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Notes to the interim condensed consolidated financial statements

ThyssenKrupp Aktiengesellschaft ("ThyssenKrupp AG" or "Company") is a publicly traded corporation domiciled in Germany. The interim condensed consolidated financial statements of ThyssenKrupp AG and subsidiaries, collectively the "Group", for the three months ended December 31, 2007, were authorized for issue in accordance with a resolution of the Executive Board on February 07, 2008.

The accompanying Group's interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations adopted by the International Accounting Standards Board (IASB) for interim financial information effective within the European Union. Accordingly, these financial statements do not include all of the information and footnotes required by IFRS for complete financial statements for year end reporting purposes.

The accompanying Group's interim condensed consolidated financial statements have been reviewed. In the opinion of Management, the interim financial statements include all adjustments of a normal and recurring nature considered necessary for a fair presentation of results for interim periods. Results of the period ended December 31, 2007, are not necessarily indicative for future results.

The preparation of interim financial statements in conformity with IAS 34 Interim Financial Reporting requires Management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The accounting principles and practices as applied in the interim condensed consolidated financial statements correspond to those pertaining to the most recent annual consolidated financial statements. A detailed description of the accounting policies is published in the notes to the annual consolidated financial statements of our annual report 2006/2007. In the 1st quarter ended December 31, 2007, the Group early adopted IFRS 8 "Operating Segments"; the adoption has no impact on the previous idenfication of segments.

In fiscal year 2007/2008, the IASB has issued the following Standards which still must be endorsed by the EU before they can be adopted:

In January 2008, the IASB issued the amended versions of IFRS 3 "Business Combinations" and IAS 27 "Consolidated and Separate Financial Statements". The main change concerns the accounting for acquisitions involving the purchase of less than 100% of the shares of a company. An option is added allowing entities to recognize goodwill from an acquisition by the "full goodwill method", i.e. including the portion attributable to minority interests. In addition, acquisitions or partial disposals of shares without loss of control must be accounted for as equity transactions. Furthermore, all acquisition-related costs must be expensed as incurred. The amended Standards must be applied to business combinations in fiscal years beginning on or after July 01, 2009, while earlier application of both Standards is permitted in fiscal years beginning on or after June 30, 2007. Currently, Management does not expect the adoption of the amended Standards to have a material impact on the Group's consolidated financial statements.

Also in January 2008, the IASB issued an amendment to IFRS 2 "Share-based Payment". The amendment clarifies that vesting conditions are service conditions and performance conditions only. It also specifies that all plan cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The application of the amended Standard is compulsory for fiscal years beginning on or after January 01, 2009, while earlier application is permitted. Currently, Management does not expect the adoption of the amended Standards to have a material impact on the Group's consolidated financial statements.

On January 01, 2005, the Group began to participate in the European Union Emissions Trading Scheme (ETS). The Group received notification from the national emissions-trading agency that it is entitled to receive allowances to emit 56.0 million tons of CO2 during the compliance period 2005 – 2007. The majority of the total allowances are allocated to the Steel segment. The rights are capitalized at cost as an intangible asset. If the emissions are expected to exceed the amount covered by the available allowances, the Group records an obligation for the purchase of additional allowances.

In the 1st quarter ended December 31, 2007, the Group acquired companies that are, on an individual basis, immaterial. Based on the values of the acquisition date, these acquisitions affected, in total, the Group's consolidated financial statements as presented below:

