NOTES TO THE CONSOLIDATED STATEMENTS OF INCOME

4 Net sales

Net sales include revenues resulting from the rendering of services of €20,611 million (2004/2005: €18,178 million).

5 Other operating income

Other operating income includes gains on the disposal of property, plant and equipment and intangible assets in the amount of €44 million (2004/2005: €34 million), gains of €0 million (2004/2005: €1 million) resulting from currency exchange differences recognized in the income statement as well as insurance compensation in the amount of €213 million (2004/2005: €29 million) which mainly results from two bigger fire damages. In addition other operating income includes €153 million resulting from the break-up fee which had to be paid by Dofasco in accordance with the terms of the Support Agreement.

6 Other operating expenses

Other operating expenses include losses on the disposal of property, plant and equipment and intangible assets in the amount of €47 million (2004/2005: €39 million), restructuring charges in the amount of €99 million (2004/2005: €88 million), other provisions (excluding restructuring) in the amount of €22 million (2004/2005: €139 million) and goodwill impairment of €34 million (2004/2005: €35 million). Additional expenses in connection with non-customer related research and development activities are shown here in the amount of €188 million (2004/2005: €166 million).

7 Financial income/(expense), net

Borrowing costs in the amount of €13 million (2004/2005: €16) were capitalized during the period. If financing is directly allocable to a certain investment, the actual borrowing costs are capitalized. If no direct allocation is possible, the Group's average borrowing interest rate of the current period is taken into account to calculate the borrowing costs.

million €
			Year ended Sept. 30, 2005		Year ended Sept. 30, 2006
Income from companies accounted for using the equity method			37		28
Interest income from financial receivables			54		140
Expected return on plan assets			120		144
Interest income			174		284
Interest expense from financial liabilities			(278)		(264)
Interest cost of pensions and health care obligations			(478)		(441)
Interest expense			(756)		(705)
Income from investments			9		6
Write-down of financial assets			(7)		(3)
Gain/(loss) from disposals of financial assets			(23)		(33)
Accretion of other provisions			(2)		(5)
Miscellaneous, net			60		17
Other financial income/(expense), net			37		(18)
Financial income/(expense), net			(508)		(411)

8 Investment in RAG Aktiengesellschaft

The change of the political environment concerning the extraction of coal has necessitated an impairment of the Group's cost investment in RAG Aktiengesellschaft. This resulted in an impairment loss of €442 million which has been reported in a separate line within the consolidated statement of income together with a €32 million increase of the Group's decommissioning liabilities stemming from its former mining business prior to 1969. The estimate regarding the carrying amount of the investment is unchanged.

9 Income taxes

Income tax expense/(benefit) for the year ended September 30, 2006 and the previous year consists of the following:

million €
			Year ended Sept. 30, 2005		Year ended Sept. 30, 2006
Current income tax expense for the reporting period			381		601
Current income tax expense/(benefit) for prior periods			4		(2)
Deferred income tax expense for the reporting period			380		351
Deferred income tax benefit for prior periods			(28)		(31)
Total			737		919

The German corporate income tax law applicable for 2005/2006 sets a statutory income tax rate of 25% (2004/2005: 25%) plus a solidarity surcharge of 5.5%. On average, the Group's German companies are subject to a trade tax rate of 13.04% (2004/2005: 13.04%). Therefore, at year-end September 30, 2006, deferred taxes of German companies are calculated with a combined income tax rate of 39.42% (2004/2005: 39.42%). The respective country-specific tax rates employed for companies outside Germany range from 5.7% to 42.3% (2004/2005: 5.7% to 42.3%). In fiscal year 2005/2006, changes in foreign tax rates resulted in deferred tax expense in the amount of €14 million (2004/2005: €16 million).

The components of income taxes recognized in equity are as follows:

million €
			Year ended Sept. 30, 2005		Year ended Sept. 30, 2006
Income tax expense as presented on the income statement			737		919
Income tax expense/(benefit) on cumulative income and expense directly recognized in equity			(255)		126
Income tax expense/(benefit) from discontinued operations			58		0
Total			540		1,045

Deferred tax assets are recognized only to the extent that the realization of such tax benefits is probable. In determining the related valuation allowance, all positive and negative factors, also including prospective results, are taken into consideration in estimating whether sufficient taxable income would be generated to realize deferred tax assets. These estimates can change depending on the future course of events. As of September 30, 2006, tax loss carryforwards for which no deferred tax asset is recognized amount to €1,045 million (2005: €1,101 million). According to tax legislation as of September 30, 2006, an amount of €580 million (2005: €646 million) of these tax losses may be carried forward indefinitely and in unlimited amounts whereas an amount of €465 million (2005: €455 million) of these tax loss carryforwards will expire over the next 20 years if not utilized. In addition, as of September 30, 2006, no deferred tax asset is recognized for deductible temporary differences in the amount of €376 million (2005: €274 million).

Dividend distributions for fiscal year 2005/2006 will not entail corporate income tax relief or additional corporate income tax payments at ThyssenKrupp AG. No deferred tax liabilities were recorded on undistributed profits of foreign subsidiaries, as such profits are to remain invested on a permanent basis. It is not practicable to estimate the amount of unrecognized deferred tax liabilities for these undistributed foreign earnings.

