advancement in all the industries including automotive,
aerospace, medical, and IT & communication industries. They are even an integral part of the production of
daily-use commodities. Evolution of machine tools makes our lives richer.
Machine, Robot, Social infrastructure
Control valve Seat frame Connector
Construction machine
parts Pump housing Spool
Aerospace
High pressure Powder nozzle holder Compressor disc

compressor housing
Fan disk Torque link Blisk

Business Highlight
Automobile, Motorcycle, EV
Gearbox housing Cylinder block Wheel hub
Crankshaft CVJ inner race Mold for Engine cover Mold for Glove box lid
Resources and Energy Semiconductor, IoT, Sensor
Turbine blade Optical communication

slide sleeve
Drill head Ring Hydroelectric turbine Scroll
Die & Mold, Precision parts Medical
Knee joint Hip joint
Denture Socket
for Hobby for Training shoes for PET bottle
Bone screw Bone plate
for Railway model for Mobile phone for Handy cleaner

Business Highlight
Transition of materials and

technological innovations
With the continuous industrial development, we are often requested to machine new materials, which require
more sophisticated technologies than conventional materials such as simple metal or alloy. DMG MORI has
been generating breakthrough technological innovations to machine tools almost every 10 years and will
continue making efforts to machine all the materials with high-accuracy.
1952 1970s 1980s 1990s 2000s
Technical innovations every 10 years
Numerically Vertical Machining Horizontal Machining Multi-axis Machines

Controlled Lathes Centers Centers
Change of material
Aluminum Steel Casting Titanium alloy Aluminum alloy Copper alloy
Common metal Diverse alloy

Business Highlight
Lasertec
2010s 2020s
5-axis Machining Additive Manufacturing

Centers
r e
Ultrasonic
Fu t u
Brittle
materials
Composite materials
Admixture
materials
Carbon Fiber CMC
Reinforced （Ceramic Matrix
Composite)
Plastics
（CFRP）
Different
materials
Zerodur / Glass
New materials:light-weight, highly heat-resistant and durable

Core Competence
Business Highlight
Our solutions toward

changes in the society
DMG MORI keeps pace with changes in our society – such as shift to EV (electric vehicle), development of AI
(artificial intelligence), and aging society. Our group responds promptly to ever-changing requirements.
Current trends
Aging
EV AI
Society
Aging society will boost demand for production of medical parts. Moreover, it will
change the production sites by bringing process integration and automated
workpiece handling to the shopfloor in compensation for limited human resources.
EV-shift will diversify materials of automobile components and expand the fields to
apply cutting, ultrasonic, and laser technologies. Even prior to a complete shift to
EV, hybrid cars will increase the number of components of engines, motors,
batteries, and other parts. This will positively affect the machine tool industry. Direct
AI-shift will lead to increased demand of semiconductor components and the
production equipment with ultra-high precision parts. AI technologies integrated in
machine tools will continuously make advancement to improve productivity of our
customers, for example by compensating vibrations of spindles, the heart of
machine tools, and thermal displacement, or performing preventive maintenance
through learning machine history and sensor data.

Business Highlight
コアコンピタンス
DMG MORI’ s Solutions
STEP1 STEP2 STEP3
Multi-axis / Integrated
Automation Digitalization
solutions
Service
One-stop Service

Business Highlight
Our solutions toward produ

DMG MORI provides all kinds of solutions for both process segmentation and process aggregation in response to
fluctuations in production volume in the manufacturing industry.
In-machine travelling robot Round pallet system Carrier pallet pool

Number of users
Large
MATRIS
5-axis/Mill-turn Pro
segme
DMU
NLX
Additive manufacturing NTX CTX-TC NVX

Small
Multi-type, small-quantity production
Medical Aerospace Mold
for PET bottle
Wheel hub
High pressure Fan disk Blisk

compressor Auto, Motorcycle
housing

Business Highlight
ction volume fluctuation
Linear pallet pool Gantry loader Full-sized turnkey solutions
cess Full automation/

ntation turnkey solutions
CMX Multi Sprint
NHX ALX+Bar feeder
Mass production
Resources and Energy Semiconductor Auto, Motorcycle
Ring Turbine blade Optical communication

slide sleeve
Connector Scroll
Joint Cylinder Crankshaft

Construction machinery block

Business Highlight
DMG MORI’s value creation

●
3 global parts centers
●
Qualified spare parts inventory
●
Service center with 24/7 operation
●
Long-term warranty service
●
Operator training
Management resources ●
Hospitality to visitors
Human
● Management leadership
● Diversity in workforce: approx. 13,000
　employees in 46 countries
Intellectual
●Business knowhow as the market leader ●
Connectivity to any
●Total skills in development, production, IoT platform
　engineering and software
●
Performance
Manufactured improvement of universal
● 14 production sites across the globe machines Software
● In-house production and internal supply of (Technology Cycles)
　key components ●
Predictive maintenance
Social and relationship
● Global branding
● Global supply chain
● Overseas direct-sales network
Financial
● Cash generation for global M&A projects
● Proactive capital investment
● Profit generation by proposing value to
　customers (sales revenue and operating profit)

●
Automotive, Medical, Aerospace,
and Die & Mold Excellence Centers
●
Extensive machining solutions
●
Turnkey system from own source

Business Highlight
model High value-added and single sourced solutions

from production to after-sales service
●
Joint development by
Japan and Germany
●
PPR＊
●
Digital Innovation Center
Service Development ＊Please see page 44
●
Geographically
optimized
production
●
In-house
production of key
components
Foundation for ●
Joint procurement
competitive Production by Japan and
Germany
advantages ●
TQM activities
Engineering Sales
●
Sophisticated solutions from
overseas direct-sales network
●
Extensive product lineup of
5-axis machines
●
Wide coverage of peripheral
equipment (DMQP)

Business Highlight
Four companies supporting value creation
Development Production
Mission
Construction of a prosperous
Develop safe and environmentally-friendly products and solutions that Produce and ship high-quality products on schedule and efficiently
increase customers' profits and strengthen DMG MORI's competitive by combining optimized procurement and advanced in-house
advantage manufacturing
Overview
The Development Company is responsible for strengthening DMG The goal of the Production Company is quick delivery of high-quality
MORI’S competitive edge. To achieve this goal, it identifies customers’ machine tools by an integrated production approach from machining
needs and transforms them into products that increase customers’ of components, such as bed and column, to assembly and product
profit, improve operators’ usability, create safe working conditions, inspection. Another important task of the Company is purchasing from
and fulfill environmental requirements. The priority tasks include: new the best-fitting partners that fulfil our requirements for production
product development to meet target customers’ needs; development capacity, financial situation, and commitment to compliance. DMG
of basic techniques and elemental technology; product upgrading; MORI has 14 production locations worldwide, and each of them is
troubleshooting; sales support; production support. Our strength specialized in certain machine models. This is one of the strengths
lies in the successful and productive joint development system of DMG MORI next to its global supply chain network and in-house
with Japanese and German contributions. Both sides successfully production of key components including spindles. DMG MORI utilizes
cooperate in research and development of new functions and software, its digital solutions at its own plants to improve production efficiency.
as well as integration of mechanical and electrical components and
machine models, to further improve the efficiency of production and
development activities.
Management messages
Demographic changes accelerate the trend for In 2018, we successfully increased production
replacing human operators by machines. The volume thanks to a strong market demand. On
demand for automation solutions is expanding the other hand, some of our customers were
from medium-mix & medium-volume to high- burdened with shipment delays and prolonged
mix & low-volume production sites. DMG MORI delivery times. We have prepared ourselves
will respond to customers’ requests promptly to achieve our targets in 2019; we will launch
with innovative machine tools, peripheral in-house production of key components using
equipment, machining technologies, and our own products and technologies. At the
software. To deliver such products, we same time, we will review the entire business
integrate our development activities for new process from order intake to shipment and
Executive Director, Senior Director
Dr. Eng. models, functions, custom designs, and eliminate unnecessary cost and time lags
quality improvement with those of elemental Minoru to deliver high-quality products on-time.
M a ko t o technology. Our joint development system Furuta By uniting the strengths of all employees
Fujishima with Japanese and German contributions will responsible for production, namely custom
reduce the total number of new and existing design, procurement, machining, suppliers,
machine models to 130 by 2020 to improve assembly, and product inspection, we aim for
production efficiency. In addition, we will grow significant and visible improvement in our
software sales by enhancing product lineup factories as well as in our financial results.
of Technology Cycles, which makes complex
machining easy and quick by universal
machine tools and standard tools and fixtures.

Business Highlight
Sales/ Service/ Engineering/ Parts (SSEP) Headquarters
industrial society　　　　　　
As an engineering trading company, provide the whole package from Construct business environment by allocating personnel, goods, and
machine tools, peripheral equipment, systems, software, to lifecycle capital according to the DMG MORI Group's business strategies and
services manage risks
The SSEP Company provides high-end solutions to customers from Our Headquarters accommodate administrative departments
a single source. It’s the strength of DMG MORI to cover the entire accountable for compliance, governance, corporate branding, HR
processes from technology proposal, quotation, sales contract, runoff development, finance and business controlling, IT infrastructure,
at plant, shipment, acceptance, to after service. Approx. 1,000 skilled etc. of the entire group. They lay the foundations for DMG MORI to
employees in sales, 1,500 in service, 1,000 in engineering, and 500 be the first choice of customers and to continue creating values. For
in spare parts department work together for even higher customer this purpose, our Headquarters focus on diversity, risk control of
satisfaction. SSEP has 157 locations in 42 countries. By joining forces business operations, financial soundness, appropriate relationships
with Development and Production, SSEP is committed to delivering to stakeholders to fulfil a wide range of requirements as a global
solutions promptly to any kind of inquires from customers, regardless company.
of their location, industry, and size of business.
Globalization, high-mix & low-volume Export control, compliance, and IT security

production, and a lack of skilled human are the key areas of risk management for
resources are part of the challenges our global business operations. The entire
customers are facing today. DMG MORI has group recognizes the importance of export
been enhancing solutions for these issues control regulations and strictly follows
with 5-axis and mill-turn technologies, the rules of countries where each plant is
automation, and digitization. The next located. As for compliance, we made careful
request from industries will be lifecycle preparations with AG to conform with GDPR
services for higher machine availability (General Data Protection Regulation), which
by smartly connecting all solutions. This came into effect in the European Union
Executive Officer Executive Vice
requires a profound understanding of the President in 2018. Specialized committees for each
Keiichi customers’ situations and sophisticated business area and product take necessary
Ota engineering skills to combine different
Hiroaki actions to ensure IT security. In addition to
solutions. DMG MORI will strengthen its Ta m a i strengthening IT infrastructure and control
engineering team with external partnerships regulations, we pay utmost attention to
and internal trainings to continue developing preventing human errors and cyber attacks
leading-edge solutions. by third parties.

Business Highlight
DMG MORI- Global One Company
Status of sales about
With approx. 10% (estimated), DMG MORI has the highest

market share in the global market. In other words, DMG
Global share
10％
MORI has approx. 150,000 customers with 300,000 about
300,000
installed machines worldwide. This large business Number of
foundation allows us to develop unique, sophisticated, units delivered
and comprehensive solutions, combining machines,
engineering and software.
about
150,000
Number of
customers
Order composition by region Japan

18％
The machine tool industry is susceptible to macro-
Germany
economy and capital investment trends, and the market 19％
demand constantly fluctuates. Nonetheless, DMG MORI
group successfully sustains a stable demand and order
intake with its customer bases in four major markets. Americas
Most importantly, around half of the turnover comes from 18％
Europe, where the capital investment cycle varies from
country to country. EMEA
(incl. Russia,
China Turkey)
6％
Our machines are designed to create added value for Asia
customers in the most advanced economies, but they 8％ (ex. China) 31％
also contribute to strengthening the manufacturing
industry in China, India, and other evolving markets.
China Russia
Production by region 3％ 2％
Americas
DMG MORI has 14 production facilities in Japan,
Germany, the United States, China, Italy and Russia; this
3％
facilitates transportation and secures short delivery Italy
Japan
times while meeting the diverse local needs. In addition,
it allows us to reach flexibly to the recent trend towards
7％ 44％
protectionism. Poland
11％
Germany
29％

Business Highlight
Procurement
DMG MORI has an efficient global supply chain network
consisting of approx. 3,200 suppliers of DMG MORI AG and 1,100 Common
partner
suppliers of DMG MORI CO. They deliver parts and components
to our factories in Japan, Europe, the United States, and China.
CO procurement AG
30% 30%
About 40% of goods are delivered from 160 joint suppliers of
DMG MORI CO and AG. Usage of common parts at the same
40%
prices based on joint evaluation standards and the resulting
higher purchasing volume contributed to stronger relationships
with suppliers and increased benefits for the company.
Procurement amount base
Human UK Germany
Poland
Russia China USA
Canada
resources
Japan
South
Korea
Switzerland
development
Czech
We believe that the diversity in the Distribution by job category

Austria (as of December 31, 2018)
workforce leads to dynamic culture Administration Apprentices/trainees
and sustainable growth. DMG MORI France
13％ 3％
has approx. 13,000 employees with Turkey Quality Sales &
3％
Service
different mother language, nationality,
43％
Spain
gender and specialization. DMG MORI Italy India Thailand Production
makes the best use of its diverse

13,042staffs 23％
employee base to satisfy the various Indonesia Australia Development Procurement
（Male： 11,200, Female： 1,842）
5％
and engineering
requirements that we face from
customers and business partners.
46countries 10％
Support for research

DMG MORI proactively supports University and research institute we donated or lend University and research institute we donated or lend
machines machines
research activities worldwide
University of California, Davis Italy University of Florence
through the Mori Manufacturing
USA University of North Carolina Charlotte Austria Vienna University of Technology
Research and Technology
MTTRF Berkeley Institute Belgium Katholieke Universiteit Leuven
Foundation and MTTRF (Machine
Tool Technologies Research Ireland University College Dublin Kobe University
Foundation). We loan out our Switzerland Swiss Federal Institute of Technology Zurich Kanazawa University
Japan
machine tools to 11 universities Osaka Institute of Technology
and 1 research institute in- and Toyohashi University of Technology
outside of Japan to support
Total: 11 universities + 1 research institute
development of machine tool
technology.

Business Highlight
Events in 2018
January
Start of 3-year warranty for MASTER-series
spindles
Pfronten Open House
Establishment of TECHNIUM
February
Disclosure of
financial results
2017
March
Sales start of MATRIS robot system
Sales start of NTX 2000/2500/3000 2nd Generation
2018
April
Welcome ceremony for
new employees
Opening of DMG MORI
Child Care Centers
May
Iga Innovation Days 2018
Establishment of Die & Mold Excellence Center in Iga
June
Appointment of Dr. Masahiko Mori, President of DMG MORI
Opening of Tokyo Digital Innovation Center
Co., Ltd., as Chairman of the Supervisory Board of AG
Service start of TECHNIUM
Sales start of NHX 4000/5000 3rd Generation

Business Highlight
August
Establishment of 5-axis
Technology Study &
Research Group
Introduction of
minimum rest period
of 11 hours between
working days
September
July IMTS (Chicago)
Sales start of ALX series
Annual General
Meeting of MTTRF
November
October
JIMTOF2018 (Tokyo)
Sales start of DMU200/340
Gantry in Japan
70th anniversary of DMG MORI Co., Ltd.
Grand Opening of FAMOT (Poland)
Establishment of DMG MORI SAILING TEAM
December
Extension of minimum rest period to 12
hours between working days

CORE
COMPETENCE

Core Competence Core Competence
Foresight of machine tool market
DMG MORI’ s unique business model facilitates further growth in the

expanding machine tool and its related market.
Our group differentiates itself from other machine tool ceramics. These areas extend the value of our potential
manufacturers by a unique business model to deliver the market to approx. JPY 8 to 10 trillion. In addition, there is a
entire production systems including peripheral rapidly growing demand for automation systems
equipment and software in addition to machines. As a consisting of machine tools and attached peripheral
total engineering company, we provide these systems to equipment such as robots and pallet changers due to the
the global market from our own source. We established a global shortage of labor and high-skilled operators. The
new business model to provide holistic solutions by our average price for these types of automation systems is at
own employees from development, procurement, least 1.5 times higher than the stand-alone machines.
production, sales, installation, to operator training. This leads to an assumption that the market potential
including automation systems and Digital Factory
Currently, we estimate the global market value of cutting solutions will be at least JPY 15 trillion or more.
machine tools as JPY 5 trillion. However, there is also an
increasing number of specialized machines such as Based on the above assumptions, we are convinced that
transfer machines and gear-manufacturing machines our unique business model of providing holistic solutions
being replaced by multi-axis machines equipped with from our original source in a single step sets us in a
application software and newly developed cutting tools. superior position in our industry and acts as a driver to
Furthermore, the segment of additive manufacturing, in increase our market share and underpin sustainable
which we already entered as a group, attracts the growth for mid to long term.
attention from manufacturers of complex-shaped
workpieces in small lots. Additionally, we witness a
growing demand for ultrasonic machines from
semiconductor industries for precision machining of Digital fa
ctory
Automat
io n
Dedicate
d machin
e
T u rn in g
M il li n g
Mill-turn
centers
5-axis M
achines Additive Ma
nufacturing
machines
/ La
Ultrasonic ser Machines
Machines

Core Competence
A trend for more axes and

technology integration
Competitive advantage based on accumulated knowledge
and experience, technology excellence, and extensive
product lineup

Core Competence
As the shape of workpieces used in aerospace, medical,

automotive, die & mold, and precision machinery
industries become more and more complex, we observe a
growing demand for highly accurate and productive
machine tools. Mill-turn machines accommodating
features of both turning and machining centers, and
5-axis machines composed of 3 linear axes and 2
rotational/swiveling axes open doors for more flexible
machining operation.
5-axis technology became popular in Germany prior to

Japan. Thanks to more than 30 years of experience in
5-axis machining, accumulated knowhow, technology
excellence, and extensive product lineup, DMG MORI has a
clear competitive edge in the machine tool industry.
Some of the advantages of 5-axis machines are process
integration and machining of complex-shaped
workpieces. That is why we expect a growing demand for
5-axis machining centers to produce complex workpieces
in small lots for semiconductor, aerospace, and medical
industries. Moreover, 5-axis machines reduce the number
of set-up changes and special tools and fixtures. This will
save the machining cost and improve the machining
quality and accuracy of conventional workpieces as well.
More than 40% of orders from Europe, the United States,

and China are 5-axis machines. In these areas machine
tools’ user base is widespread compared to Japan, where
automotive and its related industry dominates the market
and prioritizes process division for the sake of efficient
mass-production to process integration. Less than 15%
of the Japanese machine tool users own 5-axis
machining centers. Against this background, DMG MORI
engages itself in bringing 5-axis machines and
technologies closer to the Japanese customers by
lending free of charge 70 units of DMU 50, a
representative model of 5-axis machining centers, in
association with the 70th anniversary of DMG MORI. The
company provides 30 training sessions (private lessons)
by using the machines installed in customers’ factories
with a goal to develop more than 10,000 operators with
5-axis machining skills per year.
At JIMTOF 2018, one of the worldwide largest machine

tool exhibitions held in Tokyo, DMG MORI celebrated the
Japan Premiere of DMU 200 Gantry and DMU 340 Gantry.
Both are XXL 5-axis machining centers made in Pfronten,
Germany, and were launched to the domestic market in
November 2018.

Core Competence
Automation system
Automation reduces workload of humans by assuming

high-risk processes and repetitive work. Automation
extends the hours of unmanned production and improves
productivity.

Core Competence
Currently, our group makes preparation for providing automation systems to all
our machines as standard to load and unload workpieces without human
intervention by using attached peripheral equipment to supplement machining.
Automation provides us a variety of advantages: higher productivity and
machine’s availability through unmanned or nighttime production, better
quality and process stability by eliminating human operation, by better work
environment for workforce by allocating high-risk processes to machines and
saving the number of operators.
In FY 2018, 24% of our order intake were related to automation. It increased

from 17% in FY 2017. In response to the growing demand from manufacturing
industries, we strengthen direct sales, in-house engineering and direct service.
We expect our commitment will lead to further growth of automation-related
orders to eventually reach 30% in FY 2020. Investment in the expansion of
production capacity has cyclicality similar to macroeconomic trends.
Nevertheless, we observe strong demand for investment in productivity
improvement even during economic recession.
Automation systems can be roughly classified into 3 groups,

depending on the type of workpiece and the production volume.
Type of
workpiece Workpiece handling
Loader systems
It automatically transports
High-volume workpieces into the machine
tool. The control system is
embedded in the operational
panel for easy programming.
Production
Low-mix
volume
Robot system (MATRIS)
DMG MORI developed
MATRIS as a new robot
Mid- to system, which requires no
High-volume
expert knowledge in daily
operation. The installation,
setup, and layout retrofit can
be completed in a short time.
Pallet handling
Pallet pool system

The system stores multiple
High-mix pallets which mount various
workpieces and
automatically supplies them
to the machine tool.

Core Competence
Digitization
From a shingle machine to large
manufacturing lines, we optimize
production by connecting entire factory.
Robo 2 Go Clamp
Check
Job Job 3D Part Tool Control Energy
Manager Scheduler Analyzer Handling Saving
Optimized PLANNING PREPARATION PRODUCTION

solutions Job Surface
Assistant Analyzer
Organizer Tech CAD-CAM Tool Service Pallet

Calculator View Agent Agent Manager
Documents NET
service

Core Competence
There is a growing demand from today’s production sites

for connecting machines in a network in order to properly
manage material supply, machine operation and process
control. The number of machines connected to the
network is increasing from a single machine tool to
whole production lines, and even to the entire factory.
Efforts for improving machine availability are advancing
day by day, for example by remote maintenance and
status monitoring of every machine tool used all around
the world, as well as by precise malfunction forecasting
by utilizing network connection, software and sensors.
In 2013, we developed the application-based operating

system CELOS as the foundation of factory digitalization.
By using on-machine sensors and the CELOS
applications, customers can monitor and analyze
machine status, calculate overall equipment efficiency,
and manage machines appropriately by preventive
maintenance while machining is in progress. The multi-
touch monitors of CELOS enable intuitive operation of
machine tools just like smartphones and tablet PCs. The
applications will be activated with just one touch from the
application menu. Furthermore, CELOS connects
machine tools to the company’s internal systems.
Integrated management of production plan, progress,
schedules and more becomes possible by Job Manager
(Job Assistant) and Job Scheduler functions. We have
already shipped more than 10,000 machines equipped
with CELOS that can handle big data internally and
externally. The CNC (numerical control) used on our
machines is provided by multiple suppliers. Thanks to
this diversity in the choices of CNCs, the software we
Machine develop possesses a high degree of compatibility with
Protection
different types of signals and programs. As a result, our
customers have more options for IoT (Internet of Things)
platforms to connect their machine tools.
Messenger Status
MONITORING Monitor
Performance Tool
Monitor Analyzer

Core Competence
CELOS was developed as an operating system to quickly

and easily transform ideas into products. CELOS covers a
wide range of areas with its unique functionalities. For
example, a variety of applications tailor-made for every
process, multi-touch operation panel that is innovatively
easy to use, and security control by DMG MORI SMARTkey
to define individual access rights.
CELOS connects applications for production with other

software including CAD/CAM, and visualizes all data
related to production, for example the real-time status of
assembly and shipment. Customers can monitor all
production facilities by connecting CELOS machines with
the company’s production systems, and by doing so, build
a global production network.
Technology Cycles
Technology Cycles are solutions to make complex

machining easy and quick. Technology Cycles integrate
machine tools such as 5-axis and mill-turn machines
with cutting tools, peripheral equipment, and HMI
(Human Machine Interface) including CELOS by
embedded software. They make it possible to replace
specialized machines, specialized programs, and special
cutting tools by standard machines, cutting tools, and
fixtures in machining, set-up, and measurement
processes. With Technology Cycles, anyone can start
production easily and quickly and achieve high quality.
Currently, DMG MORI offers in total 34 Technology Cycles
in 4 categories – handling, measurement, cutting, and
monitoring.

Core Competence
In 2017, DMG MORI launched ADAMOS (ADAptive platform that links machines, peripheral equipment,
Manufacturing Open Solutions), a new industrial IoT measurement devices, ERP, and software from any
platform. This is a joint initiative with partner companies manufacturer. It allows one to improve quality of
from different fields to facilitate standardization and maintenance and production plans and to analyze the
development of digitalization as a machine tool data for optimized production. ADAMOS will be especially
manufacturer. ADAMOS is an open and neutral IoT beneficial to SMEs – our most important customers.
WERKBLiQ networks machine operators, service partners, ISTOS with its PLANNING SOLUTIONS products enables
manufacturers, suppliers and distributors for a quicker users to take the first crucial step towards digitization and
transfer of knowledge and more productive business to achieve more efficiency and agility in production along
processes. It increases the availability of machine with their entire added value. Planning, controlling and
operators’ machines with intelligent maintenance feedback are the foundation for optimized production
processes and reduces the amount of administrative work across vendors, applications and process boundaries and
involved in everything from creating service orders, form the basis to integrate further compatible applications
through documentation, to spare parts procurement. as required.
ISTOS GmbH and WERKBLiQ GmbH are DMG MORI AKTIENGESELLSCHAFT’s

sister companies to provide digital solutions.

Core Competence
DMG MORI’s digital solutions
CELOS has all the necessary applications to control the entire production process. Using DMG MORI’s
products with network connection, IoT Connector can communicate information in all the new and old
machines in customers’ plants to the network, and even expand the connection to an IoT platform of a third
party. IoT Connector supports all the major protocols including OPC UA and MT Connect.
Connected Industries
Sensors Acceleration
sensor
Voltage/
current sensor
Data
management
Coolant Machine
temperature Temperature protection
sensor sensor control Wireless
[MPC] tool holder
Motor & Scale Driver CNC unit
Servo drive Rotary Linear

encoder scale
Tool setter Volumetric

calibration
Measurement Touch
probe
Laser
control
system (VCS)
I/O unit

Core Competence
Different IoT platforms
Automation Edge heavy

Security controller process / AI
Communication Supplementar y machines

Robot Loader LPP
IoTconnector
Washing machine Tool presetter Bar feeder
Retrofit & 3rd party machine

Business Summary
DMG MORI’s processing technology
Turning
more than a century of experience
In turning, a bar-shaped workpiece is fixed in a machine
tool and spins continuously at a high rate of speed, while
the tool is applied to the proper position and excess
material is removed from the workpiece.
As the innovation leader in metal cutting, DMG MORI has

worked to perfect the craft of turning since its foundation. The
company offers a comprehensive product portfolio,
encompassing machines for all industries and practically all
materials. One driver of DMG MORI’s innovations was the
growth of the automotive industry. They required a cost-
effective means of producing components on a mass scale.
Most workpieces are further refined after turning, but to
complete the process without changing machines, over recent
decades DMG MORI has continuously improved and adapted its
Tu r n i n g
turning machines to the latest requirements. Most of the DMG
MORI’s turning centers can be extended with additional milling
spindles to produce parts with even more complex geometry.
Milling
machining on all axes
In general, machine tools have 2 different approaches to
machine workpieces – turning or milling. When the
workpiece in a machine tool rotates, we call it turning.
When the tool in a machine rotates, it is milling. In
milling, the tools, of which there are dozens to choose
from, and the workpiece made of a metal block or any
Milling
other materials currently being processed, are moved in
relation to each other along at least three axes to remove
exactly the desired portion from the workpiece to create
the intended form. In 5-axis machines, turning and
swiveling movements are included as well, which enables
the creation of highly complex geometries including
curved surfaces by one machine. In other words, 5-axis
machines achieve process integration and higher
machining efficiency. From pure milling applications,
5-axis simultaneous machining, turn & mill machining to
the integration of grinding, DMG MORI has played a major
role in the development of the technology.

Business Summary
Advanced Technologies
the future of production
The ULTRASONIC technology of DMG MORI enables
economical machining of complex-shaped workpieces
made of hard-to-cut advanced material, such as ceramics,
glass, corundum, tungsten carbide, cemented carbide, or
fiber-reinforced material. The kinematic with tool rotation
and ultrasonic oscillation in Z-axis direction reduces
process forces by up to 40% in comparison to conventional
machining. This leads to longer tool life and significantly
better surface finishes of materials easily affected by
problems, such as tool wear and damage to the material’s
internal structures. We further enhanced our lineup of
ULTRASONIC machines to meet any kind of demand. The
lineup includes the ULTRASONIC 10, a compact machine
with a footprint of only 2㎡ suiting the medical / dental
industry. Another machine, the ULTRASONIC ULTRASONIC
technology
mobileBLOCK, enables quick repair of fiber-reinforced
material used on aircrafts directly inside the hanger,
which had previously mostly been done manually.
Laser machining refers to technologies to cut, engrave,

or mark on materials not by cutting tools but by
irradiation of laser beam generated by optical devices.
Customers of DMG MORI’s LASERTEC series can select

the right laser source with different machining
Laser characteristics from diode, fiber, pico-second, or other

laser sources. 3D laser machining technology is applied
machining to injection molding, geometrical texturing on press

mold, complex pocket machining, fine engraving,
marking, and lettering. 5-axis laser precision cutting
technology is required by manufacturing process of
precision components of watches and medical devices.
5-axis laser drilling technology is used to drill cooling
holes on jet engine parts of aircrafts and gas turbine
parts. In area of diamond machining, laser machining is
appreciated as green technology that require no
consumables. It is regarded an alternative to conventional
machining technologies such as grinding and electric
discharge machining.

Business Summary
Additive
Manufacturing
beyond cutting-edge
Additive manufacturing, also known as 3D printing, is
technology to create desired shapes by depositing metal
powder, melting it by laser, and eventually building
workpieces designed as 3D model. DMG MORI offers two
different additive manufacturing technologies. In
selective laser melting (SLM) ―also referred to as a
powder bed method ― laser melts metal powder and
builds layers step by step. This is how delicate
geometries such as lattice and honeycomb structures, as
Powder bed
well as any other imaginable shapes, are created in one
piece without seams. In additive manufacturing of metal method
components, selective laser melting has a market share
of 80 percent. Another additive manufacturing technology
is a powder nozzle method. In this method, metal powder
is applied by the argon gas flow through a nozzle and
melted by laser into a strand of liquid metal.
DMG MORI is the first player worldwide to offer the two

most important additive manufacturing technologies of
metal components.
Powder nozzle
method

Business Summary
REALIZER GmbH
REALIZER GmbH in Borchen, Germany, has more than 20
years of experience and knowhow in selective laser
melting (SLM), or a powder bed method. In 2017,
REALIZER joined the DMG MORI Group and launched
LASERTEC 30 SLM.
Sauer GmbH ＆ Co.

Sauer GmbH in Stipshausen, Germany, produces
ULTRASONIC and LASERTEC. The group company of
DMG MORI offers holistic support to its customers from
consultations on machine selection and optimization of
production processes to turnkey solutions. Sauer has
more than 30 years of experience in ultrasonic
technology, and more than 25 years in laser precision
machining. Some models of LASERTEC series employ
5-axis laser machining technology.
INTECH DMLS Pvt. Ltd.

In November 2018, DMG MORI AG acquired a 30% stake
in INTECH in Bengaluru, India to strengthen its knowhow
in additive manufacturing. OPTOMET, a new software of
INTECH, makes it possible to achieve the best build
quality without additional surface finishing. OPTOMET
creates optimized process parameters automatically
from data input of chemical composition and particle size
distribution of the powder material. This approach is
quickly adaptable to changes in customers’ requirements
and composition of powder material. Moreover, increased
usage of recycled powder can reduce the material cost by
20%.

Business Summary
Development
Germany & Japan

Fusion of innovative concepts & workmanship
New product development process

We start development of new products by defining design specification design review (SDR) to verify the concept
specifications, and proceeds through concept design, against market requirements. The next gates are
detailed design, release of drawings, production of production design review (PDR) and mass-production
prototypes, performance evaluation to finally reach at design review (MDR). MDR takes place after finishing
mass-production. In general, this process will take 3 performance evaluation and before starting mass-
years, which means designers need to look ahead how production. Besides the machine and its performance,
customers’ requirements and industry trends will change the management checks carefully if all the necessary
in a near future. The accumulated customers’ information items are ready for the machine to start operation at
from 300,000 DMG MORI machines installed in 150,000 customers’, such as sales catalogues, operation
customers’ sites is an important foundation to develop manuals, and development of service engineers with
new machines. Prior to detailed design, DMG MORI holds a necessary skill sets.
■ Until a new product is

　mass-produced SDR PDR MDR
Design Draft Detail Release of

Prototype
Performance Mass-
specification design design drawings evaluation production
Optimization of development
CO and AG have been driving integration of machines and
components forward. Expanded usage of peripheral
products and software made it possible to meet the
various needs from customers, even with a downsized
machine portfolio. The number of machine types was cut
by half from more than 300 before integration to 152 by
the end of December 2018. This number will further
decline to about 130 by 2020. At the same time, we aim to
reduce the variety in components of machine tools by
50% from about 270 thousand, including spindles,
turrets, chip conveyors, ball screws, and measurement
equipment. Using standardized units leads to reduction
of development lead time and spare parts inventory, as
well as material cost due to higher procurement volume.

Business Summary
Joint development system

A total of some 1,000 employees work in various
development bases in Japan, Germany, Italy, the U.S., and
China. At the annual Global Development Summit (GDS),
design engineers meet each other face-to-face and have
vibrant discussions about the development of new
technologies. After confirming the future development
strategy by all participants, they separate in groups and
continue detailed discussions on new technologies,
integration of machine types, or standardization of
components in each area. In October 2018, 198 employees
joined the 5th GDS at the newly-renovated plant in FAMOT,
Poland, and discussed on topics including peripheral
equipment and automation in 12 groups.
Product Problem Report (PPR)

Since over 20 years before the integration, CO has In order to utilize ever-evolving AI, we need to analyze
collected and promptly shared any information about causes and status of past malfunctions. The accuracy of
product problems occurred at customers’ and made AI depends on the amount of past data. DMG MORI has
improvements in design and production processes with a also been accumulating information about machine
system called PPR (Product Problem Report). This malfunctions and their causes by using PPR (Product
system was extended to AG to accelerate the resolution Problem Report). Therefore, we have a competitive edge
of quality-related issues with AG products. in future innovation against our competitors.
Detailed product Horizontal

Investigation of Measures/
problem reports to deployment to
cause Improvement
plants products
PPR

Business Summary
Manufacturing
Digital factory
DMG MORI’s production sites are as clean as plants
designated for semi-conductor production. DMG MORI is
committed to turning its production sites into digital
factories, fully compatible with Connected Industries /
Industry 4.0. In the renewed facilities, the assembly
progress is visualized and updated in real time. Assembly
workers input the daily assembly status into the BHT
(Barcode Handy Terminal) and send the data to
computers through wireless LAN. The data is used for
controlling delivery times and working hours. Large
monitors in the production halls show the real-time data
input by the BHT. We combine the assembly data of all
the group’s plants to grasp the group-wide assembly
status.
Efforts to promote high accuracy

The temperature in our plants is kept constant at ±0.5℃
to maintain high accuracy of machined parts and to
enhance efficiency by reducing adjustment work during
assembly. We evaluate product quality before shipment
from our customer’s point of view; the inspection routine
includes measurements for spindle’s thermal
displacement, coolant leakage, and spindle bearing, as
well as 100 hours of continuous running. High-accuracy
measuring equipment is used throughout the process.
DMG MORI’s precision is sustained not only by the
advanced digital technology, but also by our experienced
workers. As a result of their daily practice, our workers
received the Yellow Ribbon Medal and the Contemporary
Master Craftsman award.

Business Summary
Key components
Machine tools is a source for all products, and allow us to machine tool’s accuracy. We started producing ball
produce a variety of components. Any player in the screws by ourselves and established the Spindle Plant,
machine tool industry needs to constantly have an image where all processes from component machining,
of next-generation products and adjust product assembly to testing come together. Our in-house
development and their production system to fit the production strategy reaches beyond Japan, as we
market needs. DMG MORI has promoted in-house manufacture components in our own facilities all around
production in pursuit of better quality, shorter delivery the world, such as spindles in Pfronten (Germany),
time, as well as shorter development time. For example, casting parts in FAMOT (Poland), and sheet metal in Davis
the Heat Treatment Plant, Sheet Metal Plant, and Casting (USA). In-house production of prototype machines
plant were established in Iga Campus during 2005-2006 reduces our development time, and that of key
and have greatly contributed to the reduction of lead time components shortens delivery time while letting us meet
and prototype development time. Another commitment, customers’ requests. We are committed to utilizing these
unique and unprecedented in the machine tool industry, advantages to satisfy our customers as a reliable partner.
is the in-house production of components critical to the
Ballscrew Scale
Spindle
ATC
CELOS
Coupling Direct Drive Motor

Business Summary
Commitment towards quality

Our customers purchase machine tools to manufacture inspections prior to shipment, including an ISO-based
products and sell them. Therefore, machine-downtime is a positioning accuracy test, a JIS-based cutting test and
critical issue with potential loss of income. DMG MORI 100 hours of running test.
defines high quality as surpassing customers’
expectations with our products and services. Based on ISO standards for quality management (ISO9001: 2015),
this principle, we not only measure the accuracy of all environment management (ISO14001: 2015), and labor
functions, but also regularly check the validity of those safety and health management (OHSAS18001: 2007
measurement processes, in the before-shipment quality (ISO4001: 2018 to be introduced in January 2020)) are the
control. In the after-shipment quality control, we monitor pillars of our management system. We also conduct
if the products meet our customers’ expectations. We put internal audits and external audits by DNV GL regularly
every produced machine through a sequence of on an annual basis.
～ Sequence of product inspection ～
Positioning accuracy
In-process inspection Cutting test
test
By assembly staff Every produced Every produced
during assembly machine tested against machine tested against
ISO standards JIS standards
Inspection upon
Shipment 100-hour running test Product Inspection
shipment
Inspection of packaging Total 100-hour running Comprehensive
and included items test, covering all inspection for
processes specifications,
functions and safety
TQM activities
At DMG MORI, we always strive for consistent product In 2018, all departments in Japan, including general
quality and continuous improvements in every aspect of management departments, completed TQM activities as a
our work, including customer service and internal general rule, and conducted a company-wide TQM
processes. Therefore, we introduced TQM (Total Quality tournament at the year-end. We will continue these
Management) with the support of external advisors, a activities in the future to improve the quality of our
group-wide effort in quality improvement activities products, services and customer service.
derived from the Toyota Group and other organizations.

Business Summary
Supply chain management

DMG MORI expects its suppliers to
make a binding commitment to
comply with its ethical and
principle requirements, to adhere
to its guiding principles on
procurement, and to pass on these
requirements in their own supply
chains. DMG MORI generates
synergy effects by joint purchasing
between CO and AG, while paying
utmost attention to be compliant
with environmental standards such
as energy-saving and environment-
friendly procedures, and to meet
expectations from the society.
When selecting a supplier for
global sourcing, in particular in
emerging countries in Asia, our
evaluation criteria include working
hours, employee wages,
environmental certificates such as supply and quality risks, but also sustainability risks such
ISO14001, and clear rejection of child labor. as violation of labor practices and human rights. DMG
MORI will further strengthen the effectiveness of risk
To assess the risk of existing direct suppliers, we use our scoring and evaluation system to reduce procurement
early warning system that informs us not only on credit, risks by using IT solutions.
Dojo – Training area

Passing on technological knowledge and thus educating
the next generation are among the most significant
challenges for the manufacturing industry. The machine
tools of DMG MORI are the outcome of not only the most
recent technology, but also many years of experience and
proficiency of our technicians. We established Dojos
(training areas) at our domestic production hubs in Iga
and Nara Campuses, where skilled workers train younger
colleagues. Dojos for scraping, safety and maintenance
help us preserve the techniques and provide products of
the highest quality to our customers.