million €
1st quarter ended Dec. 31, 2007
  Carrying amounts as of acquisition date Adjustments Fair values as of acquisition date
Intangible assets 1 0 1
Goodwill 0 25 25
Property, plant and equipment 16 8 24
Investments accounted for using the equity method 0 (7) (7)
Deferred tax assets 2 0 2
Inventories 32 0 32
Trade accounts receivable 33 0 33
Other current financial assets 1 0 1
Other current non-financial assets 2 0 2
Current income tax assets 1 0 1
Cash and cash equivalents 42 0 42
Total assets acquired 130 26 156
Deferred tax liabilities 0 1 1
Interest-bearing non-current financial liabilities 4 3 7
Other current provisions 6 0 6
Current income tax liablilities 0 0 0
Interest-bearing current financial liabilities 24 1 25
Trade accounts payable 21 0 21
Other current financial liabilities 27 0 27
Other current non-financial liabilities 18 0 18
Total liabilities assumed 100 5 105
Net assets acquired 30 21 51
Minority interest 2 0 2
Purchase prices (incl. incidental acquisition cost)     49
thereof: paid in cash and cash equivalents     26

In addition, in the 1st quarter ended December 31, 2007, the Group sold companies as part of the portfolio optimization that were, on an individual basis, immaterial. Based on the values at the disposal date, these disposals affected, in total, the Group's consolidated financial statements as presented below:

million €
1st quarter
ended
Dec. 31, 2007
Investment property 4
Deferred tax assets 1
Inventories 3
Trade accounts receivable 3
Other current financial assets 2
Other current non-financial assets 1
Cash and cash equivalents 7
Total assets disposed of 21
Accrued pension and similar obligations 4
Interest-bearing current financial liabilities 7
Trade accounts payable 1
Other current non-financial liabilities 2
Total liabilities disposed of 14
Net assets disposed of 7
Minority interest 0
Gain/(loss) resulting from the disposals (4)
Selling prices 3
thereof: received in cash and cash equivalents 3

As part of the portfolio optimization program, in December 2007, in the Technologies segment the disposal of the ThyssenKrupp Päzisionsschmiede has been initiated. ThyssenKrupp Päzisionsschmiede develops and produces forged parts for cars and trucks. The transaction does not meet the requirements for discontinued operation reporting in accordance with IFRS 5. Therefore, revenues and expenses will continue to be presented as income from continuing operations until the date of the disposal.

The following table shows the assets and liabilities of the disposal group as of December 31, 2007:

million €
ThyssenKrupp
Präzisions-
schmiede
Dec. 31, 2007
Intangible assets 2
Property, plant and equipment, net 59
Deferred assets 1
Inventories 45
Trade accounts receivable, net 35
Other current financial assets 2
Other current non-financial assets 2
Assets held for sale 146
   
Accrued pension and similar obligations 26
Other non-current provisions 3
Deferred tax liabilities 2
Other current provisions 10
Current income tax liabilities 1
Interest-bearing current financial liabilities 36
Trade accounts payable 17
Other current non-financial liabilities 14
Liabilities associated with assets held for sale 109

The above mentioned "assets held for sale" and "liabilities associated with assets held for sale" are included in the various tables within the notes to the financial statements.

At the end of November 2007, ThyssenKrupp's shares of RAG Aktiengesellschaft were transferred to the RAG foundation.

Management incentive plans

ThyssenKrupp recorded an income of €1.8 million from the obligations of the mid-term incentive plan in the 1st quarter ended December 31, 2007 (1st quarter ended December 31, 2006: compensation expense of €24.1 million).

The Group's Share Purchase Program resulted in a compensation expense of €4.0 million in the 1st quarter ended December 31, 2007 (1st quarter ended December 31, 2006: €4.9 million).

The net periodic pension cost for the defined benefit plans is as follows:

million €
1st quarter ended
Dec. 31, 2006		 1st quarter ended
Dec. 31, 2007
  Germany Outside
Germany		 Germany Outside
Germany
Service cost 9 12 8 8
Interest cost 66 32 73 32
Expected return on plan assets (2) (35) (3) (35)
Settlement and curtailment loss/(gain) 0 (12) 0 0
Net periodic pension cost 73 (3) 78 5

