Report by the Supervisory Board

In this report the Supervisory Board gives an account of its activities in the 2006/2007 fiscal year and describes its ongoing dialogue with the Executive Board, the main subjects of discussions at the full Supervisory Board meetings, the work of the committees and the audit of the financial statements.

In the 2006/2007 fiscal year, the Supervisory Board continued to perform the functions for which it is responsible according to statutory provisions and the Articles of Association with the utmost care. We regularly advised the Executive Board on the management of the Company and supervised the conduct of business. The Supervisory Board was directly involved from an early stage in all decisions of fundamental significance for the Company. In written and verbal reports, the Executive Board furnished us with regular, up-to-date and comprehensive information on all relevant issues of corporate planning and strategy, business progress, and the state of the Group. We paid particular attention to the risk situation, risk management and the ThyssenKrupp compliance program. Where the actual course of business deviated from plans and targets, this was explained to the Supervisory Board in detail and examined by us on the basis of the documents presented. The Executive Board agreed the Company's strategic alignment with us. All events of importance to the Company were discussed in detail by the Supervisory Board Executive Committee (Praesidium) and the full Supervisory Board on the basis of reports by the Executive Board.

Where required by statutory provisions and the Articles of Association, the Supervisory Board voted on the reports and resolution proposals of the Executive Board after detailed examination and discussion. In addition to the intensive work carried out by the Supervisory Board and the committees, I and other Supervisory Board members were personally in regular contact with the Executive Board outside the meetings and were kept informed about the current business situation and key business transactions. In separate meetings I discussed the perspectives and future strategic focus of the individual Group segments with the Executive Board.

Four Supervisory Board meetings were held in fiscal 2006/2007. Between meetings, the Executive Board informed us immediately and in detail by means of written reports about events of importance for assessing the current situation and further developments and for the management of the Company. In the event of urgent transactions, the Supervisory Board passed resolutions by written vote where necessary. Conflicts of interest of Executive Board and Supervisory Board members, which must be disclosed to the Supervisory Board immediately and reported to the Annual General Meeting, did not occur.

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Efficient work in the Supervisory Board committees

To enhance the efficiency of its work, The Supervisory Board has set up a total of six committees which prepare the resolutions of the Supervisory Board as well as the issues to be dealt with at the full meetings. Where legally permissible, in individual cases decision-making powers of the Supervisory Board were delegated to committees. This delegation of work has proved extremely valuable in practice. All committees are chaired by the Supervisory Board Chairman, with the exception of the Audit Committee. The chairmen of the committees reported regularly and in detail on the meetings and the work of the committees in the full-session meetings. The compositions of the individual committees are shown under Committees.

The Executive Committee (Praesidium) met five times in the reporting period. Between meetings, I discussed projects of particular importance to the Group with the members of the Executive Committee. The main subjects of discussion were the steel mill project in Brazil and the building of a new joint plant for the Steel and Stainless segments in the USA. The Executive Committee also dealt with the payment of the fine imposed by the EU Commission on account of competition-law infringements in the Elevator segment. It discussed the consequences to be drawn from this and the Group's compliance program. Other subjects were the implementation of the German Corporate Governance Code, the preparation of the efficiency review of the Supervisory Board and a new Supervisory Board compensation structure. Detailed information on Supervisory Board compensation is provided in the compensation report.

The Personnel Committee, which is responsible for the employment contracts and compensation of the Executive Board members and for other Executive Board matters, met four times. Key subjects of discussion were the renewal of Executive Board employment contracts, the compensation system and the amount of compensation paid to the Executive Board, the acceptance of external directorships by Executive Board members and the retention of a law firm to which a member of the Supervisory Board belongs. In its meeting on May 11, 2007 the Personnel Committee approved a revised bonus system for the Executive Board which was also discussed at the ensuing full-session meeting.

Once again in the past fiscal year it was not necessary to convene the Mediation Committee in accordance with Art. 27 par. 3 German Codetermination Act (MitbestG).

The Audit Committee likewise met four times. Its work focused in particular on the parent-company and consolidated financial statements, the audit reports, as well as the further development of the risk management system and the ThyssenKrupp compliance program. The Audit Committee discussed the interim reports to be published in the presence of the auditors. Furthermore, it obtained the statement of independence from the auditors required under Section 7.2.1 of the German Corporate Governance Code, awarded the audit engagement, and determined the audit priority areas and the auditors’ fee. Further subjects discussed were the antitrust investigations by the EU Commission in the Elevator segment and the fine imposed in this connection, a report by Corporate Internal Auditing about its internal auditing work, and a routine report on litigation in the Group. The auditors participated in all four Audit Committee meetings and reported in detail on all findings and occurrences in the course of the audit of the annual financial statements and the audit review of the quarterly financial statements which were of significance to the work of the Supervisory Board.

