notes to the group income statement and to the group balance sheet

The income statement gives priority to the presentation of continuing operations as they would appear after the disposal of discontinued operations. Accordingly, the results of discontinued operations are presented as a single line in the income statement, with further details discussed under Item 7.

1 sales revenues

Sales revenues include fees and charges billed to customers for goods and services – less any reductions to the proceeds, contract penalties and cash discounts.

The breakdown of sales revenues by business divisions and regions is shown in segment reporting.

In connection with construction contracts, sales revenues in the amount of € 661.2 million were recognized in the reporting year (compared to € 638.8 million in the prior year) according to the percentage of completion method.

2 sales, distribution, research & development and general administration costs

The following is a breakdown of the Cost of sales, Selling expenses, Research and development expenses and General and administrative expenses:

		Cost of sales				Selling expenses				Research and development expenses				General and administrative expenses				Total
in € millions		2007		2008		2007		2008		2007		2008		2007		2008		2007		2008
Cost of materials		737.0		702.1		4.4		2.0		5.8		0.9		1.7		1.3		748.9		706.3
Personnel expenses		231.6		248.2		43.9		47.2		16.4		23.5		40.1		39.1		332.0		358.0
Amortization		15.5		14.0		0.8		0.7		4.9		5.7		5.7		5.6		26.9		26.0
Other expenses and income		44.0		41.0		34.3		41.8		3.7		3.6		21.8		35.9		103.8		122.3
total		1,028.1		1,005.3		83.4		91.7		30.8		33.7		69.3		81.9		1,211.6		1,212.6

Cost of materials are arranged as follows:

in € millions		2007		2008
Cost of raw materials, supplies and goods purchased		549.4		509.3
Cost of purchased services		199.5		197.0
cost of materials		748.9		706.3

Personnel expenses are directly allocated to the functional areas based on the cost centers, which results in the following figure:

in € millions		2007		2008
Wages and salaries		277.6		301.0
Social security payments and contributions for retirement benefits and provident funds		54.4		57.0
(of that for retirement benefits)		(3.5)		(2.7)
personnel expenses		332.0		358.0

Annual average employed by the kuka Group:

		Total 2007		Total 2008		of that Germany		of that Abroad
Wage earners		2,241		2,373		1,314		1,059
Salaried employees		3,251		3,442		1,905		1,537
Trainees / apprentices		176		170		156		14
total employees		5,668		5,985		3,375		2,610
(including discontinued operations)		(6,307)		(–)		(–)		(–)

3 other operating income and expenses

These line items capture income and expenses that are not allocated to the functional categories Cost of sales, Selling expenses, Research and development or General and administrative expenses or otherwise reported separately.

in € millions		2007		2008
Income from foreign currency transactions		5.0		21.4
Reimbursements from damages claims		0.1		0.8
Income from the disposal of assets		0.0		0.3
Other income		3.5		5.6
other operating income		8.6		28.1
Expenses for foreign currency transactions		4.6		23.3
Donations		0.4		0.3
Other taxes		5.1		2.6
Other expenses		2.8		3.4
other operating expense		12.9		29.6
other operating income and expenses		– 4.3		– 1.5

4 write-downs of financial assets

The write-downs of financial assets in the amount of € 0.1 million related to shares in Tölzer & Wagner Elektrotechnik GmbH, Rohrbach, which were written down to their net realizable value.

5 interest income / expense

in € millions		2007		2008
Other interest and similar income		5.5		9.7
(of that, related to affiliated companies)		(0.5)		(0.0)
Interest and similar expenses		13.4		14.7
(of that, related to affiliated companies)		(0.4)		(0.2)
net interest income / expense		– 7.9		– 5.0

Other interest and similar income includes an amount of € 0.2 million (prior year: € 0.3 million) for expected returns on pension plan assets. The remaining interest income represents returns on bank deposits as well as the change from operating to finance leasing in connection with the financing of a factory building for the production of bodies for the Jeep Wrangler in Toledo / usa (cf. notes under 13).

Interest and similar expenses include the interest portion of additions to the provision for pensions in the amount of € 4.0 million (prior year: € 3.7 million). In addition this item includes lc and commitment fees, refinancing costs and interest on loans received. The convertible bond also added € 4.9 million. (prior year: € 4.7 million) to net interest expense for the financial year.