The net periodic postretirement benefit cost for health care obligations is as follows:

million €
1st quarter
ended
Dec. 31, 2006
USA/Canada		 1st quarter
ended
Dec. 31, 2007
USA/Canada
Service cost 4 3
Interest cost 15 14
Expected return on reimbursement rights (2) (1)
Settlement and curtailment loss/(gain) (39) 0
Net periodic postretirement benefit cost (22) 16

Total equity and the number of shares outstanding changed as follows:

Table: Total equity

Guarantees

ThyssenKrupp AG and its segment lead companies as well as, in individual cases, its subsidiaries have issued guarantees in favor of business partners or lenders. The following table shows obligations under guarantees where the principal debtor is not a consolidated Group company:

million €
Maximum
potential
amount
of future
payments
as of
Dec. 31, 2007		 Provision as of Dec. 31, 2007
Advance payment bonds 93 0
Performance bonds 72 1
Third party credit guarantee 37 0
Residual value guarantees 45 1
Other guarantees 167 2
Total 414 4

The terms of those guarantees depend on the type of guarantee and may range from three months to ten years (e.g. rental payment guarantees).

The basis for possible payments under the guarantees is the non-performance of the primary obligor under a contractual agreement, e.g. late delivery, delivery of non-conforming goods under a contract, non-performance with respect to the warranted quality or default under a loan agreement.

All guarantees issued by or issued by instruction of ThyssenKrupp AG or the segment lead companies upon request of the principal debtor are obligated by the underlying contractual relationship and are subject to recourse provisions in case of default. If such a principal debtor is a company owned fully or partially by a foreign third party, then such a third party is generally requested to provide additional collateral in a corresponding amount.

Special purpose entities

ThyssenKrupp has leased a facility used in the production of coke. The application of the rules of this Interpretation SIC 12 "Consolidation – Special Purpose Entities" to the company acting as operator of this facility resulted in considering this company to be a special purpose entity, under the scope of the Interpretation, which has to be consolidated. The consolidation of this company does not have a material effect on the results of operations or the financial position of the Group. In addition, upon review of the owner company, this is also considered to be a special purpose entity under the scope of the Interpretation, it was determined that the Group does not control this company and consequently will not include this entity in the consolidated financial statements. The obligations of the Group existing under the lease and purchasing agreement will continue to be considered future minimum lease payments from operating leases and amount to approximately €62 million in the current fiscal year. The Group's maximum exposure to loss from this facility amounts to approximately €45 million and results from the residual value guarantee for the asset at the end of the lease and purchasing agreement which is mainly covered by third parties.

Commitments and other contingencies

On November 20, 2007, the EU Commission ruled that a law adopted by the Republic of Italy in 2005 granting ThyssenKrupp Acciai Speciali Terni S.p.A. among other companies certain benefits in the purchase of electricity was inadmissible state aid. The EU Commission requested Italy to recover aid paid under this law from the companies concerned. On January 31, 2008 Italy filed a complaint against the Commission's decision. On February 06, 2008 also ThyssenKrupp Acciai Speciali Terni filed a complaint against the decision. It is not yet possible to say definitively whether and if so in what amount recovery claims will be made by the Italian government and claims made hitherto by ThyssenKrupp Acciai Speciali Terni will be settled by Italy. If the outcome of the legal case is unfavorable, a material effect on the consolidated financial statements of ThyssenKrupp cannot be ruled out.

Compared to September 30, 2007, in the Steel and Stainless segments the commitment to enter into investment projects increased by €1.0 billion. In addition, additional long term lime supply contracts were fixed which will result in purchasing commitments of €209 million.

Pending lawsuits and claims for damages

The Group is involved in pending and threatened litigation in connection with the sale of certain companies, which may lead to partial repayment of purchase price or to the award of damages. In addition, damage claims may be payable to customers and subcontractors under performance contracts. Certain of these claims have proven unfounded or have expired under the statute of limitations. The Group believes, based upon consultation with relevant legal counsel, that the ultimate outcome of these pending and threatened lawsuits will not result in a material impact on the Group's financial condition or results of operations.

