1998/99 1997/98 Pro forma figures ¤DM ¤DM Order intake m 31,964 62,516 36,265 70,928 Sales m 32,378 63,325 35,884 70,182 EBITDA m 2,552 4,991 3,043 5,951 Income before taxes and minority interests m 616 1,205 1,335 2,611 Net income m 275 538 695 1,359 Earnings per share 0.53 1.04 1.35 2.64 Earnings per share excluding non-recurring items 0.79 1.55 1.45 2.84 Return on equity including purchase accounting % 3.4 9.0* excluding purchase accounting % 9.6 18.3* ROCE including purchase accounting % 6.4 10.3 excluding purchase accounting % 8.3 12.8 EVA including purchase accounting m – 519 – 1,014 248 485 excluding purchase accounting m – 126 – 246 630 1,232 Net financial payables m 6,193 12,113 3,741* 7,316* Stockholders’ equity m 8,053 15,750 7,750* 15,158* Gearing % 76.9 48.3* Employees (Sept. 30) 184,770 183,937 * Thyssen and Krupp excluding Dover Elevators and Mannesmann Handel 1998/99 Proposal to Annual Stockholders' Meeting ¤DM Total dividend payment m 368 720 Dividend per share 0.71581 1.40 All figures in this report are presented on a pro forma basis. For both fiscal years these pro forma figures include figures for Krupp, Dover Elevators and Mannesmann Handel as well as those for Thyssen. This applies independently of the initial consolidation date. All figures in this report are in ¤, with key figures also shown in DM. The translation rate is 1 ¤ = 1.95583 DM. OVERVIEW OF THYSSENKRUPP ThyssenKrupp Group Segments Steel Automotive Industries New segments Steel Automotive Elevators Production Systems 1998/99 1998/99 1998/99 1998/99 Sales ¤ m 10,452 Sales ¤ m 5,208 Sales ¤ m 2,756 Sales ¤ m 1,257 Income* ¤ m 248 Income* ¤ m 291 Income* ¤ m 145 Income* ¤ m – 6 * before taxes and minority interests Employees (Sept. 30) 54,388 Employees (Sept. 30) 37,594 Employees (Sept. 30) 26,126 Employees (Sept. 30) 8,383 Engineering Materials & Services Other Group Companies L Components MaterialsServices FacilitiesServices Real Estate Engineering Overview of ThyssenKrupp 1998/99 Sales ¤ m 1,816 Income* ¤ m 4 Employees (Sept. 30) 9,594 Others 1998/99 1998/99 1998/99 1998/99 1998/99 Sales ¤ m 1,184 Sales ¤ m 8,886 Sales ¤ m 1,298 Sales ¤ m 426 Sales ¤ m 2,108 Income* ¤ m 76 Income* ¤ m 80 Income* ¤ m 71 Income* ¤ m 54 Income* ¤ m – 291 Employees (Sept. 30) 9,191 Employees (Sept. 30) 12,815 Employees (Sept. 30) 15,378 Employees (Sept. 30) 831 Employees (Sept. 30) 10,470 CONTENTS 1 The Group in figures Overview of ThyssenKrupp 2 Executive Board 3 Letter to Stockholders 8 ThyssenKrupp shares Year One 16 The merger 18 Growing together 22 Communication in a new corporate design 24 Economic situation 1998/99 30 Start to the new fiscal year Strategy for the future 34 6-point program to increase value 38 Steel flotation 40 Focus on customers 42 The world market in our sights 44 People at ThyssenKrupp 48 Technological capability as a competitive factor The Group’s segments 54 Steel 58 Automotive 62 Elevators 64 Production Systems 66 Components 68 MaterialsServices 72 FacilitiesServices 74 Real Estate 76 Engineering 78 Others 80 Supervisory Board 82 Report by the Supervisory Board 86 Major Subsidiaries and Investments 88 Contact ThyssenKrupp Glossary Index 2000/2001 financial calendar 2 Executive Board. Dr. Gerhard Cromme Prof. Dr. Ekkehard Schulz Chairman Chairman also Executive Board Chairman of also Executive Board Chairman of Thyssen Krupp Automotive AG Thyssen Krupp Steel AG Directorates Directorates Corporate development Central bureau Communication Senior executives Segment Technical developments Automotive Energy and environment Segment Steel Dr. Hans-Erich Forster Dr. Gerhard Jooss Jürgen Rossberg also Executive Board Chairman of Directorates Directorates Thyssen Krupp Materials & Corporate accounting Legal affairs Services AG Taxes and customs Organizational development Segments Foreign organization Internal auditing MaterialsServices Materials management Real estate FacilitiesServices Information technology Segment Others Real Estate Project Management Dr. Ulrich Middelmann Directorates Dr. Heinz-Gerd Stein Dieter Hennig Controlling Directorates also Labor Director of Mergers & Acquisitions Finance Thyssen Krupp Steel AG Investor relations Directorates Investments Personnel and social policy Prof. Dr. Eckhard Rohkamm Insurance General administration also Executive Board Chairman of Thyssen Krupp Industries AG Segments Elevators Production Systems Components Engineering Others Shipyards Plastics Machinery Civil Engineering 3 Letter to Stockholders. Dear Stockholders, For ThyssenKrupp, 1998/99 was the year of the merger: " Thyssen and Krupp were combined swiftly into a new entity. Our task was to implement the merger plan that you approved by a large majority in late 1998 and justify the trust you placed in us. " Our businesses were operating in a difficult economic environment. They were not to be additionally impeded by the post-merger process. On the contrary, the merger of