6 taxes on income / deferred taxes

Tax expense

Income tax expense breaks down by origin as follows:

in € millions		2007		2008
Current taxes		12.0		5.2
(of that relating to other periods)		(0.0)		(– 4.0)
Deferred taxes
from temporary differences		– 0.2		12.5
from loss carry-forwards		1.8		– 1.3
tax expense		13.6		16.4

Of the current expenses for tax on earnings, € 1.4 million is attributable to domestic expenditure compared to € 2.6 million in the previous year, whereas € 3.8 million is attributable to foreign expenditure compared to € 9.4 million last year.

Deferred tax expenses of € 2.1 million are attributable to domestic operations (compared to € 0.8 million in the previous year); € 9.1 million to foreign (compared to € 0.8 million the previous year).

The expected tax expense based on earnings before tax of € 47.0 million (prior year: € 62.5 million) and the applicable tax rate for the kuka companies in Germany of 30.0 percent (prior year: 39.0 percent) leads to the following actual tax expense:

in € millions		2007		2008
earnings before tax		62.5		47.0
expected tax expense		24.4		14.1
Tax rate-related differences		– 0.8		3.1
Tax reductions due to tax-exempt income		– 0.7		– 1.2
Tax increases due to non-deductible expenses		1.7		2.8
Back taxes paid (+) and tax credits received (–) for prior years		– 3.1		– 4.8
Tax refund claims according to the changes in sec. 37 par. 4 to 6 of the German Corporate Income Tax Act		– 5.3		0.0
Changes to allowance on deferred taxes		– 9.7		2.3
Changes in tax rates due to the German Business Tax Reform in Germany		7.1		0.0
Other differences		0.0		0.1
taxes on income (actual tax expense)		13.6		16.4

The applicable tax rate in Germany comprises corporate income tax (Körperschaftsteuer) of 15.0 percent, earned income tax (Gewerbesteuer) based on a uniform tax rate of 14.2 percent and the reunification tax (Solidaritätszuschlag) of 5.5 percent.

In principle, deferred taxes were recognized on the basis of the applicable tax rate for each company in question. By way of simplification, the calculation of deferred taxes for consolidation measures that have an effect of profit or loss, was based on a uniform underlying tax rate of 30 percent.

As at December 31, 2007, an increase of € 6.6 million, gross, in the corporate income tax credit balance to a gross balance of € 20.9 million was recognized on the basis of an outside tax audit for the years 1998 through 2001. After discounting, an amount of € 11.6 million (prior year: € 12.8 million) is reported as non-current tax receivable effective December 31, 2008, and an amount of € 1.8 million (prior year: € 1.8 million) is reported as current tax receivable.

There are no tax credits for which deferred taxes would need to be balanced.

Tax revenues of € 4.0 million resulted in the current financial year largely due to adjustment declarations for the years 2002 to 2006.

Deferred tax assets and liabilities

The value of deferred tax assets and liabilities due to temporary differences and tax loss carry-forwards in the Group is associated with the following items:

		Deferred tax assets				Deferred tax liabilities
in € millions		Dec.31, 2007		Dec.31, 2008		Dec.31, 2007		Dec.31, 2008
Non-current assets		1.7		16.7		14.6		39.1
Current assets		33.3		28.5		37.7		43.9
Provisions		17.9		14.1		0.1		0.0
Liabilities		15.3		17.1		10.9		3.2
Sub-Total		68.2		76.4		63.3		86.2
Balancing item		– 58.6		– 73.1		– 58.6		– 73.1
Valuation allowance		– 2.5		– 2.0		0.0		0.0
Sub-Total		7.1		1.3		4.7		13.1
Deferred taxes on temporary differences		7.1		1.3		4.7		13.1
Deferred taxes on tax loss carry-forwards		24.0		25.3		0.0		0.0
total		31.1		26.6		4.7		13.1
(thereof: from items recognized in equity)						(5.5)		(6.5)

Valuation allowance to the carrying value of deferred tax assets are recognized if the realization of the expected benefit of the deferred taxes is not sufficiently probable. The estimates made are subject to changes over time, which may result in the reversal of valuation allowance in subsequent periods.

The impact on tax expense of changes to the write-downs for temporary valuation differences and loss carry-forwards is a tax expense of € 0.9 million (prior year: tax income of € 17.1 million).