Business Summary
Global Production Strategy
Our group owns 14 production facilities in Japan,

Germany, the United States, China, Italy and Russia; this
facilitates transportation, and secures short delivery time
while meeting the diverse local needs. In addition, it
allows us flexible movement in the recent trends towards
protectionism.
Each main production base has responsible machine

types in line with the geographical and technical
strengths. For example, Iga Campus, our largest
production site in Japan, specializes on production of
middle and large-sized turning centers and machining
centers, whereas production at Pfronten Factory
(Germany) focuses on middle and large-sized 5-axis
Europe
machines. This helps us improve production efficiency.
Since the integration of CO and AG, we have gradually

standardized machine types and components. Using 2 9
7
common spindles, electric parts and key components has
led to cost reduction and strengthened the relationships
6
with suppliers due to higher procurement volume.
8
Integrated usage of machine bodies, peripheral products
and software made it possible to meet the various needs
from customers. It also enhanced our production
efficiency, as we could reduce the number of machine
types from 300 at the beginning of the integration to 152
at of the end of 2018.
Global Headquarters National Headquarters Development and production bases

(Japan)
Centrally manage DMG MORI’s global Germany
sales, service, marketing, finances,
Function as the
accounting and human resources
head offices of
DMG MORI CO
2 Bielefeld 4 Iga
Japan
Function as the
head offices of
DMG MORI Nara System
Solution Plant
1 Tokyo 3 Nagoya 5 Nara

Business Summary
42 157
● Sales & Service
countries　
● Group company
locations ● Production base
Americas
10
11
Asia Japan
12
1
3 13
5 4
Production and development bases (Germany, Italy, Poland, The United States, China, Group companies)
6 Pfronten（Germany） 7 Seebach（Germany） 8 Bergamo（Italy） 9 Pleszew（Poland）
10 Davis（USA） 11 Tianjin (China) 12 TAIYO KOKI (Niigata) 13 Magnescale (Kanagawa)

*Major development and production bases, several others

Business Summary
Our Major Plants
IGA (Japan)
Iga Campus was established in 1970, and has supported machine tool components.
DMG MORI’s manufacturing as one of the biggest
production sites for machine tools in the world. With In Iga Campus, 250 developers work at the Development
approx. 1,600 employees, it is also the largest facility Center. The Service Center is in operation 24/7, and DMG
inside the DMG MORI Group. Iga Campus functions as an MORI Academy provides training and educational
all-round production site for state-of-the-art activities to both our staff and customers.
manufacturing, development, service, production
technology, education and in-house production of key 60 cutting-edge machines and peripherals are exhibited
components. The monthly production capacity is as high in the world’s largest permanent machine tool showroom
as 250 units. Apart from its Assembly Plant, as clean as a of 3,500㎡ . We provide customers with total solutions
semi-conductor production plant, Iga Campus also including the latest machining methods, automation
contains the Bed / Column Precise Processing Plant, systems and software.
where the whole process from machining, hardening to
grinding finishing of large casting components are Currently, the Global Parts Center is located inside Nara
carried out; the Spindle Plant for production of spindles, Campus, but will be relocated to Iga Campus in 2019.
the core component of machine tools; the Ball Screw
Plant for the in-house production of ball screws, unique Opened in 1970
Site area 577,000 ㎡
to DMG MORI; the Casting Plant capable of producing up Core competencies Turning centers & milling centers
to 100 tons of castings per month with a 5-ton electric Excellence Center for Die & mold
Assembly capacity of over 3,500 machines per year
furnace; and the Heat Treatment Plant for carburizing, Approx. 1,600 employees at the location
ion nitriding and high-frequency induction hardening of Products NLX, NTX, NZX, CMX V, NVX, NHX, NMV

Business Summary
NARA (Japan)
Nara Campus is the birthplace of the former Mori Seiki production lines of mainly automotive components. With
established in 1948. The campus is located about 1 hour this new facility, we support the construction of large
and 20 minutes away from Kansai International Airport production systems at our customers’ sites.
by car, and 1 hour from Osaka, Kyoto and Iga Campus.
This place with a profound tradition is home to approx. Nara Campus also contains the Global Parts Center,
600 employees. Most of its activity focuses on where over 100,000 parts are stored and approx. 1000
development and production of machining centers and parts are shipped to our customers every day. This center
turning centers, but it also covers proposal and will be further equipped with cutting-edge technology
development of automation systems to suit our and relocated to Iga Campus in 2019.
customers’ requirements, from standard automation
systems where loaders are linked to one or multiple
machines to large-scale automation systems for mass
production. We also develop machine models dedicated
to mass production lines for automotive and other
industries. Founded in 1948
Core competencies Turning centers, milling center and automation
In 2016, we opened the System Solutions Plant with a
size of approx. 9,000㎡ to deliver TURNKEY solutions or
Excellence Center for Automotive
Assembly capacity of up to 2,000 machines per year
complete and pre-assembled automation systems to
Approx. 600 employees at the location
allow the immediate start of mass-production. We ALX, NLX, G/GG, A/AA, NZX-S, J/JJ, NRX, CMX V,
Products
installed 4 assembly lines of 80m length to build up i-Series, NMV

Business Summary
PFRONTEN (Germany)
In 1920, five engineers founded a young and ambitious machines, the factory is currently being expanded by
company in Pfronten, named Maho. In 1970, the company 24,000㎡ . The expansion is scheduled to be completed in
went public, merged with Deckel, and ultimately became a January 2021. It will increase our production efficiency
group company of today’s AG in the year 1994. Pfronten and expand our production capacity of in-house spindles
Plant is a production hub to 5-axis machines, the group’s from 4,000 to 5,000 units per year.
largest production base in Europe, and home to approx.
1,500 employees. They annually produce about 1,500
machines of 50 kinds, applicable to DMG MORI’s fields of
expertise: Die & Mold, Aerospace and Medical. The
location also houses the headquarters of Sauer, the
Founded in 1920
leading manufacturer of laser and additive manufacturing Site area 149,000 ㎡
machines. Every year Pfronten Plant holds its in-house Core competencies More than 50 machine types in the milling
trade fair, the Pfronten Open House. In January 2018, 63 segment (Deckel Maho) LASERTEC (Shape,
P re c i s i o n To o l , P o w e r D r i l l ) a n d A d d i t i v e
state-of-the-art machines were exhibited on the floor Manufacturing (Sauer)
space of 8,240㎡ . Excellence Center Aerospace and Die & Mold
Assembly capacity of up to 1,500 machines per year
More than 1,500 employees at the location
With approx. 10% of the production workers being female,
Products DMU/DMC monoBLOCK, DMU/DMC duoBLOCK,
the factory also implements safety measures for handling DMU P/DMC U Portal, DMU Gantry, NHX, DMC H
of heavy material. To meet the growing demand for 5-axis linear

Business Summary
FAMOT (Poland)
The FAMOT plant in Poland was founded in 1877 as a controls production planning and the execution with
small agricultural machinery manufacturer and joined seamless connection to ERP, as well as predictive
the DMG MORI group in 1999. The plant is one of DMG maintenance and maintenance management. Our group
MORI’s most important production bases in Europe, incorporates ISTOS, a developer of software for
which supplies main components including large production planning and execution, and WERKBLiQ, a
machine tool casting parts to other bases as well as developer of software for predictive maintenance and
being a production site of the 5-axis machining center maintenance management. The cooperation of the above
CMX Series and the turning center CLX Series. In October two companies with DMG MORI Software Solutions, who
2018, it was renovated to the most innovative digital develops and operates the application software CELOS
factory among all of DMG MORI’s production sites. With and Technology Cycles as the foundation for digitization
700 employees working, FAMOT will expand the strategies, accomplished the digitization of FAMOT as a
production capacity of the CMX/CLX Series to 2,000 units prime example of Industry 4.0/Connected Industries.
per year.
Founded in 1877
We successfully started centralized management in Site area 130,000 ㎡
FAMOT plant by uniting systems for planning, set up, Core competencies Turning centers & milling centers
production, monitoring and maintenance information. Assembly capacity of up to 2,000 machines per year
Starting from programming by CAD/CAM and set up Approx. 700 employees at the location
before machining, such centralized management system Products CLX, CMX V, CMX U

Business Summary
DAVIS (USA)
In 2012, DMG MORI opened a new plant in Davis, Center in Silicon Valley. This made the State of California
California - a university town approx. 100km northeast to once again an important location for DMG MORI’s R&D,
San Francisco. About 180 employees are working in this production, and sales activities to approach customers
location of approx. 110 thousand sqm to produce NHX- with cutting-edge IT technologies.
series, a representative horizontal machining center of
DMG MORI, or to develop customized specifications and
Opened in 2012
systems. In 2019, the Davis plant will start production of a
new turning center model, ALX series. The in-house
Core competence milling machines
production of sheet metal started in July 2018 to support Assembly capacity of up to 1,200 machines per year
increasing production volume for North American market More than 180 employees at the location
and to shorten lead time of special designs. Products CMX V, NHX
Almost all the machine tools made in Davis are delivered

to customers within the United States, while the products
made in Japanese and German plants are shipped to
various countries. The products from Davis are less
susceptible to trade policy of any country.
In July 2018, DMG MORI established a new Technical

Business Summary
TIANJIN (China)
After its opening in 2013, we celebrated the 5th production of CMX Vc for the Indian market in the
anniversary of our Tianjin Plant last year. Similar to our summer of 2019.
Davis Plant (USA), Tianjin focuses on the local market
and produces horizontal machining centers (NHC series)
Opened in 2013
and vertical machining centers (CMX series), with an
output of 40 machines per month. Additionally, some
Core competence milling machines
casting parts are manufactured in-house. Tianjin is Assembly capacity of up to 1,200 machines per year
committed to developing and retaining high-skilled staff More than 120 employees at the location
by hiring prospective graduates as factory interns and Products CMX Vc, NHC
preparing them for a full-time job upon graduation. The
facility was awarded a prize for the canteen’s quality and
cleanliness among the 4,000 companies located in the
Tianjin Economic-Technological Development Area
(TEDA). We aim to offer a comfortable working
environment to our employees.
The demand for high-end machine tools is expected to

rise in the Chinese market, alongside the growing
number of hybrid cars and EVs, and the implementation
of The Belt and Road Initiative. Also, we will begin

Business Summary
Spreading value
Showcasing new machines,

machining technology and beyond
Every year, we invite customers to exhibitions and
seminars all over the world to directly experience our
products and technologies. It is a good opportunity for us
to present practical and technical know-how and industry
trends with the latest technologies and live-
demonstrations. We invest a lot of efforts in each event
from private shows at major regional cities to big
international exhibitions across the world. This
maximizes the opportunities to interact with customers.
Apart from external exhibitions, we focus on Open House

events at each production plant worldwide. The Global
Solution Center in Iga is one of the world’s largest
permanent show rooms of machine tools with a
floorspace of 3,500㎡ . Our engineers utilize this
environment to perform tests and demonstrations for our
customers, to verify solutions for their machining-related
challenges, and to test state-of-the-art technology at any
time. Approx. 10,000 customers visited Iga Innovation
Days in May 2018. We also invited customers to our
overseas production sites at Open House events in
Pfronten (Germany) in January, FAMOT (Poland) in
October, and other locations to present our safe and
innovative production lines.

Business Summary

Business Summary
Sales / Service / Engineering / Parts
One-stop service
The current advanced manufacturing technology allows engineering and direct-service system to address our
us to machine components with not just a machine tool, customers’ complex needs or troubles. We offer, for
but in the combination with peripheral equipment, example, process integration by 5-axis machines and mill
software and others. In case of trouble, customers turns, or automation and digitalization driven by
generally have to consult the manufacturer of the peripheral equipment such as robots (DMQP) and
machine tool, the peripheral equipment and the software application software (Technology Cycles). In addition to
individually, before the problem can be located and finally solution offering, we install machines and automation
solved. However, this often causes a long waiting time for systems by ourselves, provide operator trainings,
detection of the cause through resumption of normal machining condition upgrades, after-sales service, and
operation. supply spare parts. This one-stop service differentiates
us from our competitors. We sell products mainly via
DMG MORI aims at solving these inconveniences. qualified distributors in Japan, but operate our direct-
Therefore, we utilize our direct-sales network, in-house sales network overseas.

Business Summary
Diverse customers
DMG MORI groups the world into 800 different areas and investment cycle varies from country to country. Our
assigns Area Sales Manager (ASM) to each. When business is also stabilized by the newly-gained diversity
defining each area, we take the number of customers, in customers’ industries; it covers not only the automotive
diversity in customers’ industries, and area size into and general machineries industry, but also the
consideration. aerospace, semiconductor and medical industry.
Particularly in Europe and North America, where a
The machine tool industry is susceptible to macro- number of SMEs (small and medium-sized enterprises
economy and capital investment trends, and its market with 100 employees or less) with sophisticated machining
demand constantly fluctuates. The integration of the two technology work in the aerospace, automotive, and
companies has brought the DMG MORI group a stable semiconductor production equipment industries, we have
demand and order intake, as it gained customer bases in introduced 5-axis machines and other cutting-edge
four major markets. Most importantly, around half of the machines to develop further advanced machining
group’s turnover comes from Europe, where the capital methods.

Business Summary
DMG MORI Qualified Product (DMQP)
DMG MORI offers a wide range of peripheral equipment provider, we also handle any kind of customer request
and machinery attachments perfectly suiting our machine about the equipment. Because DMG MORI gradually
tools in the 4 main fields: shaping, handling, measuring standardizes internal processes and provides
and monitoring. The DMQP (DMG MORI Qualified Product) comprehensive products, we can further generate
program certifies machine tool's peripheral equipment additional values for our machines. Procurement in large
that meets DMG MORI standards in quality, performance quantities from our carefully-selected partners allows us
and maintainability. Over 5,000 kinds of equipment and better purchasing conditions. On the other hand, our
software from 60 companies in the world have been partners are benefitted, too, from having their products
qualified. We provide customers with total support, from introduced to customers along with our machines. This
proposals of our reliable DMQPs to the delivery and gives them advantages to save on their sales activities
maintenance, ensuring long-term and comfortable and focus on production instead.
operating environments for them. As a one-stop service

Business Summary
Excellence Centers
DMG MORI operates excellence centers in Iga, Nara,

Pfronten and Seebach, each specialized in 4 major
industries, �Aerospace� , �Automotive� , �Medical� , and �Die
& Mold� . Engineers with specialized knowledge and
expertise in the specific requirements and machining
processes of each industry make suggestions for
optimized solutions. They also work closely with DMG
MORI’s 1,000 application engineers all over the world to
offer the best solutions for every customer’s
requirement.

Business Summary
Lifecycle service
Machine tools are constantly evolving towards multi-axis service of machines sold in Japan. However in January
machining, process integration, automation and 2018, DMG MORI started 3-year warranty service for all
digitalization. However, it is also important to keep an eye the MASTER-series spindles mounted on DMG MORI’s
on everyday operation. Many customers of DMG MORI are machine tools regardless of locations of production and
SMEs, whose main target is to maximize the productivity sale. This is to guarantee safer and better usability of our
of their machine tools. In the future, digitalization will products by our customers worldwide. DMG MORI applies
bring huge growth in productivity, but in the short-term, a service system consisting of 3 organizations: Service
we regard spindle and spare parts service, as well as Centers, which handle repair- and spare parts-related
service support as more crucial factors of everyday requests 24/7; Spare Parts Centers, where needed parts
production. DMG MORI has greatly invested in the are sent immediately to our customers, with more than
availability of spare parts, and has a constant stock of at 95% of the items shipped within 24 hours; and Technical
least 1000 spindles. To ensure long and proper running of Centers, where field service engineers are dispatched to
the spindle, the machine’s heart, we need to utilize our our customers’ locations. More than 3500 service
expertise as a manufacturer. Normally, we offer 2 years employees work together to provide speedy support to
of free-of-charge warranty for repair and maintenance our customer’s needs.
Customers First 2.0-

Our 5 Service Promises with Even More Commitments
1 2 3 4 5
Immediate
More service DMG MORI Full-
Fulfilling spare World-class support thanks to
experts, faster Seivice, 100%
parts spindle service service centers
support guaranteed
and Netservice

Business Summary
Service centers supporting customers’ production 24/7
More than 75
% of the problems
are solved by telephone support
（as of March, 2019）
All service call functions are centralized in service

centers, which is in 24/7 operation. Information of
delivered machines and repair service history are all
stored in a secure database on a daily basis so that our
staffs can provide customers with optimal solutions in
the shortest possible time.
In some cases of machine troubles, our employees can

remotely operate the machine from the service center for
quick recovery.
Substantial service and support with 157 bases in 42 countries / regions
Technical centers are our bases to provide field service to

customers. We have built a system for a service engineer
to go straight to the customer in the shortest possible
time for on-site repair when in need on a call from the
service center. Our highly skilled engineers listen to our
customers' needs face-to face and offer them meticulous
and speedy service.

Business Summary
DMG MORI as a total engineering company
There is a long process to go through before DMG MORI’s machining specialists to work at customers’ locations.
machine tools start operation at customers’ plants – we Customers’ requests collected by resident engineers are
propose machining technology, cutting tools, and test useful inputs for the next generation product
cuts; get customers’ verification for machine’s development, and will ultimately lead to the development
performance including accuracy and machining time; of more attractive products.
install the machines at customers’ sites and receive
acceptance. DMG MORI is a total engineering company In February 2016, DMG MORI started operation of a
that provides not only machine tools but also machining machining technologies database "technology monitor".
and software technologies to make complex machining All the information necessary for machining is
possible. DMG MORI’s engineers are working worldwide accumulated in this database, including the latest
together with sales and development teams to deliver the machining technology, cutting tools, fixtures, and
best solutions for customers to achieve required materials. In this way, engineers from all over the world
productivity and accuracy. DMG MORI also offers resident share the machining knowhow.
engineering services by dispatching highly qualified

Business Summary
Parts centers
A new machine tool of DMG MORI is made of about 5,000 world. In Japan, 95% of the parts are shipped within 24
components. We guarantee stock availability of all the hours.
parts for 10 years, and in some cases even up to 20 years.
DMG MORI has established 3 global parts centers around The parts center in Nara (Japan) will be relocated to Iga
the world to provide reliable post-sales services for Campus in 2019. The new automated warehouse contains
customers. Global parts centers in Nara (Japan) and state-of-the-art logistics equipment such as pallet
Geretsried (Germany) store more than 100,000 parts, stacker and case conveyor lines. We will strengthen our
while the one in Dallas (USA) has over 50,000 parts in spare parts system by fully utilizing the latest equipment
stock. This ensures prompt parts shipment across the and IT technology.

Business Summary

Business Summary
Dynamic.
Excellence

Major Group Company
Group Companies
TAIYO KOKI http://www.taiyokoki.com/
Since its foundation in 1985, TAIYO KOKI specializes in

grinding technology for automotive and general
machinery parts. In 1989, TAIYO KOKI developed the first
vertical grinding machine. TAIYO KOKI’s machines are
well-recognized by worldwide customers as high-
precision, high-rigidity, space-saving, and flexible
products compatible with automation. The company’s
wide range of product lineup from small machines for
mass-production parts to large machines for high-mix,
low-volume production is another ground for its very
positive reputation. In October 2005, TAIYO KOKI brought
innovation to machining process of medium- to large-
sized workpiece by vertical internal / external grinding
machine (NVG series) and turret-type vertical multi-
process grinding machine (NVG-T series). NVGH series is a
vertical multi-process grinding machine for large-sized
TAIYO KOKI CO., LTD.
tough-to-cut material launched in October 2008.
Currently, the company focuses on strengthening 221-35, Seiryo-machi, Nagaoka City,Niigata, Japan
machining technology by improving usability of its

applications.
TAIYO KOKI’s head plant has been reaching at its full

production capacity for some time. By June 2021, the
company will enlarge its production site in Nagaoka-city
by approx. 105,000 sqm to triple its production volume at
its maximum. The new facility plant is dedicated to
production of small and medium machines for automotive
industry, while the existing head plant will specialize in
large machines for aircraft engine parts production.

Major Group Company
Magnescale http://www.magnescale.com/mgs/language/english/
Ever since its establishment in 1969, Magnescale’s optimized control and preventive maintenance.
fundamental principle is to contribute to advancement and
development of manufacturing industry by ultra-precision In April 2010, Magnescale became a wholly-owned
measurement technology. The product "Magnescale" subsidiary of DMG MORI. DMG MORI is gradually
originated from magnetic recording technology of tape increasing the number of machine models with
recorders. It has been applied to machine tools as well SmartSCALEs equipped as standard.
thanks to its robustness, high accuracy, and high
resolution. "Laserscale" was born from optoelectronics Isehara Plant
technologies applied to optical disks. Assuming the Research and Isehara
Plant Development
requirements for ultra-precision in electronics industry Base
would be more demanding in the future, the company has
offered the product to upgrade cutting-edge high-density
production equipment of semiconductors and disk media.
In 2017, Magnescale started integrated production of
"SmartSCALE," a new product accommodating the
Iga Plant
cutting-edge high resolution of 5nm and bearing-less non- Vibration-free
contact structure at the same time. precision plant
To produce parts by machine tools, material should be

machined from different angles, and that requires
repeated movements of linear and rotational axes.
Controlling the movement of multiple axes of machine
tools quickly and precisely, or in other words, controlling Magnescale Co., Ltd
the positioning accuracy is the key to achieve higher 45 Suzukawa, Isehara City, Kanagawa, Japan
productivity and machine’s accuracy.
Measurement devices such as scales and sensors are key

～1 m 1 ～2 m 2 ～4 m
components for machine tools to achieve high accuracy. It
will become even more important in the future to capture
the status of every part of machine tools, for example by
attached sensors to measure position, pressure,
temperature, and vibration, to feedback the measured
ALX1500 / 300 NHX 10000 DMC 340 FD
data to machine’s control, and to utilize the data for
The world’s first water and dust proof, open-type, high-accuracy, high-
resolution absolute Magnescale that requires no air-purging
was launched. Featuring the simple structure with the head and the scale
separated, it achieves a high resolution of 0.005 μm despite the large
mounting tolerance of ±0.1 mm.
● Achieved a protection class of IP67 for dustproofing and waterproofing

● Max. resolution of 0.005 μm　● Max. response speed of 200 m/min
● Vibration resistance of 250 m/s2

Major Group Company
DMG MORI B.U.G. http://www.bug.co.jp/
DMG MORI B.U.G. CO., LTD. was established in 1980 in Moreover, DMG MORI B.U.G. strongly promotes research
Sapporo as an IT start-up company of Hokkaido and development projects for IoT, as demand for such
University. Since then, DMG MORI B.U.G. has been technology is expected to grow further. DMG MORI B.U.G.
developing cutting-edge computer technologies by is a key part of the group for achieving that goal, given its
utilizing its extensive technical expertise in both hardware abundance of experience in the development of network
and software. devices and embedded software.
In 2008, DMG MORI B.U.G. joined the DMG MORI group.

DMG MORI B.U.G. makes significant contributions to
improving operator-friendliness and increased
productivity of machine tools through the development of
the next generation operation software such as CELOS
and MAPPS V. Both products were jointly developed with
DMG MORI, and they are easy to operate and highly
competitive.
DMG MORI B.U.G. CO., LTD.
1-1-14, Shimonopporo Techno Park, Atsubetsu-ku,

Sapporo City, Hokkaido, Japan
Saki Corporation http://www.sakicorp.com/
With a solid foundation in automatic visual-inspection

technology, Saki Corporation has developed automatic
inspection equipment for electronic parts mounting
processes, utilizing two-dimensional, three-dimensional
and X-ray CT images, since its initiation in 1994.
Internal development of hardware and software allows

high-resolution, high-speed and high-accuracy inspection
in line with technology advancement of electronic
equipment. With the recent smart factory trend in
electronic parts mounting process, Saki Corporation will
further promote worldwide M2M collaborations with
major manufacturing equipment producers and
continuously provide pioneering total solutions.
Saki Corporation
3-1-4, Edakawa, Koto-ku, Tokyo, Japan

Major Group Company
TECHNIUM https://www.technium.net/
In January 2018, DMG MORI and Nomura Research Institute

(NRI) have jointly established a new company TECHNIUM
Co., Ltd. to improve customers’ productivity by DMG MORI
Group’s sophisticated production technology and NRI’s
robust IT technology. DMG MORI offers its cutting-edge
technology on machines, machining, and software. NRI
brings in expertise in planning, development and
implementation of advanced services and schemes by
combining consulting services and reliable IT technologies.
By uniting both parties’ strengths, TECHNIUM makes it
possible for customers to manage all the production-
related information such as production equipment, human
resources, machining knowhow, etc. through their own
webpage in members’ website. In addition, TECHNIUM
provides state-of-the-art software and trainings to fully
TECHNIUM
utilize customers’ machine tools according to their available
Tokyo Digital Innovation Center, 3-1-4 Edagawa Koto-ku, Tokyo,
equipment and operators’ skills. Furthermore, DMG MORI
Japan
will help create optimized machining programs based on its
database of machining technology. All these solutions
support customers to fully utilize their machines’ potential.
Main services
Customer dedicated
website
Reduce the trouble of finding
information by centralized
management of possessed
machine information Time reduction by centralized management
Tons of paper manuals/Inconvenience on the web
Training service
Quick development of human
resources who can master
advanced equipment
High efficiency learning with actual
No time for basic training machine operation and e-learning
Drawing, machine information
Process engineering
service
Eliminate difficult issues when
beginning production
Resolution about process,

Customer's production site programing and tools Engineering

CORPORATE
SOCIAL
RESPONSIBILITY

IMPACT & ACTIVE INFLUENCE
•Resources management
•Energy
•Emissions
•Product quality &
∙Resources •Resources product safety •Resources •Product quality &
management management •Human rights management product safety
•Energy •Personnel structure •Energy
•Emissions •Employee development •Emissions
•Occupational •Diversity & equal •Product quality &
health & safety opportunities product safety
•Human rights •Occupational •Occupational
•Compliance & health & safety health & safety
data privacy •Social responsibility
•Compliance & data privacy
RAW MATERIALS SUPPLIERS CUSTOMERS DISPOSAL &

RECYCLING
•Conflict minerals •Drinking water •Drinking water •Drinking water •Energy

•Human rights •Waste •Waste •Waste •Emissions
•Occupational •Conflict minerals •Human rights
health & safety •Drinking water
•Energy •Waste
•Emissions
•Drinking water
•Waste
IMPACT WITHOUT INFLUENCE

CSR Activities
CSR activities of DMG MORI
DMG MORI’s CSR-guideline sets goals for sustainable growth based on

long-term business perspective.
As a globally operating company, DMG MORI commits itself to contribute
to achieving the Sustainable Development Goals (SDGs).
Approach to SDGs
Contributions to SDGs
Environment
Risk Management
Human Capital
Social Contributions

CSR Activities
At "The United Nations Sustainable Development Summit"

held in New York at the UN Headquarters from September 25
to 27, 2015, countries adopted "Transforming our world: the
2030 Agenda for Sustainable Development" - an action plan
with goals and declarations for the human being, the planet and
prosperity. Following the Millennium Development Goals (MDGs),
"The Sustainable Development Goals (SDGs)" consist of 17 goals
and 169 targets.
DMG MORI commits itself to make contributions to achieve
these goals for sustainable development.
Social challenges DMG MORI’s efforts
• Reduce CO2 emissions from customers � factories • Used machine sale

• Reduce CO2 and other emissions from • Less energy consumption by
manufacturing processes GREENmode
• Emission monitoring at production sites
• Prevent production of weapons of mass • Ensure peaceful usage of our products

destructions through stringent export control
regulations
• Empowerment of women • Working conditions which meet women’s

• Create jobs at business locations needs
• Prevent long working hours and improve • Diverse workforce
productivity • Work & life balance, productivity
improvement
• Give opportunities for high-quality technical • Contributions to the DMG MORI

education Scholarship Fund
• Promote innovation and efficient resource usage • Supporting universities and technical
colleges
• R&D through collaborations with
scientific institutions

Corporate Governance
1. Our Basic Approaches to Corporate Governance knowledge in company’s operations, and External
Enhancing corporate governance and management Directors, who are more independent from company’s
monitoring functions is the first priority for DMG MORI, business. In accordance with the audit principles, each
because it would lead to even higher transparency of our Auditor attends and makes comments at meetings of the
business to the entire society including our shareholders, Board of Directors, Operating Officers and departments,
investors, customers and business partners, employees, and other important meetings. They inspect documents
and members of the community, and to make our for important decision making and conduct strict audit
business operations fair and efficient. over the headquarters, departments, campuses,
technical centers, and subsidiaries in and outside of
We will continue to work on improving our corporate value Japan. To conclude, DMG MORI’s corporate governance
with consistency for long term, and continuing business structure is efficient; it makes the company’s
based on even higher standard of corporate ethic. management fair and transparent, because management
reforms such as establishing a compliance system are
2. Corporate Governance Structure made possible by quick decision making of a small
DMG MORI applies an audit system by Auditors. number of Directors and by productive discussions at
Our basic approach is to execute top-down business meetings of the Board of Directors.
decisions quickly and efficiently, founded on the prevailed
audit system exercised by appointed Auditors. 5. Governance at AG
AG, as a Germany company, has a governance system
3. Board of Directors different from the Japanese. At AG, appointment of
Out of 11 members of the Board of Directors, 4 are External Directors and approval of business and investment plans
Directors (Ratio of External Directors being 36%) as of are determined by the Supervisory Board, which exercises
March 22, 2019. We have been coping with quick changes in control over the Board of Directors. Therefore, controlling
the market environment and technology trend that are the Supervisory Board is crucial to appoint Directors who
unique to the machine tool industry. Against this are appropriate to realize an integrated business and
background, our management structure consisted of a finance of CO and AG. While none of the members of the
limited number of Directors supported by Operating Officers Audit and Supervisory Board of CO comes from AG, Dr.
to enable quick decision making. Since 2015, however, we Masahiko Mori, President of CO, was appointed as the
increase the number of Directors by appointing External Chairman of the Supervisory Board of AG in May 2018.
Directors. The number of External Directors increased from This has further strengthened governance over AG. Joint
2 out of in total 7 Directors to 4 out of in total 9 Directors in meetings of Dr. Mori and executives of CO and AG are held
2017. Their presence provides increased transparency and once a month to discuss and manage the status of
objectiveness to company’s business. All of the 4 External everyday operations at the group’s sales and production
Directors have professional management experience. They bases. The result is joint decision making as one global
bring in a wide range of insights based on their specialized company.
knowledge in engineering and other areas.
■ Ratio of External Directors and Auditors (as of March 22, 2019)
The Board of Directors discusses on important business
Directors 11
strategies for the future of the company. Discussions on daily
business operations are conducted at the meetings of
Management Committee and Operating Officers. This structure
enables extensive discussions by the Board of Directors and at Auditors 3 External
the same time quick actions in business operations. 36%
4. Audit and Supervisory Board
The Board of Auditors consists of a full-time Corporate External
Auditor, a former Executive Officer with extensive 66%

Corporate Governance Structure of DMG MORI
General Shareholders’ Meeting

Appointment /
Business Report Appointment / Dismissal Audit Report by Auditors Appointment / Dismissal
Dismissal
Report
Directors /
Report Financial Auditor
Board of Directors
Audit Auditors (sole system)/ Audit and Supervisory Board
Approval to appointment /
Appointment / dismissal Judgment on validity of audit Report
Dismissal Report Audit
Supervision Report
Direction / Supervision
Representative Director Internal Audit Department
Report Alliance
Direction /
Report
Supervision
Report
Management Committee (compliance
and risk control) Directors Audit

Internal audit
Export Control Committee
Information Disclosure Control Committee
Operating Officers’ Meeting (FT Meeting)

(Directors and Operating Officers)
Management Meetings
(discussion and reporting on important issues) Directors,
Operating Officers, General Managers, other managers
Executive Officers, Vice Executive Officers, General Managers
Direction
Business Departments and Group Companies
DMG MORI Meeting Structure *Regular meetings where top managements of CO and AG meet in one
place. Report the progress of each project and promote decision-making
of each company.
DMG MORI CO Board of Directors Meeting

Board
DMG MORI AG Supervisory Board Meeting

(DMG MORI CO Audit & Supervisory Board Meeting)
Group Companies DMG MORI AG

Joint Committee Meeting
Board of Directors Meeting Board Meeting
Management (Internal Board) Meeting (Planning Meetings)

GM Management
FT Meeting** (CO) FT Meeting** (AG)

**FT: Führungsteam (Management team)
Sales, Service, Parts and Inventory (SPI) Meeting
Quality Engineering / Status Meeting Status Meetings HR (AG) Purchase

HR IT Sales & Service
Meeting Application Mtg. Plants Companies Meeting Meeting
Joint Quality
IT Meetings Design Meeting Design Review
＝ AG only
Staff
Meeting
＝ CO only
Product Development Conference
＝ AG and CO
Global Development Summit

Introduction of Board of Directors As of March 22nd, 2019
Name Brief personal history

Dr. Mori was born in Nara in 1961. After graduating from Kyoto University, Engineering Faculty, Department of Precision Engineering
in 1985, he started his career at ITOCHU Corporation. Later in 1993, he joined Mori Seiki Co., Ltd. (current DMG MORI CO., LTD.)
In 1999, he became President at the age of 37 by succeeding his father Yukio. Aside from his professional career, he gained a
doctorate in Engineering at the University of Tokyo. He was appointed as a member of the Supervisory Board of GILDEMEISTER
Aktiengesellschaft (current DMG MORI Aktiengesellschaft) in November 2009, and the chairman of the said board in May 2018. Dr.
Mori is Vice Chairman of the Japan Machine Tool Builders’ Association, Fellow of CIRP (The International Academy for Production
Engineering), and Director of KYOTO UNIVERISITY INNOVATION CAPITAL Co., Ltd.
Masahiko Mori
President, Dr. Eng.
After studying business management at the University of Münster, he joined DMG MORI (then GILDEMEISTER AKTIENGESELLSCHAFT)
in 1998. He became Head of Global Business Development, Sales and Marketing in 2000, and Managing Director of SAUER GmbH in
2001 to establish Advanced Technologies: ULTRASONIC, LASERTEC, and ADDITIVE MANUFACTURING. In 2009, he led DECKEL MAHO
Pfronten GmbH as Managing Director. In 2012, he became a member of the Executive Board of AG in charge of production and product
development, and its Chairman in 2016. Throughout the cooperation with CO, he drives technological, organizational, and cultural
integration as "Global One Company".　
Christian Thönes
Vice president
After graduating from Doshisha University, Faculty of Commerce in 1983, he started his career as an accounting specialist at DMG
MORI CO., LTD. (then Mori Seiki Co., Ltd.). He was transferred to the U.S. sales company in 1984 and learned machine tool business
and accounting in the U.S. Upon his return to Japan in 1988, he gained further experience in accounting, tax and finance. For a decade
since 1992, he acquired management skills by supporting President from Management Planning Office. In August 2002, he led the
partial business acquisition from Hitachi Seiki Co., Ltd. and establishment of a new company. Since 2009, when CO started business
collaboration with AG, he leads business culture integration and talent development as Director in charge of human resources.
Hiroaki Tamai
Executive Vice President
Mr. Kobayashi graduated from Keio University, Faculty of Economy in 1997. He also studied PMD at Harvard Business School. He
started his career at Kirin Holdings Company, Limited (then Kirin Brewery Co., Ltd.) and was engaged in planning and executing
overseas business growth strategy. He led negotiations on investment in a brewery company in Australia and other domestic and
international M&As. He became Representative Director and Managing Director of Kirin Holdings in 2012, responsible for business
investment, collaboration and information strategy. After joining DMG MORI CO., LTD. in 2015, Mr. Kobayashi facilitates the group’s
integration in accounting and financial fields. He will be continuously committed to cultivating a solid accounting and financial basis
for business expansion to meet shareholders’ and investors’ expectations.
Hirotake Kobayashi
Executive Vice President
After graduating from the Department of Electronic Engineering, Faculty of Engineering, Doshisha University in 1981, he started his
career at DMG MORI Co., Ltd. (then Mori Seiki Co., Ltd.) In 1997, he developed control systems such as Human Machine Interface
as manager of Control Technology Department. He earned his PhD in Engineering at Kyoto University in 2002. He was appointed
as Director in 2003 and Executive General Manager of Development Headquarters in 2005. In 2008, he moved to the United States
as CEO of Digital Technology Laboratory. After his return to Japan, he led procurement for 2 years, before again took responsibility
in development to head business collaboration with AG. He was appointed as R&D Company’s President in 2019. He re-organized
the company’s development system from machine models-based to elementary technology-based structure. He promotes the
Makoto Fujishima development of innovative products and elementary technology.
Executive Director, Dr. Eng.
After graduating from Loyola University, Chicago in 1981 with a Juris Doctor degree, Mr. Nudo became licensed to practice law in the
State of Illinois and in U.S. Federal Court. In 1992, he joined YAMAZEN INC., the U.S. subsidiary of YAMAZEN CORPORATION. In 2000,
again from Loyola he received a Master of Science, Organization Development degree. In 2003, he joined DMG MORI CO., LTD (then
Mori Seiki Co. Ltd.) initially as General Counsel of its U.S. subsidiary until relocating to the parent company in Japan in 2005 with
responsibility for international legal matters. During his tenure in Japan, he was involved with the business cooperation with AG and
is still involved in the integration of the companies. Since 2017, he has been in the U.S., as President of DMG MORI USA, INC. In 2018,
he became a member of the Supervisory Board of AG.
James Nudo
Executive Director, J.D.
He joined DMG MORI Co., Ltd. (then Mori Seiki Co., Ltd.) after graduating from the Faculty of Business and Commerce, Kansai
University, in 1995. He gained general experience in Accounting Department, before leaving Japan in December 1997 to spend 2
years in the USA and Germany, respectively, and study overseas accounting and IT. After his return to Japan in 2002, he took charge
of export control, consolidated accounting, tax management and management accounting. In 2006, he introduced SAP’s accounting
system, before he moved to Europe in 2007 for the second time. During the 11 years spent abroad, he led business collaboration with
AG and sales of Japanese machines in Europe. In 2018, he returned to Japan to lead business operation and accounting. Since 2019,
he heads production and procurement and commits himself to optimizing material procurement and building an efficient production
Minoru Furuta system with cutting-edge technologies.
Senior Director

Introduction of External Director As of March 22nd, 2019
Name Brief personal history Relationship with our company
He obtained a bachelor’s degree in 1974, a master’s degree in 1976 and an engineering Dr. Tojiro Aoyama is a Vice-President
doctorate in 1979 from the Department of Mechanical Engineering, Faculty of Engineering, of Keio University and has served in
Keio University. His doctorate thesis themed "Dynamic behavior of hydrostatic thrust bearings roles such as professor at the Faculty
and the optimum design method." He became an assistant of the said department in April of Science and Technology of Keio
1979, and after serving as a fulltime lecturer and an associate college professor, he was University and Dean of that Faculty.
promoted to a professor. During his tenure as an assistant, he studied tribology for one year Whereas DMG MORI engages in
at RWTH Aachen University in Germany. He was assigned to the dean of the Faculty of Science transactions with Keio University, the
and Technology and the chair of Graduate School of Science and Technology in July 2009, and transaction amount is negligible, with
to a professor emeritus in April 2017. He has been the vice-president of Keio University since the maximum annual value being JPY
May 2017. He specializes in production engineering and his scope of researches includes 9 mil. in the past three years (0.00 %
sophistication of constituent elements of machine tools, development of functional materials as a percentage of the consolidated net
and monitoring of machining process. He is a fellow for CIRP (The International Academy for sales), and we have determined that
Tojiro Aoyama Production Engineering), the Japan Society of Mechanical Engineers and the Japan Society this is not something that affects the
for Precision Engineering. He has been in DMG MORI as an external director since June independence of Dr. Tojiro Aoyama. As of
External Director, Ph D.
2015, utilizing his academic expertise and experiences in university management to advise March 22, 2019, 23 graduates from Keio
on technology development and trainings, in pursuit of further contribution to machine tool University are employed in DMG MORI.
technology around the world.
He obtained a master’s degree from the Department of Precision Engineering, Graduate School of Dr. Tsuyoshi Nomura has served in roles
Engineering, Kyoto University in 1978. Upon the graduation, he joined Kobe Shipyard & Machinery such as Managing Director of Panasonic
Works, Mitsubishi Heavy Industries, Ltd. and designed nuclear power plants. He moved to Production Corporation during his career. Whereas
Engineering Laboratory, Matsushita Electric Industrial Co., Ltd. (currently Panasonic Corporation) in DMG MORI engages in transactions with
1990. In 2000, he earned a qualification for Professional Engineer. He practiced analysis simulation Panasonic Corporation, the transaction
technology (CAE), as well as measuring, inspection, kinematics, control, and material process amount is negligible, with the maximum
technology, after which he joined a fuel cell project and Jisso Core Engineering Lab. He was annual value being JPY 109 mil. in the past
assigned to President of Advanced Production Systems Development Company, Limited, which scope three years (0.03 % as a percentage of
includes production facility, die and mold, and software businesses, and later to Executive Officer of the consolidated net sales), and we have
Manufacturing Innovation Division to lead the production technology and manufacturing projects of determined that this is not something that
the whole group. He became Director in 2009, Managing Director in 2013, and Managing Executive affects the independence of Dr. Tsuyoshi
officer of Manufacturing Innovation Division in charge of manufacturing innovation, quality, logistics and Nomura.
Tsuyoshi Nomura procurement, and environment. He earned an engineering doctorate in 2013 from Osaka University. After
retiring from Panasonic, he founded Nomura Techno Co., Ltd. to provide venture companies with support
External Director, Dr. Eng.
for manufacturing and management, utilizing industry-academia network. He contributes to further
growth of DMG MORI with his long-term management experience, first-hand practices in production
technology, quality, procurement and environment, and the wide range of technical knowledge.
After graduating from the Faculty of Law, University of Tokyo, he joined Ministry of International Trade and Industry. He was Mr. Makoto Nakajima has served in roles
assigned as a responsible official for commercial negotiation and industrial cooperation at the Mission of Japan to the EC/ such as Commissioner of Japan Patent
Embassy of Japan in Belgium for 3 years since May 1984. Upon his return to Japan, he proceeded through Trade Policy Office and Representative Director of
Bureau, Industrial Policy Bureau (where he founded Intellectual Property Policy Office, using the word "intellectual property" Sumitomo Electric Industries, Ltd. during
for the first time, protected trade secrets with Unfair Competition Prevention Act, and introduced stock options to promote his career. Whereas DMG MORI engages
business innovations of companies and ventures), Secretary to the Minister, Director of Policy Evaluation and Public Relations in transactions with Sumitomo Electric
Division, Trade Bureau (where he promoted trade insurance system), Director of Industrial Machinery Division and Director Industries, the transaction amount is
of Budget and Account Division. He became Director General of Kinki Bureau of Economy, Trade and Industry in 2001, and negligible, with the maximum annual value
Director General of Trade and Economic and Cooperation Bureau (where he reached Japan-Mexico Economic Partnership being JPY 537 mil. in the past three years
Agreement). In 2005, he assumed office as Commissioner of Japan Patent Office, committed himself to acceleration of (0.14 % as a percentage of the consolidated
patent examination process, globalization and alignment with other countries’ patent system. He also started the five-nation net sales), and we have determined that
commissioner meeting with the U.S., EU, China and Korea during his tenure. He joined Sumitomo Electric Industries, Ltd. In this is not something that affects the
Makoto Nakajima 2008. He was registered as attorney in 2009, and practiced law in management planning, legal affairs, intellectual property, independence of Mr. Makoto Nakajima.
public relations and export control. In June 2016, when he was Representative Senior Managing Director of Sumitomo
External Director
Electric, he retired from the company and soon after he joined Japan Institute of Invention and Innovation as Vice Chairman
and Senior Executive Managing Director, where he has promoted invention and raised awareness
of intellectual property system. He has been DMG MORI’s External Director since March 2017.
He earned a bachelor’s degree from the Faculty of Letters, Kyoto University in 1979, and Mr. Takashi Mitachi has rich experience
MBA from Harvard Business School with Baker Scholar in1992. He had been engaged in and expertise based on his many years
management consulting for directors of major companies in The Boston Consulting Group for having acted as a managerial consultant
24 years. He served as Japan Co-chair of the said company and a member of Global Executive and is currently Senior Advisor at The
Committee for a long term, and is experienced in management of global company himself. He Boston Consulting Group. Whereas DMG
advises the government from business point of view, as Vice Chairman of KEIZAI DOYUKAI (Japan MORI engages in transactions with The
Association of Corporate Executives) and a member of several panels of experts. He is also Boston Consulting Group, the transaction
a member of Global Agenda Council of World Economic Forum, and he proposes solutions to amount is negligible, with the maximum
Global Agenda Council in his duty. He continuously contributes to enhance the corporate value annual value being JPY 408 mil. in the past
of DMG MORI by supporting management internationalization with his rich experiences. three years (0.08 % as a percentage of
the consolidated net sales), and we have
determined that this is not something that
Takashi Mitachi affects the independence of Mr. Takashi
External Director Mitachi.