The Strategy, Finance and Investment Committee met twice in the reporting period. It dealt with the international focus and strategic development of the Group and the individual segments and with corporate and investment planning, and prepared the relevant resolutions of the Supervisory Board. It also discussed in detail the building of the steel mill in Brazil as well as the future strategy of the Steel and Stainless segments in the NAFTA market and the associated planned building of a new plant in the USA.

The Nomination Committee, which was formed for the first time in September 2007 and will propose suitable candidates to the Supervisory Board for proposal to the Annual General Meeting when new elections are due, did not meet in the reporting period.

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Wide spectrum of topics again discussed in the full Supervisory Board meetings

The development of sales, earnings and employment in the Group and the individual segments, the financial situation and all major investment and disposal projects were the subject of regular deliberations at the full-session meetings. In several meetings we discussed the steel mill project in Brazil, the future alignment of the Steel and Stainless segments in the NAFTA region, the administrative fine proceedings of the EU Commission in connection with infringement of competition law in the Elevator segment, and Executive Board matters.

At the beginning of November 2006, the Supervisory Board approved by written procedure, on the basis of extensive documentation, the sale of the chassis and suspension business of ThyssenKrupp Automotive in North America to Martinrea.

In the meeting on November 30, 2006 we focused on the parent-company and consolidated financial statements for the year ended September 30, 2006 and the corporate plan for fiscal 2006/2007. On the basis of a detailed report by the Executive Board we also discussed the strategic development of the Group, focusing in particular on the steel mill project in Brazil, the NAFTA strategy of the Steel and Stainless segments, and an assessment of the chances of acquiring the Canadian steel manufacturer Dofasco. In this connection, the Supervisory Board also discussed the consequences for ThyssenKrupp of the continued consolidation on the world steel market. Against the background of the major investment projects, we also dealt in detail with the financial latitude available, the Group's rating situation and the safeguarding of dividend continuity. Another key subject in this meeting was the antitrust investigation by the EU Commission in the Elevator segment and the measures taken by the Executive Board in this connection. In preparation for the Annual General Meeting in January 2007, we discussed with the Executive Board the creation of authorized capital as well as the creation of a designation right for the Alfried Krupp von Bohlen und Halbach Foundation in connection with future appointments to the Supervisory Board. Furthermore, we discussed the compensation system for the Executive Board and obtained a detailed progress report on the new ThyssenKrupp Quarter in Essen. In the absence of the Executive Board, the Supervisory Board dealt with the efficiency review of the Supervisory Board which had previously been prepared by the Executive Committee. A key issue here was the new compensation system for the Supervisory Board, information on which is contained in the compensation report below.

In the meeting on January 19, 2007 - immediately before the Annual General Meeting - the Executive Board reported mainly on the current situation of the Group. The meeting also served to prepare for the ensuing stockholders' meeting. In addition, we approved an investment program for the expansion of the Waupaca foundry in America. Furthermore, the Executive Board presented its deliberations on the disposal of a real estate package including the current headquarters building in Düsseldorf. We approved the disposal on conclusion of the negotiations in March 2007 by written procedure on the basis of extensive documentation.

We used the meeting on May 11, 2007 mainly to discuss the Group's strategic development with the Executive Board. On the basis of detailed documents, the Supervisory Board approved the construction of a new joint steel mill for the Steel and Stainless segments in the USA, aimed at enhancing our market position in the NAFTA region. In the same meeting we approved the investment plan for the 2007/2008 fiscal year and the financing thereof and discussed with the Executive Board the effects on ThyssenKrupp of the corporate tax reform planned by the German government. Following a detailed presentation, we discussed the ThyssenKrupp compliance program and the measures for its continued development with the Executive Board. In consultation with the Supervisory Board, the compliance program was reviewed by a law firm. The review found that it meets the legal requirements and best practice standards. Further, we dealt in this meeting with the modified bonus system for the Executive Board, under which part of the bonuses paid to the segment executive board chairmen will be linked to their segment’s EBT and ROCE from fiscal year 2006/2007. In addition, we approved the sale of the 33.33% shareholding in the Aventec group in Mexico, which is active in automotive body stampings, to the co-shareholders Hirotec and Sumitomo.

Items on the agenda for the Supervisory Board meeting on September 05, 2007 included the report by the Executive Board on the situation of the Group and a progress report on the building of the new steel mill in the USA. A detailed presentation gave us a deeper insight into the development and future alignment of the Elevator segment, which we discussed with the Executive Board. Furthermore, the Supervisory Board gave its approval for the disposal of the shareholding in RAG AG to the RAG Foundation and for the acquisition of the steel trading company Ferostav in Slovakia by the Services segment. In addition, in accordance with the German Corporate Governance Code as amended on June 14, 2007, the Supervisory Board resolved an amendment of the Rules of Procedure for the Executive Board, the Supervisory Board and the Audit Committee and formed a Nomination Committee.