The recognized values on the balance sheet are written off in the event that the tax benefits that they represent are no longer expected to be realized.

From the loss carry-forward of € 179.3 million (prior year: € 164 million), amounts totaling € 85.9 million (prior year: € 77.0 million) are not considered in the accounting of deferred taxes.

In accordance with ias 12, deferred tax items must be recognized for the difference between the pro-rata equity of a subsidiary recognized on the Group balance sheet on the tax balance sheet of the parent company (so-called outside basis differences) if it is likely that this difference amount will be realized. Since both the kuka Aktiengesellschaft as well as the subsidiaries in question are corporations, these differences are predominantly tax exempt under § 8b kstg upon realization and thus permanent in nature. According to ias 12.39, no deferred tax liability should be recognized even for temporary differences, if any (e. g., those resulting from the 5 percent flat-rate allocation under § 8b kstg) if it is not likely, given control by the parent company, that these differences will reverse in the foreseeable future. Since no such reversal is expected, no deferred tax items had to be recognized on the balance sheet for this purpose.

From the change to the deferred tax liabilities of € 8.4 million (prior year: € – 5.2 million), € – 0.1 million (€ – 0.8 million in the prior year) is largely attributed to the change in the group of consolidated companies.

Overall the change to deferred tax assets and liabilities of € 12.9 million (prior year: € 9.2 million) came from amounts affecting net income totaling € 11.2 million (prior year: € 1.6 million) as well as amounts not affecting net income totaling € 1.7 million (prior year: € 7.6 million) including currency effects.

Tax losses and tax loss carry-forwards

To the extent that loss carry-forwards have not been written off, it is expected in the next three years that this tax-reducing potential will be utilized via taxable income, which is likely based on the planning of the Group companies.

As at December 31, 2008, the loss carry-forwards not yet utilized amount to € 179.3 million (prior year: € 164 million). German companies account for € 140.0 million of this, and the amounts do not expire. In the usa loss carry-forwards amount to € 12.0 million and will expire in 2020.

In addition, loss carry-forwards in the total amount also include € 17.3 million for France, € 2.3 million for China as well as € 1.5 million for Spain and € 1.1 million for Japan. There are loss carry-forwards totaling € 5.1 million in other countries as well. With the exception of the amounts expiring in Japan in 2013, the remaining loss carry-forwards do not expire.

7 result from discontinued operations

The following table shows a breakdown of the current portion of earnings from discontinued operations:

in € millions		2007
sales revenue		88.0
Changes in inventories of finished goods and work in process		11.4
Own costs capitalized		0.2
total output		99.6
Other operating income		0.1
		99.7
Cost of materials		– 44.0
Personnel expense		– 37.2
Depreciation / amortization on intangible assets and tangible assets		– 2.2
Other operating expenses		– 15.5
		– 98.9
earnings from operating activities		0.8
earnings from financing activities		– 3.1
income from ordinary activities		– 2.3
Taxes on income		– 0.4
operating earnings from discontinued operations		– 2.7
Result recognized on disposal		74.1
Tax impact of result on disposal		– 2.3
result from disposal of discontinued operations		71.8
result from discontinued operations		69.1

Results from the disposal of discontinued operations in the financial year 2007 include gains on the disposal of companies in the Packaging division in the amount of € 69.4 million.

8 earnings per share

Undiluted / diluted earnings per share break down as follows:

		2007		2008
Net income for the year after minority interests (in € millions)		117.9		30.6
(of that discontinued operations)		(69.1)		(–)
Weighted average number of shares outstanding		26,600,000		25,819,822
earnings per share (in €)		4.43		1.18
(of that discontinued operations)		(2.60)		(–)

According to ias 33, undiluted earnings per share were calculated on the basis of Group consolidated earnings after taxes and the weighted average number of shares outstanding for the year. As a result of the share buyback program, the average number of outstanding shares declined from 26.6 million to 25.8 million.

The issuance of the convertible bond on May 9, 2006 could result in a future dilution effect since contingent capital has been increased by a maximum of currently 2,718,322 shares. Since the average share price in 2008 remained below the conversion price so that a conversion would have been unfavorable for the bond holders, there was no diluting effect in 2008.