Regarding the remaining contingencies, including pending litigations, there have been no significant changes since the previous year end.

The notional amounts and carrying amounts of the Group's derivative financial instruments are as follows:

million €
Notional
amount
Sept. 30, 2007		 Carrying
amount
Sept. 30, 2007		 Notional
amount
Dec. 31, 2007		 Carrying
amount
Dec. 31, 2007
Derivative financial instruments        
Assets        
Foreign currency derivatives including embedded derivatives 3,950 182 3,904 203
Interest rate derivatives* 757 4 782 3
Commodity derivatives 854 68 765 93
Total 5,561 254 5,451 299
         
Liabilities        
Foreign currency derivatives including embedded derivatives 5,181 241 5,024 292
Interest rate derivatives* 208 6 185 6
Commodity derivatives 827 86 838 96
Total 6,216 333 6,047 394
* inclusive of cross currency swaps

In the 1st quarter ended December 31, 2007, a Group subsidiary realized sales of €0.5 million resulting from a €2 million elevator modernization contract which the subsidiary received in 2006/2007 from an entity belonging to the Alfried Krupp von Bohlen and Halbach Foundation.

ESG Legierungen GmbH is classified as a related party due to the fact that a close member of the family of an Executive Board member is a managing director. In the 1st quarter ended December 31, 2007, the Group realized sales of €0.5 million with ESG Legierungen GmbH from the sale of zinc. In the same period the Group received zinc alloy of €0.1 million from ESG Legierungen GmbH. The transactions were carried out at market conditions and settled as of December 31, 2007.

Segment information for the 1st quarter ended December 31, 2006 and December 31, 2007 is as follows:

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million €
Steel Stainless Technologies Elevator Services Corporate Consolidation Group
1st quarter ended
Dec. 31, 2006		                
External sales 2,757 1,764 2,775 1,082 3,765 189 0 12,332
Internal sales within the Group 361 207 17 1 207 5 (798) 0
Total sales 3,118 1,971 2,792 1,083 3,972 194 (798) 12,332
Income/(loss) before income taxes 399 325 148 97 192 (93) (6) 1,062
                                 
1st quarter ended
Dec. 31, 2007		                
External sales 2,872 1,649 2,804 1,183 3,733 29 0 12,270
Internal sales within the Group 342 189 18 1 134 5 (689) 0
Total sales 3,214 1,838 2,822 1,184 3,867 34 (689) 12,270
Income/(loss) before income taxes 353 (45) 179 119 132 (84) (8) 646

Basic earnings per share is computed as follows:

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1st quarter ended Dec. 31, 2006 1st quarter ended Dec. 31, 2007
  Total amount
in million €		 Earnings
per share in €		 Total amount
in million €		 Earnings
per share in €
Numerator:        
Net income (attributable to ThyssenKrupp AG‘s stockholders) 641 1.31 414 0.85
         
Denominator:        
Weighted average shares 488,764,592   488,764,592  

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.

There were no dilutive securities in the periods presented.

Non-cash investing activities

In the 1st quarter ended December 31, 2007, the acquisition and first-time consolidation of companies created an increase in intangible assets, property, plant and equipment and investment property of €52 million (December 31, 2006: €3 million).

The non-cash addition of assets under finance leases in the 1st quarter ended December 31, 2007 amounts to €25 million (December 31, 2006: €3 million).

Non-cash financing activities

In the 1st quarter ended December 31, 2007, the acquisition and first-time consolidation of companies results in an increase in gross financial payables of €32 million (December 31, 2006: €0 million).

On the basis of the authorization granted by the Annual Stockholders' Meeting on January 18, 2008, the Executive Board of ThyssenKrupp AG resolved on January 31, 2008 to purchase up to around 15.8 million treasury shares before the authorization expires on July 17, 2009. This represents around 3% of the capital stock.