Introduction of Auditors As of March 22nd, 2019
External
Relationship with our
Name Brief personal history company
board
members
After graduating from Meiji University’s School of Law in 1984, Mr. Kawayama
started his career in NTN Corporation (former NTN Toyo Bearing Co.,
Ltd.). First, he gained experiences in accounting of headquarters and
manufacturing cost. While stationed in the United States from 1992 to 1998,
he earned a global viewpoint and deepened his expertise through introduction
of an accounting system and trouble-shooting of trade-related issues. Back in
Japan, he was assigned as Deputy General Manager of Finance Headquarters /
General Manager of Budgeting Department, mainly responsible for budget
management. In January 2009, Mr. Kawayama joined DMG MORI CO., LTD. (former
Mori Seiki Co., Ltd.) and has been engaged in various fields from headquarter
accounting, factory accounting, to budget management. He introduced the
International Financial Reporting Standards (IFRS) and the Advance Pricing
Agreement (APA) for transfer pricing taxation, and also accelerated the
vitally-important accounting integration with DMG MORI AG by handling
complicated accounting procedures and unified accounting standards. He was
Toshio Kawayama appointed to Operating Officer in 2011 and Executive Officer in 2015, and has
greatly contributed to DMG MORI’s accounting as a supervisor of Accounting /
Corporate Auditor
Finance Headquarters. In March 2019, Mr. Kawayama became a member of
Audit & Supervisory Board. With the accounting experience and knowledge
cultivated over many years, he will further strengthen DMG MORI’s global
corporate governance system.
After graduating from the Graduate School of Engineering at Nagoya University, Dr. Sojiro Tsuchiya
he joined Nippondenso Co., Ltd. (currently, DENSO CORPORATION) in 1975. has served in roles
As a production engineer, he developed production systems of precision parts such as Executive Vice
of cars, including development and utilization of machining technologies President of DENSO
such as cutting and grinding. Later, he was responsible for productivity CORPORATION. Whereas
improvement of the whole factory through CIM (Construction Information DMG MORI engages
Modeling / Management) and FA (Factory Automation). In 2001, he earned a in transactions with
PhD in Engineering from Gifu University by his research in precision control DENSO CORPORATION,
of hydraulic technology. In 2002, he was appointed as Executive Director the transaction amount
and Member of the Board to lead the entire production engineering and is negligible, with the
manufacturing departments at DENSO. In 2011, he became Executive Vice maximum annual value
President to lead the production globally. In 2013, he left the position, but being JPY 1,024 mil. in
continued to provide advice on production engineering as Executive Advisory the past three years (0.27
Engineer / Advisor until 2016. In March 2017, he was appointed as External % as a percentage of the
Auditor of DMG MORI. At the same time, he serves as External Director of consolidated net sales), and
Sojiro Tsuchiya Toyoda Gosei Co., Ltd. and NISSEI CORPORATION, as well as Chairman of we have determined that
Japan Institute of Plant Maintenance. He engages himself pro-actively in this is not something that
External Auditor, Dr. Eng.
management and development of production engineering. As External Auditor affects the independence of
of DMG MORI, he provides insights from customers’ point of view as a long-time Dr. Sojiro Tsuchiya.
user of machine tools, and exercises control over the company’s management
based on his knowledge in management and production engineering.
Mr. Yoshinori Kawamura

has served in roles such
In 1975, he joined The Sumitomo Bank, Limited (today Sumitomo Mitsui as President of Sumitomo
Banking Corporation). He acquired expertise in international business and Mitsui Finance and Leasing
investment banking. In area of international business, he spent 16 years Company, Limited and is
in the United States; he managed the financial crisis in the 1990s, and led currently Special Adviser of
strategic sales, integrated risk management, and compliance with financial Sumitomo Mitsui Finance
control regulations as Managing Director and Head of the Americas Division. and Leasing Company,
In area of investment banking, he focused on M&A and project finance. In 2006, Limited. Whereas
he became a member of the management board. As Managing Director for DMG MORI engages
international business, he led the bank’s overall strategy for globalization. in transactions with
Also, as Managing Director for corporate finance, he worked out business Sumitomo Mitsui Finance
and risk management strategies for client companies. In 2011, he became and Leasing Company,
President of Sumitomo Mitsui Finance and Leasing Company, Limited. He the transaction amount
expanded business and strengthened management before his resignation in is negligible, with the
2017. As President of the company, he took initiatives in aircraft leasing and maximum annual value
large-scale acquisition of GE’s leasing business in Japan. He also directed being JPY 2,432 mil. in
Yoshinori Kawamura relocation of the Headquarters. Based on his experience in overseas business, the past three years (0.65
External Auditor mainly in the United States, as well as in acquisition of foreign companies’ % as a percentage of the
leasing business, he well recognizes challenges in effective risk management consolidated net sales), and
and construction of the governance system of global companies. He brings in we have determined that
such expertise as an Auditor of DMG MORI. this is not something that
affects the independence of
Mr. Yoshinori Kawamura.

Message from an External Director

One of the characteristic natures of machine tool business is the vulnerability to the world’s
economy. In accordance with economic fluctuation, the machine tool demand swings up and down
in several- to about a dozen-year cycle.
DMG MORI has flexibly managed the ever-changing conditions, outperformed the competitors, and
eventually become a leading player in the global market. The flexibility, however, will be further
tested in the following years.
In the mid- to long-term, we expect solid growth in the machine tool demand, particularly in
automated solutions with high-end machines and services. The manufacturing industry will be
desperately lacking in human resources as working population shrinks, not only in Japan, China,
Takashi Mitachi South Korea, and the neighboring countries in the "World’s Factory" East Asia, but also in other
External Director advanced countries. This trend works positively to our end.
On the other hand, the ongoing digitalization will transform industrial structure and change our
customers’ business landscape. The current U.S.-centered world will be gradually polarized,
bringing geopolitical and trade-conflict risks. We will thus see a sharp drop in demand several
times, even during the mid- to long-term growth. The keys to survive through the hardships are
the foresight to stay ahead of competitors and the robust operation management to generate cash
and control cost.
DMG MORI has shown a great tolerance against economic fluctuation. As one of the external board
members, I will fully utilize some 25 years of experiences with global companies to further
enhance the resilience.
Message from an External Auditor

Recently, terms such as CSR and Corporate Governance have increasingly gained public attention.
Needless to say, it is a company’s responsibility as a member of society to follow laws and
regulations, and to contribute to environment and safety. Governance is the mechanism or system
of controlling and monitoring companies to ensure their compliance with laws and regulations
and efficient operation; such system also referred to as Corporate Governance Guidelines. Our
company also follows this principle, as we evaluate ourselves and maintain an appropriate system.
However, the benefits of Corporate Governance are more profound than mere legal compliance
and prevention of scandals, as it is crucial for growth and prosperity based on healthy
management. A machine possesses a control unit (controller), a regulation unit for adjusting
variable elements to a specific level (regulator), and a unit for governing equipment (governor).
Different from the controller and the regulator, the governor works autonomously to efficiently use
Sojiro Tsuchiya the machine’s potential and protect it from malfunction and damage. This applies to Corporate
External Auditor, Dr. Eng. Governance just the same. Rather than simply regulating and enforcing rules onto employees,
they need to share its principles and the company must make them a customary practice. This is
key to autonomously protecting the company and its actions, and meeting shareholder
expectations. Ensuring legal compliance of the company’s actions at any time is crucial for both;
safe and efficient operation, as well as avoiding unpredictable risks.

Remuneration of Corporate Officers
The amount of compensations, etc. of DMG MORI’s business and the status of business execution into
Corporate Officers and the principle for its calculation account. In case of Auditors, compensations are
method are determined within the compensation determined by discussions of Auditors.
framework approved by the Annual General Meeting of
Shareholders. In case of Directors, compensations are Please find below the status of compensations in 2018.
determined by taking each Director’s contributions to
■ Amount of Compensations, etc. of Directors and Auditors　 (January-December, 2018)
Performance- Total
Basic
Right of based compensation
Title Name Headcount compensation
representation compensation amount
(mil. JPY)
(mil. JPY) (mil. JPY)
Total: Directors (excluding External Directors) 5 379 321 700
　　* Directors whose total compensations, etc. exceed 100 mil. JPY
　　Director and President Yes Masahiko Mori - 144 96 240
　　Director and Executive Vice President Yes Hiroaki Tamai - 68 72 140
　　Director and Executive Vice President Yes Hirotake Kobayashi - 68 72 140
　Total: External Directors 4 94 ─ 94
Grand total: Directors 9 473 321 794
　Compensation framework of Directors 1,000
　Total: Auditors (excluding External Auditors) 2 37 10 47
　Total: External Auditors 3 33 ─ 33
Grand total: Auditors 5 70 10 80
　Compensation framework of Auditors 100

Attendance at board meetings by each Director
The Board of Directors convened 11 meetings with the Directors and full-time Corporate Auditor convened 13
attendance of External Directors and External Auditors to meetings, and Operating Officers convened 11 meetings,
plan management strategies, and to enhance appropriate to understand and manage the risks of the entire
and efficient business execution by each Director. business operation. Please find below the status of
attendance by each Director and Auditor at meetings of
Furthermore, the Management Committee consisting of the Board of Directors.
■ Status of attendance at meetings of the Board of Directors　(January-December, 2018)
Name Status of attendance Note
Attended 11 out of
Masahiko Mori
11 meetings
Christian Appointed at the General Meeting of Shareholders on
─
Thönes March 22, 2019
Attended 11 out of
Hiroaki Tamai
11 meetings
Hirotake Attended 11 out of
Kobayashi 11 meetings
Appointed at the General Meeting of Shareholders on
Makoto Fujishima ─
March 22, 2019
Directors James Nudo ─
March 22, 2019
Minoru Furuta ─
March 22, 2019
Attended 11 out of
Tojiro Aoyama
11 meetings
Attended 11 out of
Tsuyoshi Nomura
11 meetings
Attended 11 out of
Makoto Nakajima
11 meetings
Attended 11 out of
Takashi Mitachi
11 meetings
Toshio Kawayama ─
March 22, 2019
Attended 11 out of
Auditors Sojiro Tsuchiya
11 meetings
Yoshinori Appointed at the General Meeting of Shareholders on
─
Kawamura March 22, 2019
(Note) Auditors Mr. Hisao Sato and Mr. Yoshito Kato retired on March 22, 2018. They attended 3 out of 3 meetings and 2 out of 3 meetings, respectively.
Directors Mr. Naoshi Takayama and Mr. Kenji Oishi, as well as Auditors Mr. Tatsuo Kondo and Mr. Yasuyuki Kimoto retired on March 22, 2019. Each of them
attended 11 out of 11 meetings.

Risk Management
Risk Management
DMG MORI manages risks with various approaches: a Compliance team

management system for environment, labor safety and In DMG MORI, Auditors and the Internal Auditing Office
health, and quality risks; initiatives to ensure the secure compliance of each group company. In 2018, we
credibility of financial reports; a risk management additionally established the Compliance Promotion Team
program for export control; and a workflow system for as a group-wide approach. Compliance Officers assigned
controlling daily risks. by region instruct and oversee Local Compliance Officers
of each company, based on the unified rules across the
We have also established Management Councils chaired group. The target is to improve our compliance literacy
by President, who assigned a director for overall risk and proactively share the best practices within the group.
management and directors for each risk category. The
council aims for comprehensive and thorough
Risk assessment
management over group-wide risks.
In addition to the Compliance Promotion Team, we also
started compliance risk assessment of group companies.
We apply same indicators and evaluation tools to
objectively assess the compliance system of each
Compliance company and utilize the result to improve our trainings
and organizations.
DMG MORI defined criteria for specific actions of

Directors, Operating Officers and other employees by
speculating rules in Mission Statement, Employee
Handbook, Compliance Handbook, Export Control
Program, Information Security Policy, and Management
System for environment, labor safety and health and
quality, and secures compliance by accordingly
BCP
（Business Continuity Plan）
implementing them.
We also organize compliance trainings for new employees Since the Great East Japan Earthquake in March 2011,
and other staffs, depending on their level, as well as DMG MORI has continuously updated the manuals for
associated e-learning and other learning opportunities. disaster management. The Disaster Management Plan
In case of sexual harassment and other problems where assigns disaster management staff by department and by
special considerations to the privacy of employees are affected area in all the group companies. As part of
needed, an external third-party institution takes the lead. disaster prevention activities, the company checks the
inventory of disaster prevention goods and tests the
connectivity of satellite phones, in addition to the regular
GDPR
updates of the manuals.
As a company with major bases in Europe, we promptly
adjusted ourselves to comply with the GDPR (General Our 14 global production bases help us promptly react to
Data Protection Regulation) after the enforcement in May our customers’ needs, and also sustain our business in
2018. CO concluded Standard Contractual Clauses (SCC) case of disaster.
for data protection with the European group companies
and assigned a person in charge of data security in each
company, in order to establish a sound management
system for customers’ and employees’ personal
information. External audits help us further improve the
system, too.

Risk Management
Information Security
To safeguard continuous and stable business operations, Control security
DMG MORI gives special priority to appropriately protecting In addition to the Information Security Committee which
and controlling its technology information, which is an manages information assets, DMG MORI launched the
important business asset of the company, as well as Control Security Committee to ensure safety in machine
various kinds of information received from customers and tool operation and IT environment at customers’ sites. In
business partners. We announced the Basic Policy for collaboration with CNC manufacturers, suppliers for
Information Security in 2015 and established the machine tool safety, and external security consultants for
Information Security Committee in 2016 to strengthen the IT security, we are fully committed to protecting digitized
information control system. By strictly implementing the factories.
Basic Policy for Information Security, we will safeguard the
security of our products and protect the customers’
information, while offering manufacturing solutions mainly
through machine tools. Furthermore, we will continue to
provide ever increasing value and unlimited possibilities of
machine tools to customers worldwide while following
international laws and regulations.
Basic Policy for Information Security:

1. In order to protect all of its information assets from 3. The Company will strictly follow laws and regulations, code
unauthorized access, theft, destruction, manipulation, and of ethics, and internal rules, carefully monitor social and
leaks, the Company will appoint a person with overall technological trends, and continuously review its internal
responsibility for information security management. rules, structures, and systems. In this way, the Company
Further, the Company will establish the Information will strive to evaluate, maintain, and improve its
Security Committee to construct an appropriate information security management system.
management structure.
4. Any violation of the Basic Policy of Information Security
2. The Company will continuously implement educational and its related rules will be consistently pursued.
programs which are necessary to raise awareness of the
importance of information security for all employees and
persons involved in its business operations.
Export Control
DMG MORI’s basic approach is to follow Foreign operation of the program. They evaluate customers and
Exchange and Foreign Trade Act (hereinafter referred to make applications for export licenses to the Ministry of
as �Foreign Exchange Act� ) when exporting goods, Economy, Trade and Industry (hereinafter referred to as
supplying technologies, and conducting agency �METI� ). In DMG MORI’s export control system, every
transactions. Our Export Control Committee consists of item to be exported or technology to be supplied to
all the board members and is chaired by President & overseas must obtain an approval by Export Control
Representative Director. The Committee stipulates and Office. In addition, Human Resources Department makes
amends internal rules, such as the �DMG MORI Export training plans on export control and the Internal Audit
Control Program� , and appoints persons in charge of Department audits the operation.
operation. Export Control Office is responsible for

Risk Management
Pre-export assessment
In prior to export, we need to confirm whether the After receiving the license, we conduct final check before
companies or organizations that are going to purchase shipment of the ordered machines. Recently, we started
our products and services plan to utilize DMG MORI’s applying the same procedures to machines produced in
machines only for civil purpose and not for military the United States and China as well, in addition to those
purpose that will pose a threat to international peace and produced in Japan, to ensure compliance with both local
stability. We first check the content of business of those and Japanese laws.
customers and whether the desired products are
subjected to Foreign Exchange Act or other export control If we have any doubt during the above-mentioned process
regulations. After receiving orders, we perform thorough that our products may be used for military purpose, the
background investigations based on documents and head of Export Control Office will be informed and Export
visits. Thereafter, we apply for export license to METI. Control Committee will make the final decision.
■ Outline of international export control regime

International export Weapons of mass destructions Conventional weapons
control regime Biological and
Nuclear weapons Missiles Conventional weapons
chemical weapons
Export control of weapons NSG AG MTCR WA
of mass destruction and Missile Technology Wassenaar
conventional weapons, Nuclear Suppliers Group Australia Group
Control Regime Arrangement
technologies for Established Established Established
development of such Established in 1996
in 1978 in 1985 in 1987
weapons, and dual-use Participants: 41
Participants: Participants: Participants:
countries
goods 48 countries 41 countries 35 countries
Japan Domestic control by Foreign Exchange Act and related laws and regulations
Source: Text of export control seminar hosted by Japan Machine Tool Builders’ Association, General Incorporated Foundation
Post-export procedures
Continuous monitoring and control after export is GPS information of the expected installation location and
important to guarantee proper usage of our machines. the name of an employee who will visit the site. When the
DMG MORI equips all of its machines with GPS-based employee visits the location, he/she must obtain the GPS
devices for detection of machine relocation to prevent information once again on-site and confirm that both
military usage by third parties through unauthorized sale data are identical. In case of unauthorized relocation, the
or after bankruptcy. To unlock the machines, authorized machine remains deactivated.
employees responsible for export control must register
■ Outline of GPS-based relocation detection devices
Objective Concept
To prevent violation of export control laws and regulations and A system that excludes involvement of -Encrypted data transmission
utilization of our machines for military purpose, DMG MORI established human judgment at: - Confirmation of location by GPS-information
a structure to eliminate intentional unlawful acts (relocation and -Delivery of password GPS-information will be received outside of the customer’s
resale without informing DMG MORI) and human errors. -Confirmation of installment location factory but close to the machines. Accuracy of information is
guaranteed by time and a special device for data transmission.
GPS A system that goes without human judgment
How to unlock USB dongle data
Valid only for a designated 〈Employee in charge
period of time
of installation〉〈HQ〉〈METI〉
USB USB ④ Confirm ③ Receive installation information
⑤ Confirm the device installation location *Location and device ① Apply for export license Installation
information
-Machine ID
⑥ Unlock Transfer -GPS data
⑦ Work history Specialized software ⑧ Report on work accomplished -Unlocked
〈Inside the customer’s factory〉〈Outside the customer’s factory〉 *Location, device, date & time period of time
〈encrypted〉

Risk Management
Internal control
DMG MORI CO., LTD. resolved �Internal Control Guidelines� at the Board of Directors’ meeting and accordingly implements
the policy.
Auditing by auditors Internal audit

The Audit & Supervisory Board and the Auditors of DMG DMG MORI has a dedicated team for internal audits, the
MORI have regular and irregular exchanges with the Internal Auditing Department which directly reports to
President and the Financial Auditors. the President. It oversees optimized and efficient
business operation of the entire group. Auditors also
Auditors witness resolutions and require reports at key monitor the risk management of subsidiaries; reports
meetings including the Board of Directors’ meeting, from subsidiaries are shared with Auditors upon audits
Management Committee, and Operating Officers’ or audit liaison meetings with auditors of subsidiaries.
meeting, and if necessary request additional explanations
from Directors, Operating Officers and other employees. Currently, the Internal Auditing Department, the
Administrative Headquarters and the Accounting/Finance
If Directors, Operating Officers and other employees Headquarters jointly develop a structure to efficiently
witness potential significant damages to the company, discuss and share compliance-related issues and give
they need to immediately report it to the Audit & associated instructions throughout the group. In 2005, we
Supervisory Board or an Auditor, as is stipulated in the launched the Information Disclosure Control Committee
�Regulation to ensure the effectiveness of audits headed by the Executive General Manager of the
conducted by Auditors� . It also allows the Audit & Administrative Headquarters, an advisory organization
Supervisory Board and the Auditors to request reports for information disclosure as part of the internal control
from Directors, Operating Officers or other employees. system. The target is to enhance management
DMG MORI prohibits retaliation measures against the transparency and soundness.
employees who inform the Auditors of negative facts and
obliges all staff to follow this rule.
Management of subsidiaries J-SOX

For management of subsidiaries, we hold a series of DMG MORI has established a J-SOX section under the
regular meetings on a consolidated basis, occasionally Internal Auditing Department in October 2005, preceding
utilizing TV conference systems. The President and the the governmental regulations for the new internal control
Directors pay regular and irregular visits to subsidiaries report system over financial reporting in accordance with
and conduct periodic internal audits to better understand the Financial Instruments and Exchange act (J-SOX).
and optimize their operation. One or more DMG MORI’s Since then, we have successfully developed and operated
Directors are appointed as Directors or Auditors of an internal control system in line with the legal
subsidiaries and attend the Board of Directors’ and other framework, inside and outside the group.
key meetings, in order to hear the updated status from
the other Directors or Operating Officers of each Our internal audit section operates J-SOX with its AG
subsidiary. counterparty. Together with the evaluation results of AG,
we are audited by our Financial Auditors and prepare a
joint report on the internal control system of the entire
DMG MORI group.

Environment
Environment
Environmental policy
We will reduce energy consumption in our business
activities, use resources effectively and prevent
environmental pollution. We will use resources and
energy carefully and produce environmentally-friendly
products. We will raise our employees' environmental
awareness and as a responsible corporate citizen comply
with environmental laws and regulations and legal
requirements that apply to us, and support environmental
policy. We will aim to disclose information relating to
environmental protection.
Environmental management system

In pursuit of efficient use of resources and energy and
protection of global environment, DMG MORI introduced
an environment management system called ISO14001
and earned external certification. With this system for
environment preservation, we have successfully reduced
energy consumption and industrial waste at the factories
promoted recycling, and designed environment-friendly
products.
GREENmode
Since September 2017, DMG MORI has standardized
GREENmode to save energy consumption. Optimized
functions are added in accordance with each machine’s
application and characteristics, with a focus on 4
viewpoints; shortening lead time, visualizing, eliminating
idle time and introducing cutting-edge technology. By
combining four different approaches called GREEN
control (shortening lead time), GREEN monitoring
(visualizing), GREEN idling stop (eliminating idle time),
and GREEN device (introducing cutting-edge technology),
we support highly-productive and eco-friendly operation
at customers’ sites. Most significantly we have line-ups
of 9 functions in GREEN control, which improves
machining conditions and shortens machining time with
control technology. With GREENmode, a machine can
reduce the annual CO2 emission by 2,650 kg.

Environment
Environmental Data
〈 DMG MORI 〉
INPUT items location unit 2014 2015 2016 2017 2018
Electricity (*1) Japan thousand kWh 49,333 50,851 46,309 46,612 48,164
Solar power Japan thousand kWh 126 123 130 127 126
Energy input Production Heavy oil (*2) Japan Kℓ 2,136 2,574 3,187 3,129 2,218
City gas Japan thousand ㎥ 173 196 175 0 0
LPG Japan ｔ 296 279 228 304 360
Water Clean water Japan thousand ㎥ 117 121 126 138 139
Production
consumption Groundwater Japan thousand ㎥ 75 74 104 93 72
Energy input and water consumption are dependent on production numbers and machine model composition of each fiscal year.
In the following table, we converted energy input to crude oil consumption.

INPUT items location unit 2014 2015 2016 2017 2018
Energy input Production Converted to crude oil Japan Kℓ 15,093 15,906 15,281 15,185 14,757
OUTPUT items location unit 2014 2015 2016 2017 2018

Greenhouse gas Production CO2 emission (*3) Japan t-CO2 32,498 33,815 32,425 32,197 29,633
Final disposal amount Japan(Iga) t 139 153 110 119 130
Industrial waste Production
Final disposal rate Japan (Iga) % 4 4 3 3 4
【Scope of data】DMG MORI’s factories in Japan(Iga, Nara, Chiba (until FY2016))
【Fiscal year period】2014: from April 1st to March 31st of the following year; FY2015-2018: from January 1st to December 31st.
Environmental data are dependent on production numbers and machine model composition of each fiscal year.
(*1)Energy input �Electricity� indicates the volume purchased from power generation companies.
(*2)Energy input �Heavy oil� includes consumption for private power generation.
(*3)Greenhouse gas: Volume of CO2 emission was calculated by using emission coefficients published by power generation companies.
〈 DMG MORI AG 〉
ENERGY KEY FIGURES*1,*2,*4
in MWh 2017 2018 Change from previous year

Fuel consumption from fossil energy sources 76,281 80,506 4,225
　of which natural gas 30,681 32,491 1,810
　of which liquid gas 325 364 39
　of which heating oil 0 55 55
　of which fuel 45,275 47,596 2,321
Electricity consumption 46,757 48,962 2,205
　of which procured from the grid 45,456 47,489 2,033
　of which self-generation from renewable sources 1,301 1,473 172
Energy consumption in total 123,038 129,468 6,430
GHG EMISSIONS *1,*3,*4
2017 2018 Change from previous year

GHG emissions in total (Scope 1, Scope 2) in t CO2e 38,430 40,549 2,119
　Direct emissions (Scope 1) in t 18,164 19,163 999
　Indirect emissions (Scope 2) in t 20,266 21,385 1,119
*1：Includes the following sites in Germany: Bielefeld, Pfronten, Seebach; Italy: Brembate di Sopra, Tortona; Poland: Pleszew; Russia: Ulyanovsk.
*2：The conversion factors for liquid gas and heating oil are taken from the Bundesverband der Energie- und Wasserwirtschaft e. V. (BDEW – the federal association
of the energy and water industries) 2017. The conversion factors for fuel were taken from the Bundesamt für Wirtschaft und Ausfuhrkontrolle (BAFA – Federal
Office for Economic Affairs and Export Control) 2017.
*3：The CO2e emissions were formed as a product of the energy used and the corresponding emission factor. The factors for calculating direct emissions (Scope 1)
of heating oil, diesel, gasoline and natural gas, are taken from the Department for Environment, Food & Rural Affairs (Great Britain). The six main greenhouse
gases (carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6), as defined
by the Intergovernmental Panel on Climate Change (IPCC), were taken into account in calculating the CO2 equivalents (CO2e). The IPCC factors were used in the
conversion. To calculate the indirect emissions (Scope 2) from electricity, country-specific factors were applied. The data was taken from CO2 Emissions from
Fuel Combustion 2017, International Energy Agency, 2017. Other emissions only occur in small quantities and will not be reported individually.
*4： Figures are extracted from Sustainability Report 2018 of DMG MORI AG.

Environment
Sales of secondhand machines Collective transportation

DMG MORI reuses resources and saves energy by selling Parts produced by domestic suppliers are gathered at
secondhand machines; we retrieve young and well- designated points in each area, and are collectively
maintained machines from our showrooms, machining transported by trucks DMG MORI arranges; in this way,
plants, and customers, and replace core components or CO2 emission was significantly reduced from the previous
add requested options before delivering it to a new individual transportation. In 2018, around 20 partner
customer. Machine tools generally run for a decade or companies from Hokuriku area joined this initiative, in
two, and we are capable of upgrading the accuracy and addition to the existing 70 from Kansai, Tokai, and Kanto
reliability of our secondhand machines and allowing areas. As a result, CO2 emission reductions were
them exploit the full lifespan. In this way, we can increased from 5,856 tons in 2017 to 10,488 tons in 2018.
minimize waste and preserve natural resources.
Reusable packaging materials
Development of Zero-Sludge Coolant Tank Previously we used wooden boxes for machine and parts
Many customers wish to remove cutting chips more transportation, which were discarded after one-time
easily. In DMG MORI’s Zero-Sludge Coolant Tank, several usage. This approach was reviewed; the wooden
nozzles attached to the tank create optimize coolant flow containers were replaced with returnable pallets for
to collect fine sludge efficiently by high-precision cyclone overseas transportation and steel crates for domestic
filters. This new technology has many advantages: less ones, by which we reduced wood consumption. We
frequent maintenance of the tank, prevention of clogged carefully wrap our machines with in-house plastic sheets
pipes and coolant nozzles, sustaining pump’s with DMG MORI logo.
performance, extension of coolant’s lifetime and
reduction of environmental footprint. DMG MORI ships spare parts and accessories resource-
friendly. This packaging is FSCTM certified to support
sustainable forestry in raw materials production.
■ Effect of sludge stirring
Sludge collected Sludge collected

Insufficient Sufficient
Sludge stirring nozzle

Environment
Viva con Agua

Since July 2018 we have been supporting the project �Viva
con Agua� . Viva con Agua de St. Pauli e.V. is a developmental
non-profit organization founded in 2006 and is based in
Hamburg. We procure the mineral waters from Sankt Pauli
for our headquarters in Bielefeld: part of the sales price of
every bottle sold is donated and goes, For example, towards
drilling wells for drinking water in Africa, Brazil and India/
Nepal.

Human Capital
Human Capital

Human Capital
Human resources development is an important mission

of DMG MORI. 1% of the annual turnover is spent for
trainings, encouraging each employee to be a global and
professional player. We offer level-specific trainings for
new employees and managers to Directors, as well as
skill-specific trainings to brush-up expertise and
management skills at DMG MORI Academy since 2006.
TOEIC courses for English learners, open seminars on
latest machining technology and industrial trends, and an
online education system for machine tool-related topics
are also among our extensive lineup.
AG traditionally offers an apprenticeship program to help

young talents explore their skills and career paths. In
2018, 397 trainees were enrolled in the program. Job
trainings are available in 10 qualified fields, and the
trainees can take associated courses at local vocational
colleges or at the applied science faculty of universities.
The initiative was highly appreciated by German business
magazine �Capital,� and AG was appraised as the nation’s
most committed enterprise to talent development.

Human Capital
Mori Manufacturing Research and

Technology Foundation https://morifound.dmgmori.co.jp
DMG MORI lends or donates its machine tools worldwide National Institute of Technology, an independent
to strengthen alliances with industrial and administrative administrative agency.
partners and research institutes at universities, etc. and
to support their application research activities. In In 2018, the foundation plans a scholarship program that
addition, the company has established a scholarship fund will support engineering students (7 students) who enter
and made donations to nurture talented engineers in PhD course at either Kyoto University or Keio University
Japan and overseas. Mori Manufacturing Research and in Japan.
Technology Foundation was established to conduct
such corporate social responsibility activities of DMG 3) Support for local communities and cultural activities
MORI continuously by maintaining a designated business
The foundation’s support for local communities and
volume. The foundation has taken over the responsibility
cultural activities is centered in Nara Prefecture, where
for the said activities from DMG MORI. We believe that
DMG MORI was founded, and Iga City in Mie Prefecture,
the foundation’s activities to provide continuous support
where company’s main plant is located. In Yamato-
for technology development and innovation of machine
Koriyama City of Nara, the birthplace of DMG MORI, it
tools will strengthen the basis for sustainable growth of
planted 140 cherry blossom trees alongside the Bodaisen
the machine tool industry as a whole. We also believe
River which runs close to Nara Campus in Idono-cho,
that human resources development through the alliances
Yamato-Koriyama City, and donated the trees to the city
with research institutes worldwide will contribute to
to create a beautiful landscape. In addition, DMG MORI
global industrial development including in emerging
sponsors various local events hosted by local
countries. Further, as a part of its social contribution
communities in Yamato-Koriyama, Iga, and Nabari such
activities, the foundation will strengthen the alliance with
as cherry blossom festivals, summer festivals, fireworks
local communities by extending support for constructing a
festivals, etc.
cultural environment with higher public value.
1) Support for research and development

Support for research and development of machine tools
and related technologies is handled by DMG MORI,
financial contributor to the foundation, through its joint
research and development activities with universities and
research institutes worldwide. The main focus areas of
the foundation are providing support for international
academic conferences, etc.
2) Support for human resources development

The foundation took over responsibility for operation and
management of "DMG MORI Scholarship Fund" , which
was established by both DMG MORI Co., Ltd. and DMG Letter of appreciation from National Institute of Technology
MORI AG to support technical college students who
suffered from the Great East Japan Earthquake in March Mori Manufacturing Research and Technology Foundation
(General Incorporated Foundation)
2011. In 2017, it made a contribution of 15 million JPY to

Human Capital
DMG MORI Academy

DMG MORI Academy is an internal training institution for Application training
machine tool operation. All the trainings focus on Through the trainings, application engineers gain
practical operation of machines equipped with real knowledge, skills and techniques required for the daily
cutting tools. At 8 training facilities in Japan, Germany duties such as machine operation, machining processes,
the United States, China, and Italy, DMG MORI Academy workpiece fixture, tool selection, CAM programming,
offers trainings for employees and customers. CMM and other measuring equipment.
New employee training Sales trainings

All the employees take this course as soon as they join ASMs (Area Sales Managers) from Japan, Asia and other
the company. It covers the basic knowledge required for parts of the world take the trainings. Through
safe operation, and the trainees learn about potential programming and operation of turning centers and
risks in lectures and demonstrations. robots, the attendees can understand DMG MORI
products better and enhance their sales skills.
Skills training
This training is designed to learn the machining process Manufacturing trainings
from tooling, programming, tool compensation, to A variety of trainings are available for manufacturers.
dimension adjustments by using machine tools to One example is a measuring course, which offers
improve product knowledge. Generally, subject learning and practicing opportunities of measuring
employees participate in this training once a year as a equipment from micrometers, calipers to CMM. A basic
continuous learning opportunity. course helps attendees understand hydraulic, pneumatic,
electrical and sequence circuits with a circuit assembly
Service training practice.
Besides acquiring new product knowledge, service

engineers review basic service operation to brush up
their professional skills, expertise and service quality to
provide better services to customers.