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High corporate governance standards maintained

The Supervisory Board continuously monitored the further development of corporate governance standards. The Executive Board – also on behalf of the Supervisory Board – reports on corporate governance at ThyssenKrupp in the corporate governance report in accordance with section 3.10 of the German Corporate Governance Code. In the Supervisory Board meeting on September 05, 2007 we discussed the implementation of the Code at ThyssenKrupp in depth with the Executive Board. We focused in particular on the amendments to the Code made by the Government Commission on the German Corporate Governance Code in its meeting on June 14, 2007. On October 01, 2007 the Executive Board and Supervisory Board issued an updated Declaration of Conformity according to Art. 161 of the Stock Corporation Act (AktG) and made it permanently available to stockholders on the Company website. ThyssenKrupp AG complies with all recommendations of the Code as amended on June 14, 2007, published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette (Bundesanzeiger) on July 20, 2007.

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Detailed discussion of the audit of the parent-company and consolidated financial statements

The parent-company financial statements for the period October 01, 2006 to September 30, 2007, prepared by the Executive Board in accordance with HGB (German GAAP) rules, and the management report of ThyssenKrupp AG were audited by KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin. The audit contract had been awarded by the Audit Committee of the Supervisory Board in accordance with the resolution of the Annual General Meeting on January 19, 2007. The auditors issued an unqualified audit opinion.

The consolidated financial statements of ThyssenKrupp AG were prepared on the basis of IFRS in accordance with Art. 315a HGB. The consolidated financial statements and the management report on the Group were also given an unqualified audit opinion.

The Audit Committee had selected the following key audit areas for the reporting period: The hedging of raw material and commodity supplies through suitable derivatives, the sale and assignment of inventories, as well as the internal controls in selected areas and their effectiveness against corruption risks. The reports on this as well as the other audit reports and financial statement documentation were sent to all Supervisory Board members in good time. They were discussed at length in the Audit Committee meeting on November 16, 2007 and in the Supervisory Board meeting on November 30, 2007. At both meetings, the auditors took part in the discussion of the parent-company and consolidated financial statements. They reported on the main results of the audits and were available to the Supervisory Board to answer questions and provide supplementary information.

Following our own examination of the parent-company financial statements, the consolidated financial statements, the management report and the management report on the Group, we approved the result of the audit and, in the meeting on November 30, 2007, on the recommendation of the Audit Committee approved the parent-company and consolidated financial statements. The parent-company financial statements are thus adopted. We concurred with the proposal of the Executive Board for the appropriation of net income.

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Changes in the composition of the Supervisory Board and Executive Board

In the year under review, there was one change in the composition of the Supervisory Board of ThyssenKrupp AG: Mr. Gerold Vogel stepped down from the Supervisory Board at the close of December 31, 2006. By court ruling effective January 04, 2007, Mr. Theo Frielinghaus was appointed to the Supervisory Board as his successor. Mr. Frielinghaus also succeeds Mr. Vogel as a member of the Strategy, Finance and Investment Committee. The Supervisory Board thanks Mr. Vogel for his constructive and expert contributions and for the good and trustful cooperation. Also on the Strategy, Finance and Investment Committee, Mr. Markus Bistram took over from Mr. Peter Scherrer as from January 19, 2007.

In its meeting in November 2006, the Supervisory Board extended the appointment of Mr. Edwin Eichler as member of the Executive Board of ThyssenKrupp AG until September 30, 2012. In the January 2007 meeting, the appointment of Mr. Ralph Labonte as Executive Board member and labor director was extended until December 31, 2012, and in the May 2007 meeting the appointment of Dr. Ulrich Middelmann as Executive Board member and Executive Board Vice Chairman was extended until September 30, 2010. In the November 2007 meeting the Supervisory Board extended the appointments of Mr. Jürgen H. Fechter and Dr.-Ing. Karl-Ulrich Köhler, in each case until September 30, 2013.

At the close of November 30, 2006 Dr. A. Stefan Kirsten left the Company at his own request. The Supervisory Board thanks Dr. Kirsten for his successful work for the Group. Dr. Kirsten’s functions were allocated to Dr. Middelmann with the exception of information management, which was assigned to Mr. Labonte.

The Supervisory Board thanks the executive and management boards, the employees and employee representatives of all Group subsidiaries and expresses its appreciation for their successful work in the past fiscal year.

The Supervisory Board

Dr. Gerhard Cromme
Chairman

Düsseldorf, November 30, 2007

Source: Annual Report 2006/2007, p. 18-23