3. Statements of cash flows

The statements of cash flows present the origin and use of cash flows during the fiscal years 2002/2003 through 2004/2005. It is of central importance for the evaluation of the financial position of the ThyssenKrupp Group. The statements of cash flows presented include the cash flows resulting from discontinued operations.

The amounts taken into consideration in the statements of cash flows correspond to the balance sheet item "Cash and cash equivalents".

The cash flows from investing activities and financing activities have been determined based on payments. In contrast, the cash flow from operating activities is determined indirectly by reconciling the Group's net income to cash provided by operating activities. The changes in balance sheet items in connection with operating activities have been adjusted for the effects of foreign currency translations and changes in the scope of consolidation. Therefore, they do not directly conform to the corresponding changes based on the consolidated balance sheets.

Operating activities provided €2.2 billion during the fiscal year 2004/2005 compared to €2.5 billion during the previous year. The decrease of cash flows from operating activities results from an increase of net working capital from €(0.1) billion to €(0.5) billion due to the extended business volume, whereas the Group's net income before depreciation and amortization, before deferred tax expenses and before gains from the disposal of fixed assets rose by €0.1 billion.

The discontinued operations provided cash flows from operating activities in the amount of €26 million (2003/2004: cash flow provided €170 million).

Investing activities provided cash flows of €0.9 billion; in 2003/2004 investing activities used €(0.9) billion. As a result cash flow from investing activities improved by €1.9 billion during 2004/2005.The increase is the result of an increase of proceeds from the sale and from disposals of fixed assets by €1.7 billion to €2.4 billion offset by an increase in investment activities by €0.1 billion to €1.8 billion. The proceeds from the sale of businesses in the previous year were influenced especially by the sale of the Triaton Group in the Services segment, by the sales of the Novoferm Group in the Technologies segment and Berkenhoff GmbH in the Steel segment. During the current reporting period cash inflows result from the disposals of the Residential Real Estate business (€1.9 billion), Edelstahl Witten- Krefeld GmbH (EWK) in the Steel segment (€0.1 billion) and Alu Castings Group in the Automotive segment (€0.1 billion). Disposals of property, plant and equipment and intangible assets resulted in an – compared to the previous year unchanged – additional cash inflow totaling €0.2 billion. Moreover, especially due to the acquisition of Howaldtswerke-Deutsche Werft (HDW), acquired cash and cash equivalents increased by €0.3 billion.

The discontinued operations used cash flows from investing activities in the amount of €16 million (2003/2004: cash flow used €114 million) due to the Residential Real Estate business, MetalCutting activities and Turbine components.

The free cash flow, i.e. the total of cash flows provided by operating activities and cash flows provided by or used in investing activities, increased significantly by €1.5 billion to €3.1 billion. During fiscal year 2004/2005 the free cash flow was used for dividend payments of €0.3 billion and for the entire redemption of net financial debt of €2.8 billion.

Other cash flows presented within financing activities for fiscal year 2004/2005 comprise cash outflows of €1 million (2003/2004: €8 million cash inflows), resulting from Group overnight money transactions with non-consolidated subsidiaries. During fiscal year 2004/2005 cash payments of €1 million result from short-term financial accounts receivable (2003/2004: €52 million cash inflows).

The discontinued operations used cash flows from financing activities in the amount of €(47) million (2003/2004: €(318) million).

Changes in foreign exchange rates increased cash and cash equivalents by €51 million (2003/2004: €(13) million), which primarily is due to the decrease of the us dollar (basis: €1) during fiscal 2004/2005.

Change in cash and cash equivalents million €

The internal financing capability, defined as the ratio of cash flow from operating activities and cash flow from investing activities, has improved to (2.3) (2003/2004: 2.6), primarily due to the proceeds from the sale of Residential Real Estate business. The debt to cash flow ratio, which indicates the period during which net financial payables can be theoretically covered by the cash flow from operating activities, was 1.1 years in 2003/2004. As of September 30, 2005 the Group reports net financial receivables of €9 million.