Human Capital
Emerging technologies laboratory

DMG MORI established Emerging Technologies
Laboratory in July 2017, in order to develop young talents
to lead IoT and other digital transformation in line with
the ever-changing customers’ and social needs. The new
facility offers learning opportunities for selected
employees and long-term internships from Kanto area.
With a view to decades ahead, we are cultivating human
resources with strength in connected industries,
including AI and cloud technology.
Leadership program
While DMG MORI Academy provides technical trainings
for engineers and sales personnel, our Leadership
Program intends to develop talented employees and to
strengthen organizations throughout the DMG MORI
group. The exclusive program started in 2018 and has
been offered to 60 incumbent and potential managers.
The attendees from Japan, the United States, Canada,
Mexico, Brazil, and India improved their leadership skills
through a 200-hour curriculum in Davis, Dallas, Chicago,
and Tokyo, and strengthened their group-wide network.
Scholarship fund
The DMG MORI Scholarship Fund started in 2011 to help and the University of Tokyo jointly established the DMG
the recovery from the Great East Japan Earthquake. It MORI IIT Scholarship Program for students of the Indian
pays monthly 50,000 yen (annually 600,000 yen) Institutes of Technology. We hope to encourage the
individually to national technical college students in the scholarship recipients to study mechanical, electrical, or
affected area for 10 years. In this way, we have supported aeronautical engineering, or other fields in depth and to
the growth of young talents for the future of Japan’s play an active role around the world, including India and
manufacturing industry. Furthermore in 2008, DMG MORI Japan.

Human Capital
Development of industrial human resources
M T T R F（Machine Tool Technologies Research Foundation） http://www.mttrf.org/
MTTRF (Machine Tool Technologies Research Foundation)

is a non-profit organization accredited by the US
government. Since its establishment in October 2002, DMG
MORI and other companies worldwide have financially
supported the operation. Based in San Francisco,
California, the United States, the foundation aims at
developing machine tool researchers. Through MTTRF,
DMG MORI offers state-of-the-art machine tools, software,
and R&D expenses to research institutes. The results of
MTTRF’s research are widely published via journals and
international conferences, including the MTTRF’s Annual
Meeting which is open to the public and not limited to
sponsors or recipients of MTTRF’s support, thus fostering
the education of young and talented engineers.
CIRP (The International Academy for Production Engineering)
CIRP is the world’s most renowned international academic

conference on production engineering with 600 members in
about 50 countries. It publishes an international academic
journal �CIRP Annals ― Manufacturing Technology� . At the
annual general assembly of CIRP, participants attend
presentations on some 150 carefully-selected research papers,
approx. 10 key note speeches, and STC (Scientific Technical
Committee) meetings. In 2018, the general assembly was held
in Tokyo with the attendance of Their Majesties the Emperor
and Empress of Japan, and DMG MORI supported this event as a
platinum sponsor. Other contributions from DMG MORI
included: a research paper presentation on thermal
compensation of a turning center as the first author;
submission of 4 research papers as co-authors; lectures and
technical support at 2 STC meetings.
Support for vocational school

For the past 14 years, DMG MORI has supported technical
trainings at the German University in Cairo (GUC), as a door
opener to African market. We contributed 10 machines by
2018, and a new powder bed-type laser machine upon the
establishment of the Technology and Solution Center and
the Training Academy in January 2019.

Human Capital
WorldSkills competitions
WorldSkills Competitions take place every 2 years to
promote skill development through vocational training in
member countries and strengthen friendship among
young participants, who represent their countries/regions
as winners of pre-competitions. DMG MORI is a long-
standing sponsor as a Global Industry Partner since
2007. The company hosted WorldSkills Leipzig 2013 in
Germany as a main sponsor. At WorldSkills Abu Dhabi
2017 in UAE, DMG MORI provided 29 machine tools for
the 4 metal-cutting sections: CNC milling, CNC turning,
Manufacturing team challenge, and Plastic die
engineering. DMG MORI will continue its support at the
next competition WorldSkills Kazan 2019 in Russia.
The Cutting dream contest https://www.dmgmori.co.jp/corporate/dreamcontest/
The Cutting Dream Contest has been held 13 times since through a rigorous screening process by juries comprised
2004 to facilitate exchange and development of cutting of university professors. The 5 categories of the contest
technologies and techniques of the industry. Users of are: Production Parts Machining, Prototype & Test Cut
cutting machine tools at companies, technical colleges, Machining, Die & Mold/Form Machining, Micro Machining
universities, and research institutes in Japan are eligible and Academic Research. The awarded workpieces are on
participants. The contest started also in the U.S. in 2006 display at the Iga Global Solution Center of DMG MORI.
and in Europe in 2007. Every day, a lot of visitors from Japan and overseas enjoy
the extraordinary techniques and innovative ideas
The event has been well received and appreciated in both represented by these workpieces.
regions. The prize winners are selected by category
Prize winners of the 13th Cutting dream contest
Gold Prize Winners DMG MORI

5-axis Grand Prize

Human Capital
Work style reform
Flexible working hours

By offering both core time system and shift system, we the annual paid holidays given to its employees. In 2018,
encourage an efficient working style and less working our employees took in average 22.1 days-off by
hours. We prepared independent working day calendar consuming the new and accumulated paid holidays from
for each department based on the peak seasons and the past year. The gap between the average annual
events. To find a better work-life-balance and productive working hours between CO (2,000 hours) and AG (1,800
working style, the company sets a goal to consume all hours) is getting smaller.
■ Average number of consumed annual paid holidays ■ Average annual working hours
(days) (hours)
25 2,500
21.8 2,093
1,989 2,026
20 18.4 18.4 2,000
15 1,500
10 1,000
5 500
0 0
2016 2017 2018 2016 2017 2018
Subject: permanent and contract Japanese employees Subject: permanent and contract Japanese employees
Calculated on a basis of 20 annual paid holidays
Minimum rest period between working days

In August 2018, DMG MORI introduced an interval system, than 12 hours. Since January 2019, employees may not
where employees must take at least 11 hours of rest log-in the company’s IT system for 12 hours after leaving
period between working days. In December, the minimum the office. In this way, the company strictly controls the
rest period was extended to 12 hours, and employees working hours of its employees to avoid overwork.
were banned from staying in their working areas longer
■ Implementation of minimum rest period between working days
At the time of introduction (August 2018)
The previous day's work Minimum rest period of 11 hours between working days On the day of work
After the change (December 2018)

Extension of minimum rest period
to 12 hours between working days
The previous day's work Minimum rest period of 12 hours between working days On the day of work

Human Capital Human Capital
Support for balancing career and family

We encourage employees to pursue their professional childcare leave and for nursery school, short working
careers continuously at DMG MORI over child- or elderly- hours, as well as telecommuting during childcare leave.
care leaves. We offer maternity, child- and elderly-care Many employees utilize these services to continue
leaves, financial support for early returners from working for the company.
■ Overview of company’s childcare support

Enrollment Graduation
During Birth of in from
1 year old 2 years old 3 years old
pregnancy the child elementary elementary
school school
Maternity leave Childcare leave Financial support during childcare leave
Financial support for early

comeback to workplace
Financial support for nursery fee
Work from home during childcare leave Vacation for childcare in case children get sick
Shorter work hours during childcare period

Vacation for spouse at
childbirth (1 day) Prioritized re-employment after retirement due to childbirth or childcare
Company’s child care facilities (DMG MORI Childcare Centers)
DMG MORI Child Care Centers

In April 2018, the company established DMG MORI Child free, thanks to the company’s child care support
Care Centers at its main locations in Japan ― Iga allowance system. The company started in-house
Campus, Nara Campus, Nagoya National Headquarters childcare service in 2016 limited to working days on
and Tokyo Global Headquarters for 120 pre-school weekend. Upon users’ requests, the company extended
children under 6 years old. The child care centers are the service and established the permanent child care
certified and supported by the Cabinet Office as part of its centers. DMG MORI will continue investment in creating
company-led child care project, and DMG MORI Group better work environment for employees.
employees can receive the child care service virtually for
D M G M O R I C h i l d c a r e C e nte r (I g a)

Social Activity Social Activity
Contributions to communities
Japan
Loaning out cutting-edge machine tools

DMG MORI concluded a �Comprehensive Agreement on
Partnership and Cooperation� with Nara Prefecture and a
�Comprehensive Partnership Agreement on Industrial
Development� with Mie Prefecture to promote advanced
technical education and to support engineers and
researchers. In 2018, the company loaned out in total 6
units of 5-axis machining centers and turning centers to
Nara Suzaku High School, Oji Technical High School, and
Gose Industrial High School in Nara Prefecture, an
ultrasonic machine to Nara Prefecture Institute of
Industrial Development, and a 5-axis machining center to
Yokkaichi Technical High School in Mie Prefecture.
DMG MORI YAMATO KORIYAMAJO HALL

In January 2017, DMG MORI acquired the naming rights
of the hall that has been familiar to the people of Yamato-
Koriyama City, and named it �DMG MORI YAMATO
KORIYAMAJO HALL.� Besides support to maintenance
and improvement of the hall’s facilities, the company is
committed to make it a place for transmitting various
cultures and to improve the quality of life of the people in
the city. In May 2018, �Nara Piano Friends,� a music event
featuring the piano supported by DMG MORI as a special
sponsor since 2012, took place in this hall. Ⓒ Nara Piano Friends ／ MBS
Preservation of cultural heritages

DMG MORI supports preservation and renovation of
historic monuments of ancient capital Nara, such as
Kasuga Taisha Shrine and Kofukuji Temple.
Material credit:
Nara City Tourist Association
(Kofukuji Temple)
Material credit:
Kasuga Taisha Shrine

Social Activity
Germany
We feel an obligation towards the community and invest In the reporting period we invested about €450,000 in
in the confidence of the public. This forms an integral donations and sponsorships. The focus of donation was
part of our values and our policy. Many of our employees primarily on children. The Edith & Alois Berger
play a role in giving back to local society. The focus of our foundation, which takes care of children in need in
social commitment is on our employees, young people, Germany and Africa, charitable organization �Hoffnungstern
schools, colleges and universities, and charitable Uganda-Freunde e.V.� , and �Fruchtalarm� project for
associations. DMG MORI sponsors projects in the areas children suffering from cancer, for example. AG has been
of the community, education, science, the arts, culture, heavily involved for years in sponsoring the Arminia
sport and particularly for up-and-coming talent. Bielefeld football club. Additionally, in November 2018,
AG acquired shares in the Schüco-Arena, the Arminia
In November, we held German-Japanese classical Bielefeld stadium. Moreover, we have sponsoring
concert in the Rudolf-Oetker-Halle in Bielefeld, and also agreements with Bielefeld Marketing GmbH and the
supported the modernization of the renowned concert Bielefeld Kunstverein (art association).　
venue. This event was a very special part of our local
sponsoring approach in the fields of sport, the arts and
culture. It also reflected the broad cultural diversity of
our �Global One Company� .
We support schools and universities through donations

and cooperation by exchanging ideas and knowledge. We
regularly take part in events such as �Girls Day� and �Future
Day� and facilitate visits to our production sites for school
children and students. In addition, we are heavily involved
at all our sites in local organizations and projects to
actively form networks and through these to be able to
support the interests of the respective region.
Illuminated in the company

colors: the Rudolf-Oetker-
Halle glows in the colors of
DMG MORI on the evening
of the German-Japanese
classical concert.

Social Activity
Investor Relations
DMG MORI’s basic approach is to always pay attention to information from CSR point of view in addition to financial
expectations from shareholders and society and to take information, which is usually required by regulations.
actions for higher accountability. This is our base for
information disclosure and IR activities including In 2018, we conducted more than 230 meetings with
communication with shareholders, investors and other investors.
parties.
Every year, we invite individual shareholders to our Solution

Centers in Iga Campus and Tokyo Global Headquarters
(totaling to 2 events per year). Shareholders have
opportunities to look at the latest machine tools and to
better understand DMG MORI’s technologies and efforts. We
recognize Fair Disclosure as an integral part of our IR
activity. We always publish information for investors both in
Japanese and English. Additionally, we release supplemental
information as Q&A from investors at quarterly financial
disclosures to ensure fairness. We also proactively disclose Individual shareholders visiting DMG MORI
■ Major IR activities in 2018
Activities Details
Every year, we invite individual shareholders to our Solution Centers in Iga Campus and
Visits by individual shareholders Tokyo Global Headquarters (totaling to 2 events per year). Results are shared in the
Shareholders’ Newsletter.
Twice a year face-to-face meetings following disclosure of mid-term and full-year results.
Meetings for financial analysts
Additionally, twice a year phone-conferences after disclosure of the 1st and 3rd Quarter
and institutional investors
results.
Meetings for institutional An Operating Officer dedicated for IR holds individual meetings with investors in Europe (twice
investors outside of Japan a year), Americas (twice a year), and Asia (4 times a year).
Disclosure of IR documents on Disclosure of IR documents in both Japanese and English on company’s website (https://
company’s website www.dmgmori.co.jp/corporate/ir/) after closing of each quarter and as necessary.
■ Communications with institutional investors in 2018
One-on-one meetings with investors 82 meetings 68 meetings 50 meetings 30 meetings

Factory tour for investors Eight times Twice Twice Three times
(Showroom)
Tour
Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec.
Road show Quiet Quiet Quiet Quiet

(foreign investors) period Hong Kong period London period Hong Kong period Paris・London
New York・Boston Singapore New York・Chicago Singapore

Social Activity Social Activity
Sports marketing
FIA World Rally Championship (WRC)

In 2017, DMG MORI concluded a partnership agreement
with Toyota Motor Corporation in the FIA World Rally
Championship (WRC), which is one of the most
prestigious motorsport championships like the FIA
Formula One World Championship and the FIA World
Endurance Championship. Many parts used in the rally
car YARiS were machined on DMG MORI’s machine tools.
In the second year following its return to WRC after 18
years, the Toyota team won the manufacturer’s title at
WRC 2018. DMG MORI will continue its engineering
support to TOYOTA GAZOO Racing World Rally Team at
WRC 2019, which will be the largest championship since
2008 with 14 rounds including the new location in Chile.
DMG MORI SAILING TEAM

�Vendée Globe� is a non-stop, solo, round-the-world
yacht race held every four years. This event is as popular
as the �French Open� tennis tournament or �Tour de
France� in the host country of France, as well as in the
other parts of Europe. In 2018, we launched the DMG
MORI SAILING TEAM, a professional oceanic sailing
team, and welcomed a marine adventurer Mr. Kojiro
Shiraishi as a team member. In November 2020, the team
will join Vendée Globe 2020 to complete the 80-day
journey with its robust, high-precision, and state-of-the-
art yacht that will survive through tough environment.
Support to Local Sports Clubs

DMG MORI sponsors two sports teams in Nara, the
birthplace of the company – �Bambitious Nara� , a
professional basketball team since 2014, and �NARA
CLUB� , a JFL soccer team since 2017. We promote sports
activities in Nara to make the area further appealing.
Material credit: Material credit:

Bambitious Nara NARA CLUB

FINANCIAL
SECTION

Financial Summary
Financial Summary
The following is an analysis of our financial situation, As a result, total liabilities stood at 414,256 million yen.
business results and cash flows during the fiscal year
ended December 31st, 2018. (3) Equity
Equity totaled 114,166 million yen, mainly due to
DMG MORI adopted the International Financial Reporting decreases of 8,930 million yen in other components
Standards (IFRS) in December 2015 to improve the of equity, while retained earnings increased by 11,271
international comparability of financial information on million yen.
the capital market, and to standardize accounting within
the group. 【Analysis of business results】
【Analysis of financial position】 Sales revenue for the fiscal year 2018 amounted to
501,248 million yen (3,844 million euro) (16. 7% increase
(1) Assets from the previous year). Operating profit came to 36,261
Current assets totaled 244,029 million yen, mainly million yen (278 million euro) (23.4% increase from the
due to increase of 8,700 million yen in trade and other previous year). Earnings before income taxes for the
receivables, while cash and cash equivalents decreased fiscal year amounted to 31,275 million yen (240 million
by 37,605 million yen. euro) (26.1% increase from the previous year), and
income attributable to owners of the parent company
Non-current assets totaled 284,393 million yen, mainly totaled 18,517 million yen (142 million euro) (21.3%
due to decreases of 5,296 million yen in property, plant increase from the previous year).
and equipment, 4,493 million yen in goodwill, and 3,916
million yen in intangible assets. Group-wide order intake value of machine tools
amounted to 497 billion yen (11% increase from the
As a result, total assets stood at 528,423 million yen. previous year), mainly due to the positive result of
the first half term (23% increase from the previous
(2) Liabilities year). The second half, while still performing well,
Current liabilities totaled 314,537 million yen, mainly only reached the level of the previous year. Demand
due to increases of 92,124 million yen in other financial for automation, including CELOS, Technology Cycles
liabilities, 61,695 million yen in contractual liabilities, and peripheral equipment, increased and amounted to
and 32,072 million yen in interest-bearing bonds and 24% of our total order intake (compared to 17% in the
borrowings, while advances received decreased by previous year). Apart from 5-axis machines and mill-
45,696 million yen. turn centers, order intake of advanced technologies,
such as Ultrasonic and Additive Manufacturing
Non-current liabilities stood at 99,718 million yen. This machines, is growing as well.
primarily reflected decreases of 101,749 million yen
in other financial liabilities and 94,417 million yen in Among all regions, Japan grew the most (24%
interest-bearing bonds and borrowings. increase compared to the previous year), followed
by the Americas (13%), Europe and China (7% each)
Operating profit (Billions of yen) Profit attributable to owners of

Sales revenues (Billions of yen) Ratio of operating profit the parent company (Billions of yen)
to sales revenues (%) Ratio of annual profit to sales revenues (%)
501.2 ■ Operating profit ■ Profit attributable to owners of the parent company
Ratio of operating profit to sales revenues Ratio of annual profit to sales revenues
429.7
9.8% 36.3 26.9
376.6
31.1 29.4
318.4 8.4% 18.5
7.2% 15.3
6.8%
3.6% 3.7%
-2.1%
0.5% 2.0
-7.8
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018
2018

Financial Summary
and Asia including India (4%). We recorded high- 【Analysis of cash flows】
level order intake numbers for Japan, the Americas
and Europe over the course of this term. While the (1) Cash flows from operating activities
decreasing demand for machining of smartphone Net cash flows from operating activities totaled
housings negatively impacted the industry in the 49,398 million yen (31,423 million yen in the previous
Chinese market, our group remained unaffected, due year). The main factors for this positive increase were
to not being present in this sector. As a result, orders 31,275 million yen of Earnings before income taxes,
from manufacturers of transportation equipment, such 18,499 million yen in depreciation and amortization,
as buses and trucks, orders from the energy sector an increase of 10,517 million yen in Trade and
and orders from general machinery manufacturers other payables, an increase of 18,828 million yen in
increased over the first three quarters. However, contractual liabilities, and an increase of 5,873 million
unable to escape the effects of the US-China trade yen in Provisions. The main negative factors were 3,751
dispute, demands decreased upon entering the 4th million yen of Other non-cash transactions, an increase
quarter. Additionally, difficulties in foreign currency of 12,958 million yen in inventories, an increase of
procurement on customer side delayed the collection 11,782 million yen in Trade and other receivables, 5,002
of down payments, which are required for recording million yen of interest paid, and 7,269 million yen of
an order. Consequently, order intake in the Chinese corporate income tax paid.
market drastically decreased. Order intake shares for
each region are as follows: Japan 18%, Americas 18%, (2) Cash flows from investing activities
Europe 50%, China 8%, Asia including India 6%. Cash flows used for investing activities amounted to
19,020 million yen (1,387 million yen in the previous
year). The main negative factors were 13,732 million
The Japan Machine Tool Builders� Association (JMTBA) yen for purchases of property, plant and equipment, and
expects a decrease of 12% in the industry’s order 5,545 million yen for purchases of intangible assets.
intake for 2019 compared to the previous year, and
other effects leading to a correction of the current (3) Cash flows from financing activities
economic growth. Nevertheless, our group foresees Cash flows used in financing activities amounted to
a positive market response to our strategy of process 65,433 million yen (37,726 million yen in the previous
integration in the form of 5-axis machines and mill-turn year). The main positive contributions were 12,240
centers, a growing demand in automation systems, and million yen of net increase in current borrowings,
increasing use of advanced machining technology, such and 4,885 million yen of proceeds from non-current
as Ultrasonic machines and Additive Manufacturing borrowings. The main negative factors were 75,404
machines. We will continuously commit ourselves to million yen in payments for non-currents borrowings,
further improving the order intake. and 6,044 million yen in dividends paid.
As a result, cash and cash equivalents as of December

31st, 2018, stood at 27,368 million yen, a decrease of
37,605 million yen from December 3.
Total assets (Billions of yen) Shareholders’ equity (Billions of yen)

Return on total assets (ROA) (%) Return on equity (ROE) (%) Free cash flow (Billions of yen)
■ Total assets ■ Shareholders’ equity ■ Net cash flows from operating activities
Return on total assets (ROA) Return on equity (ROE) ■ Net cash flows used in investing activities
558.2 567.4 Free cash flow
528.4 49.4
598.0 155.3
31.4
100.4 107.6 111.1 30.4
5.8% 17.0% 18.6 18.2 30.0
2.7% 3.4%
14.7% 16.9% 8.2
-1.4
-8.3 -10.0
-19.0
-1.4% -6.1% -26.9
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018

Consolidated Statement of Financial Position

Thousands of U.S. dollars
Millions of yen
(Note 2)
2018 2017 2018

(31st December) (31st December) (31st December)
Assets
Current assets:
Cash and cash equivalents

¥ 27,368 ¥ 64,973 $ 246,514
(Notes 7 and 24)
Trade and other receivables
69,441 60,741 625,481
(Notes 8, 24 and 25)
Other financial assets
6,836 8,652 61,574
(Notes 12 and 24)
Inventories (Note 9) 130,726 122,981 1,177,499
Other current assets 9,656 10,629 86,975
Total current assets 244,029 267,979 2,198,063
Non-current assets:
Property, plant and equipment

128,686 133,983 1,159,124
(Note 10)
Goodwill (Note 11) 68,854 73,347 620,194
Other intangible assets (Note 11) 65,399 69,315 589,074
Other financial assets (Notes 12 and 24) 8,509 8,996 76,643
Investments in associates and joint ventures

3,331 2,229 30,003
(Note 13)
Deferred tax assets (Note 20) 4,317 6,082 38,884
Other non-current assets 5,293 5,476 47,676
Total non-current assets 284,393 299,431 2,561,637
Total assets ¥ 528,423 ¥ 567,411 $ 4,759,709


Millions of yen
(Note 2)
2018 2017 2018

Liabilities
Current liabilities:
Trade and other payables (Notes 14 and 24) ¥ 56,833 ¥ 47,717 $ 511,916
Interest-bearing bonds and borrowings (Notes 15 and 24) 54,725 22,653 492,929
Advances received (Note 2) － 45,696 －
Contract liabilities (Notes 2 and 25) 61,695 － 555,710
Other financial liabilities (Notes 16, 24 and 34) 95,982 3,857 864,546
Accrued income taxes 9,147 4,002 82,390
Provisions (Note 19) 32,256 29,886 290,542
Other current liabilities 3,896 6,144 35,092
Total current liabilities 314,537 159,958 2,833,156
Non-current liabilities:
Interest-bearing bonds and borrowings (Notes 15 and 24) 62,289 156,706 561,061
Other financial liabilities (Notes 16 and 24) 19,158 120,907 172,563
Net employee defined benefit liabilities (Note 18) 5,159 6,254 46,469
Provisions (Note 19) 5,633 3,973 50,738
Deferred tax liabilities (Note 20) 6,133 7,844 55,242
Other non-current liabilities 1,345 1,746 12,114
Total non-current liabilities 99,718 297,433 898,198
Total liabilities 414,256 457,391 3,731,363
Equity (Note 21)
Subscribed capital 51,115 51,115 460,412
Capital surplus －－－
Hybrid capital 49,505 49,505 445,910
Treasury shares (8,571) (9,726) (77,202)
Retained earnings 37,498 26,227 337,758
Other components of equity (18,435) (9,504) (166,051)
Equity attributable to owners of the parent 111,113 107,617 1,000,837
Non-controlling interests 3,053 2,402 27,499
Total equity 114,166 110,019 1,028,337
Total liabilities and equity ¥ 528,423 ¥ 567,411 $ 4,759,709
See accompanying notes to consolidated financial statements.

Consolidated Statement of Profit or Loss / Consolidated Statement of Comprehensive Income
Consolidated Statement of Profit or Loss

Fiscal year ended 31st December, 2018

Millions of yen
(Note 2)
2018 2017 2018

Revenues:
Sales revenues (Note 25) ¥ 501,248 ¥ 429,664 $ 4,514,934
Other operating revenues (Note 26) 4,472 12,028 40,281
Total revenue 505,720 441,692 4,555,215
Costs:
Changes in merchandise, finished goods and
(1,498) 5,578 (13,493)
work in progress for sale
Costs of raw materials, consumables and
235,972 189,000 2,125,490
goods for resale (Note 9)
Personnel costs (Notes 23 and 28) 131,426 120,728 1,183,804
Depreciation and amortization (Notes 10 and 11) 18,499 18,344 166,627
Other operating costs (Notes 10, 11 and 27) 85,059 78,650 766,159
Total costs 469,459 412,301 4,228,598
Operating result 36,261 29,391 326,616
Financial income (Note 29) 470 647 4,233
Financial costs (Notes 30 and 34) 5,624 5,297 50,657
Share of profits of associates and joint ventures
accounted for using equity method (Note 13) 167 62 1,504
Profit before income taxes 31,275 24,803 281,705

Income taxes (Note 20) 11,900 9,127 107,187
Profit ¥ 19,374 ¥ 15,676 $ 174,509
Income attributable to:

Owners of the parent ¥ 18,517 ¥ 15,263 $ 166,789
Non-controlling interests 857 412 7,719
Profit ¥ 19,374 ¥ 15,676 $ 174,509
Yen U.S. dollars
Profit per share

Basic (Note 32) ¥ 144.09 ¥ 116.44 $ 1.29
Diluted (Note 32) ¥ 143.18 ¥ 115.59 $ 1.28

Consolidated Statement of Profit or Loss / Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income


Millions of yen
(Note 2)
2018 2017 2018

Profit ¥ 19,374 ¥ 15,676 $ 174,509
Other comprehensive income:

Items that will not be reclassified
subsequently to profit or loss:
Remeasurements of defined benefit plans 426 (129) 3,837
Change in fair value measurements of
financial assets at fair value through other (782) － (7,043)
comprehensive income (Note 2)
Share of other comprehensive income
of associates accounted for using equity (21) － (189)
method (Note 2)
Subtotal (377) (129) (3,395)
Items that may be reclassified

Exchange differences on translation of
(8,404) 4,044 (75,698)
foreign operations
Effective portion of changes in fair value of
157 (31) 1,414
cash flow hedge
－－
Changes in fair value measurements of
(2,602)
available-for-sale financial assets (Note 2)
Share of other comprehensive income
of associates accounted for using equity － 18 －
method (Note 2)
Subtotal (8,246) 1,428 (74,274)
Total other comprehensive income for the
(8,624) 1,298 (77,679)
period (Note 31)
Comprehensive income ¥ 10,750 ¥ 16,974 $ 96,829
Comprehensive income attributable to:

Owners of the parent 9,904 16,566 89,209
Non-controlling interests 845 408 7,611
Total ¥ 10,750 ¥ 16,974 $ 96,829

Consolidated Statement of Changes in Equity

Millions of yen
Equity attributable to owners of the parent

Other Non-
Total
Subscribed Capital Hybrid Treasury Retained components controlling
Subtotal equity
capital surplus capital shares earnings of equity interests
(Note 21)
As of 1st January, 2017 ¥ 51,115 ¥ － ¥ 49,505 ¥ (23,769) ¥ 34,863 ¥(11,266) ¥ 100,449 ¥ 2,033 ¥ 102,482
Profit －－－－ 15,263 － 15,263 412 15,676
Other comprehensive income －－－－－ 1,302 1,302 (4) 1,298
Total comprehensive income －－－－ 15,263 1,302 16,566 408 16,974
Payments to owner of hybrid capital (Note 21) －－－－ (1,069) － (1,069) － (1,069)

Acquisition of treasury shares (Note 21) －－－ (5,251) －－ (5,251) － (5,251)
Cancellation of treasury shares (Note 21) － (12,847) － 12,847 －－－－－
Disposition of treasury shares (Note 21) － (6,442) － 6,446 －－ 3 － 3
Cash dividends (Note 22) －－－－ (3,405) － (3,405) (57) (3,462)
Transfer from retained earnings to capital surplus － 19,290 －－ (19,290) －－－－
Share-based payments (Note 23) －－－－－ 328 328 － 328
Changes due to business combinations －－－－ (5) － (5) 18 13
－－－－－－－－－
Transfer from other components of equity to retained earnings －－－－ (129) 129 －－－
Total transactions with owners of the parent － 0 － 14,042 (23,899) 458 (9,398) (39) (9,437)
Acquisition of non-controlling interests － (0) －－－－ (0) (0) (0)
－－－－－
Changes in ownership interests in
subsidiaries and others
(0) (0) (0) (0)
As of 31st December, 2017 ¥ 51,115 ¥ － ¥ 49,505 ¥ (9,726) ¥ 26,227 ¥ (9,504) ¥ 107,617 ¥ 2,402 ¥ 110,019
As of 1st January, 2018 ¥ 51,115 ¥ － ¥ 49,505 ¥ (9,726) ¥ 26,227 ¥(9,504) ¥ 107,617 ¥ 2,402 ¥ 110,019
Impact of changes in accounting policies (Note 2) －－－－ (208) － (208) － (208)
As of 1st January, 2018 (revised) 51,115 － 49,505 (9,726) 26,018 (9,504) 107,408 2,402 109,811
Net income －－－－ 18,517 － 18,517 857 19,374
Other comprehensive income －－－－－ (8,612) (8,612) (11) (8,624)
Total comprehensive income －－－－ 18,517 (8,612) 9,904 845 10,750
Payment to the owner of hybrid capital (Note 21) －－－－ (1,072) － (1,072) － (1,072)
Acquisition of treasury shares (Note 21) －－－ (0) －－ (0) － (0)
Cancellation of treasury shares －－－－－－－－－
Disposition of treasury shares (Note 21) － (254) － 1,156 － (100) 801 － 801
Cash dividends (Note 22) －－－－ (6,050) － (6,050) (159) (6,210)
Transfer from retained earnings to capital surplus － 340 －－ (340) －－－－
Share-based payments (Note 23) － 4 －－－ 209 213 － 213
Changes due to business combinations －－－－－－－－－
Increase in consolidated subsidiaries －－－－－－－ 250 250
Transfer from other components of equity to retained earnings －－－－ 426 (426) －－－
Total transactions with owners of the parent － 90 － 1,155 (7,037) (318) (6,109) 90 (6,018)
Acquisition of non-controlling interests － (90) －－－－ (90) (285) (375)
－－－－－
Total changes in ownership interests in
(90) (90) (285) (375)
As of 31st December, 2018 ¥ 51,115 ¥ － ¥ 49,505 ¥ (8,571) ¥ 37,498 ¥(18,435) ¥ 111,113 ¥ 3,053 ¥ 114,166

Thousands of U.S. dollars (Note 2)
Equity attributable to owners of the parent

Non-
Other Total
Subscribed Capital Hybrid Treasury Retained controlling
components Subtotal equity
capital surplus capital shares earnings interests
of equity
As of 1st January, 2018 $ 460,412 $ － $ 445,910 $ (87,605) $ 236,236 $ (85,606) $ 969,347 $ 21,635 $ 990,983
Impact of changes in accounting policies (Note 2) －－－－ (1,873) － (1,873) － (1,873)
As of 1st January, 2018 (revised) 460,412 － 445,910 (87,605) 234,354 (85,606) 967,456 21,635 989,110
Profit －－－－ 166,789 － 166,789 7,719 174,509
Other comprehensive income －－－－－ (77,571) (77,571) (99) (77,679)
Total comprehensive income －－－－ 166,789 (77,571) 89,209 7,611 96,829
Payment to the owner of hybrid capital (Note 21) －－－－ (9,655) － (9,655) － (9,655)
Acquisition of treasury shares (Note 21) －－－ (0) －－ (0) － (0)
Cancellation of treasury shares －－－－－－－－－
Disposition of treasury shares (Note 21) － (2,287) － 10,412 － (900) 7,214 － 7,214
Cash dividends (Note 22) －－－－ (54,494) － (54,494) (1,432) (55,935)
Transfer from retained earnings to capital surplus － 3,062 －－ (3,062) －－－－
Share (based payments (Note 23) － 36 －－－ 1,882 1,918 － 1,918
Changes due to business combinations －－－－－－－－－
Increase in consolidated subsidiaries －－－－－－－ 2,251 2,251
Transfer from other components of equity to retained earnings －－－－ 3,837 (3,837) －－－
Total transactions with owners of the parent － 810 － 10,403 (63,384) (2,864) (55,026) 810 (54,206)
Acquisition of non(controlling interests － (810) －－－－ (810) (2,567) (3,377)
－－－－－
Total changes in ownership interests in
(810) (810) (2,567) (3,377)
As of 31st December, 2018 $ 460,412 $ － $ 445,910 $ (77,202) $ 337,758 $ (166,051)$ 1,000,837 $ 27,499 $1,028,337

Consolidated Statement of Cash Flows / Notes to Consolidated Financial Statements
Consolidated Statement of Cash Flows


Millions of yen
(Note 2)
Fiscal year ended 31st Fiscal year ended 31st Fiscal year ended 31st
December, 2018 December, 2017 December, 2018
(1st January, 2018 through (1st January, 2017 through (1st January, 2018 through
31st December, 2018) 31st December, 2017) 31st December, 2018)
Cash flows from operating activities:

Profit before income taxes ¥ 31,275 ¥ 24,803 $ 281,705
Depreciation and amortization 18,499 18,344 166,627
Loss on sales or disposal of property, plant and equipment 492 470 4,431
Financial income and costs 5,154 4,649 46,424
Share of profits of associates and joint ventures accounted for using equity method (167) (62) (1,504)
Other non-cash transactions (3,751) (5,502) (33,786)
Changes in asset and liability items:
Inventories (12,958) 5,324 (116,717)
Trade and other receivables (11,782) (6,601) (106,125)
Trade and other payables 10,517 (9,872) 94,730
Advanced received (Note 2) － 15,298 －
Contract liabilities (Note 2) 18,828 － 169,591
Provisions 5,873 247 52,900
Other (Note 2) (770) (1,315) (6,935)
Subtotal 61,207 45,783 551,315
Interest received 342 393 3,080
Dividends received 119 254 1,071
Interest paid (5,002) (5,305) (45,054)
Income tax paid (7,269) (9,703) (65,474)
Net cash flows from operating activities 49,398 31,423 444,946
Cash flows from investment activities:

Purchases of property, plant and equipment (13,732) (5,895) (123,689)
Proceeds from sales of property, plant and equipment 1,521 1,882 13,700
Purchases of intangible assets (5,545) (3,488) (49,945)
Acquisition of subsidiaries, net of cash acquired (199) (649) (1,792)
Acquisition of associated companies, net of cash acquired (1,103) － (9,935)
Purchases of financial instruments (64) (1,616) (576)
Proceeds from sales of financial instruments 50 8,001 450
Other 53 378 477
Net cash flows from investing activities (19,020) (1,387) (171,320)
Cash flows from financing activities:

Net increase in short-term borrowings 12,240 17 110,250
Proceeds from long-term borrowings 4,885 65,372 44,001
Payments for long-term borrowings (75,404) (87,489) (679,192)
Payments for bond redemption － (20,000) －
Dividends paid (6,044) (3,403) (54,440)
Dividends paid to non-controlling interests (159) (57) (1,432)
Proceeds from non-controlling interests 250 － 2,251
Acquisition of non-controlling interests (392) (0) (3,530)
Acquisition of treasury shares (0) (5,251) (0)
Payments for obligations for non-controlling interests (1) (11) (9)
Payments to owners of hybrid capital (Note 21) (1,072) (1,069) (9,655)
Proceeds from issue of debt instruments (Note 16) － 14,838 －
Others 265 (670) 2,386
Net cash flows from financing activities (65,433) (37,726) (589,380)
Effect of exchange rate changes on cash and cash equivalents (2,550) 4,913 (22,968)
Decrease in cash and cash equivalents (37,605) (2,777) (338,722)
Cash and cash equivalents at the beginning of the period 64,973 67,750 585,236
Cash and cash equivalents at the end of period (Note 7) ¥ 27,368 ¥ 64,973 $ 246,514

Consolidated Statement of Cash Flows / Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements

1. Reporting Entity
DMG MORI Co., Ltd. (the �Company� ) is a company the �Group� ). The Group engages in businesses
established under Corporation Law of Japan. The related to manufacturing and sales of machine
Company domiciles in Japan and its registered tools (machining centers, turning centers, turn-
office is located in 106 Kitakoriyama-cho, Yamato- mill complete machining centers and universal
Koriyama City, Nara. milling machines for five-axis machining), software
(user interface, technology cycles and embedded
The consolidated financial statements of the software) and measuring devices, and provides
Company as of and for the fiscal year ended 31st total solutions utilizing the machine tools, software
December, 2018 (the fiscal year 2018) comprise and measuring devices with service support,
the Company, its subsidiaries and associates, and applications and engineering.
equity interests in related companies (collectively,
2. Basis of Preparation
(1) Accounting standards adopted The translation of Japanese yen amounts to
The consolidated financial statements of the U.S. dollar amounts is included solely for the
Group have been prepared in accordance with convenience of readers outside Japan, using the
International Financial Reporting Standards prevailing exchange rate of ¥111.02 to U.S. $1.00
(�IFRS�), pursuant to the provisions set forth at 31st December, 2018. This translation should
in Article 93 of the Ordinance on Terminology, not be construed as a representation that the
Forms, and Preparation Methods of Consolidated Japanese yen amounts have been, could have
Financial Statements (Ordinance of the Ministry been or could in the future be, converted into U.S.
of Finance No. 28 of 1976), as the Group meets the dollars at the above or any other rate.
requirements for a � Specified Company applying
Designated IFRS� prescribed in Article 1-2 of said (4) Approval of consolidated financial statements
ordinance. The consolidated financial statements of the
Group were approved at the Board of Directors’
(2) Basis of measurement meeting of the Company held on 22nd March,
As stated below in Note 3,� Significant Accounting 2019.
Policies,� the consolidated financial statements
have been prepared on a historical cost basis, (5) Changes in presentation
with the main exception of financial instruments, �Increase in advances received� and �Increase
which are measured at fair value. in contract liabilities�, which were included
in �Other� in consolidated statement of cash
(3) Functional and presentation currency flows from operating activities, were presented
The consolidated financial statements are separately from the fiscal year 2018 due to the
presented in Japanese yen, which is the Company’s increase in financial importance. In order to
functional currency. All financial information reflect the changes, consolidated statements of
presented in Japanese yen has been rounded the fiscal year 2017 were reclassified.
down to the nearest million, unless otherwise
stated. As a result, ¥13,982 million ($125,941 thousand),

which was included in �Other� in consolidated at fair value through other comprehensive
Cash Flow statement of the fiscal year 2017, was income are recognized in other
reclassified ¥15,298 million ($137,794 thousand) comprehensive income, and the cumulative
of �Increase (decrease) in advances received� and amount of other comprehensive income is
-¥1,315 million (-$11,844 thousand) of �Other�. transferred to retained earnings when the
instruments are derecognized.
(6) Changes in accounting policies
Effective 1st January, 2018 the Group adopted the (ii) Impairment of financial assets
following new and revised standards. On 1st January, 2018, the Group changed
the methodology of assessing impairment
Description of new accounting
IFRS
standards and amendments of its financial assets from the incurred loss
Amendments to classification, model under IAS 39 to the expected credit
Financial measurement and recognition of loss model under IFRS 9. In accordance with
IFRS 9
Instruments financial instruments and hedge
accounting the transition method of IFRS 9, the Group
Revenue from has not restated prior periods, but it has
Comprehensive framework for
IFRS 15 Contracts with reassessed the loss allowances under the
revenue recognition
Customers
new approach as of 1st January, 2018.
Overview of these standards and its impact to the
consolidated financial statements is as follows: (iii) Hedge accounting
As the Group may continue to apply the
1 IFRS 9 �Financial Instruments� hedge accounting requirements of IAS
Effective 1st January, 2018, the Group has 39 instead of those in IFRS 9 at the initial
implemented IFRS 9 �Financial Instruments.� application of IFRS 9, the Group has chosen
The new standard replaces IAS 39 �Financial to continue to apply the hedge accounting
Instruments: Recognition and Measurement.� requirements of IAS 39.
The standard deals with the classification,
recognition and measurement (including (iv) Transition approach
impairment) of financial instruments and also At the initial application of IFRS 9, the
introduces a new hedge accounting model. Group has adopted the transition method of
recognizing the cumulative effect amount
There is no material impact on the Group’s as an adjustment in retained earnings at the
performance or financial position from the application. As a result, ¥43 million ($387
application of this standard. thousand) of retained earnings as of 1st
January, 2018 was decreased.
(i) Classification and measurement of financial
instruments 2 IFRS 15 �Revenue from Contracts with
Items such as equity securities and debt Customers�
securities which were previously classified Effective 1st January, 2018, the Group
as available-for-sale under IAS 39, are has implemented IFRS 15 �Revenue from
classified as financial assets at fair value contracts with customers.� The new
through other comprehensive income standard replaces IAS 18 �Revenue� and
(FVTOCI financial assets). Debt financial IAS 11 �Construction Contracts.� IFRS 15
instruments are classified as financial establishes a comprehensive framework for
instruments measured at amortized cost. determining whether, how much and when
revenue is recognized, and also contains
Changes in the fair value of equity new requirements related to presentation.
instruments designated as financial assets The core principle in that framework is that

revenue should be recognized dependent on (ii) Transition approach

the transfer of promised goods or services At the initial application of IFRS 9, the
to the customers for an amount that reflects Group has adopted the transition method of
the consideration which should be received in recognizing the cumulative effect amount
exchange for those goods or services. as an adjustment in retained earnings at the
application. As a result, ¥164 million ($1,477
The objective of the standard is to provide thousand) of retained earnings as of 1st
following five-step approach to revenue January, 2018 was decreased.
recognition:
Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in
the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the
performance obligations in the contract
Step 5: Recognize revenue when (or as)
the entity satisfies a performance
obligation
(i) Impact of the application to the Group

The Group engages in businesses related
to manufacturing and sales of machine
tools and provide services and solutions
for the machine tools and related business
areas. For the sales of machine tools, the
Group recognizes revenue at a point in time
when control over the products passed to
the customers which is defined in the sales
contracts. For the providing of services and
solutions, the Group recognizes revenue
when the Group satisfies performance
obligations required by the contracts with
the customers.
With adopting IFRS 15, ¥1,293 million($11,646

thousand) of sales revenue, ¥451 million
($4,062 thousand) of operating results and
profit before income taxes were decreased
in this fiscal year, respectively. Please note
that �Advances received� in the consolidated
statement of financial position in the
previous year is presented as �Contract
liabilities.� A part of provisions and other
current liabilities are also presented
�Contract liabilities�.