Significant components of the deferred tax assets and liabilities are as follows:

million €
* Gross of deferred tax assets and liabilities included in "assets held for sale" or "liabilities associated with assets held for sale", respectively.
			Deferred tax assets				Deferred tax liabilities
			Sept. 30, 2005		Sept. 30, 2006		Sept. 30, 2005		Sept. 30, 2006
Intangible assets			46		59		277		345
Property, plant and equipment			149		209		998		997
Financial assets			20		13		49		55
Inventories			128		115		860		1,154
Other assets			131		200		483		337
Accrued pension and similar obligations			1,673		1,186		17		65
Other provisions			340		500		270		127
Other liabilities			704		848		186		280
Tax loss carryforwards			765		541		–		–
Gross value			3,956		3,671		3,140		3,360
Valuation allowance			(435)		(422)		–		–
Offset			(2,732)		(2,542)		(2,732)		(2,542)
Balance sheet amount*			789		707		408		818

Deferred tax assets and liabilities are offset if they pertain to future tax effects for the same taxable entity towards the same taxation authority.

For fiscal year 2005/2006, the income tax expense of €919 million (2004/2005: €737 million) presented in the financial statements is €115 million lower (2004/2005: €76 million higher) than the expected income tax expense of €1,034 million (2004/2005: €661 million) which would result if the German combined income tax rate of 39.42% (2004/2005: 39.42%) were applied to the Group's income from continuing operations before income taxes. The following table reconciles the expected income tax expense to the income tax expense presented in the financial statements.

million €
			Year ended Sept. 30, 2005		in %		Year ended Sept. 30, 2006		in %
Expected income tax expense			661		39.4		1,034		39.4
Foreign tax rate differential			(17)		(1.0)		(80)		(3.0)
Changes in tax rates or laws			16		1.0		14		0.5
Tax consequences of disposal of businesses			49		2.9		(2)		(0.1)
Permanent items			51		3.0		(7)		(0.3)
Change in valuation allowance			12		0.7		22		0.8
Tax expense for prior periods			(24)		(1.5)		(33)		(1.2)
Other, net			(11)		(0.6)		(29)		(1.1)
Income tax expense as presented on the income statement			737		43.9		919		35.0

10 Earnings per share

Basic earnings per share are computed as follows:

million €
			Year ended Sept. 30, 2005				Year ended Sept. 30, 2006
			Total amount in million €		Earnings per share in €		Total amount in million €		Earnings per share in €
Numerator:
Income from continuing operations (net of tax)			425		0.85		1,643		3.24
Loss from discontinued operations (net of tax)			(1)		0.00		–		–
Gain on disposal of discontinued operations (net of tax)			614		1.23		–		–
Net income (attributable to ThyssenKrupp AG's stockholders)			1,038		2.08		1,643		3.24
Denominator:
Weighted average shares			498,628,610				507,731,743

Relevant number of common shares for the determination of earnings per share

Earnings per share have been computed by dividing income attributable to common stockholders of ThyssenKrupp AG (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Shares issued during the period and shares reacquired during the period have been weighted for the portion of the period that they were outstanding.

The weighted average number of outstanding shares was reduced by the reacquisition of shares on May 06, 2003 and increased by the sale of those shares in the 2nd quarter ended March 31, 2004, the 3rd quarter ended June 30, 2005 and the 1st quarter ended December 31, 2005. In the 4th quarter ended September 30, 2006, the weighted average number of outstanding shares was reduced again by the reacquisition of shares.

There were no dilutive securities in the periods presented.

11 Additional disclosures to the consolidated statements of income

Personnel expenses included in the consolidated statements of income are comprised of:

million €
* excluding expected return on plan assets and interest cost which are recognized as part of interest income/expense
			Year ended Sept. 30, 2005		Year ended Sept. 30, 2006
Wages and salaries			7,059		7,261
Social security taxes			1,278		1,259
Net periodic pension costs - defined benefit*			126		154
Net periodic pension costs - defined contribution			29		34
Net periodic postretirement benefit cost other than pensions*			16		8
Other expenses for pensions and retirements			104		125
Related fringe benefits			363		464
Total			8,975		9,305

The annual average number of employees is as follows:

			Year ended Sept. 30, 2005		Year ended Sept. 30, 2006
Steel			30,383		30,683
Stainless			12,288		12,156
Special Materials			2,381		–
Automotive			44,386		41,749
Technologies			29,750		27,485
Elevator			33,139		35,164
Services			33,811		37,982
Corporate			1,078		1,353
Total			187,216		186,572
This total breaks down to
Wage earners			119,150		119,312
Salaried employees			63,513		62,896
Trainees			4,553		4,364

Auditors' fees and services

For the services performed by the Group auditors KPMG Deutsche Treuhand-Gesellschaft, Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft and the companies of the world-wide KPMG association in fiscal years 2004/2005 and 2005/2006 the following fees were recognized as expenses:

million €
			Year ended Sept. 30, 2005				Year ended Sept. 30, 2006
			Total		thereof Germany		Total		thereof Germany
Audit fees			22		13		18		9
Audit-related fees			2		1		3		2
Tax fees			1		0		1		0
Fees for other services			1		0		1		1
Total			26		14		23		12

The audit fees include mainly fees for the year-end audit of the consolidated financial statements, the auditors' review of the interim consolidated financial statements, and the statutory auditing of ThyssenKrupp AG and the subsidiaries included in the consolidated financial statements. The audit-related fees essentially comprise the fees for due diligence services in connection with acquisitions and disposals and auditing of the internal control system. The tax fees include in particular fees for tax consulting services for current and planned transactions, for the preparation of tax returns, for tax due diligence services, for tax advice in connection with projects and Group-internal reorganizations as well as tax advice for employees sent to work abroad. The fees for other services are mainly fees for projectrelated consulting services.