Thyssen and Krupp was to bring immediate benefits for all. " The merger is not the end of the road. It is the platform on which to strengthen the competitiveness of ThyssenKrupp long-term and the foundation for the strategic realignment ahead. We went to work on this three-fold challenge immediately, drawing on the combined efforts of all employees at all levels of the Group to achieve our shared aims. We would like to thank everyone for their extremely hard work in the crucial first year of the new company. Today we want to take stock and report to you, the owners of the Company, on the year of the merger. We also wish to explain to you how we see the future for ThyssenKrupp. Merger completed in mere months We succeeded quickly in combining Thyssen and Krupp. A detailed timetable and action plan for implementing the merger, early decisions on filling management positions and a policy of keeping employees fully informed were important factors in this. In summer 1999, mere months after the launch of ThyssenKrupp, the process was largely complete. Speed was of the essence. The task was to bring the merger plan to life and prove it made sense, and there is no more persuasive argument than rapid success. Not least through the speed of the post-merger integration we proved that the merger was the right solution for Thyssen and Krupp. Compared with combining our production and service capacities, optimizing our locations and uniting our workforces, the job of harmonizing our internal reporting and information systems will appear to many 4 LETTER TO STOCKHOLDERS to be of secondary importance, but in fact it was key to managing the new company efficiently and meas- uring the success of the integration process. We used the opportunity created by the harmonization of our reporting systems to take another step toward enhancing the transparency of our operations, internally and externally. ThyssenKrupp switched its accounting to US GAAP for the 1998/99 fiscal year and in doing so adopted the highest international stand- ard. Under US GAAP rules our merger has to be accounted for as if Thyssen had acquired Krupp. The date of the initial consolidation is December 4, 1998 – the date of the merger stockholders’ meeting of Thyssen AG – as the hypothetical date of acquisition. Krupp is included in the US GAAP figures as of this date only. This approach detracts materially from the comparability of the figures and presents an inadequate picture of the Group's actual performance. Therefore, in addition to the legally relevant US GAAP statements we have stat- ed key financial figures on a pro forma basis, both for 1998/99 and for 1997/98. For this reason, this year's annual report is a double offering: the Year One Report is based on the comparable pro forma figures on an annualized basis, while the Financial Report contains the US GAAP statements. Business and earnings satisfactory The economic weakness affecting many of the sectors and regions of importance to the Group left its mark on our books as well. On a like-for-like basis, sales in the reporting period fell ¤3.5 billion to ¤32.4 billion. Income before taxes and minority interests decreased from ¤1,335 million to ¤616 million. The US GAAP consolidated statements for the first fiscal year show sales of ¤29.8 billion and income before taxes and minority interests of ¤624 million. This translates into earnings per share excluding non- recurrent items of ¤0.83 or DM1.62. Based on this we will be recommending the Annual Stockholders' Meeting on May 24, 2000 to approve the payment of a dividend of DM1.40 or ¤0.71581 per share for 1998/99. Six strategic core businesses in future The world keeps on turning. The merged Group therefore cannot afford to take a break. In fact business momentum has quickened even more with the new technologies and the increasingly global transfer of resources of all kinds. It is all the more important to face up to the challenges of competition. LETTER TO STOCKHOLDERS 5 In summer 1999 we carried out an analysis of the Group's extended portfolio of businesses after the merger, examining their strengths and weaknesses and assessing their potential for growth and value generation against their financing requirements. The result was clear – the merger has strengthened our market positions and opened new strategic opportunities. All our businesses are capable of expansion. However the available financial resources of the Group and the differences in growth potential between the businesses call for further concentration and focusing. Selection criteria are profitability and liquidity, growth in the market, competitive positioning, service share of sales and position in the life cycle. The core businesses in which ThyssenKrupp aims to rank among the best worldwide are Automotive, Elevators, Production Systems, Components, MaterialsServices and FacilitiesServices, plus the soon to be listed Steel business.