3. Significant Accounting Policies

The significant accounting policies of the Group Any excess of the consideration transferred over
are applied continuously to all the years indicated the fair value of the identifiable assets acquired
in the consolidated financial statements, unless and liabilities assumed is recognized as goodwill
otherwise stated. in the consolidated statement of financial position.
(1) Basis of consolidation Goodwill is allocated to a cash generating unit

All financial statements included in the (�CGU�) or group of CGUs that are expected to
consolidated financial statements are prepared benefit from synergies of the combination. If
as of 31st December, 2018, in accordance with the this is less than the fair value of the net assets
unified accounting policies and, when necessary, of the subsidiary acquired, the difference is
adjustments are made to the financial statements recognized directly in profit or loss. Goodwill
of subsidiaries to bring their accounting policies is not amortized in accordance with IFRS 3
into line with those of the Group. �Business Combinations� and IAS 36 �Impairment
of Assets.�
(2) Business combinations
Business combinations are accounted for using Equity in a subsidiary not attributable, directly
the acquisition method. The consideration or indirectly, to a parent is recognized as non-
transferred for the acquisition of a business is the controlling interest. Total comprehensive income
aggregate of the acquisition date fair value of the is attributed to the owners of the parent and to the
assets transferred, the equity interests issued by non-controlling interest even if this results in the
the Group and the liabilities incurred, including non-controlling interest having a deficit balance.
the fair value of any assets or liabilities resulting
from a contingent consideration arrangement. Changes in the Group’s ownership interest in a
subsidiary that do not result in a loss of control
Identifiable assets acquired and liabilities and is accounted for as an equity transaction. If the
contingent liabilities assumed resulting from a Group, however, loses control of a subsidiary, any
business combination are, in principle, measured resulting effects are recognized as gain or loss in
at fair value at the acquisition date. profit or loss attributable to the Group.
In a business combination achieved in stages, (3) Investments in subsidiaries

any previously held equity investment before A subsidiary is an entity controlled by the Group.
obtaining control is remeasured at its acquisition-
date fair value and any resulting gain or loss is Specifically, the Group controls an investee if and
recognized in profit or loss. only if the Group has all of the following:
(a) Power over the investee,
For each business combination, the Group (b) Exposure, or rights, to variable returns from
chooses the method of measurement of non- its involvement with the investee and
controlling interests, which can be measured (c) The ability to use its power over the investee
using one of two bases, either at fair value at to affect the amount of the investor’s returns
the acquisition date or at the non-controlling Consolidation of a subsidiary begins when the
interest’s proportionate share of the acquiree’s net Group obtains control over the subsidiary and
identifiable assets. Acquisition-related costs are ceases when the Group loses control of the
expensed as incurred. subsidiary.

All intercompany transactions, balances, and of impairment as the difference between the
any unrealized gains and losses arising from recoverable amount of the associate and its
intercompany transactions, are eliminated in carrying amount, and then recognizes the loss
the preparation of the consolidated financial as �Other operating costs� in the consolidated
statements. statement of profit or loss. Unrealized gains and
losses resulting from transactions between the
(4) Investments in associates Group and associates are eliminated to the extent
An associate is an entity over which the Group has of the Group’s interest in the associate.
significant influence but does not have control
to govern the entity’s financial and operating (5) Joint control
policies. The Group’s investments in its associates A joint arrangement is a contractual arrangement
are accounted for using the equity method. Under where two or more parties have joint control.
the equity method, the investment in an associate The Group determines the type of joint agreement
is initially recognized at acquisition cost. The in which it is involved. The classification of a joint
carrying amount of the investment is adjusted to arrangement as joint operation where the Group
recognize changes in the Group’s net share of net has rights to the assets and obligations for the
assets of the associate since the acquisition date. liabilities of the arrangement, or a joint venture
where the Group has rights to the net assets of
Goodwill relating to the associate is included in the arrangement, depends upon the rights and
the carrying amount of the investment (less any obligations of the parties to the arrangement.
accumulated impairment loss).
For a joint operation, the Group recognizes its
The consolidated statement of profit or loss assets, including its share of any assets held
reflects the results of operations of its associates jointly, liabilities, including its share of any
through the Group’s investments. Any changes in liabilities incurred jointly, revenue from the sale
other comprehensive income of those associates of its share of the output arising from the joint
since the acquisition date are presented as part of operation, share of the revenue from the sale of
the Group’s other comprehensive income. the output by the joint operation; and expenses,
including its share of any expenses incurred
When there has been a change recognized jointly. The Group’s interest in a joint venture is
directly in retained earnings of the associate, the accounted for using the equity method.
Group recognizes its share of any changes in its
retained earnings. (6) Cash and cash equivalents
Cash and cash equivalents consist of cash on
The carrying amount of the investment is adjusted hand, demand deposits, and readily-marketable
to recognize any change in the Group’s share of short-term investments with maturities of three
net assets of the associate since the acquisition months or less from the date of acquisition, which
date. When the Group’s share of losses in an are subject to an insignificant risk of changes in
associate equals or exceeds its interest in the value.
associate, the Group does not recognize further
losses, unless it has incurred obligations or made (7) Inventories
payments on behalf of the associate. Inventories are measured at the lower of cost
and net realizable value. The cost of inventories
At each reporting date, the Group determines includes purchase costs, costs of conversion,
whether there is objective evidence that an storage costs and all other costs incurred in
investment in an associate is impaired. If there is bringing the inventories to their present location
such evidence, the Group calculates the amount and condition.

Net realizable value is calculated as the estimated annually and any respective impairment losses
selling price for the inventories in the ordinary are recognized when necessary. Impairment
course of business, less the estimated costs of losses relating to goodwill cannot be reversed in
completion and the estimated costs necessary to future periods.
make the sale.
Development costs on an individual project are
Cost of inventories is mainly determined by the recognized as an intangible asset, only if all of the
average cost method, except for the following following have been demonstrated:
inventories to which the identified cost method is (a) The technical feasibility of completing the
applied. intangible asset so that it will be available
for use or sale;
The identified cost method is applied to (b) The Group’s intention to complete and use or
inventories such as: sell the intangible asset;
(a) Inventories that are not interchangeable and (c) The Group’s ability to use or sell the
(b) Goods or services produced for specific intangible asset;
projects and segregated from other inventories (d) How the intangible asset will generate
probable future economic benefits;
(8) Property, plant and equipment (e) The availability of appropriate technical,
Property, plant and equipment is measured using financial and other resources to complete
the cost model and is stated at acquisition cost the development and to use or sell the
less accumulated depreciation and accumulated intangible asset; and
impairment losses. Such cost includes any costs (f) The ability to measure reliably the
directly attributable to the purchase of the assets. expenditure related to the intangible asset
Repair and maintenance costs are recognized in during its development.
profit or loss as incurred. Capitalized development costs are amortized on a
straight-line basis beginning when development
Depreciation of property, plant and equipment is complete and the asset is available for use
begins when the asset is available for use, on a over the period of expected future benefit.
straight-line basis, over the following estimated Development costs which do not meet the above
useful lives: criteria are expensed as incurred.
Office and plant : 3–50 years Other intangible assets are amortized on a
Machinery : 2–30 years straight-line basis over the following estimated
Tools, furniture and fixtures : 2–23 years useful lives:
Intangible assets generated by development : 2–10 years
Software and other intangible assets : 1–5 years
(9) Goodwill and other intangible assets Customer-related assets : 15 years (approximately)
(other than leased assets) Technology-related assets : 6 years (approximately)
Intangible assets are measured using the cost Trademarks (with definite useful lives) : 30 years
model and are stated at acquisition cost less
accumulated amortization and accumulated (10) Leases
impairment losses. Leases that transfer substantially all the risks
and rewards incidental to ownership to the Group
Goodwill arising on a business combination is are classified as finance leases and other lease
recognized as �Goodwill � in the consolidated transactions are classified as operating leases.
statement of financial position. Goodwill and
intangible assets with indefinite useful lives are Determining of whether an arrangement
not amortized, but are tested for impairment contains a lease is based on the substance of the

arrangement at the inception of the lease. useful lives and that have not yet been brought
into use are not amortized but tested for
Operating lease payments are charged to profit impairment annually, mainly at the end of fiscal
or loss over the lease term after the recognition year, regardless of whether an indication of
of the aggregate of any benefit of incentives given impairment exists and when circumstances
by a lessor as a reduction of lease payments on a indicate that the carrying amount may be
straight-line basis. impaired. When the recoverable amount of a CGU
is less than its carrying amount, an impairment
Finance leases are capitalized at the loss is recognized.
commencement of the lease at the inception date
fair value of the leased property or, if lower, at the The recoverable amount of CGU is the higher of
present value of the minimum lease payments. the value in use and the fair value less costs of
Lease obligations are recognized as current disposal. In assessing value in use, the estimated
or non-current liabilities in the consolidated future cash flows are discounted to their present
statement of financial position. value using a pre-tax discount rate that reflects
current market assessments of the time value of
Lease payments are apportioned between money and the risks specific to the asset.
the finance charge and the reduction of the
outstanding liability and the finance charge is The estimated present value based on future cash
allocated to each period during the lease term so flows incorporates assumptions about future
as to produce a constant periodic rate of interest sales price, sales volume and costs.
on the remaining balance of the liability for each
period. For assets, excluding goodwill, an assessment is
made at each reporting date to determine whether
A leased asset is depreciated over its useful life. there is an indication that previously recognized
However, if there is no reasonable certainty that impairment losses may no longer exist or may
the Group will obtain ownership by the end of have decreased. The reversal is limited so that
the lease term, the asset is depreciated over the the carrying amount of the asset does not exceed
shorter of the estimated useful life of the asset its recoverable amount, nor exceed the carrying
and the lease term. amount (net of depreciation) that would have
been determined had no impairment loss been
(11) Impairment of non-financial assets recognized for the asset in prior years.
The Group assesses, at each reporting date,
whether there is any indication that intangible (12) Income taxes
assets with indefinite useful lives and that have Income taxes consist of current and deferred
not yet been brought into use and all property, taxes. Current and deferred taxes are recognized
plant and equipment, excluding goodwill, may in profit or loss, except for those arising from
be impaired. If any indication exists, the Group business combinations and recognized directly in
estimates the asset’s recoverable amount. When other comprehensive income or equity.
the carrying amount of an asset or CGU exceeds Deferred tax is provided using the asset and
its recoverable amount, the asset is considered liability method on temporary differences
impaired and the asset is written down to its between the tax bases of assets and liabilities
recoverable amount. A CGU is the smallest group and their carrying amounts for financial reporting
of assets which generates cash inflows from purposes, including carry forwards of unused tax
continuing use that are largely independent of losses and tax credits granted at the reporting
those from other assets or groups of assets. date.
Goodwill and intangible assets with indefinite Deferred tax assets are recognized for all

deductible temporary differences, the carry (ii) Classification and subsequent measurement
forwards of unused tax losses and any unused The financial assets are classified as financial
tax credits to the extent that it is probable that assets measured at amortized cost, financial
taxable profit will be available against which the assets measured at fair value through other
deductible temporary difference can be utilized. comprehensive income or financial assets
Deferred tax liabilities are recognized for all measured at fair value through profit or loss at
taxable temporary differences in principle. initial recognition.
Deferred tax assets and liabilities are recognized (Financial assets measured at amortized cost)
for all taxable temporary differences, except: A financial asset shall be measured at
(a) Future taxable temporary differences arising amortized cost if both of the following
from initial recognition of goodwill. conditions are met:
(b) Future taxable or deductible differences ・the financial asset is held within a business
relating to initial recognition of an asset model whose objective is to hold financial
or liability in a transaction other than a assets in order to collect contractual cash
business combination that affects neither flows and
accounting profit nor taxable profit or loss. ・the contractual terms of the financial asset
(c) Future taxable temporary differences give rise on specified dates to cash flows that
associated with investments in subsidiaries are solely payments of principal and interest
when the timing of the reversal of the on the principal amount outstanding.
temporary differences can be controlled and
it is probable that such differences will not Financial assets measured at amortized cost
reverse in the foreseeable future. are measured at amortized cost using the
(d) Future deductible temporary differences effective interest method subsequent to the
associated with investments in subsidiaries initial recognition.
when it is probable that such differences will
not reverse in the foreseeable future. (Financial assets measured at fair value
through other comprehensive income)
Deferred tax assets and liabilities are offset if a Equity instruments such as shares held mainly
legally enforceable right exists to set off current for the purpose of maintaining or strengthening
tax assets against current tax liabilities and the business relationships with investees are
deferred taxes relate to income taxes levied by designated at initial recognition as financial
the same taxation authority on the same taxable assets measured at fair value through other
entity. comprehensive income.
(13) Financial instruments Any change in fair value of equity financial

1. Financial assets assets measured at fair value through other
(i) Initial recognition and measurement comprehensive income is recognized in other
Trade and other receivables are initially comprehensive income subsequent to the initial
recognized on the date when they are incurred, recognition. If such assets are derecognized
and other financial assets at the transaction or the fair value decreases significantly,
date when the Group becomes a party to the accumulated other comprehensive income
contract for the financial assets. At the initial is directly transferred to retained earnings.
recognition, financial assets are measured at Dividends from such financial assets are
fair value plus transaction costs, except for recognized in profit or loss.
those measured at fair value through profit or
loss. Debt financial assets which meet both of the
below requirements are classified into financial

assets measured at fair value through other decreased due to any event that occurred after
comprehensive income. the initial recognition of the impairment losses,
・the financial asset is held within a business the previously recognized impairment losses
model whose objective is achieved by both are reversed and recognized in profit or loss.
collecting contractual cash flows and selling
financial assets and (iv) Derecognition
・the contractual terms of the financial asset A financial asset is derecognized when the
give rise on specified dates to cash flows that contractual rights to the cash flows from the
are solely payments of principal and interest financial asset expire or when the contractual
on the principal amount outstanding. rights to receive the cash flows from the
financial asset are assigned and substantially
(Financial assets measured at fair value all the risks and rewards of ownership are
through profit or loss) transferred.
Financial assets other than above are classified
as financial assets measured at fair value 2. Financial liabilities
through profit or loss. (i) Initial recognition and measurement
Changes in fair value of financial assets Financial liabilities are initially recognized at
measured at fair value through profit or loss the transaction date when the Group becomes
are recognized in profit or loss subsequent to a party to the contract for the financial
the initial recognition. liabilities. All financial liabilities are measured
at fair value at initial recognition, whereas
(iii) Impairment of financial assets financial liabilities measured at amortized
For financial assets measured at amortized cost are measured at the amount less directly
cost, allowance for doubtful receivables for attributable transaction costs.
expected credit losses is recognized.
(ii) Classification and subsequent measurement
The Group evaluates at the end of each Financial liabilities are classified into financial
reporting period whether there is a significant liabilities measured at fair value through profit
increase in credit risk of financial assets since or loss or financial liabilities measured at
initial recognition. When there is no significant amortized cost at initial recognition.
increase in the credit risk since initial
recognition, the amount equal to expected Changes in fair value of financial liabilities
credit losses for 12 months are recognized measured at fair value through profit or loss
as allowance for doubtful receivables. When are recognized in profit or loss subsequent to
there is a significant increase in credit risk the initial recognition.
since initial recognition, the amount equal
to expected credit losses for the remaining Financial liabilities measured at amortized cost
life of the financial assets are recognized as are measured at amortized cost subsequent
allowance for doubtful receivables. to the initial recognition, by using the effective
interest method. Amortization by the effective
For trade and other receivables, allowance for interest method, as well as gains and losses
doubtful receivables are always recognized at associated with derecognition shall be
the amount equal to expected credit losses for recognized in profit or loss.
the remaining life of the assets.
(iii) Derecognition
With regard to financial assets on which A financial liability is derecognized when it
impairment losses were previously recognized, is extinguished, namely when the obligation
when the amount of impairment losses specified in the contract is discharged,
cancelled or expires.

(iv) Preferred shares The Group applies cash flow hedges to interest
Preferred shares are classified as equity or rate-related derivative transactions that meet
financial liability based on the substance of criteria for hedge accounting. Of changes in
the contractual arrangements, not on their fair value associated with hedging instruments
legal forms. Preferred shares mandatorily in cash flow hedges, the effective portion is
redeemable on a specified date are classified recognized in other comprehensive income,
as financial liabilities. Preferred shares and recognized as other components of equity
classified as liability are measured at until the hedged transaction is executed and
amortized cost in the consolidated statement recognized in profit or loss. The ineffective
of financial position and the dividends on these portion is recognized in profit or loss.
preferred shares are recognized as interest
expense and presented as financial costs in the The amount associated with hedging
consolidated statement of income. instruments recognized in other components
of equity is transferred to profit or loss, at the
3. Offsetting financial instruments point in time when the hedged transactions
Financial assets and liabilities are offset, with exerts impact on profit or loss. If a hedged item
the net amount presented in the consolidated results in the recognition of a non-financial
statements of financial position, only if asset or a non-financial liability, the associated
the Group holds a legal right to offset the amount recognized in other components of
recognized amounts, and there is an intention equity is accounted for as adjustment to the
to settle on a net basis or to realize the asset initial book value of the non-financial asset or
and settle the liability simultaneously. the non-financial liability. When any forecast
transaction is no longer expected to occur,
4. Derivatives and hedge accounting hedge accounting is discontinued, and any
The Group uses derivatives such as forward related cumulative gain or loss that has been
foreign currency exchange contracts and recognized as other components of equity is
interest rate swaps, as hedging instruments transferred to profit or loss. Even if hedge
against foreign currency exchange risk and accounting was discontinued, the amount that
interest rate risk. These derivatives are had been recognized as other components of
classified as financial assets measured at equity until hedge accounting was discontinued
fair value through profit or loss and financial continues to be recognized in other components
liabilities measured at fair value through profit of equity until future cash flows occur when
or loss. Derivatives that meet criteria for these future cash flows are expected to occur.
hedge accounting are designated as hedging The Group does not use fair value hedges or
instruments, and hedge accounting is applied net investment hedges in foreign operations.
to the derivatives. For the application of
hedge accounting, the Group officially makes (14) Provisions
designation and prepares documentation at the Provisions are recognized when the Group has
inception of the hedge, regarding the hedging a legal or constructive obligation as a result of
relationship as well as the risk management a past event, it is probable that an outflow of
objectives and strategies. Such document resources embodying economic benefits will be
contains hedging instruments, hedged required to settle the obligation and a reliable
items, the nature of the risks to be hedged estimate can be made of the amount of the
and the method for evaluating the hedging obligation. The amount to be recognized as a
effectiveness. The Group continually evaluates provision is measured based on the best estimate
whether the hedging relationship is effective of the expenditure required to settle the present
prospectively. obligation at the end of the reporting period. If

the effect of the time value of money is material, statement of comprehensive income.
provisions are discounted using a current pre- Past service costs are recognized immediately in
tax rate that reflects, when appropriate, the risks profit or loss.
specific to the liability.
The contribution payable for a defined contribution
(15) Employee benefits plan in exchange for employee service is
The Group recognizes the undiscounted amount of recognized as an expense, unless another IFRS
any short-term benefits attributable to services requires or permits its capitalization.
that have been rendered in the period as an
expense. When a present legal or constructive When there is a surplus in a defined benefit
obligation to make payments associated with plan, the net defined benefit asset recognized is
bonus plans or accumulating paid absences restricted to the lower of the surplus in the plan
exists, and a reliable estimate of the provision and the asset ceiling.
can be made, the amount to be paid in accordance
with these benefits is accounted for as a liability. (16) Equity and equity instruments
Projected benefit obligations are measured using 1. Common stock
the projected unit credit method. This actuarial Equity instruments issued by the Company
method also determines the current service cost are included in subscribed capital and capital
and any past service costs. surplus. Transaction costs related to the
issuance of equity instruments are deducted
The projected unit credit method is used to from capital surplus.
make a reliable estimate of the ultimate cost
to the entity for benefits that employees have 2. Treasury shares
earned in return for their services in current When the Company repurchases its
and prior periods. This requires the Group to own ordinary shares, the amount of the
make estimates (actuarial assumptions) about consideration paid, including transaction
demographic variables and financial variables, costs, is deducted from equity. When the
such as future increases in salaries that will Company sells or reissues treasury shares, the
affect the cost of the benefit. The valuation is consideration received is recognized directly
based on a report prepared by independent in equity, and the gain or loss resulting from
actuaries. the transaction is included in capital surplus-
treasury shares.
Net defined benefit liabilities are based on the
present value of the defined benefit obligation 3. Perpetual subordinated loan and perpetual
less the fair value of plan assets at the reporting subordinated bonds
date. Perpetual subordinated loan and perpetual
subordinated bonds are classified as equity
The present value of a defined benefit obligation instruments as no specific date is determined
is based on the discounted future cash flows at a for repayment of the principal and optional
rate determined by reference to market yield on deferral of interest payments is possible. The
high-quality corporate bonds whose currency and proceeds from the perpetual subordinated
term are consistent with the obligation. loan and perpetual subordinated bonds, after
deduction of issuance costs, are recorded as
Actuarial differences arising from changes �Hybrid capital � in the consolidated statement
in actuarial assumptions and experience of financial position.
adjustments are recognized immediately in
other comprehensive income in the consolidated

as an increase in liabilities. The liabilities

(17) Share-based payment is remeasured at fair value as of the end of
1. Stock option the each quarter period until settlement, the
The Group has stock option plans as incentive changes measured at fair value is recognized
plans for directors, executive officers, and as profit or loss.
employees and accounted for as cash-settled
share-based payment transactions. The fair (18) Revenue recognition
value of stock options at the grant date is The Group recognizes revenues as adopting the
recognized as a personnel cost over the vesting following steps to contracts with customers.
period from the grant date as a corresponding
increase in other components of equity. The fair STEP 1: Identify the contract(s) with a customer
value of the stock options is measured using STEP 2: Identify the performance obligations in
the Black-Scholes model or other models, the contract in the contract
taking into account for the terms of the options STEP 3: Determine the transaction price
granted. The Group regularly reviews the STEP 4: Allocate the transaction price to
terms and revises estimates of the number of the performance obligations in the
options that are expected to vest, as necessary. contracts
STEP 5: Recognize revenue when (or as)
2. Restricted share remuneration plan the entity satisfies a performance
The Group has adopted restricted share obligation
remuneration plan as equity-settled share-
based remuneration for directors. The Group engages in businesses related to
manufacturing and sales of machine tools and
The consideration amount as provided service provide services and solutions for the machine
is measured at the fair value of the company tools and related business areas. For the sales
shares as of the grant date, which recognized of machine tools, the Group recognizes revenue
as expenses on a straight-line basis over at a point in time when control over the products
certain period from the grant date and the passed to the customers which is defined in the
same amount is recognized as an increase in sales contracts. For the providing of services and
equity. solutions, the Group recognizes revenue when the
Group satisfies performance obligations required
3. Trust-type employee stock ownership incentive by the contracts with the customers.
plan
The Group has adopted �Trust-Type Employee Revenue is measured at the amount of promised
Stock Ownership Incentive Plan� as an cash- consideration in contracts with customers
settled incentive plan to increase the mid to less discounts and rebates, and reduced by the
long-term corporate value of the company to amount of sales returns.
its employees.
(19) Financial income
Under this plan, the Company shares owned Interest income is recorded using the effective
by �DMG MORI Employee Shareholders interest method.
Association Exclusive Trust� are treated as
treasury shares. Dividend income is recognized when the Group’s
right to receive payment is established.
The consideration amount as provided service
is measured at fair value of the liabilities (20) Government grants
incurred, which is recognized as expenses Government grants are recognized at fair value
over the expiration of the trust period from the where there is reasonable assurance that the
grant date and the same amount is recognized grant will be received and all attached conditions

will be complied with. value in a foreign currency are translated using

the exchange rates at the date when the fair value
When the grant relates to an expense item, it is was measured.
recognized as income on a systematic basis over
the periods in which the related costs, for which it Non-monetary items that are measured in
is intended to compensate, are expensed. terms of historical cost in a foreign currency are
translated using the exchange rates at the dates
When the grant relates to an asset, it is of the initial transactions.
recognized as income in equal amounts over the
expected useful life of the related asset and as The gain or loss arising on settlements or
deferred income for the remaining portion in the translation is recognized in profit or loss.
consolidated statement of financial position.
Any goodwill and other intangible assets arising
(21) Borrowing costs on the acquisition of a foreign operation and any
Borrowing costs directly attributable to the fair value adjustments to the carrying amounts
acquisition, construction or production of of assets and liabilities arising on the acquisition
qualifying assets that necessarily take a are treated as assets and liabilities of the foreign
substantial period of time to get ready for their operation and translated at the spot rate of
intended use or sale are capitalized as part of the exchange at the reporting date.
cost of the assets.
(23) Significant accounting judgments,
All other borrowing costs are expensed for the estimates and assumptions
year when they occur. The preparation of consolidated financial
statements requires management of the Group
(22) Foreign currency translation to make judgments, estimates and assumptions
Transactions in foreign currencies are initially that affect the application of accounting policies
recorded by Group entities at their respective and the reported amounts of assets, liabilities,
functional currency spot rates at the date the income and expenses.
transaction first qualifies for recognition.
Assets and liabilities of foreign subsidiaries are Uncertainty about these assumptions and
translated into Japanese yen using the closing estimates could result in outcomes that require
rate at the reporting date and income and a material adjustment to the carrying amount of
expense items are translated using the average assets or liabilities affected in future periods.
exchange rates for the period. Estimates and assumptions are reviewed on an
ongoing basis.
The exchange differences arising on translation
of financial statements of foreign subsidiaries Changes in accounting estimates are accounted
are recognized in other comprehensive income for prospectively; defined as recognizing the
and the cumulative effect from the exchange effect of the change in the accounting estimate
differences is recognized in �Other components of in the current and future periods affected by the
equity� in the consolidated statement of financial change.
position.
In the process of applying the Group’s accounting
Monetary assets and liabilities denominated policies, management has made the following
in foreign currencies are translated using the estimations and judgments, which have the most
functional currency spot rates at the reporting significant effect on the amounts recognized in
date. the consolidated financial statements:
Non-monetary items that are measured at fair

1. Fair value of acquired assets and assumed of the Group. The estimation of taxable
liabilities as a result of business combinations income may change due to market changes
Assets acquired and liabilities assumed as a or circumstances arising that are beyond
result of a business combination are initially the control of the Group and, accordingly,
measured at fair value at the date of acquisition. prospectively significant adjustments to the
The key assumptions, including future cash recognized amount of deferred tax assets may
flow and discount rates, serving as the basis occur.
for the valuation of fair value may change due
to market changes or circumstances arising 4. Measurement of provisions
that are beyond the control of the Group The amount to be recognized as a provision is
and, accordingly, prospectively significant measured based on the best estimate of the
adjustments to the carrying amount of goodwill expenditure required to settle the present
and other intangible assets and respective obligation at the end of the reporting period.
amortization expenses may occur.
The estimated outcome and financial effects
2. Impairment of property, plant and equipment, are determined by the judgment of the
goodwill and other intangible assets management of the Group, supplemented by
An impairment test is performed annually or at evidence provided by events occurring after the
any time if indications of impairment exist. reporting period.
For the impairment testing of property, plant The assumptions used for measuring a
and equipment, goodwill and other intangible provision may change due to market changes
assets, the recoverable amount is defined as or circumstances arising that are beyond
the higher of fair value less costs of disposal the control of the Group and, accordingly,
and value in use based on the identified cash prospectively significant adjustments to the
generating units. measurement of a provision may occur.
The key assumptions, including the 5. Financial liabilities arising from the
measurement of fair value less cost of disposal Domination, Profit and Loss Transfer
and the cash flow that the Group will derive Agreement (hereinafter, the �DPLTA�)
from the use and disposal, in order to calculate The Group estimates the amount of its
the value in use of the cash generating unit obligation for the share purchase option and
and the respective discount rates may change the annual compensation amount at the end of
due to market changes or circumstances the reporting period based on a re-purchase
arising that are beyond the control of the Group price per share, annual compensation amount
and, accordingly, prospectively significant per share and the number of outstanding
adjustments to the impairment loss of shares. At the same time, the Group
property, plant and equipment, goodwill and reasonably estimates the expected payment
other intangible assets may occur. timing. Based on this information, the Group
recognizes the present discounted value of
3. Recoverability of deferred tax assets financial liabilities arising from the DPLTA.
Deferred tax assets are recognized for
deductible temporary differences to the extent The conditions for the Group’s obligation
that it is probable that future taxable profits will and future economic conditions may change
be available against which they can be utilized. and, accordingly, prospectively significant
However, judgment of the recoverability is adjustments to the measurement of the liability
based on the premise of estimated taxable may occur.
income estimated from business plans

4. New Accounting Standards Not Yet Adopted by the Group

The new accounting standards, amended standards and new interpretations that are issued or amended, but
not yet adopted by the Group up to the date of approval of the consolidated financial statements are as follows:
Mandatory adoption To be adopted Description of

IFRS
(Effective) by the Group new accounting standards and amendments
Amendments to recognition of assets and liabilities

IFRS16 Leases 1st January, 2019 Fiscal year
for lessees
Uncertainty
IFRIC Clarifying accounting treatment for uncertainty over
over Income Tax 1st January, 2019 Fiscal year
23 income tax treatments.
Treatments
IFRS 16 �Lease� will be adopted effective from disclosed or method to recognize the amount of
the fiscal year beginning on or after 1st January, the cumulative effect due to the application of this
2019. IFRS 16 will replace IAS 17 �Leases� and standard on the date of application.
the related application guidance which currently
applies. As the Group will implement a single lessee
accounting model for operating leases, mainly
IFRS 16 does not require that a lessee classifies the right of use assets, land, buildings, structure,
its leases into finance lease or operating leases, machinery, vehicle will increase. Therefore, the
and introduces a single lessee accounting model. rent fees recorded under IAS 17 will be recognized
A lessee recognizes, for all leases, a right-of-use as depreciation and financial cost.
asset representing its right use of the underlying
leased asset and a lease liability representing The Group plans not to apply IFRS 16 for short-
its obligation to make lease payments. However, term and low-value leases.
a lessee may elect not to apply the above In addition, in applying IFRS 16, the Group plans
requirement to short-term and low value lease. to select the method to recognize the amount of
After the initial recognition of a right-of-use the cumulative effect due to the application of this
asset and a lease liability, an entity recognizes standard on the date of application.
depreciation cost of the right-of-use asset and
interest expense of the lease liability. In addition, With adopting IFRIC 23, no significant impact to the
in applying IFRS 16 the Group can select either consolidated financial statement expected.
method to apply retrospectively to all periods to be
5. Significant Change in Scope of Consolidation

There was no significant change in scope of consolidation during the fiscal years 2018 and 2017.

6. Segment Information
(1) Outline of reportable segments The � Machine Tools� segment generates its
The reportable segments of the Group are revenue through the production and sales
based on its business areas for which discrete of machine tools. The � Industrial Services�
financial information is available, and they are segment generates its revenue through
regularly reviewed by the Board of Directors providing services and solutions related to
and corporate officers for the purpose of machine tools.
making decisions about resource allocation and
performance assessment. The classification (2) Calculation methods of sales revenues,
of the reportable segments is based on the income or loss, assets and other items by each
products and services and the associated reportable segment
internal reporting and management methods. The amount of segment income is based on
operating income and share of profits of at
As a result, the business activities of the Group equity-accounted investments. Sales revenues
are categorized into �Machine Tools� and between the segments are based on market
�Industrial Services,� as its two reportable prices.
segments.
(3) Segment sales revenue and income

The segment sales revenues, income or loss and other items by each reportable segment for the fiscal
years 2018 and 2017 are summarized as follows:
Millions of yen
2018
Reporting segments Adjustments
Consolidated
Corporate
Machine Tools Industrial Services Total Elimination
Services
Sales revenues:
External customers ¥ 373,348 ¥ 127,875 ¥ 501,223 ¥ 24 ¥ － ¥ 501,248
Other segments 194,835 17,969 212,804 1,918 (214,722) －
Total 568,183 145,844 714,027 1,943 (214,722) 501,248
Segment income (Note 1) 40,163 12,938 53,101 (16,444) (228) 36,429
Financial income －－－－－ 470
Financial costs －－－－－ (5,624)
Profit before income taxes －－－－－ 31,275
Segment assets (Note 2) 724,941 503,325 1,228,267 399,242 (1,099,086) 528,423
Other items
Depreciation and amortization 8,832 5,759 14,591 3,907 － 18,499
－－
Investments in associates and
joint ventures 427 2,903 3,331 3,331
Capital expenditure 12,104 2,209 14,314 5,227 (262) 19,278

2018
Reportable segments Adjustments
Consolidated
Corporate
Services
Sales revenues:
External customers $ 3,362,889 $ 1,151,819 $ 4,514,709 $ 216 $ － $ 4,514,934
Other segments 1,754,954 161,853 1,916,807 17,276 (1,934,083) －
Total 5,117,843 1,313,673 6,431,516 17,501 (1,934,083) 4,514,934
Segment income (Note 1) 361,763 116,537 478,301 (148,117) (2,053) 328,130
Financial income －－－－－ 4,233
Segment assets (Note 2) 6,529,823 4,533,642 11,063,475 3,596,126 (9,899,891) 4,759,709
Other items
－－
joint ventures 3,846 26,148 30,003 30,003
Capital expenditure 109,025 19,897 128,931 47,081 (2,359) 173,644
(Note 1) �Adjustments to segment income� include trade elimination of inter-segment transactions and expenses related to corporate services.
(Note 2) �Adjustments to segment assets� mainly include corporate assets not attributable to any business segment and elimination of inter-segment
receivables.
Millions of yen
2017
Consolidated
Corporate
Services
Sales revenues
－
Sales revenues with third
parties ¥ 312,073 ¥ 117,556 ¥ 429,630 ¥ 34 ¥ ¥ 429,664
－
Sales revenues with other
segments 131,133 18,580 149,714 2,067 (151,782)
Total 443,207 136,136 579,344 2,101 (151,782) 429,664

Segment income (Note 1) 31,407 9,087 40,495 (9,511) (1,529) 29,453
Financial income －－－－－ 647
Segment assets (Note 2) 687,366 502,990 1,190,356 431,189 (1,054,134) 567,411
Other items
－－
joint ventures 413 1,815 2,229 2,229
Capital expenditure 4,116 1,569 5,686 3,916 (218) 9,384
(Note 1) �Adjustments to segment income� include trade elimination of inter-segment transactions and expenses related to corporate services.
(Note 2) �Adjustments to segment assets� includes corporate assets not attributable to each business segment and elimination of inter-segment
receivables.

(4) Information on products and services 7. Cash and Cash Equivalents

As the classification for the reportable segments
is based on the type of products and services of
The breakdown of cash and cash equivalents at
the Group, there is no additional information to be
31st December, 2018 and 2017 is as follows:
disclosed.
Thousands of
Millions of yen
U.S. dollars
(5) Information on geographical areas 2018 2017 2018
Sales revenues from external customers and non- Cash on hand
and at banks
current assets by geographic areas are as follows: with maturities ¥ 27,368 ¥ 64,973 $ 246,514
of three months
or less
Sales revenues from external customers Total ¥ 27,368 ¥ 64,973 $ 246,514
Thousands of (Note) The balance of cash and cash equivalents in the consolidated
Millions of yen
U.S. dollars
statement of financial position at 31st December, 2018 and 2017
2018 2017 2018 agreed with the respective balances in the consolidated
Japan ¥ 80,300 ¥ 65,756 $ 723,293 statement of cash flows.
Germany 112,868 99,952 1,016,645

The Americas 85,154 78,524 767,014 8. Trade and Other Receivables
Europe other
than Germany 158,821 141,802 1,430,562
China and Asia 64,103 43,627 577,400
The breakdown of trade and other receivables at
31st December, 2018 and 2017 is as follows:
Total ¥ 501,248 ¥ 429,664 $ 4,514,934
(Note) Sales revenues by geographical areas are categorized by Millions of yen
Thousands of
countries or regions based on the geographical location of the U.S. dollars
respective sales entities. 2018 2017 2018
Notes and trade
¥ 65,709 ¥ 59,343 $ 591,866
Non-current assets receivables
Other 6,238 3,525 56,188
Thousands of
Millions of yen Allowance
U.S. dollars
for doubtful (2,506) (2,127) (22,572)
2018 2017 2018 receivables
Japan ¥ 63,357 ¥ 60,028 $ 570,680 Total ¥ 69,441 ¥ 60,741 $ 625,481
Germany 92,269 97,785 831,102
The Americas 9,612 10,334 86,578 9. Inventories
Europe other
than Germany 105,431 115,220 949,657
China and Asia 9,300 11,081 83,768 The breakdown of inventories at 31st December,
Eliminations (17,029) (17,803) (153,386) 2018 and 2017 is as follows:
Total ¥ 262,941 ¥ 276,646 $ 2,368,411
Thousands of
Millions of yen
U.S. dollars
(Note) Non-current assets by geographical areas are classified by
countries or regions based on the locations of the assets, and 2018 2017 2018
consist of property, plant and equipment, goodwill and other Raw materials
intangible assets. and supplies ¥ 59,235 ¥ 50,770 $ 533,552
Work in process 31,294 30,152 281,877
(6) Information on major customers Merchandise
Disclosure of major customers was omitted and finished 40,196 42,059 362,060
goods
because the proportion of revenue from an Total ¥ 130,726 ¥ 122,981 $ 1,177,499
individual customer did not exceed 10% of
(Note 1) �Costs of raw materials, consumables and goods for resale�
consolidated sales revenues for the fiscal years in the consolidated statement of profit or loss includes the
2018 and 2017, respectively. write-downs of inventories of ¥3,928 million ($35,381
thousand) and ¥3,215 million for the fiscal years 2018 and
2017, respectively.
(Note 2) Cost of inventories recognized in profit or loss for the fiscal
years 2018 and 2017 amounted to ¥315,111 million ($2,838,326
thousand) and ¥268,125 million, respectively, including the
above write-downs of inventories.
(Note 3) There is no significant reversal of impairment loss for the
fiscal years 2018 and 2017.

10. Property, Plant and Equipment
(1) The movement in acquisition cost, accumulated depreciation and impairment losses and carrying
amount for property, plant and equipment for the fiscal years ended 31st December, 2018 and 2017 is as
follows:
Acquisition cost Millions of yen

2018
Land, buildings and Tools, furniture and Construction in progress
Machinery and vehicles Total
structures fixtures (Note 3)
Beginning balance ¥ 163,235 ¥ 28,927 ¥ 42,661 ¥ 1,605 ¥ 236,430
Acquisitions 3,729 1,068 3,213 5,996 14,009
－－－－－
Acquisitions through business
combinations
Disposals (2,072) (2,958) (1,488) － (6,518)
Reclassification from construction
in progress 642 395 493 (1,497) 34
Exchange differences on translation
of foreign operations (5,858) (1,548) (2,284) (322) (10,014)
Other － 1,001 －－ 1,001
Ending balance ¥ 159,678 ¥ 26,886 ¥ 42,595 ¥ 5,782 ¥ 234,942

2018
Beginning balance $ 1,470,320 $ 260,556 $ 384,264 $ 14,456 $ 2,129,616
Acquisitions 33,588 9,619 28,940 54,008 126,184
－－－－－
combinations
Disposals (18,663) (26,643) (13,403) － (58,710)
in progress 5,782 3,557 4,440 (13,484) (306)
of foreign operations (52,765) (13,943) (20,572) (2,900) (90,199)
Other － 9,016 －－ 9,016
Ending balance $ 1,438,281 $ 242,172 $ 383,669 $ 52,080 $ 2,116,213
Accumulated depreciation and impairment losses

Millions of yen
2018
Beginning balance ¥ (60,217) ¥ (14,019) ¥ (28,210) ¥ － ¥ (102,447)
－
Depreciation
(Note 1) (4,121) (2,879) (4,146) (11,147)
－－－
Impairment losses
(Note 2) (590) (590)
Disposals 661 2,148 1,308 － 4,118
－
of foreign operations 1,500 729 1,568 3,798
Other － 13 0 － 13
Ending balance ¥ (62,767) ¥ (14,007) ¥ (29,480) ¥ － ¥ (106,255)


2018
Beginning balance $ (542,397) $ (126,274) $ (254,098) $ － $ (922,779)
－
Depreciation
(Note 1) (37,119) (25,932) (37,344) (100,405)
－－－
Impairment losses
(Note 2) (5,314) (5,314)
Disposals 5,953 19,347 11,781 － 37,092
－
of foreign operations 13,511 6,566 14,123 34,210
Other － 117 0 － 117
Ending balance $ (565,366) $ (126,166) $ (265,537) $ － $ (957,079)
Carrying amount Millions of yen

2018
Ending balance 96,910 12,878 13,114 5,782 128,686

2018
Beginning balance $ 927,922 $ 134,282 $ 130,156 $ 14,456 $ 1,206,836
Ending balance 872,905 115,997 118,122 52,080 1,159,124
(Note 1) Depreciation is included in �Depreciation and amortization� in the consolidated statement of profit or loss.
(Note 2) Impairment losses are included in �Other operating costs� in the consolidated statement of profit or loss.
(Note 3) Amounts for property, plant and equipment under construction are presented in �Construction in progress.�

2017
Acquisitions 1,802 935 2,153 1,163 6,054
－－
combinations 15 9 24
Disposals (4,439) (3,778) (1,272) (310) (9,800)
in progress 6,392 642 992 (8,163) (136)
of foreign operations 4,995 746 2,696 57 8,496
Other 780 194 (1,261) － (285)
Ending balance ¥ 163,235 ¥ 28,927 ¥ 42,661 ¥ 1,605 ¥ 236,430

Accumulated depreciation and impairment losses

Millions of yen
2017
Beginning balance ¥ (57,033) ¥ (13,632) ¥ (23,970) ¥ － ¥ (94,636)
－
Depreciation
(Note 1) (3,388) (3,373) (4,420) (11,182)
－－
Impairment losses
(Note 2) (950) (570) (1,520)
Disposals 3,487 3,414 1,027 － 7,930
－
of foreign operations (1,749) (380) (1,767) (3,897)
Other (583) 521 920 － 858
Ending balance ¥ (60,217) ¥ (14,019) ¥ (28,210) ¥ － ¥ (102,447)
Carrying amount Millions of yen

2017
Ending balance 103,018 14,908 14,450 1,605 133,983
(Note 1) Depreciation is included in �Depreciation and amortization� in the consolidated statement of profit or loss.
(Note 2) Impairment losses are included in �Other operating costs� in the consolidated statement of profit or loss.
(Note 3) Amounts for property, plant and equipment under construction are presented in �Construction in progress.�
(2) Impairment losses The carrying amounts of buildings were written

The carrying amount of certain assets, including down to their recoverable amount during the
buildings, were written down to their recoverable fiscal year 2017 as their profitability declined. In
amount during the fiscal year 2018 as their addition, the carrying amounts of machinery were
profitability declined. As a result, ¥590 million ($5,314 written down to their recoverable amount during
thousand) of impairment loss was allocated to the the fiscal year 2017 as they were not expected to
Industrial Services segment. be used for business purposes. As a result, ¥1,520
million of impairment loss was allocated to the
Industrial Services segment.
(3) Leased assets (4) Collateral

The carrying amounts of the leased assets held Assets pledged as collateral and secured liabilities
under finance lease contracts included in property, are as follows:
plant and equipment are as follows: Assets pledged as collateral
Thousands of Thousands of
Millions of yen Millions of yen
U.S. dollars U.S. dollars
2018 2017 2018 2018 2017 2018
－－
Land, buildings Land and
and structures ¥ 2,349 ¥ 2,642 $ 21,158 buildings ¥ ¥ 5,376 $
Machinery and
207 768 1,864 Total ¥ － ¥ 5,376 $ －
vehicles
Tools, furniture
and fixtures 54 138 486 Secured liabilities
Total ¥ 2,610 ¥ 3,549 $ 23,509 Millions of yen
Thousands of
U.S. dollars
2018 2017 2018
Interest-
bearing bonds ¥ － ¥ 2,052 $ －
and borrowings
Total ¥ － ¥ 2,052 $ －

11. Goodwill and Other Intangible Assets
(1) The movement in acquisition cost and accumulated impairment losses for goodwill for the fiscal years
2018 and 2017 is as follows:
Millions of yen Thousands of U.S. dollars
2018 2018
Accumulated Accumulated
Acquisition cost impairment Carrying amount Acquisition cost impairment Carrying amount
losses losses
Beginning balance ¥ 73,347 ¥ － ¥ 73,347 Beginning balance $ 660,664 $ － $ 660,664
Acquisitions －－－ Acquisitions －－－
－－
Acquisitions through Acquisitions through
business combinations 43 43 business combinations 387 387
Disposals －－－ Disposals －－－
Impairment losses － (306) (306) Impairment losses － (2,756) (2,756)
Exchange differences Exchange differences
on translation of foreign (4,216) (13) (4,230) on translation of foreign (37,975) (117) (38,101)
operations operations
Ending balance ¥ 69,174 ¥ (320) ¥ 68,854 Ending balance $ 623,076 $ (2,882) $ 620,194
Millions of yen
2017
Accumulated
Acquisition cost impairment Carrying amount
losses
Beginning balance ¥ 65,641 ¥ － ¥ 65,641
Acquisitions －－－
－
Acquisitions through
business combinations 1,727 1,727
Disposals －－－
Impairment losses －－－
Exchange differences
on translation of foreign 5,979 － 5,979
operations
Ending balance ¥ 73,347 ¥ － ¥ 73,347
(2) The movement in acquisition cost and accumulated amortization and impairment losses for other
intangible assets for the fiscal years 2018 and 2017 as follows:
Acquisition cost
Millions of yen
2018
Capitalized
Customer Technology
Trademarks Patents development Others Total
-related assets -related assets
costs
Beginning balance ¥ 45,468 ¥ 8,432 ¥ 6,396 ¥ 1,669 ¥ 8,953 ¥ 33,659 ¥ 104,581

Acquisitions 55 －－－－ 5,848 5,903
－－－－－－－
combinations
Additions due to internal development －－－－ 1,030 － 1,030
Disposals －－－－ (18) (134) (153)
Reclassification －－－－－ (34) (34)
－
foreign operations (2,731) (458) (378) (1,185) (1,125) (5,879)
Other －－－－－－－
Ending balance ¥ 42,792 ¥ 7,974 ¥ 6,018 ¥ 1,669 ¥ 8,779 ¥ 38,212 ¥ 105,448


2018
Capitalized
Customer Technology
costs
Beginning balance $ 409,547 $ 75,950 $ 57,611 $ 15,033 $ 80,643 $ 303,179 $ 942,001

Acquisitions 495 －－－－ 52,675 53,170
－－－－－－－
combinations
Disposals －－－－ (162) (1,206) (1,378)
Reclassification －－－－－ (306) (306)
－
foreign operations (24,599) (4,125) (3,404) (10,673) (10,133) (52,954)
Other －－－－－－－
Ending balance $ 385,444 $ 71,824 $ 54,206 $ 15,033 $ 79,075 $ 344,190 $ 949,810
Accumulated amortization and impairment losses

Millions of yen
2018
Capitalized
Customer Technology
costs
Beginning balance ¥ (1,166) ¥ (2,648) ¥ (3,059) ¥ (1,611) ¥ (3,747) ¥ (23,031) ¥ (35,265)
Amortization (345) (544) (1,074) (29) (1,724) (3,632) (7,351)
Impairment losses －－－－－ (109) (109)
Reversal of impairment losses －－－－－－－
Disposals －－－－ 18 98 117
Reclassification －－－－－－－
－
foreign operations 67 153 209 1,154 975 2,560
Other －－－－－－－
Ending balance ¥ (1,444) ¥ (3,040) ¥ (3,925) ¥ (1,640) ¥ (4,298) ¥ (25,699) ¥ (40,048)

2018
Capitalized
Customer Technology
costs
Beginning balance $ (10,502) $ (23,851) $ (27,553) $ (14,510) $ (33,750) $ (207,449) $ (317,645)
Amortization (3,107) (4,900) (9,673) (261) (15,528) (32,714) (66,213)
Disposals －－－－ 162 882 1,053
Reclassification －－－－－－－
－
foreign operations 603 1,378 1,882 10,394 8,782 23,058
Other －－－－－－－
Ending balance $ (13,006) $ (27,382) $ (35,353) $ (14,772) $ (38,713) $ (231,480) $ (360,727)
Carrying amount
Millions of yen
2018
Capitalized
Customer Technology
costs
Beginning balance ¥ 44,302 ¥ 5,784 ¥ 3,337 ¥ 58 ¥ 5,205 ¥ 10,627 ¥ 69,315
Ending balance 41,347 4,934 2,093 29 4,481 12,512 65,399


2018
Capitalized
Customer Technology
costs
Beginning balance $ 399,045 $ 52,098 $ 30,057 $ 522 $ 46,883 $ 95,721 $ 624,346
Ending balance 372,428 44,442 18,852 261 40,362 112,700 589,074
Other intangible assets in the above table with mainly trademarks, which were recognized as a
finite useful lives are amortized over their useful result of the integration between DMG MORI AG
economic lives. and the Company during the fiscal period 2015.
Trademarks are classified as intangible assets with
Amortization of intangible assets is included indefinite useful lives since there is no foreseeable
in �Depreciation and amortization� in the limit to the period over which the asset is expected
consolidated statement of profit or loss. to generate net cash flows for the Group to the
Impairment losses are included in �Other extent that their respective operations continue.
operating costs� in the consolidated statement of
profit or loss. Internally generated intangible assets (after
deducting accumulated amortization and
The amount of intangible assets in the above table impairment losses) at 31st December, 2018 were
with indefinite useful lives was ¥32,940 million ¥4,481 million ($40,362 thousand) and included in
($296,703 thousand) at 31st December, 2018. capitalized development costs in the above table.
Intangible assets with indefinite useful lives were

2017
Capitalized
Customer Technology
costs
Beginning balance ¥ 41,356 ¥ 7,658 ¥ 5,813 ¥ 1,669 ¥ 6,003 ¥ 29,402 ¥ 91,904
Acquisitions －－－－－ 2,695 2,695
－－－－－
combinations 1 1
Disposals －－－－－ (88) (88)
Reclassification － 154 －－ 107 (125) 136
－
foreign operations 4,112 620 583 1,313 1,805 8,433
Other －－－－－ (32) (32)
Ending balance ¥ 45,468 ¥ 8,432 ¥ 6,396 ¥ 1,669 ¥ 8,953 ¥ 33,659 ¥ 104,581
Accumulated amortization and impairment losses

Millions of yen
2017
Capitalized
Customer Technology
costs
Beginning balance ¥ (761) ¥ (1,918) ¥ (1,769) ¥ (1,581) ¥ (1,537) ¥ (17,989) ¥ (25,557)
Amortization (336) (530) (1,043) (29) (1,533) (3,687) (7,161)
Disposals －－－－－ 80 80
Reclassification － (16) －－－ 16 －
－
foreign operations (68) (182) (246) (676) (1,294) (2,468)
Other －－－－－ 32 32
Ending balance ¥ (1,166) ¥ (2,648) ¥ (3,059) ¥ (1,611) ¥ (3,747) ¥ (23,031) ¥ (35,265)

Carrying amount
Millions of yen
2017
Capitalized
Customer Technology
costs
Beginning balance ¥ 40,595 ¥ 5,740 ¥ 4,044 ¥ 88 ¥ 4,465 ¥ 11,413 ¥ 66,346
Ending balance 44,302 5,784 3,337 58 5,205 10,627 69,315
Other intangible assets in the above table with which were recognized as a result of the integration
finite useful lives are amortized over their useful between DMG MORI AG and the Company during
economic lives. the fiscal period 2015. Trademarks are classified
Amortization of intangible assets is included as intangible assets with indefinite useful lives
in �Depreciation and amortization� in the since there is no foreseeable limit to the period
consolidated statement of profit or loss. over which the asset is expected to generate net
Impairment losses are included in �Other cash flows for the Group to the extent that their
operating costs� in the consolidated statement of respective operations continue.
profit or loss. Internally generated intangible assets (after
The amount of intangible assets in the above table deducting accumulated amortization and
with indefinite useful lives was ¥35,009 million impairment losses) at 31st December, 2017
at 31st December, 2017. Intangible assets with were ¥5,205 million and included in capitalized
indefinite useful lives were mainly trademarks, development costs in the above table.
(3) Impairment losses DMG MORI AG and the Company during the fiscal
The carrying amount of goodwill was written down period 2015 as follows:
to their recoverable amount during the fiscal Thousands of
Millions of yen
U.S. dollars
year 2018 since the Group judged that certain 2018 2017 2018
Remaining
foreign subsidiaries could not meet their target Carrying Carrying amortization Carrying
amount amount period amount
profit as originally expected. Additionally, the Goodwill ¥ 66,053 ¥ 70,203 － $ 594,964
carrying amount of a part of software was written Other intangible
assets:
down to their recoverable amount as they were 27 years
not expected to be used for business purpose. Trademarks 41,319 44,254 or non- 372,176
amortizable
Impairment loss of ¥109 million ($981 thousand) Customer-
4,238 4,913
approximately
38,173
related assets 12 years
and ¥306 million ($2,756 thousand) were allocated Technology- approximately
2,093 3,337 18,852
to Machine Tools segment and the Industrial related assets 3 years
Services segment, respectively.

(5) Impairment test of goodwill and other intangible assets
The carrying amount of a part of software was Carrying amounts of goodwill and other intangible
written down to their recoverable amount during assets with indefinite useful lives allocated to each
the fiscal year 2017 as they were not expected to CGU (or group of CGUs) are as follows:
be used for business purposes. Impairment loss Thousands of
Millions of yen
U.S. dollars
in the amount of ¥190 million was allocated to the
CGU 2018 2017 2018
Machine Tools segment. Machine
¥ 29,315 ¥ 31,157 $ 264,051
Tools
Goodwill Industrial
Services 39,539 42,190 356,143
(4) Significant goodwill and other intangible assets Total ¥ 68,854 ¥ 73,347 $ 620,194
Significant goodwill and other intangible assets in Machine
Other intangible Tools ¥ 14,843 ¥ 15,775 $ 133,696
the consolidated statement of financial position assets with Industrial
indefinite useful Services 18,096 19,233 162,997
were recognized as a result of the integration with lives
Total ¥ 32,940 ¥ 35,009 $ 296,703

The recoverable amount of goodwill and other indefinite useful lives related to DMG MORI AG
intangible assets (allocated to each CGU) with exceeded the corresponding carrying amounts by
indefinite useful lives related to DMG MORI AG is ¥16,792 million ($151,252 thousand) and ¥18,594
measured at value in use. The key assumptions million in the Machine Tools segment and ¥56,942
used for the calculation are as follows: million ($512,898 thousand) and ¥27,245 million in
the Industrial Services segment at 31st December,
Estimation of future cash flow: The Group 2018 and 2017, respectively. Future business
estimates future cash flow based on a five-year plans or the discount rate used for the calculation
business plan. The expected growth rate of future of the value in use may change, and, as a result,
cash flow beyond the period of the business plan is the recognition of impairment may be required in
estimated as 2.2%. some cases.
Discount rate: The Group used a discount rate of The value in use for the other goodwill currently
9.5% and 9.7% at 31st December, 2018 and 2017 exceeds the carrying amounts and the Group
considering the corresponding WACC in similar believes any reasonably possible change in the key
business industries. assumptions on which the recoverable amount
is based would not cause the aggregate carrying
The recoverable amounts of goodwill and other amount to exceed the aggregate recoverable
intangible assets (allocated to each CGU) with amount of the CGU.
12. Other Financial Assets 13. Investments in Associates and Joint Ventures
The breakdown of other financial assets at 31st The carrying amount of the Group’s investments in
December, 2018 and 2017 is as follows: associates at 31st December, 2018 and 2017 is as follows:
Thousands of
Thousands of Millions of yen
Millions of yen U.S. dollars
U.S. dollars
2018 2017 2018
2018 2017 2018 Carrying amount
of investments in
Financial assets associates (at the ¥ 3,331 ¥ 2,229 $ 30,003
measured at reporting date)
amortized cost:
Other financial
assets including ¥ 9,007 ¥ 10,474 $ 81,129
Income and other comprehensive income
loans attributable to the Group are as follows:
Financial assets
Thousands of
measured at fair Millions of yen
U.S. dollars
value through other
comprehensive 2018 2017 2018
income Profit attributable to the Group ¥ 167 ¥ 62 $ 1,504
－
Other financial Other comprehensive
assets[Equities] 6,088 54,836 income (loss) (21) 18 (189)
attributable to the Group
Financial assets
measured at fair Total ¥ 146 ¥ 80 $ 1,315
value through profit
or loss:
250 － 2,251
14. Trade and Other Payables
Derivative assets
Financial assets
measured at fair
value
The breakdown of trade and other payables at 31st
Derivative assets － 95 －
December, 2018 and 2017 is as follows:
－－
Available-for-sale
financial assets 7,079 Thousands of
Millions of yen
U.S. dollars
Total ¥ 15,345 ¥ 17,649 $ 138,218 2018 2017 2018
Current assets ¥ 6,836 ¥ 8,652 $ 61,574 Trade payables ¥ 38,264 ¥ 32,913 $ 344,658
Non-current assets 8,509 8,996 76,643 Other payables 10,881 8,536 98,009
Total ¥ 15,345 ¥ 17,649 $ 138,218 Others 7,688 6,267 69,248
Total ¥ 56,833 ¥ 47,717 $ 511,916

15. Interest-bearing Bonds and Borrowings
The breakdown of interest-bearing bonds and borrowings at 31st December, 2018 and 2017 is as follows:
Thousands of
Millions of yen
U.S. dollars
Average interest rate
Maturity
2018 2017 (%)
(Note 1)
2018
(Note 1)
Financial liabilities measured at amortized cost:
Short-term borrowings ¥ 17,838 ¥ 5,590 0.15~1.59 － $ 160,673
Long term borrowings due within one year 16,887 17,063 0.21~2.80 － 152,107
Long term borrowings
(excluding those due within one year) 52,334 126,788 0.19~2.80 2020-2025 471,392
Interest-bearing bonds due within one year 20,000 － 0.12 － 180,147
Interest-bearing bonds
(excluding those due within one year) 9,954 29,918 0.21 2021 89,659
Total ¥ 117,015 ¥ 179,359 $ 1,053,999
Current liabilities 54,725 22,653 $ 492,929
Non-current liabilities 62,289 156,706 561,061
Total ¥ 117,015 ¥ 179,359 $ 1,053,999
(Note 1) Average interest rate and maturity are based on the respective information at the end of the fiscal year 2018.
16. Other Financial Liabilities
The breakdown of other financial liabilities at 31st December, 2018 and 2017 is as follows:
Thousands of
Millions of yen
U.S. dollars
2018 2017 2018
Financial liabilities measured at amortized cost:
Payment obligation for external shareholders
(Note 1) ¥ 94,680 ¥ 101,691 $ 852,819
Preferred shares (Note 2) 14,833 14,838 133,606
Finance lease obligations 3,546 4,580 31,940
Others 1,023 1,185 9,214
Financial liabilities at fair value through profit or
loss:
Derivative liabilities 1,057 2,469 9,520
Total ¥ 115,140 ¥ 124,765 $ 1,037,110
Current liabilities ¥ 95,982 ¥ 3,857 $ 864,546
Non-current liabilities 19,158 120,907 172,563
Total ¥ 115,140 ¥ 124,765 $ 1,037,110
(Note 1) The payment obligation for external shareholders arose from the DPLTA. For details, please refer to Note 34 �Domination and Profit and Loss
Transfer Agreement.�
(Note 2) One subsidiary of the Group issued preferred shares in the fiscal year 2017. The preferred shares cannot be converted to corporate bonds and
instead, the subsidiary shall redeem the shares after a period of five years from the issuance date. Considering the contractual conditions, the
subsidiary classifies these shares as financial liabilities instead of equity. The shares are cumulative preferred shares and the annual dividend
rate is based on the Japanese-yen TIBOR (6 months). The subsidiary shall be liable for any unpaid dividends with the amount carried forward to
the next fiscal year in the event that the subsidiary does not fully pay the dividend based on the annual rate.

The net present value of finance lease obligations at 31st December, 2018 and 2017 is as follows:
Thousands of
Millions of yen
U.S. dollars
Average interest rate
Maturity
2018 2017 (%)
(Note 2)
2018
(Note 1)
Minimum lease payments ¥ 4,399 ¥ 5,767 －－ $ 39,623
Less: Future financing costs (853) (1,186) －－ (7,683)
Net present value of minimum lease payments 3,546 ¥ 4,580 －－ 31,940
－
Current finance lease obligations
(Not later than one year) 932 ¥ 724 3.74 8,394
Non-current finance lease obligations
(Later than one year) 2,613 3,856 6.11 2020-2029 23,536
Total ¥ 3,546 ¥ 4,580 $ 31,940
(Note 1) Average interest rate is based on the weighted-average rate that applied to interest rates and balances at the end of fiscal year 2018.
(Note 2) Average interest rate and maturity are based on the respective information at the end of fiscal year 2018.
17. Operating Leases 18. Retirement Benefits
Lease payments under operating lease contracts The Company and its consolidated subsidiaries
recognized as an expense are as follows: have established funded and unfunded defined
benefit pension plans and defined contribution
Thousands of
Millions of yen
U.S. dollars pension plans. In addition to the above, certain
2018 2017 2018 domestic consolidated subsidiaries participate in
Minimum lease
payments ¥ 5,311 ¥ 4,831 $ 47,838 a small- and medium-sized enterprise mutual aid
Total ¥ 5,311 ¥ 4,831 $ 47,838 plan.
Minimum lease payments are included in �Other operating costs� in
the consolidated statement of profit or loss. (1) Defined benefit plans
1. Defined contribution plans adopted in Japan as
Future minimum lease payments under non-
post-employment benefit
cancelable operating lease contracts are as
The Company and its domestic consolidated
follows:
subsidiaries have established defined
Millions of yen
Thousands of contribution pension plans. Although certain
U.S. dollars
2018 2017 2018
domestic subsidiaries had established defined
Not later than one benefit pension plans, the change of post-
year ¥ 4,783 ¥ 3,981 $ 43,082
employment benefits from defined benefit
Later than one year
and not later than five 9,923 9,668 89,380 plans to defined contribution plans has been
years
completed.
Later than five years 2,608 1,606 23,491
2. Defined benefit plans of overseas subsidiaries
Total ¥ 17,315 ¥ 15,256 $ 155,962
as post-employment benefits
Operating lease payments represent rental fees payable by the Group
for certain rental buildings. Some lease contracts include renewal Overseas consolidated subsidiaries, mainly
options. However, there are no significant restrictions on variable lease in Germany and Switzerland, have primarily
fees, purchase options, sublease agreements, escalation clauses and
significant limits under any lease contracts. established defined benefit plans for post-
employment benefits. The contributions to
these plans are determined based on the
employee’s length of service, salary level
and other factors depending on general laws,
economic conditions and taxation regulations of
the respective countries. These plans expose

the Group to the risks arising from fluctuations The movement in the present value of defined
in interest rates, market and foreign exchanges benefit obligations for the fiscal 2018 and 2017 is
rates, as well as actuarial differences due to as follows:
changes in estimations, such as average life Thousands of
Millions of yen
expectancy. U.S. dollars
2018 2017 2018
Beginning balance ¥ 10,116 ¥ 10,645 $ 91,118
Assets and liabilities of defined benefit plans
Pension cost charged
recognized in the consolidated statement of to profit or loss:
financial position at 31st December, 2018 and 2017 Current service cost 206 195 1,855
are as follows: Past service cost 71 39 639
Interest cost 101 106 909
Thousands of
Millions of yen
U.S. dollars Subtotal 379 340 3,413
2018 2017 2018 Remeasurement
(gains) losses in
Present value of other comprehensive
defined benefit ¥ 8,834 ¥ 10,116 $ 79,571 income:
obligations
Actuarial gains
Fair value of plan
(3,675) (3,862) (33,102) and losses arising
assets from changes 60 － 540
in demographic
Funded status 5,159 6,254 46,469 assumptions
Effect of asset ceiling －－－ Actuarial gains and
losses arising from
Net defined benefit
¥ 5,159 6,254 46,469 changes in financial (368) 29 (3,314)
liabilities
assumptions
Amounts in
consolidated Actuarial gains
and losses arising
statement of financial
from experience (147) 218 (1,324)
position:
adjustments
－－－
Employee defined
benefit assets Subtotal (455) 248 (4,098)
Net employee Other:
defined benefit ¥ 5,159 ¥ 6,254 $ 46,469
liabilities Benefits paid (701) (793) (6,314)
Contributions to the
plan by participants 78 82 702
Costs of defined benefit plans recognized in the
－－
Decrease through
(114)
consolidated statements of profit or loss for the business disposals
Exchange
fiscal 2018 and 2017 are as follows: differences on
translation of (581) (292) (5,233)
foreign operations
Millions of yen
Thousands of Subtotal (1,205) (1,117) (10,853)
U.S. dollars
Ending balance ¥ 8,834 ¥ 10,116 $ 79,571
2018 2017 2018
Current service cost ¥ 206 ¥ 195 $ 1,855
Past service cost 71 39 639
Subtotal of
operating costs 278 234 2,504
Net interest cost 66 70 594
Subtotal of financial
costs 66 70 594
Other －－－
Total ¥ 344 ¥ 304 $ 3,098

The movement in the fair value in the plan assets The sensitivity analysis does not consider
for the fiscal years ended 31st December, 2018 and correlations between assumptions, assuming
2017 is as follows: that all other assumptions are held constant. In
Thousands of
practice, changes in some of the assumptions may
Millions of yen
U.S. dollars
occur in a correlated manner. When calculating
2018 2017 2018
the sensitivity of the defined benefit obligations,
Beginning balance ¥ 3,862 ¥ 4,444 $ 34,786
the same method has been applied as when
Amount recognized in
profit or loss: calculating the defined benefit obligations in the
Interest income 35 36 315 consolidated statement of financial position.
Subtotal 35 36 315
Thousands of
Millions of yen
Amount recognized in U.S. dollars
other comprehensive
income: 2018 2017 2018
Remeasurements Discount rate:
of fair value of plan
assets 0.25% increase ¥ (268) ¥ (234) $ (2,413)
Return on plan
assets 156 47 1,405 0.25% decrease 283 317 2,549
Changes in rate of
Subtotal 156 47 1,405 increase in benefits
paid:
Other:
0.25% increase 190 213 1,711
Contributions to
the plan by the 461 478 4,152 0.25% decrease (186) (205) (1,675)
employer
Benefits paid (691) (773) (6,224)
Contributions to the
The breakdown of the fair value of plan assets at
19 17 171
plan by participants 31st December, 2018 and 2017 is as follows:
Exchange
differences on Millions of yen
translation of (167) (389) (1,504)
foreign operations 2018
Subtotal (378) (666) (3,404) Quoted prices in
Quoted prices
in active market Total
active market
Ending balance ¥ 3,675 ¥ 3,862 $ 33,102 unavailable
－－－
Cash and cash
(Note) The Group expects to contribute ¥414 million ($3,729 thousand) equivalents ¥ ¥ ¥
－－－
to its defined benefit pension plans for the fiscal year 2019.
Equities
Bonds －－－
Significant actuarial assumptions used for the Real estate －－－
calculation of the present value of defined benefit Insurance － 2,070 2,070
obligations are as follows: Other － 1,604 1,604
Total ¥ － ¥ 3,675 ¥ 3,675
2018 2017
Discount rates (%) 0.78～2.50 0.59～3.01 Thousands of U.S. dollars
Rate of increase in benefits paid (%) 0.00～2.00 0.00～2.00 2018
(Note) The weighted average duration of the defined benefit obligation Quoted prices
Quoted prices in
as of 31st December, 2018 and 2017 were 13.0 years and 13.5 active market
unavailable
years, respectively.
－－－
Cash and cash
equivalents $ $ $
Equities －－－
Bonds －－－
Real estate －－－
Insurance － 18,645 18,645
Other － 14,447 14,447
Total $ － $ 33,102 $ 33,102

Millions of yen (2) Defined contribution plans

2017 The expenses related to the defined contribution
Quoted prices in
Quoted prices
plans charged to profit or loss for the fiscal years
active market
unavailable
2018 and 2017 are as follows:
－－－
Cash and cash
equivalents ¥ ¥ ¥
Thousands of
－－－
Millions of yen
Equities U.S. dollars
Bonds －－－ 2018 2017 2018
－－－
Expenses for defined
Real estate contribution plans ¥ 2,920 ¥ 2,807 $ 26,301
Insurance － 2,209 2,209
Other － 1,652 1,652
Total ¥ － ¥ 3,862 ¥ 3,862
The investment strategy of the global pension

assets in the Group is based on the goal of
assuring pension payments over the long term. In
Germany, plan assets mainly comprise insurance
contracts and are held by a legally separate and
independent entity whose sole purpose is to
hedge and finance employee benefit liabilities. In
Switzerland, external plan assets are invested
in a traditional pension fund. Plan assets in
Switzerland are subject to customary minimum
funding requirements.
19. Provisions
The movement in provisions for the fiscal years ended 31st December, 2018 and 2017 is as follows:
Millions of yen
2018
Provision for product Provision for sales Provision for personnel
Other provisions Total
warranties commissions costs
－
Adjustment amount for adopting
IFRS 15 (6) (292) (305) (605)
Beginning balance after adjusting 5,892 4,548 15,392 7,421 33,254
Increase 7,354 3,237 12,627 4,439 27,657
Decrease due to intended use (5,550) (1,756) (9,951) (1,194) (18,452)
Reversal (187) (502) (795) (518) (2,003)
Increase due to passage of time 0 － (4) 1 (2)
－－－－－
Increase due to business
combinations
of foreign operations (358) (340) (965) (900) (2,564)
Ending balance ¥ 7,151 ¥ 5,185 ¥ 16,303 ¥ 9,249 ¥ 37,889


2018
Beginning balance $ 53,134 $ 43,595 $ 138,641 $ 69,600 $ 304,981
－
Adjustment amount for adopting
IFRS 15 (54) (2,630) (2,747) (5,449)
Beginning balance after adjusting 53,071 40,965 138,641 66,843 299,531
Increase 66,240 29,156 113,736 39,983 249,117
Reversal (1,684) (4,521) (7,160) (4,665) (18,041)
Increase due to passage of time 0 － (36) 9 (18)
－－－
combinations - -
of foreign operations (3,224) (3,062) (8,692) (8,106) (23,094)
Ending balance $ 64,411 $ 46,703 $ 146,847 $ 83,309 $ 341,280
Millions of yen
2017
Increase 5,478 2,377 10,343 1,815 20,014
Reversal (65) (395) (620) (578) (1,658)
Increase due to passage of time 0 － 1 0 2
－
combinations 30 4 21 56
of foreign operations 388 330 1,008 961 2,689
Ending balance ¥ 5,899 ¥ 4,840 ¥ 15,392 ¥ 7,727 ¥ 33,859
The breakdown of provisions at 31st December, Provision for product warranties

2018 and 2017 is as follows: Provision for product warranties is calculated
Thousands of based on the actual historical ratio of repair costs
Millions of yen
U.S. dollars
as a portion of the corresponding product sales
2018 2017 2018
revenues to provide for future repairs during free-
Current liabilities:
of-charge product warranty periods.
Provision for
product warranties ¥ 7,151 ¥ 5,899 $ 64,411
Provision for sales
commissions 5,032 4,567 45,325 Provision for sales commissions
Provision for Provision for sales commissions is calculated
personnel costs 12,951 12,325 116,654
based on the estimated commissions to be paid to
Other provisions 7,121 7,094 64,141
sales dealers.
Subtotal 32,256 29,886 290,542
Non-current
liabilities: Provision for personnel costs
Provision for sales
commissions 152 273 1,369 Provision for personnel costs mainly consists of a
Provision for
3,352 3,067 30,192 provision for annual paid leaves and bonuses.
personnel costs
Other provisions 2,128 632 19,167
The outflows of economic benefits related to
Subtotal 5,633 3,973 50,738
provisions included in current liabilities and non-
Total ¥ 37,889 ¥ 33,859 $ 341,280
current liabilities are expected within one year from
the end of the reporting period and after one year
from the end of the reporting period, respectively.

20. Income Taxes
(1) Deferred tax assets and liabilities

The breakdown and movement of deferred tax assets and liabilities by major causes of their occurrence for
the fiscal years 2018 and 2017 are as follows:
Millions of yen
2018
Recognized in profit or
Increase due to business Recognized in other
Beginning balance loss Ending balance
combinations comprehensive income
(Note 1)
Deferred tax assets：
Intangible assets ¥ 2,722 ¥ － ¥ (368) ¥ － ¥ 2,354
Property, plant and equipment 988 － 244 － 1,232
Inventories 3,937 － 1 － 3,938
Trade and other receivables 1,329 － 66 － 1,395
Unused tax losses (Note 2) 2,813 － (897) － 1,915
Other 6,336 － (669) － 5,667
Total 18,128 － (1,623) － 16,504
Deferred tax liabilities:
Intangible assets (12,668) － 721 － (11,947)
Property, plant and equipment (2,478) － 699 － (1,778)
Available-for-sale financial assets (858) － 19 154 (685)
Inventories (293) － 35 － (257)
Other (3,590) － 217 (278) (3,651)
Total (19,890) － 1,694 (124) (18,320)
Net amount ¥ (1,762) ¥ － ¥ 70 ¥ (124) ¥ (1,816)

2018
(Note 1)
Intangible assets $ 24,518 $ － $ (3,314) $ － $ 21,203
Property, plant and equipment 8,899 － 2,197 － 11,097
Inventories 35,462 － 9 － 35,471
Trade and other receivables 11,970 － 594 － 12,565
Unused tax losses (Note 2) 25,337 － (8,079) － 17,249
Other 57,070 － (6,025) － 51,044
Total 163,285 － (14,618) － 148,657
Intangible assets (114,105) － 6,494 － (107,611)
Property, plant and equipment (22,320) － 6,296 － (16,015)
Available-for-sale financial assets (7,728) － 171 1,387 (6,170)
Inventories (2,639) － 315 － (2,314)
Other (32,336) － 1,954 (2,504) (32,885)
Total (179,156) － 15,258 (1,116) (165,015)
Net amount $ (15,871) $ － $ 630 $ (1,116) $ (16,357)

Millions of yen
2017
(Note 1)
Intangible assets ¥ 2,503 ¥ － ¥ 218 ¥ － ¥ 2,722
Property, plant and equipment 1,051 － (63) － 988
Inventories 4,371 － (433) － 3,937
Trade and other receivables 1,415 － (85) － 1,329
Unused tax losses (Note 2) 4,803 － (1,989) － 2,813
Other 4,760 － 1,576 － 6,336
Total 18,905 － (777) － 18,128
Intangible assets (12,182) (68) (417) － (12,668)
Property, plant and equipment (2,493) － 15 － (2,478)
Available-for-sale financial assets (1,623) － (1) 766 (858)
Inventories (180) － (113) － (293)
Other (3,925) － 248 85 (3,590)
Total (20,405) (68) (268) 852 (19,890)
Net amount ¥ (1,500) ¥ (68) ¥ (1,045) ¥ 852 ¥ (1,762)
(Note 1) Exchange differences arising on translation of foreign operations are included.
(Note 2) The cause of deferred tax assets associated with unused tax losses at 31st December, 2018 and 2017 is non-recurring in nature, and it is probable that
the tax benefit will be realizable based on the forecast of future taxable income in the business plan approved by the Board of Directors of the Company.
(2) Unrecognized deferred tax assets (3) Income tax expense

Deductible temporary differences, unused tax The breakdown of income tax expense recognized
losses, and unused tax credits for which no in profit or loss is as follows:
deferred tax asset is recognized are as follows: Thousands of
Millions of yen
U.S. dollars
Thousands of 2018 2017 2018
Millions of yen
U.S. dollars
Current income tax
2018 2017 2018 expense ¥ 10,289 ¥ 8,716 $ 92,676
Deductible temporary
differences ¥ 19,493 ¥ 13,221 $ 175,580 Deferred income
tax expense:
Unused tax losses 9,964 11,795 89,749 Temporary differences
originated and reversed 1,933 (1,271) 17,411
Unused tax credits 46 297 414
Changes in tax rate
Total ¥ 29,504 ¥ 25,313 $ 265,753 or imposition of 8 1,892 72
new taxation
Unused tax losses and unused tax credits for which no Change in unused
deferred tax asset is recognized will expire as follows: tax losses or
temporary
differences not (330) (209) (2,972)
Thousands of recognized in prior
Millions of yen
U.S. dollars years
2018 2017 2018
Total 1,610 411 14,501
Unused tax losses
Total income taxes ¥ 11,900 ¥ 9,127 $ 107,187
Year 1 ¥ 81 ¥ 401 $ 729
Year 2 184 101 1,657
Year 3 579 1,428 5,215
Year 4 1,694 1,010 15,258
Year 5 or later 7,424 8,854 66,870
Total ¥ 9,964 ¥ 11,795 $ 89,749
Unused tax credits
Year 1 ¥ 32 ¥ 264 $ 288
Year 2 － 32 －
Year 3 14 － 126
Year 4 －－－
Year 5 or later －－－
Total ¥ 46 ¥ 297 $ 414

(4) Reconciliation of effective tax rate 21. Equity and Other Components of Equity
The Company is mainly subject to corporate tax,
inhabitant tax and enterprise tax. The effective
(1) Number of authorized shares and issued shares
statutory tax rates calculated based on these taxes
The number of authorized shares and issued
was 30.69% for the fiscal years 2018 and 2017.
shares is as follows:
Foreign subsidiaries are subject to income taxes in
Shares
their respective jurisdictions.
2018 2017
Number of authorized shares 300,000,000 300,000,000
The reconciliation of the effective statutory tax rates
Number of issued shares:
and the average actual tax rates for the fiscal years
At the beginning of the porting
2018 and 2017 is as follows: period 125,953,683 132,943,683
Increase/(decrease) － (6,990,000)
2018 2017
Effective statutory tax rates 30.69% 30.69% At the end of reporting period 125,953,683 125,953,683
Non-deductible expenses, such as (Note 1) The shares issued by the Company are ordinary shares with
entertainment expenses 3.99 3.49
no par value. Issued shares are fully paid-in.
Tax credits (0.49) (0.83) (Note 2) The number of issued shares decreased by 6,990,000 during
Non-taxable income, such as dividend the fiscal year 2017 was due to cancellation of treasury
income (0.15) (0.10)
shares.
Temporary differences arising from
investments in associates 0.34 0.08
(2) Treasury shares
Changes in unrecognized deferred tax
assets 5.20 (3.44) The movement in treasury shares is as follows:
Effect of change in applicable tax rates 0.03 7.63 Shares
Effective tax rate difference in overseas
consolidated subsidiaries (1.38) (1.30) 2018 2017
Other (0.18) 0.58 At the beginning of the reporting
5,054,853 12,924,920
period
Average actual tax rates 38.05% 36.80%
Increase (Notes 1 and 2) 362 2,619,933
Decrease (Notes 1 and 2) 598,616 10,490,000
At the end of reporting period 4,456,599 5,054,853
(5) Revision of amounts of deferred tax assets and
(Note 1) The increase of the number of treasury shares by 362 shares
deferred tax liabilities due to changes in tax is due to purchases of treasury shares less than one unit
rate, such as corporate tax during the fiscal year 2018. The decrease of the number of
treasury shares by 598,616 shares during the fiscal year
Based on the enactment of the new US tax 2018 is due to the following reasons; stock option exercise of
legislation on 22nd December 2017, which includes 363,700 shares, sales to employee shareholders association
of 226,300 shares and grant of restricted stocks of 8,616
a reduction of the federal corporate tax rate from shares.
35% to 21% effective from the fiscal year 2018. (Note 2) The number of treasury shares at 31st December 2018
includes 2,273,700 shares which is hold by The Nomura
The Group has evaluated the deferred tax balances Trust and Banking Co., Ltd (DMG MORI Employee
in the US and recognized a one-time tax expenses Shareholders Association Exclusive Trust) for Trust-Type
Employee Stock Ownership Incentive Plan.
of ¥1,890 million for the fiscal year 2017, arising (Note 3) The increase of number of treasury shares by 2,619,933
from reversal of the deferred tax assets on the loss shares during the fiscal year 2017 was due to the following
reasons; purchases of 2,619,100 shares based on the
carryforward of the past years and devaluation. resolution of the Board of Directors on 13th January, 2017
and purchases of 833 shares less than one unit during the
fiscal year 2017. The decrease of the number of treasury
shares by 10,490,000 shares during the fiscal year 2017 was
due to the following.
Reasons; disposal of 3,500,000 shares amounted to ¥6,446
million to Mori Manufacturing Research and Technology
Foundation on purpose of supporting the entity’s activity of
social contribution based on the resolution of shareholders’
meeting and the Board of Directors on 22nd March, 2017
cancellation of 3,500,000 treasury shares amounted to
¥6,446 million on 31st March, 2017 based on the resolution
in the Board of Directors on 13th January, 2017 and
cancellation of 3,490,000 shares amounted to ¥6,401 million
on 30th June, 2017 based on the resolution of the Board of
Directors on 10th May, 2017.

(3) Capital surplus and retained earnings 2．Overview of Subordinated Bonds

The Corporation Law of Japan (the �Law� ) provides （1）Amount ¥10 billion
that an amount equal to 10% of the amount to be （2）Execution date 2nd September, 2016
No repayment date is specified.
disbursed as distributions of capital surplus and Provided, however, that on each interest payment
（3）Repayment date
retained earnings be transferred to the capital date from 2nd September, 2021 onward, optional
repayment of all principal is possible.
reserve and the legal reserve, respectively, until From 2nd September, 2016 to 2nd September,
the sum of the capital reserve and the legal reserve （4）Interest rate
2021: Fixed interest
From 3rd September, 2021 onward: Variable
equals to 25% of the capital stock account. interest based on 6-month Japanese yen LIBOR
（5）Clauses relating to
Deferral of interest payment is optional.
payment of interest
(4) Hybrid capital （6）Subordinated loan The subordinated creditors have right to claim
The Company raised funds in the amounts of ¥40 clause for repayment only after the all claims by senior
creditors are satisfied in case an event defined in
billion through a perpetual subordinated loan the loan contract such as liquidation occurs.
(the �subordinated loan� ) and ¥10 billion through （7）Replacement

restrictions
When making optional redemption or repurchase
of the subordinated bonds, it is assumed that
perpetual subordinated bonds (the �subordinated the subordinated bonds are being replaced with
bonds� ) in September, 2016.

equivalent bonds or loans certified by a credit
rating agency, that satisfy necessary conditions to
be classified as equity instruments.
Provided, however, that if, after five years elapse,
The subordinated loan and the subordinated bonds both of the following items are satisfied, it is
possible not to refinance with equivalent financial
are classified as equity instruments since no date instruments.
(a) Consolidated shareholders’ equity after the
for repayment of the principal is specified and adjustment is more than ¥151.2 billion.
(b) The consolidated equity ratio after the
optional deferral of interest payments is possible. adjustment is more than 26.8%.
The proceeds from the subordinated loan and the The values stated above shall be calculated
according to the following method.
subordinated bonds after deducting issue costs are (a) Consolidated shareholders’ equity after the
recorded as �Hybrid capital� under �Equity� in the

adjustment is equal to total equity attributable
to owners of parent less other components of
equity and hybrid capital.
consolidated statement of financial position. (b) The consolidated equity ratio after the
adjustment is equal to consolidated
shareholders’ equity after the adjustment as
1．Overview of Subordinated Loan calculated above divided by total assets.
（1）Amount ¥40 billion
（2）Lender
Mizuho Bank, Ltd., and Sumitomo Mitsui Banking 3．Paid amount for hybrid capital
Corporation
（3）Execution date 20th September, 2016 The following payments on the hybrid capital were
No repayment date is specified. made for the fiscal years 2018 and 2017:
Provided, however, that on each interest payment
（4）Repayment date
date from 20th September, 2021 onward, optional Payment amount
repayment of all or part of the principal is possible.
From 20th September, 2016 to 20th September, 2018
2026: Variable interest based on 6-month Thousands of
（5）Interest rate Japanese yen TIBOR Category Payment date Millions of yen
U.S. dollars
From 21st September, 2026 onward: Variable
interest stepped up by 1.00% 20th March, 2018 ¥ 437 $ 3,936
Subordinated loan
（6）Clauses relating to 20th September, 2018 448 4,035
Deferral of interest payment is optional.
payment of interest
Subordinated
1st March, 2018 93 837
The subordinated creditors have right to claim
bonds
（7）Subordinated loan for repayment only after the all claims by senior 30th August, 2018 93 837
clause creditors are satisfied in case an event defined in
the loan contract such as liquidation occurs.
Payment amount
2017
Category Payment date Millions of yen
21st March, 2017 ¥ 440
Subordinated loan
20th September, 2017 442
Subordinated
2nd March, 2017 93
bonds
1st September, 2017 93

4. Fixed future payment on hybrid capital

Subsequent to 31st December, 2018 and 2017, the following payments were determined before the approval date
of the consolidated financial statements:
Payment amount
Payment amount
2018
2017
Thousands of
Category Payment date Millions of yen
U.S. dollars Category Payment date Millions of yen
Subordinated loan 20th March, 2019 ¥ 441 $ 3,972 Subordinated loan 20th March, 2018 ¥ 437
Subordinated bonds 28th February 2019 93 837 Subordinated bonds 1st March, 2018 93
(5) Other components of equity

The movement in other components of equity is as follows:
Millions of yen
2018
Changes in fair
Exchange Effective portion value measurements
Remeasure-ments
differences on of changes in fair of financial assets
of defined benefit Stock options Total
translation of value of cash flow measured at fair
plans value through other
foreign operations hedges
comprehensive income
Beginning balance ¥ － ¥ (11,564) ¥ (198) ¥ 1,845 ¥ 412 ¥ (9,504)

Other comprehensive income (loss) 426 (8,392) 157 (804) － (8,612)
Treasury shares disposition －－－－ (100) (100)
Share-based payments －－－－ 209 209
－－－－
Transfer from other components of equity
to retained earnings (426) (426)
Ending balance ¥ － ¥ (19,957) ¥ (40) ¥ 1,040 ¥ 521 ¥ (18,435)
Thousands of U.S dollars

2018
Changes in
Exchange Effective portion fair value measurements
Remeasure-ments
differences on of changes in fair of financial assets
translation of value of cash flow measured at fair
plans value through other
Beginning balance $ － $ (104,161) $ (1,783) $ 16,618 $ 3,711 $ (85,606)

Other comprehensive income (loss) 3,837 (75,589) 1,414 (7,241) － (77,571)
Treasury shares disposition －－－－ (900) (900)
Share-based payments －－－－ 1,882 1,882
－－－－
to retained earnings (3,837) (3,837)
Ending balance $ － $ (179,760) $ (360) $ 9,367 $ 4,692 $ (166,051)
Millions of yen
2017
Exchange Effective portion Changes in

Remeasure-ments
differences on of changes in fair fair value measurements
translation of value of cash flow of available-
plans for-sale financial assets
Beginning balance ¥ － ¥ (15,613) ¥ (167) ¥ 4,429 ¥ 83 ¥ (11,266)

Other comprehensive income (loss) (129) 4,048 (31) (2,584) － 1,302
Share-based payments －－－－ 328 328
－－－－
to retained earnings 129 129
Ending balance ¥ － ¥ (11,564) ¥ (198) ¥ 1,845 ¥ 412 ¥ (9,504)

Descriptions and purposes of other components of Effective portion of changes in fair value of cash
equity are explained as follows: flow hedges
Remeasurements of defined benefit plans This is the effective portion of changes in the fair
Remeasurements of defined benefit plans comprise value of derivative transactions designated as cash
actuarial gains and losses, the return on plan assets, flow hedges.
excluding amounts included in interest income, Changes in fair value movements of financial
and any changes in the effect of the asset ceiling, assets measured at fair value through other
excluding amounts included in interest income. comprehensive income
Exchange differences on translation of foreign This is a valuation difference on financial assets
operations measured at fair value through other comprehensive
Exchange differences on translation of foreign income. This is included in �Changes in fair value
operations arising from the translation of the measurements of available-for-sale financial
foreign currency financial statements of foreign assets� for the fiscal year 2017.
subsidiaries. Stock options
The Company has stock option plans and issues
stock options under the Law. For details on the
conditions and amounts, please refer to Note 23
�Share-based Payment.�
22. Dividends
(1) Dividends paid
Dividend paid for the fiscal years 2018 and 2017 are as follows:
2018 2017
Total dividends Dividends
Dividends
Class of (Millions of yen) per share Effective Class of Total dividends Effective
Resolution Record date Resolution per share Record date
shares (Thousands of (Yen) (U.S. date shares (Millions of yen) date
(Yen)
U.S. dollars) dollars)
Annual Annual
general ¥ 3,022 ¥ 25 31st 23rd
general
31st 23rd
meeting of Ordinary meeting of Ordinary
shareholders shares
December, March,
shareholders shares ¥ 1,560 ¥ 13 December, March,
2017 2018 2016 2017
held on 22nd $ 27,220 $ 0.22 held on 22nd
March, 2018 March, 2017
Board of Board of
Directors ¥ 3,089 ¥ 25 14th Directors 15th
Ordinary 30th June, Ordinary 30th June,
meeting
shares 2018
September, meeting
shares ¥ 1,844 ¥ 15 2017
September,
held on 8th 2018 held on 8th 2017
August, 2018 $ 27,823 $ 0.22 August, 2017
(Note) The amount of dividends based on Board of Directors meeting held on 8th August, 2018 includes ¥61 millions ($ 549 thousand) of dividends
paid for exclusive trust account of �DMG MORI Co., Ltd. Employee Shareholders Association Exclusive Trust.�
(2) Dividends whose record date is in the fiscal year 2018 but whose effective date is in the following fiscal
year are as follows:
2018 2017
Total dividends Dividends Total dividends Dividends
Class of (Millions of yen) per share Effective Class of (Millions of yen) per share Effective
Resolution Record date Resolution Record date
shares (Thousands of (Yen) date shares (Thousands of (Yen) date
U.S. dollars) (U.S. dollars) U.S. dollars) (U.S. dollars)
Annual Annual
general ¥ 3,098 ¥ 25 31st
general
31st 23rd
meeting of Ordinary 25th March, meeting of Ordinary
shareholders shares
December,
2019 shareholders shares ¥ 3,022 ¥ 25 December, March,
2018 2017 2018
held on 22nd $ 27,904 $ 0.22 held on 22nd
March, 2019 March, 2018
(Note) The amount of dividends based on Annual general meeting of shareholders held on 22nd March, 2019 includes ¥56 millions ($ 504 thousand)
of dividends for exclusive trust account of �DMG MORI Co., Ltd. Employee Shareholders Association Exclusive Trust.�

23. Share-based Payment 2. Changes in the number of shares for outstanding

stock options (100 shares per 1 option)
The Group introduces stock options, restricted

2018 2017
stock compensation plan, and trust-type Beginning balance 2,305,000 2,410,000
employees stock ownership incentive plan as Granted －－
share-based payment. Expired (60,000) (105,000)
Exercised (363,700) －
The share-based payment is implemented as Ending balance 1,881,300 2,305,000
an incentive plan to gain the medium- to long-
－
Exercisable outstanding balance at
the reporting date 1,881,300
term corporate value of the Group as well as to
(Note) The weighted-average share prices of stock options at the
promote operation towards increase in business
time of exercise were ¥1,526 ($13) for the fiscal year 2018.
performance by raising awareness to the business
performance and share price of the Group. 3. Measurement approach for fair value of stock
options
(1) Description of stock options The fair value of stock options has been estimated
1. Outline of stock options using the Black-Scholes model. The fair value and
The Company grants stock options as equity- assumptions used in the calculation are as follows:
settled share-based payments to its corporate Granted on 30th September, 2016
officers and certain of its and its subsidiaries’ (Decided on 13th September, 2016)
employees, in order to raise their motivation for Issue price per options (Yen) 27,700
enhancing the corporate value of the Company Share price at the grant date (Yen) 1,042
and secure talented personnel. Exercise price of the option (Yen) 1,090
Expected volatility of the share price (%) 47.724
Expected remaining life of the option
The outline of stock option plan is as follows: (years) 3.46
Issuer The Company (DMG MORI CO., LTD.) Expected dividend yield (%) 2.495
Date of resolution at the Risk-free interest rate for the remaining
life of the option (%) (0.267)
Board of Directors 13th September, 2016
Meeting
Corporate officers of the Company 20
Employees of the Company 75
The exercise price shall be the amount that is
Grantees
Executive officers of the Company’s subsidiaries 15 equal to the average of the daily closing prices
Employees of the Company’s subsidiaries 49
Class and number of (excluding days on which no transactions are
Common stock, 2,410,000 shares
granted shares established) of common stock of the Company
Grant date 30th September, 2016
in regular transactions at the Tokyo Securities
Continuous service with the Company or its
Vesting Conditions
subsidiaries in the state of being employed or Exchange during the calendar month immediately
entrusted from the grant date (30th September, 2016)
to the vesting date (13th September, 2018) prior to the month in which the grant date of the
Service period From 30th September, 2016 to 13th September, 2018 stock acquisition rights belongs, multiplied by
Exercisable period From 14th September, 2018 to 13th September, 2021 1.05, and any fraction less than one yen resulting
therefrom shall be rounded down; provided,
however, that in the event that this amount is
less than the closing price of common stock of
the Company in regular transactions at the Tokyo
Securities Exchange as of the grant date (the
closing price on the day immediately preceding the
grant date if no transactions are established on the
grant date), the relevant closing price shall be the
exercise price.

The expected volatility of the share price is 2. Restricted stock compensation plan issued by
calculated based on past weekly share prices Taiyo Koki Co., Ltd.
corresponding to the remaining life of the option. Taiyo Koki Co., Ltd ( �the company� ), one of
The Company’s consolidated subsidiaries, has
The Company has adjusted the exercise price of introduced a restricted stock compensation
the options granted on 30th September, 2016 from plan ( �the plan� ) as equity-settled share-
¥1,121 to ¥1,090 due to disposal of common shares based payment since the fiscal year 2018 for
at a price below the market price, for which the the company’s executive directors excluding
payment due date was 31st March, 2017. outside directors ( �the eligible directors� ), for
the purpose of raising their motivation and
(2) Description of restricted stock compensation plan providing an incentive to sustainably enhance
1. Restricted stock compensation plan issued by the corporate value.
the Company
The Company has introduced a restricted stock For introducing the plan, the company and each
compensation plan ( �the Plan� ) as equity-settled eligible directors have made an arrangement on
share-based payment since the fiscal year 2018 allotment of restricted stocks, which includes (1)
for the Company’s executive directors excluding prohibiting the shares from being transferred or
outside directors ( �the Eligible Directors� ), for pledged to a third party or otherwise disposed
the purpose of further promoting shared value of in any manner during a certain specified
with shareholders and providing an incentive to period and (2) allowing the company to reclaim
sustainably increase the Company’s corporate the shares at no cost under certain specified
value. circumstances. Transfer restriction period is
For introducing the plan, the Company and each 40 years and the transfer restriction is lifted
Eligible Directors have made an arrangement on for all shares held by eligible directors when
allotment of restricted stocks, which includes (1) the transfer restriction period expires, on the
prohibiting the shares from being transferred or condition that the eligible directors continued
pledged to a third party or otherwise disposed to hold any position of the company during the
of in any manner during a certain specified transfer restriction period. The fair value of
period and (2) allowing the Company to reclaim the restricted stock is measured based on the
the shares at no cost under certain specified observable market price.
circumstances. Transfer restriction period is 2018
30 years and the transfer restriction is lifted The grant date 27th March, 2018
for all shares held by Eligible Directors when Common stock 25,900 of
Number of stocks granted (shares)
the transfer restriction period expires, on the Taiyo Koki Co, Ltd.
condition that the Eligible Directors continued Fair value of grant date (Yen)
(U.S. dollars) ¥2,565 ($23)
to hold a position of directors, executive officers
not concurrently serving as directors, audit & (3) Description of trust-type employee stock
supervisory board members, employees and ownership incentive plan
fellows, or any other equivalent position of the The Company has implemented a trust-type
Company during the transfer restriction period. employee stock ownership incentive plan ( �the
The fair value of the restricted stock is measured Incentive Plan� ) as cash-settled share-based
based on the observable market price. payment since the fiscal year 2018 as incentives for
2018 its employees to gain the medium- to long-term
The grant date 6th April, 2018 corporate value of the Company.
Number of stocks granted (shares) Common stock 153,400
Fair value of grant date (Yen)
(U.S. dollars) ¥1,954 ($17.6) The Incentive Plan is available to all employees
who belong to the DMG MORI Employee
Shareholders Association ( �the Association� ).

Under the Incentive Plan, the Company sets up 2018

a trust – DMG MORI Employee Shareholders Share price (Yen) (U.S. dollars) ¥1,241($11)
Association Exclusive Trust ( �the Exclusive
Acquired shares (Shares) 2,500,000
Remaining shares (Shares) 2,273,700
Trust� ) – through a trust bank. The Exclusive Expected volatility of the share price * (%) 42.764
Trust estimates the number of shares that the Expected remaining life of the option (years) 6.5
Association is likely to acquire in the future and
Risk-free interest rate for the remaining life of the option (%) (0.128)
*The expected volatility of the share price is calculated based on past
purchases this amount during the acquisition
daily share prices corresponding to the expected remaining period
period set in advance. Then the Exclusive Trust will of the option.
sell the Company’s shares to the Association on
the same date every month. The Exclusive Trust The liabilities arising from share-based payment
will continuously sell the Company’s shares to the regarding the Incentive Plan are as follows:
Association, and if an amount equivalent to net Millions of yen
Thousands of
U.S. dollars
gains on the Company’s shares has accumulated in 2018
the Exclusive Trust when the trust period comes to Book value arising from the cash-settled
¥ 16 $ 144
share-based payments
an end, such money will be distributed as residual
assets to members of the Association who meet
(4) Share-based payment expenses
beneficiary eligibility criteria. This distribution is
Share-based payment expenses on the consolidated
cash-settled transaction and the fair value of the
statement of profit or loss are as follows:
liability is measured on every reporting date at
Thousands of
Millions of yen
discounted present value of estimated cash flows U.S. dollars
2018 2017 2018
as of the end of the trust period in accordance with Expenses arising from the
¥ 213 ¥ 328 $ 1,919
the provisions in the trust contract. stock options
－
Expenses arising from the
restricted stock compensation plan 33 297
The fair value of the Incentive Plan has been estimated Expenses arising from the
trust-type employee stock 16 － 144
using the Monte-Carlo method. The fair value and ownership incentive plan
assumptions used in the calculation are as follows: Total ¥ 262 ¥ 328 $ 2,360
24. Financial Instruments
(1) Capital management (2) Risk management policy

The Group’s capital management policy is to The Group is exposed to financial risk, credit risk,
maintain an optimal capital structure in order to liquidity risk, foreign exchange risk, interest rate
achieve sustained improvement in the enterprise risk and market volatility risk in operating its
value for further growth in global machine tool business and manages these risks based on its
markets. The Group monitors financial indicators, policy to mitigate them.
such as ROE (return on equity), EPS (earnings per
share) and the equity ratio, in order to maintain an The Group manages surplus funds by investing only
optimal capital structure. The Group is not subject in short-term deposits and others and does not
to any material capital regulation. enter into speculative transactions. The purpose
of derivative transactions is, in principle, to hedge
The Group raises necessary capital partly by the risks as described herein, and transactions are
issuing new shares and bonds, borrowings from not carried out for speculative purposes.
banks and liquidation of receivables for mainly
operations related to the manufacturing and sales (3) Credit risk
of machine tools based on the demand for funds 1. Credit risk management
from its operating activities. Credit risk is the risk that a counterparty will
not meet its obligations under a financial

instruments or customer contract, leading to a 3. Credit risk management practices

financial loss. Credit risk exposure of the Group regarding
trade and other receivables and other financial
Cash and cash equivalents are held only with instruments is as follows:
banks and financial institutions with high credit Credit risk exposure of trade receivables is
ratings, therefore, the corresponding credit risk measured at same amount as expected credit
is very limited. losses for all terms. In addition, considering
with increase of significant credit risk, such
Trade and other receivables are exposed credit as debtor’s financial condition at the end of
risk of customers. The Group regularly monitors the fiscal year and past bad debt loss and
the credit information related to customer overdue payment, the financial instruments are
operating claims and manages collection dates classified as for �the debtors who aren’t facing
and outstanding balances in accordance with its a serious problem in business condition� and
credit control policy. The Group’s receivables �the debtors who are facing serious problems in
don’t have significant concentration of credit repaying their debt� , allowance for doubtful is
risk on specific counterparties or counterparty recognized by measuring expected credit losses
groups. for each category. �The debtor who aren’t facing
a serious problem in business condition� refer
Other account receivables are also exposed to those that have no indication of problems in
credit risk, however they are settled in short- repaying their debts and no problems in ability
term period. to repay their debts. Allowance for doubtful
receivables on receivables from the debtors in
Derivative transactions included in other this category is recognized collectively using a
financial assets and liabilities are exposed provision ratio based on a historical loan loss
to credit risks associated with the banks and ratio and future estimates. �The debtors who
financial institutions with which the Group are facing serious problems in repaying their
has a business relationship. To minimize the debts� refer to those that are facing or will
counterparty risk when entering into derivative likely face, serious problems in repaying their
transactions, counterparties are limited to debts. Allowance for doubtful receivables on
financial institutions with high credit ratings. receivables from the debtors in this category
is recorded based on the estimated collectable
2. Maximum exposure of credit risk amount of the respective assets on an individual
The Maximum exposure of credit risk at the end basis.
of the fiscal year 2018 is carrying amount after
impairment of financial assets, however, there is The Group evaluates at the end of each reporting
no significant bad debt loss in prior years. period whether there is a significant increase
in credit risk of �other receivables and other
The Group has granted certain financial financial assets� since initial recognition.
guarantees and these are exposed to the credit When there is no significant increase in credit
risk of those entities for which the guarantees risk since initial recognition, the amount
were granted. Other than guarantee obligations, equal to expected credit losses for 12 months
the Group’s maximum exposures to credit is recognized as allowance for doubtful
risk, without taking into account any collateral receivables. When there is a significant increase
held or other credit enhancements, is the in credit risk since initial recognition, the amount
carrying amount of the financial instruments equal to expected credit losses for the remaining
less impairment losses in the consolidated period of the financial assets is recognized as
statement of financial position and the amount allowance for doubtful receivables.
of guarantee obligations as disclosed in Note 37,
�Contingent Liabilities.�

�A significant increase in credit risk� refers to Information on trade receivables

a situation in which there are serious problems Carrying amounts of trade receivables and
in collectability of receivables at the end of the allowance for doubtful receivables are as follows:
reporting period compared to that at the initial
recognition. When evaluating whether or not Trade receivables at 31st December, 2018
there is a significant increase in credit risk, Millions of yen
the Group takes into consideration reasonably 2018
Debtors who Debtors who
available and supportable information, such as aren’t facing are facing
a serious serious
a debtor’s operating results for past periods and problem in problems in
Total
business repaying their
management improvement plan, as well as past condition debt
due information. Beginning balance ¥ 59,201 ¥ 141 ¥ 59,343

Ending balance ¥ 65,604 ¥ 104 ¥ 65,709
Allowance for doubtful receivables on �trade and Thousands of U.S. dollars
other receivables and other financial assets� is 2018
recognized using a method to estimate credit Debtors who Debtors who
aren’t facing are facing
losses collectively or individually according to the a serious serious
Total
problem in problems in
extent of the debtor’s credit risk. However, when business repaying their
condition debt
the debtors are in serious financial difficulty
Beginning balance $ 533,246 $ 1,270 $ 534,525
or legally or substantially bankrupt, allowance
Ending balance $ 590,920 $ 936 $ 591,866
for doubtful receivables is recognized using a
method to estimate credit losses individually by
Allowance for doubtful receivables for the fiscal year 2018
considering the receivables as credit-impaired
Millions of yen
financial assets.
2018
a serious serious
Total
condition debt
Beginning balance based on IAS 39 ¥ 1,986 ¥ 141 ¥ 2,127
Adjustment for adapting IFRS 9 43 － 43
Beginning balance based on IFRS 9 2,029 141 2,170
Increase during the year 1,478 4 1,482
Decrease during the year (853) (40) (894)
Other(Exchange difference
on translation of foreign (299) (0) (299)
operations)
Ending balance ¥ 2,354 ¥ 104 ¥ 2,459

2018
a serious serious
Total
condition debt
Beginning balance based on IAS 39 $ 17,888 $ 1,270 $ 19,158
Adjustment for adapting IFRS 9 387 － 387
Beginning balance based on IFRS 9 18,275 1,270 19,546
Increase during the year 13,312 36 13,348
Decrease during the year (7,683) (360) (8,052)
Other(Exchange difference
on translation of foreign (2,693) (0) (2,693)
operations)
Ending balance $ 21,203 $ 936 $ 22,149

Information on other receivables

The carrying amounts of other receivables and allowance for doubtful receivables are as follows:
Other receivables at 31st December, 2018

2018 2018
Financial instruments measured at Financial instruments measured at
same amount as expected credit losses same amount as expected credit losses
Financial assets for all terms Financial assets for all terms
measured at measured at
same amount as Credit risk same amount as Credit risk
of financial Total of financial Total
expected credit Credit-impaired expected credit Credit-impaired
losses for 12 instruments losses for 12 instruments
financial financial
months was significantly months was significantly
instruments instruments
increased since increased since
initial recognition initial recognition
－－－－
Beginning Beginning
balance ¥ 3,525 ¥ ¥ ¥ 3,525 balance $ 31,751 $ $ $ 31,751
Ending balance ¥ 6,238 ¥ － ¥ － ¥ 6,238 Ending balance $ 56,188 $ － $ － $ 56,188

2018 2018
Financial same amount as expected credit losses Financial same amount as expected credit losses
instruments for all terms instruments for all terms
measured at Credit risk measured at Credit risk
same amount as of financial Total same amount as of financial Total
losses for 12 was significantly financial losses for 12 was significantly financial
months instruments months instruments
Beginning Beginning
balance based on ¥ － ¥ － ¥ － ¥ － balance based on $ － $ － $ － $ －
IAS 39 IAS 39
－－－－－－－－
Adjustment for Adjustment for
adapting IFRS 9 adapting IFRS 9
Beginning Beginning
balance based on －－－－ balance based on －－－－
IFRS 9 IFRS 9
－－－－
Increase during Increase during
the year 48 48 the year 432 432
－－－－－－－－
Decrease during Decrease during
the year the year
Other(Exchange Other(Exchange
difference on difference on
translation (1) －－ (1) translation (9) －－ (9)
of foreign of foreign
operations) operations)
Ending balance ¥ 47 ¥ － ¥ － ¥ 47 Ending balance $ 423 $ － $ － $ 423

Information on other financial assets

The carrying amounts of allowance for doubtful receivables of other financial assets and certain receivables
are as follows:
Other financial instruments at 31st December, 2018

2018 2018
－－
Beginning Beginning
balance ¥ 10,307 ¥ 278 ¥ ¥ 10,585 balance $ 92,839 $ 2,504 $ $ 95,343
Ending balance ¥ 8,846 ¥ 170 ¥ － ¥ 9,016 Ending balance $ 79,679 $ 1,531 $ － $ 81,210

2018 2018
Beginning Beginning
balance based on ¥ － ¥ 111 ¥ － ¥ 111 balance based on $ － $ 999 $ － $ 999
IAS 39 IAS 39
－－－－－－－
Adjustment for Adjustment for
adapting IFRS 9 - adapting IFRS 9
Beginning Beginning
balance based on － 111 － 111 balance based on － 999 － 999
IFRS 9 IFRS 9
－－－－－－－－
Increase during Increase during
the year the year
－－－－
Decrease during Decrease during
the year (97) (97) the year (873) (873)
Other(Exchange Other(Exchange
difference on difference on
translation － (4) － (4) translation － (36) － (36)
of foreign of foreign
operations) operations)
Ending balance ¥ － ¥ 9 ¥ － ¥ 9 Ending balance $ － $ 81 $ － $ 81

(4) Liquidity risk credit lines from financial institutions that enable
The Group is exposed to liquidity risk that it might the Group to meet its obligations based on funding
have difficulty settling its financial obligations. plans that are updated in a timely manner.
Trade and other payables, bonds and borrowings Financial liabilities by maturity date are as follows:
and other financial liabilities are exposed to The contractual cash flows in the table are based
liquidity risk. However, the Group manages on the undiscounted cash flows, reflecting interest
liquidity risk by maintaining liquidity on hand and payments.
Millions of yen
2018
Over one year within five
Carrying amount Contractual cash flows Within one year Over five years
years
Non-derivative financial liabilities:
Trade and other payables ¥ 56,833 ¥ 56,833 ¥ 56,833 ¥ － ¥ －
Bonds and borrowings 117,015 118,333 56,142 61,158 1,031
Other financial liabilities
(Payment obligation for external 94,680 96,731 96,731 －－
shareholders)
－
(Preferred shares) 14,833 16,029 257 15,772
Other financial liabilities 4,569 5,400 1,145 2,475 1,779
Derivative financial liabilities:
Other financial liabilities 1,057 1,057 369 688 －
Total ¥ 288,989 ¥ 294,386 ¥ 211,480 ¥ 80,094 ¥ 2,810

2018
Carrying amounts Contractual cash flows Within one year Over five years
years
Trade and other payables $ 511,916 $ 511,916 $ 511,916 $ － $ －
Bonds and borrowings 1,053,999 1,065,871 505,692 550,873 9,286
(Payment obligation for external 852,819 871,293 871,293 －－
shareholders)
－
(Preferred shares) 133,606 144,379 2,314 142,064
Other financial liabilities 41,154 48,639 10,313 22,293 16,024
Other financial liabilities 9,520 9,520 3,323 6,197 －
Total $ 2,603,035 $ 2,651,648 $ 1,904,882 $ 721,437 $ 25,310
Millions of yen
2017
Carrying amounts Contractual cash flows Within one year Over five years
years
Trade and other payables ¥ 47,717 ¥ 47,717 ¥ 47,717 ¥ － ¥ －
Bonds and borrowings 179,359 181,952 33,604 148,348 －
(Payment obligation for external 101,691 105,510 2,973 102,536 －
shareholders)
－－
(Preferred shares) 14,838 15,000 15,000
Other financial liabilities 5,766 6,953 953 3,881 2,117
Other financial liabilities 2,469 2,469 186 2,283 －
Total ¥ 351,842 ¥ 359,602 ¥ 85,435 ¥ 272,049 ¥ 2,117

Borrowing commitments and other credit lines Foreign currency sensitivity analysis
For effective financing purposes, the Group The financial impact on profit before income taxes
concluded line-of-credit agreements with several for the years ended 31st December, 2018 and
banks and financial institutions. The status of such 2017 in the case of a 1% increase in the Japanese
agreements is summarized as follows: yen, which is the Company’s functional currency,
Thousands of against the U.S. dollar and Euro is as follows:
Millions of yen
U.S. dollars
2018 2017 2018
Credit line ¥ 290,810 ¥ 282,132 $ 2,619,437 It is based on the assumption that all parameters
Borrowings 14,839 12,494 133,660 other than the currencies used for the calculation
Unused balance ¥ 275,971 ¥ 269,637 $ 2,485,777 do not fluctuate. In addition, these amounts are
based on the effect of translation. The effects of
(5) Foreign exchange risk forecasted sales revenues and purchases are not
The Group operates globally and its business taken into account.
transactions denominated in foreign currencies Thousands of
Millions of yen
other than the functional currencies of each group U.S. dollars
2018 2017 2018
entity are exposed to foreign exchange risks. The Japanese yen ¥ 19 ¥ 13 $ 171
underlying currencies of these transactions are U.S. dollar (118) (243) (1,062)
mainly the Japanese yen, the U.S. dollar and the Euro (49) 84 (441)
Euro. (Note) The impact on profit or loss due to the fluctuation of the
Japanese yen in the above table is related to financial assets
or financial liabilities denominated in Japanese yen of foreign
Trade receivables denominated in foreign subsidiaries.
currencies are exposed to foreign exchange
risk, which is, in principle, hedged using foreign (6) Interest rate risk
exchange forward contracts, limited to the Non-current floating rate borrowings in the Group
necessary amounts, in order to mitigate the risk of are exposed to interest rate risk. In order to
fluctuations of foreign currencies identified by each manage the exposure and hedge interest rate risk,
currency. Trade payables denominated in foreign the Group enters into interest rate swaps in which
currencies, mainly related to the import of raw the Group agrees to exchange interest payments at
materials, are also exposed to foreign exchange specified intervals.
risk.
Interest rate sensitivity analysis
The analysis of exposures to foreign exchange risk The financial impact on profit before income taxes
of the Group is as follows: for the fiscal the years 2018 and 2017 in the case of
a 1% increase in interest rates is as follows:
Millions of yen
2018 It is based on the assumption that all parameters
Japanese yen U.S. dollars Euro other than the interest rates used for the
Net exposures ¥ (1,905) ¥ 11,844 ¥ 4,915
calculation do not fluctuate. In addition, the table
$ 106,683 € 38,698
Per each local currency － below represents the sensitivity analyses to the
thousand thousand
balance of floating rate borrowings, excluding the
2018 portion of borrowings whose interest payments
Japanese yen U.S. dollars Euro
are substantially fixed through a corresponding
Net exposures $ (17,159) $ 106,683 $ 44,271
interest rate swap.
Millions of yen
2017
Japanese yen U.S. dollars Euro
Net exposures ¥ (1,303) ¥ 24,357 ¥ (8,439)
$ 215,556 € 62,515
Per each local currency －
thousand thousand

Millions of yen
Thousands of 2018
U.S. dollars Thousands of
2018 2017 2018 Millions of yen
U.S. dollars
Profit before income Fair value at the date of
taxes ¥ (628) ¥ (703) $ (5,656) derecognized ¥ 50 $ 450
－－
Cumulative profit and loss for
disposal
(7) Equity instruments measured at fair value (Note 1) The Group derecognized some of equity instruments
through other comprehensive income measured at fair value through other comprehensive income
by selling for mainly reviewing business relationship during
The Group holds listed shares and others of the year.
companies with business relationship, these (Note 2) In case that equity instruments measured at fair value
through other comprehensive income are derecognized,
equity instruments measure at fair value through cumulative profit and loss of other comprehensive income
other comprehensive income because the purpose (after tax) are reclassified into retained earnings.
holding these equity instruments is maintaining

and strengthening of relationship. 3. Dividend income
The breakdown of dividend income recognized
These investments are classified as available-for- from equity instruments measured at fair value
sale financial assets during the fiscal year 2017. through other comprehensive income is as
follows:
1. Main issuer and fair value 2018
Main issuers and fair value as of 31st December, Millions of yen
Thousands of
U.S. dollars
2018 are as follows: Equity instruments
derecognized during the year ¥ 0 $ 8
Thousands of U.S.
Millions of yen Equity instruments held at the
Issuer dollars
end of year 117 1,053
2018
YAMAZEN CORPORATION ¥ 1,210 $ 10,898
Total ¥ 118 $ 1,062
DAIKIN INDUSTRIES,LTD. 1,075 9,682
4. Equity instruments sensitive analysis
The Nanto Bank，Ltd. 1,021 9,196
The Group holds listed shares with business
nLIGHT, INC 988 8,899
relationship which are exposed market volatility
Shimadzu Corporation 719 6,476
risk of equity instruments. The Group continually
ADAMOS GmbH 254 2,287
assesses the market situation by periodically
THK CO., LTD. 226 2,035 reviewing share prices and the financial position
FURUSATO INDUSTRIES,LTD. 161 1,450 of the issuers.
CKD Corporation 147 1,324 The financial impact on other comprehensive
Other 281 2,531 income (net of tax) for the year ended 31st
Total ¥ 6,088 $ 54,836
December, 2018 and 2017 in the case of a 10%
2. Equity instruments measured at fair value decrease in listed share prices is as follow. It is
through derecognized other comprehensive based on the assumption that all parameters
income other than the share prices used for the
Fair value and cumulative profit and loss of calculation do not fluctuate.
equity instruments (before tax) measured Millions of yen
Thousands of
U.S. dollars
at fair value through derecognized other 2018 2017 2018
comprehensive income during the year are as Other comprehensive
income ¥ (427) ¥ (470) $ (3,846)
follows at the date of derecognized.

(8) Fair value of financial instruments

Carrying amounts and fair value of financial instruments are as follows:

2018 2017 2018
Carrying amounts Fair value Carrying amounts Fair value Carrying amounts Fair value
Financial assets measured at
amortized cost:
Cash and cash equivalents ¥ 27,368 ¥ 27,368 ¥ 64,973 ¥ 64,973 $ 246,514 $ 246,514
Trade and other receivables 69,441 69,441 60,741 60,741 625,481 625,481
Other financial assets including
loans 9,007 9,007 10,474 10,474 81,129 81,129
Financial assets measured
at fair value through other
comprehensive income included
in other financial assets:
Other financial assets (Equities) 6,088 6,088 －－ 54,836 54,836
Financial assets measured at
fair value through profit or loss
included in other financial assets:
Derivative assets 250 250 95 95 2,251 2,251
－－
Available-for-sale financial
assets – – 7,079 7,079
Total ¥ 112,155 ¥ 112,155 ¥ 143,364 ¥ 143,364 $ 1,010,223 $ 1,010,223
Financial liabilities measured at
amortized cost:
Trade and other payables ¥ 56,833 ¥ 56,833 ¥ 47,717 ¥ 47,717 $ 511,916 $ 511,916
Interest-bearing bonds and
borrowings 117,015 117,037 179,359 179,456 1,053,999 1,054,197
(Payment obligation for external 94,680 94,530 101,691 101,186 852,819 851,468
shareholders)
(Preferred shares) 14,833 14,875 14,838 14,838 133,606 133,984
Other financial liabilities 4,569 4,569 5,766 5,766 41,154 41,154
Financial liabilities measured
at fair value through profit or
loss included in other financial
liabilities:
Derivative liabilities 1,057 1,057 2,469 2,469 9,520 9,520
Total ¥ 288,989 ¥ 288,904 ¥ 351,842 ¥ 351,434 $ 2,603,035 $ 2,602,269
Methods to determine the fair value of financial based on the present value of total amount of
assets and liabilities measured at amortized cost principal and interest discounted by the expected
are summarized as follows: interest rate based on the maturity term and
credit risk considering years to maturity. On the
Cash and cash equivalents other hand, the carrying amount of the current
The carrying amount approximates the fair value portion approximates the fair value due to the
due to the short maturities of the instruments. short maturities of the instruments.
Trade and other receivables Trade and other payables

The carrying amount approximates the fair value The carrying amount approximates the fair value
due to the short maturities of the instruments. due to the short maturities of the instruments.
Other financial assets including loans Interest-bearing bonds and borrowings

The fair value of the non-current loans and other The fair value of interest-bearing bonds is
financial assets including loans is calculated determined based on the market price at the end

of the reporting period. Other financial assets (Equities)

The fair value of listed securities is based on the
The fair value of non-current borrowings with market price, and when no market price exists
fixed interest rates is calculated based on the for non-listed securities, a rationally calculated
present value of total amount of principal and amount principally measured based on net
interest discounted by the expected interest assets value is used.
rate based on the maturity term and credit risks
considering years to maturity. On the other The fair value of the debt securities is measured
hand, the carrying amount of the current portion based on prices provided by counterparty
approximates the fair value due to the short financial institutions.
maturities of the instruments.
Methods to determine the fair value of financial
Other financial liabilities assets and liabilities measured at fair value
The fair value of the payment obligations for through profit or loss are summarized as
external shareholders (the liabilities arising from follows:
the entry into force of the DPLTA) is calculated
based on the present value of total amount Derivative assets and liabilities
of estimated future payments to the external The fair value of foreign exchange forward
shareholders discounted by the expected contracts included in derivative assets and
interest rate based on the payment period and liabilities is determined based on respective
credit risk considering years to payments. market price at the end of the reporting period.
The fair value of interest rate swaps is calculated
The Group classifies its preferred shares based on the present value of estimated future
outstanding as financial liabilities in accordance cash flows discounted by the expected interest
with IFRS since the shares are to be redeemed rate based on the maturity term and applicable
at a certain point of time in the future. swap rates at the end of the reporting period.
The fair value of the preferred shares is The levels of the fair value hierarchy are as
calculated based on the present value of follows:
future cash flows discounted by the expected
interest rate including the credit risk premium Fair value of financial instruments is categorized
considering years to maturity period and credit within the fair value hierarchy described as
risk. follows from Level 1 to Level 3. Any significant
transfers of the financial instruments between
The fair value of other financial liabilities is levels are recognized at the date of events that
calculated based on the present value of total causes the transfers or changes on the status.
amount of principal and interest discounted by
the expected interest rate based on the maturity Level 1 – Fair value measured using quoted
term and credit risks considering years to prices (unadjusted) in active markets
maturity. for identical assets or liabilities
Level 2 – Fair value measured using inputs
Methods to determine the fair value of financial other than quoted prices included
assets measured at fair value through other within Level 1 that are observable for
comprehensive income are summarized as the asset or liability either directly or
follows: indirectly
Level 3 – Fair value measured using
unobservable inputs for the asset or
liability

Financial instruments measured at amortized cost

The carrying amount and the respective level in the fair value hierarchy of financial instruments measured at
amortized cost at the end of the reporting period are as follows:
Millions of yen
2018
Fair value
Carrying amounts
Level 1 Level 2 Level 3 Total
Interest-bearing long-term borrowings ¥ 69,222 ¥ － ¥ － ¥ 69,222 ¥ 69,222
Interest-bearing bonds 29,954 － 29,977 － 29,977
－－
Other financial liabilities (Payment obligation for
external shareholders) 94,680 94,530 94,530
Other financial liabilities (Preferred shares) 14,833 －－ 14,875 14,875
(Note) The balance of interest-bearing non-current borrowings and interest-bearing bonds includes those due within one year.

2018
Fair value
Carrying amounts
Interest-bearing long-term borrowings $ 623,509 $ － $ － $ 623,509 $ 623,509
－－
Millions of yen
2017
Fair value
Carrying amounts
Interest-bearing long-term borrowings ¥ 143,851 ¥ － ¥ － ¥ 143,935 ¥ 143,935
－－
The carrying amounts of financial instruments measured at amortized cost, except for non-current
borrowings and bonds and other financial liabilities (payment obligation for non-controlling interests and
preferred shares), approximates the fair value.

Financial instruments measured at fair value

The carrying amount and the respective level in the fair value hierarchy of financial instruments measured at
fair value at the end of reporting period are as follows:
Millions of yen
2018
Other financial assets:
Financial assets measured at fair value through other
comprehensive income included in other financial assets:
Other financial assets (Equities) ¥ 5,556 ¥ － ¥ 531 ¥ 6,088
Financial assets measured at fair value through profit or loss
Derivative assets － 250 － 250
Total ¥ 5,556 ¥ 250 ¥ 531 ¥ 6,338
Other financial liabilities:
Financial liabilities measured at fair value through profit or loss
included in other financial liabilities:
Derivative liabilities ¥ － ¥ 1,057 ¥ － ¥ 1,057
Total ¥ － ¥ 1,057 ¥ － ¥ 1,057
(Note) There have been no significant transfers between Levels 1, 2, and 3 of the fair value measurement hierarchy during the fiscal year 2018.

2018
Financial assets measured at fair value through other
comprehensive income included in other financial assets:
Other financial assets (Equities) $ 50,045 $ － $ 4,782 $ 54,836
Financial assets measured at fair value through profit or loss
Derivative assets － 2,251 － 2,251
Total $ 50,045 $ 2,251 $ 4,782 $ 57,088
Financial liabilities measured at fair value through profit or loss
included in other financial liabilities:
Derivative liabilities $ － $ 9,520 $ － $ 9,520
Total $ － $ 9,520 $ － $ 9,520
(Note) There have been no significant transfers between Levels 1, 2, and 3 of the fair value measurement hierarchy during the fiscal year 2018.
Millions of yen
2017
Derivative assets ¥ － ¥ 95 ¥ － ¥ 95
Available-for-sale financial assets 6,141 － 937 7,079
Total ¥ 6,141 ¥ 95 ¥ 937 ¥ 7,174
Derivative liabilities ¥ － ¥ 2,469 ¥ － ¥ 2,469
Total ¥ － ¥ 2,469 ¥ － ¥ 2,469
(Note) There have been no significant transfers between Levels 1, 2 and 3 of the fair value measurement hierarchy during the fiscal year 2017.
The fair value of non-listed shares categorized within Level 3 is measured using the respective net asset
values, which is calculated by the adjusted net asset method.

The financial assets and financial liabilities such as the notional amount and payment date
categorized in Level 2 are mainly derivative are to be matched. The Group sets the hedge
transactions related to foreign exchange forward ratio to 1:1 as the hedging exchange risk and
contracts and interest rate and currency swaps. the hedged risk have similar quality. The Group
The fair values of foreign exchange forward evaluates the effectiveness of the hedge by
contracts and interest rate and currency swaps are comparing the change in the fair value of the
measured based on observable market data, such hedging instrument with that of the hedged
as interest rates mainly provided by counterparty item. The factors for the ineffective portion of
financial institutions. the hedge are as follows:
The movement in fair value of financial - Mismatches in timing between the cash
instruments categorized within Level 3 of the fair flows of the hedging instrument and of the
value hierarchy is as follows: hedged item
Thousands of - Counterparty’s credit risk associated with
Millions of yen
U.S. dollars
2018 2017 2018 the changes in fair value of the hedging
Beginning balance ¥ 937 ¥ 369 $ 8,439 instrument and of the hedged item
Total gain and loss: - Changes in estimated cash flows of the
Profit or loss (Note 1) － (58) － hedging instrument and of the hedged item
Other comprehensive income
(loss) (Note 2) (16) 14 (144)
The average exchange rate in the exchange
Purchase 25 695 225
forward contracts is 130.32 JPY / EUR and 108.70
Sales (50) － (450)
JPY / USD.
Transfer from level 3 (Note 3) (333) － (2,999)
Other (29) (83) (261)
The Group also uses cross currency interest
Ending balance ¥ 531 ¥ 937 $ 4,782
rate swaps to exchange USD and EUR or JPY
Changes of unrealized gain
which is recognized as profit or and receive variable interest rates and pay
loss on financial instruments ¥ － ¥ (58) $ －
held at the end of reporting fixed interest rates in order to hedge the risk of
period (Note 1)
currency exchange and interest rate, and applies
(Note 1) Gain and loss included in profit or loss are included in other
operating costs in the consolidated statement of profit or loss hedge accounting by designating the swaps as
(Note 2) Gain and loss included in other comprehensive income (loss) cash flow hedges. For cross currency interest
are included in changes in fair value measurements of
financial assets measured at fair value through other rate swaps, the notional amount, term (maturity)
comprehensive income in the consolidated statement of and the interest index of the hedging instrument
comprehensive income for the fiscal year 2018 and changes
in fair value measurements of available-for-sale financial and the hedged item are set to be matched, in
assets in the consolidated statement of comprehensive principle.
income for the fiscal year 2017.
(Note 3) Transfer from level 3 is due to listing of the issuer.
The receipt of variable interest rates is LIBOR +
0.20% (annual) for six months and the payment
(9) Derivative and hedge accounting of the fixed interest rates is 0.40%.
(i) Overview of hedge
The Group uses foreign exchange forward
contracts to hedge the risk of foreign currency
transactions and applies hedge accounting by
designating the contracts as cash flow hedges.
The Group recognizes economic relationship
between the hedging instrument and the hedged
item as the condition for exchange forward and
that for highly probable forecast transaction

(ii) Information on items designated as hedging instruments

The impact of the hedging instrument on the Group’s consolidated statements of financial position is as
follows:
Millions of yen
2018
Carrying amounts of the hedging Changes in
instruments fair value of
Disclosure item in the
(Fair value) the hedging
consolidated statement of
instruments used
financial position which
in calculation of
includes the hedging
Contract amount Over one year Assets Liabilities recognition of the
instruments
ineffective portion
of the hedge
Cash flow hedge:
Foreign exchange forward
－－
(current) and
contracts (risk of foreign ¥ 40,111 ¥ ¥ 250 ¥ 369 Other financial liabilities
currency transaction) (current)
Cross currency interest rate
－－
swaps (risk of foreign currency 19,717 19,717 688 (non-current)
transaction and interest rate)
Total ¥ 59,828 ¥ 19,717 ¥ 250 ¥ 1,057 －

2018
Carrying amounts of the hedging Changes in fair
instruments value of the hedging Disclosure item in the
(Fair value) instruments used consolidated statement of
in calculation of financial position which
recognition of the includes the hedging
Contract amount Over one year Assets Liabilities
ineffective portion instruments
of the hedge
Cash flow hedge:
Foreign exchange forward
－－
(current) and
contracts (risk of foreign $ 361,295 $ $ 2,251 $ 3,323 Other financial liabilities
currency transaction) (current)
Cross currency interest rate
－－
swaps (risk of foreign currency 177,598 177,598 6,197 (non-current)
Total $ 538,893 $ 177,598 $ 2,251 $ 9,520 －
Derivative transactions which do not qualify for Derivative transactions which qualify for hedge
hedge accounting accounting
2017 2017
Contract Contract
Over one year Fair value Over one year Fair value
amount amount
－－
Foreign exchange forward Foreign exchange forward
contracts ¥ 23,318 ¥ ¥ (59) contracts ¥ 3,465 ¥ ¥ (31)
－－－
Cross currency interest Cross currency interest
rate swaps rate swaps 30,103 30,103 (2,283)
Total ¥ 23,318 ¥ － ¥ (59) Total ¥ 33,569 ¥ 30,103 ¥ (2,314)

(iii) Information on items designated as hedged items

The impact of the hedged items on the Group’s consolidated statement of financial position is as follows:

2018 2018
Changes in fair Changes in fair
value of the hedged value of the hedged
Cash flow hedge Cash flows hedge Cash flow hedge Cash flows hedge
items used in items used in
reserve from reserve from reserve from reserve from
calculation of calculation of
continued hedge discontinued hedge continued hedge discontinued hedge
recognition of the recognition of the
accounting accounting accounting accounting
ineffective portion ineffective portion
of the hedge of the hedge
Cash flow hedge: Cash flow hedge:
Highly probable forecast Highly probable forecast
transactions (risk transactions (risk
of foreign currency ¥ － ¥ (43) ¥ － of foreign currency $ － $ (387) $ －
transactions in trade transactions in trade
receivables) receivables)
Highly probable forecast Highly probable forecast
transactions (risk transactions (risk
of foreign currency － (8) － of foreign currency － (72) －
transactions in trade transactions in trade
payables) payables)
Variable interest rates Variable interest rates
borrowings in foreign borrowings in foreign
currency (risk of foreign － 10 － currency (risk of foreign － 90 －
currency transaction and currency transaction and
interest rate) interest rate)
Total ¥ － ¥ (41) ¥ － Total $ － $ (369) $ －
(iv) Impact on the consolidated statements of profit or loss and comprehensive income by applying hedge
accounting
The impact of the hedging instruments on the Group’s consolidated statements of profit or loss and
comprehensive income is as follows:
Millions of yen
2018
Cash flow hedges Disclosure item in Disclosure item in
Amount of
recognized in other the consolidated the consolidated
Ineffective portion of reclassification
comprehensive statements of income statements of profit
the hedge recognized adjustment from cash
income during the which includes the or loss which includes
in profit or loss flow hedge reserve to
reporting period ineffective portion of the reclassification
profit or loss
(Note) the hedge recognized adjustment
Cash flow hedge:
Highly probable forecast transactions (risk
of foreign currency transactions in trade ¥ (43) ¥ － ¥ － ¥ －－
receivables)
－－
Highly probable forecast transactions (risk of Other operating
foreign currency transactions in trade payables) (8) (62) costs
Variable interest rates borrowings in foreign
－－
Other operating
currency (risk of foreign currency transaction 10 (229) costs
and interest rate)
Total ¥ (41) ¥ － ¥ － ¥ (291)
(Note) The above table disclose the amounts before tax effect.

2018
Cash flow hedges Disclosure item in Disclosure item in
Amount of
recognized in other the consolidated the consolidated
Ineffective portion of reclassification
comprehensive statements of income statements of profit
the hedge recognized adjustment from cash
income during the which includes the or loss which includes
in profit or loss flow hedge reserve to
reporting period ineffective portion of the reclassification
profit or loss
(Note) the hedge recognized adjustment
Cash flow hedge:
Highly probable forecast transactions (risk
of foreign currency transactions in trade $ (387) $ － $ － $ －－
receivables)
－－
Highly probable forecast transactions (risk of Other operating
foreign currency transactions in trade payables) (72) (558) costs
Variable interest rates borrowings in foreign
－－
Other operating
currency (risk of foreign currency transaction 90 (2,062) costs
and interest rate)
Total $ (369) $ － $ － $ (2,621)
(Note) The above table disclose the amounts before tax effect

(v) Movement in other components of equity (changes

in fair value of the hedged items)
Thousands of
Millions of yen
U.S. dollars
2018
Beginning balance ¥ (291) $ (2,621)
Transaction during the reporting
period
Highly probable forecast
transactions (risk of foreign
currency transactions in trade (43) (387)
receivables)
Highly probable forecast
transactions (risk of foreign
currency transactions in trade (8) (72)
payables)
Variable interest rates
borrowings in foreign currency
(risk of foreign currency 10 90
Reclassification adjustment to
profit or loss (Note) 291 2,621
Tax effect 0 0
Ending balance ¥ (40) $ (360)
(Note) The amount before tax effect of ¥291 million ($2,621 thousand)
is included in �Other operating costs� in the consolidated
statements of profit or loss.
(10) Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities arising from financing activities is as follows:
Millions of yen
2018
Non-cash changes
Cash flows from Cash flows from Foreign exchange Measuring at Appropriation of
Beginning balance Ending balance
financing activities operating activities differences amortized cost retained earnings
Short-term borrowings ¥ 5,590 ¥ 12,240 ¥ － ¥ 7 ¥ － ¥ － ¥ 17,838
Long-term borrowings 143,851 (70,519) － (4,352) 242 － 69,222
Interest-bearing bonds 29,918 －－－ 36 － 29,954
Dividends payable 27 (6,204) －－－ 6,210 33
－
Payment obligation for
external shareholders 101,691 (1) (2,513) (7,041) 2,545 94,680
Preferred shares 14,838 －－－ (4) － 14,833
Finance lease obligations 4,580 (463) － (571) －－ 3,546
Total ¥ 300,496 ¥ (64,948) ¥ (2,513) ¥ (11,957) ¥ 2,819 ¥ 6,210 ¥ 230,107
Thousands of U.S dollars

2018
Non-cash changes
Short-term borrowings $ 50,351 $ 110,250 $ － $ 63 $ － $ － $ 160,673
Long-term borrowings 1,295,721 (635,191) － (39,200) 2,179 － 623,509
Interest-bearing bonds 269,482 －－－ 324 － 269,807
－
external shareholders 915,970 (9) (22,635) (63,421) 22,923 852,819
Preferred shares 133,651 －－－ (36) － 133,606
Finance lease obligations 41,253 (4,170) － (5,143) －－ 31,940
Total $ 2,706,683 $ (585,011) $ (22,635) $ (107,701) $ 25,391 $ 55,935 $ 2,072,662

Millions of yen
2017
Non-cash changes
Short-term borrowings ¥ 2,444 ¥ 17 ¥ － ¥ 3,128 ¥ － ¥ － ¥ 5,590
Long-term borrowings 154,473 (22,117) － 11,171 324 － 143,851
Interest-bearing bonds 49,863 (20,000) －－ 54 － 29,918
－
external shareholders 92,802 (11) (2,406) 9,235 2,071 101,691
Preferred shares － 14,838 －－－－ 14,838
Finance lease obligations 5,569 (462) － (525) －－ 4,580
Total ¥ 305,177 ¥ (31,198) ¥ (2,406) ¥ 23,010 ¥ 2,450 ¥ 3,462 ¥ 300,496
25. Sales Revenues
(1) Breakdown of sales revenues Machine tools segment revenue is recognized

The breakdown of sales revenues is as follows: when the control of product transfers to customers
Thousands of
based on the contract. Industrial service revenue
Millions of yen
U.S. dollars is recognized when the obligation based on the
2018 2017 2018
contract is executed.
Sales of products ¥ 373,348 ¥ 312,073 $ 3,362,889
Service revenue 127,875 117,556 1,151,819
Revenue is measured at the amount of promised
Other 24 34 216 consideration in contracts with customers less
Total ¥ 501,248 ¥ 429,664 $ 4,514,934 discounts and rebates, and reduced by the amount
of sales returns.
The relationship between regional sales revenues

and segment sales revenues is as follows;
Millions of yen
2018
Machine Tools Industrial Services Total Corporate Services Elimination Consolidated
Sales revenues
Japan ¥ 109,047 ¥ 29,756 ¥ 138,804 ¥ － ¥ (58,503) ¥ 80,300
Germany 194,385 33,237 227,623 1,943 (116,697) 112,868
The Americas 70,433 16,531 86,965 － (1,810) 85,154
Europe other than Germany 139,456 50,411 189,868 － (31,047) 158,821
China and Asia 54,859 15,906 70,766 － (6,662) 64,103
Total ¥ 568,183 ¥ 145,844 ¥ 714,027 ¥ 1,943 ¥ (214,722) ¥ 501,248

2018
Machine Tools Industrial Services Total Corporate Services Elimination Consolidated
Sales revenues
Japan $ 982,228 $ 268,023 $ 1,250,261 $ － $ (526,959) $ 723,293
Germany 1,750,900 299,378 2,050,288 17,501 (1,051,134) 1,016,645
The Americas 634,417 148,901 783,327 － (16,303) 767,014
Europe other than Germany 1,256,134 454,071 1,710,214 － (279,652) 1,430,562
China and Asia 494,136 143,271 637,416 － (60,007) 577,400
Total $ 5,117,843 $ 1,313,673 $ 6,431,516 $ 17,501 $ (1,934,083) $ 4,514,934

(2) Balance of outstanding contracts 28. Personnel Costs

Balance of receivables from contract with
customers and contract liabilities is as follows:
The breakdown of personnel costs is as follows:
Thousands of
Millions of yen Thousands of
U.S. dollars Millions of yen
U.S. dollars
2018 2017 2018
2018 2017 2018
Receivables from
contract with customers ¥ 65,709 ¥ 59,343 $ 591,866 Remuneration and
¥ 88,584 ¥ 82,157 $ 797,910
salaries
Contract liabilities 61,695 49,204 555,710 Bonuses 16,277 14,300 146,613
Social security and
welfare expenses 18,687 17,379 168,321
Receivables from contract with customers Retirement benefit
3,264 3,111 29,400
are included in trade and other receivables in expenses
Share-based
consolidated statement of financial position. compensation 262 328 2,359
expenses
Other employee
benefit expenses 4,351 3,450 39,191
Revenues recognized during the fiscal year 2018 Total ¥ 131,426 ¥ 120,728 $ 1,183,804
which is included in contract liabilities at the
beginning of the fiscal year is ¥49,204 million. ($443,199
thousand). The expected contract term of remaining 29. Financial Income
implementation obligation is less than one year.
The breakdown of financial income is as follows:
26. Other Operating Revenues Millions of yen
Thousands of
U.S. dollars
2018 2017 2018
Financial income
The breakdown of other operating revenues is as follows:
Interest income:
Thousands of
Millions of yen Financial assets measured
U.S. dollars
at amortized cost ¥ 351 ¥ 393 $ 3,161
2018 2017 2018
Dividend income:
Gain on sales of property,
¥ 311 $ 2,801
－－
¥ 459 Available-for-sale
plant and equipment
financial assets 254
Received commission 411 749 3,702 Financial assets
－
measured at fair
－－
Gain on sales of 118 1,062
financial instruments 5,536 value through other
Other 3,750 5,283 33,777 Total ¥ 470 ¥ 647 $ 4,233
Total ¥ 4,472 ¥ 12,028 $ 40,281
30. Financial Costs

27. Other Operating Costs
The breakdown of financial income is as follows:
The breakdown of other operating costs is as follows: Thousands of
Millions of yen
U.S. dollars
Thousands of 2018 2017 2018
Millions of yen
U.S. dollars
Financial costs
2018 2017 2018
Interest expenses on
Commissions ¥ 21,803 ¥ 18,575 $ 196,388 bonds and borrowings:
Sales promotion costs 7,300 7,756 65,753 Financial liabilities
measured at amortized ¥ 3,078 ¥ 3,014 $ 27,724
Outward freight and
packaging 16,032 14,465 144,406 cost
Financial costs arising
Research and from DPLEA:
development costs
Financial liabilities
(except for amortization 10,987 9,151 98,964 measured at amortized 2,545 2,071 22,923
of capitalized
cost
development costs)
Exchange losses 20 594 180 Others － 211 －
Total ¥ 5,624 ¥ 5,297 $ 50,657
Other 28,914 28,107 260,439
Total ¥ 85,059 ¥ 78,650 $ 766,159

31. Other Comprehensive Income
The breakdown of each component of other comprehensive income (loss) and the corresponding tax effects (including
non-controlling interests) is as follows:
2018 2017 2018

Before tax Before tax After tax Before tax After tax
Tax effect After tax effect Tax effect Tax effect
effect effect effect effect effect
Items that will not be reclassified
Remeasurements of defined
benefit plans:
Amount arising during the
year ¥ 612 ¥ (185) ¥ 426 ¥ (201) ¥ 71 ¥ (129) $ 5,512 $ (1,666) $ 3,837
Net changes during the year 612 (185) 426 (201) 71 (129) 5,512 (1,666) 3,837
Changes in fair value of
financial assets measured
at fair value through other
comprehensive income:
－－－
year (936) 154 (782) (8,430) 1,387 (7,043)
Net changes during the year (936) 154 (782) －－－ (8,430) 1,387 (7,043)
Share of other comprehensive
income of associates accounted
for using equity method:
－－－－－
year (21) (21) (189) (189)
Net changes during the year (21) － (21) －－－ (189) － (189)
Subtotal (346) (31) (377) (201) 71 (129) (3,116) (279) (3,395)
Items that may be reclassified
Exchange differences
on translation of foreign
operations:
－－－
year (8,405) (8,405) 4,044 4,044 (75,707) (75,707)
－－－－－
Reclassification adjustments
to profit or loss 1 1 9 9
Net change during the year (8,404) － (8,404) 4,044 － 4,044 (75,698) － (75,698)
Effective portion of changes in
fair value of cash flow hedges:
year (41) 0 (40) (291) 93 (198) (369) 0 (360)
to profit or loss 291 (93) 198 246 (78) 167 2,621 (837) 1,783
Net change during the year 250 (92) 157 (45) 14 (31) 2,251 (828) 1,414
Changes in fair value
measurements of available-for-
sale financial assets:
－－－－－－
year 2,167 (776) 1,390
－－－－－－
to profit (5,536) 1,543 (3,993)
Net change during the year －－－ (3,369) 766 (2,602) －－－
Share of other comprehensive
income of associates and joint
ventures accounted for using
equity method:
Amount arising during the year －－－ 18 － 18 －－－
Net change during the year －－－ 18 － 18 －－－
Subtotal (8,153) (92) (8,246) 647 781 1,428 (73,437) (828) (74,274)
Total other comprehensive
income ¥ (8,499) ¥ (124) ¥ (8,624) ¥ 446 ¥ 852 ¥ 1,298 $ (76,553) $ (1,116) $ (77,679)

32. Earnings Per Share AG is subject to the DPLTA based on German

Company Law, which enables an entity to give
direct instructions to a decision-making body,
The basis of the calculation of basic earning per
normally the board meeting, of another entity. In
share and diluted earnings per share is as follows:
addition, under the agreement all profit or loss of
Millions of yen
Thousands of AG is transferred to GmbH.
U.S. dollars
2018 2017 2018
Profit attributable to owners
¥ 18,517 ¥ 15,263 $ 166,789 Shareholders of AG, except for GmbH (hereinafter
the �external shareholders� ), have two options;
of the parent
Profit not attributable to
owners of the parent 1,078 1,068 9,709
Profit used for basic earnings either to offer their shares to GmbH in exchange
per share 17,438 14,195 157,070
for a cash compensation amount, or to receive a
－－－
Profit adjustment for
diluted profit recurring annual cash compensation from GmbH.
Diluted earnings 17,438 14,195 157,070
Weighted-average number
of shares (Thousands of 121,026 121,909 Therefore, GmbH undertakes upon demand of the
shares)
Increase in number of external shareholders to purchase their shares in
common stock shares
for diluted earnings per exchange for the amount of €37.35 per share, or to
share
Increase due to pay them the recurring annual cash compensation
exercising stock options 770 892 of €1.17 per share. The obligation of GmbH to
(Thousands of shares)
Weighted-average number purchase the shares was originally limited to two
of shares outstanding for
121,797 122,801
diluted earnings per share months after the effective date of the agreement.
(Thousands of shares)
Basic earnings per share
¥ 144.09 ¥ 116.44 $ 1.29 However, since some external shareholders
(Yen)
Diluted earnings per share initiated a judicial appraisal proceeding to achieve
(Yen) 143.18 115.59 1.28
a higher recurring compensation or a higher
(Note) Basic earnings per share and diluted earnings per share are
calculated dividing by the average number of shares after
exercise price of the share purchase option, as
deducting the average number of treasury shares during the the result, the time limitation period has been
year from profit attributable to owners of the parent after
deducting the amount attributable to owners of hybrid capital.
extended to two months after the date on which
The average number of treasury shares during the year are the final ruling has been announced in the Federal
calculated after deducting the share of the Company held by
Gazette based on the German law.
The Nomura Trust and Banking Co., Ltd (DMG MORI Employee
Shareholders Association Exclusive Trust) (Average number of
shares during the year of 2,400,144 shares) due to the
The amounts of the recurring cash compensation
implementation of �Trust-Type Employee Stock Ownership
Incentive Plan�. and the exercise price of the share purchase
option have been audited and certified as fair by
independent auditors appointed by a German
33. Business Combinations court and therefore, the Group believes that those
amounts are appropriate.
There was no business combination during the
fiscal year 2018 and 2017. (2) Outline of accounting treatments and
significant non-cash transactions
Due to the entry into force of the DPLTA, the Group
34. Domination and Profit and recognized the net present value of the expected
Loss Transfer Agreement future payment obligations as other financial
liabilities in the consolidated statement of financial
(1) Entry into force of Domination, Profit and Loss position.
Transfer Agreement
On 24th August, 2016, the DPLTA between As a result of revaluation of the discounted present
DMG MORI GmbH ( �GmbH� ), one of the value of the future payment obligations to external
Company’s consolidated subsidiaries, and DMG MORI shareholders at the end of fiscal year 2018, the
AKTIENGESELLSCHAFT ( �AG� ) came into effect.

Group recognized ¥94,680 million ($852,819

thousand) of other financial liabilities (current) and
at the consolidated statement of financial position,
and ¥2,545 million ($22,923 thousand) of financial
expenses in the consolidated statement of profit or
loss for the fiscal year 2018.
35. Significant Subsidiaries
The Group does not recognize significant non-controlling interests in its subsidiaries.
36. Related Party Transactions
(1) Transactions with related parties

Transactions with related parties carried out during the reporting period are as follows:
Thousands of
Millions of yen
U.S. dollars
Transaction
Name of related Details of Transaction amounts
Category amounts
parties transactions
2018 2017 2018
DMG MORI
Associates
Finance GmbH
Sales of products ¥ 15,201 ¥ 12,948 $ 136,921
Receivables and payables due from and to major related parties are as follows:
Name of related Details of 2018 2017 2018

Category
parties transactions Millions of yen Millions of yen Millions of yen Millions of yen Millions of yen Millions of yen
DMG MORI
Associates
Finance GmbH
Sales of products ¥ 2,731 ¥ 975 ¥ 1,485 ¥ 801 $ 24,599 $ 8,782
(2) Key management compensation 37. Contingent Liabilities

The breakdown of key management compensation
in the Group is as follows: The breakdown of guarantee obligations is as follows:
Thousands of Thousands of
U.S. dollars U.S. dollars
2018 2017 2018 2018 2017 2018
Compensation and
bonuses ¥ 2,189 ¥ 1,789 $ 19,717 Guarantees for
lease payments by ¥ 2,527 ¥ 2,486 $ 22,761
－
Share-based customers
payments 16 144
Other guarantee
obligations 599 535 5,395
Total ¥ 2,205 ¥ 1,789 $ 19,861
Total ¥ 3,127 ¥ 3,021 $ 28,166
(Note 1) Key management compensation is paid to directors, including
outside directors, of the Company, and important director (Note) Guarantee obligations are not recognized as a financial liability,
executive officers of subsidiaries such as DMG MORI AG. as the probability of executing these guarantees is very low.
(Note 2) The compensation and bonuses paid to the directors of DMG
MORI AG totaled ¥1,314 million ($11,835 thousand) and
¥1,096 million for the fiscal years 2018 and 2017, respectively.
(Note 3) Share-based payments are costs of restricted stock
38. Events after Reporting Period
compensation for the directors, excluding outside directors
of the Company.
There is no applicable event.

Corporate Data Corporate Data
Basic information
as of December 31, 2018
Corporate Profile
2-35-16 Meieki, Nakamura-ku, Nagoya City,
Company Name DMG MORI CO., LTD. National Head Office
Aichi 450-0002, Japan
Capital 51,115 million yen Tokyo Global Headquarters 2-3-23, Shiomi, Koto-ku, Tokyo 135-0052, Japan
Manufacture and Sale of Machine Tools (Machining
Business Operations
Established October, 1948 Centers, CNC lathes and other products)
Number of employees 13,042 (consolidated)
Registered Head Office Yamato-Koriyama City, Nara, Japan Website https://www.dmgmori.co.jp
Share
Total number of authorized shares 300,000,000
Number of shares outstanding 123,935,256 (excluding 2,018,427 treasury shares)
Number of shareholders 38,669
Top share holders

Name Position (in thousand shares) % of outstanding shares
The Master Trust Bank of Japan, Ltd. (trust account) 5,587 4.51
Masahiko Mori 3,591 2.90
Japan Trustee Services Bank, Ltd.(Mori Manufacturing Research and Technology Foundation account) 3,500 2.82
Japan Trustee Services Bank, Ltd. (trust account) 3,085 2.49
DMG MORI Employee Shareholders Association 2,899 2.34
Japan Trustee Services Bank, Ltd. (trust account 5) 2,450 1.98
The Nomura Trust and Banking Co., Ltd. (DMG Mori Co., Ltd. Employee Stock Ownership Plan) 2,273 1.83
CDSIL AS DEPOSITARY FOR OLD MUTUAL GLOBAL INVESTORS SERIES (standing proxy: Citibank, N.A.) 2,229 1.80
The Nomura Trust and Banking Co., Ltd. (investment trust account) 2,175 1.76
Japan Trustee Services Bank, Ltd. (trust account 9) 2,096 1.69
※Although DMG MORI holds treasury stocks (2,018,427 shares), the company is excluded from the major shareholders shown above.
※Shareholding ratio excludes treasury stock.
Shareholder composition Distribution by position
Number of shares Number of Number of shares Number of

(1,000 shares) shareholders (1,000 shares) shareholders
Foreign corporate bodies (other than 1,000,000 shares or more 54,880 26
40,588 321
individuals)
500,000 shares or more 15,577 23
Individuals/ Others 42,620 37,911
100,000 shares or more 20,038 84
Financial institutions 32,712 72
50,000 shares or more 4,083 58
Securities companies 4,399 60
10,000 shares or more 7,421 424
Other corporate bodies (Japan) 3,583 268
5,000 shares or more 3,962 643
Treasury shares 2,018 1
1,000 shares or more 12,649 7,680
Foreign individual investors 29 36 500 shares or more 3,053 5,130
Up to 500 shares 4,287 24,601

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DMG MORI CO., LTD.

Tokyo Global Headquarters
2-3-23 Shiomi Koto-ku, Tokyo 135-0052, Japan
Phone: +81-3-6758-5900
Fax : +81-3-6758-5919
www.dmgmori.co.jp/en/

2018 Ar All e

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a

Fiscal Year 2018

As befits a worldwide corporation, we will:

As profitability is a goal of all healthy business organizations

As an industry leader and responsible corporate citizen, we will:

Contribute our fair share to our local community and society;

1 | Annual REport 2018

Descriptions in the annual report Explanations

71st Annual General Meeting of

117th Annual General Meeting of

Release for the 2nd Quarter 2019

Release for the 3rd Quarter 2019

Annual REport 2018 | 2

3 | Annual REport 2018

P5-9 Management Message

P10 Financial Summary

P11-26 Business Highlight

P27-38 Core Competence

P39-68 Business Summary

P69-72 Major Group Company

P73-76 CSR Activities

P77-84 Corporate Governance

P85-88 Risk Management

P93-101 Human Capital

P102-105 Social Activity

P106-163 Consolidated Financial

P164 Corporate Data

This symbol indicates a video

External Director Corporate Auditor External Auditor

Makoto Nakajima Toshio Kawayama Yoshinori Kawamura

Hiroaki Tamai Makoto Fujishima Minoru Furuta

Annual REport 2018 | 4

Message from group CEO

5 | Annual REport 2018

investment cost, shorten delivery lead time, and make

Multi-axis technology allows us to machine workpieces

Annual REport 2018 | 6

■ Organization Chart (from January 2019)

R&D Production SSEP Group Sales & Production

7 | Annual REport 2018

Message from CEO of DMG MORI AG

Digitization� – for customers and suppliers.

ADDITIVE MANUFACTURING is one future area with high

In addition, to our five strategic future topics －

Annual REport 2018 | 8

DMG MORI's high-quality and high-efficiency total production solutions

Message from Executive Vice President

CO makes long-term investment in human resources. In order to mitigate the

In FY 2019, we expect a shift towards an adjustment phase, although the overall

9 | Annual REport 2018

In billion JPY In million EUR

（Operating profit margin） 7.2% 6.8% 7.2% 6.8%

Net profit 19.4 15.7 3.7 23.6 149 124 25 20.0

Net profit attributable to the

Free cash flow 30.4 30.0 0.3 233 237 －4

2018 2017 Changes

Employees 13,042 12,375 667

*Employees at the end of each period

■ Machine tool ■ Sales revenues ■ Operating profit ■ Dividends per Share

　customers (sales revenue and operating profit)