9 fixed assets

schedule of changes in fixed assets 2008

		Acquisition / Manufacturing Costs
in € thousands		Status as at Jan.1, 2008		Reclassification as discontinued operations		Exchange rate differences		Changes to scope of consolidiation		Additions		Disposals		Reclassi- fications		Status as at Dec.31, 2008
i. intangible assets
1. Rights and similar assets		31,397		0		249		0		4,072		883		70		34,905
2. Self-developed software and other development costs		14,509		0		0		0		9,457		5,844		0		18,122
3. Goodwill		56,633		0		0		0		0		0		0		56,633
4. Advances paid		36		0		2		0		44		0		– 70		12
		102,575		0		251		0		13,573		6,727		0		109,672
ii. tangible assets
1. Land, similar rights and buildings including buildings on land owned by third parties		113,796		0		500		0		2,785		2,302		456		115,235
2. Technical plant and equipment		80,241		0		134		73		3,272		2,075		1,338		82,983
3. Other equipment, factory and office equipment		67,787		0		75		80		8,577		6,224		– 107		70,188
4. Advances paid and construction in progress		976		0		32		0		4,298		405		– 1,687		3,214
		262,800		0		741		153		18,932		11,006		0		271,620
iii. financial investments
1. Participations in affiliated companies		5,651		0		0		– 953		0		1		0		4,697
2. Participations in associated companies		36		0		0		0		0		36		0		0
3. Other participations		306		0		0		0		0		145		0		161
4. Other loans		889		0		25		0		0		400		0		514
		6,882		0		25		– 953		0		582		0		5,372
		372,257		0		1,017		– 800		32,505		18,315		0		386,664
The following amount has been capitalized under item land and buildings in consequence of finance leases in which the kuka Group acts as the lessee:
land and buildings		3,450		–		396		–		–		–		–		3,846

		Accumulated Depreciation																Net carrying amount
in € thousands		Status as at Jan.1, 2008		Reclassi- fication as discontinued operations		Exchange rate differences		Changes to scope of con- solidiation		Additions		Disposals		Reclassi- fications		Status as at Dec.31, 2008		Status as at Dec.31, 2008
i. intangible assets
1. Rights and similar assets		21,422		0		222		0		4,484		880		0		25,248		9,657
2. Self-developed software and other development costs		4,660		0		–		0		4,412		5,844		0		3,228		14,894
3. Goodwill		6,996		0		–		0		0		0		0		6,996		49,637
4. Advances paid		0		0		–		0		0		0		0		0		12
		33,078		0		222		0		8,896		6,724		0		35,472		74,200
ii. tangible assets
1. Land, similar rights and buildings including buildings on land owned by third parties		59,264		0		70		0		3,346		1,589		2		61,093		54,142
2. Technical plant and equipment		60,038		0		50		13		6,698		2,075		350		65,074		17,909
3. Other equipment, factory and office equipment		51,568		0		129		31		7,035		6,022		– 350		52,391		17,797
4. Advances paid and construction in progress		2		0		0		0		0		0		– 2		0		3,214
		170,872		0		249		44		17,079		9,686		0		178,558		93,062
iii. financial investments
1. Participations in affiliated companies		4,753		0		0		– 234		0		0		0		4,519		178
2. Participations in associated companies		0		0		0		0		0		0		0		0		0
3. Other participations		34		0		0		0		0		0		0		34		127
4. Other loans		428		0		25		0		0		0		0		453		61
		5,215		0		25		– 234		0		0		0		5,006		366
		209,165		0		496		– 190		25,975		16,410		0		219,036		167,628
The following amount has been capitalized under item land and buildings in consequence of finance leases in which the kuka Group acts as the lessee:
land and buildings		2,046		–		249		–		372		–		–		2,667		1,179

schedule of changes in fixed assets 2007

		Acquisition / Manufacturing Costs
in € thousands		Status as at Jan. 1, 2007		Reclassi- fication as discontinued operations		Exchange rate differences		Changes to scope of consolidiation		Additions		Disposals		Reclassi- fications		Status as at Dec.31, 2007
i. intangible assets
1. Rights and similar assets		48,083		– 18,930		– 444		0		7,675		5,152		165		31,397
2. Self-developed software and other development costs		18,580		– 10,518		0		0		6,447		0		0		14,509
3. Goodwill		118,158		– 61,525		0		0				0				56,633
4. Advances paid		161		– 161		0		0		201		0		– 165		36
		184,982		– 91,134		– 444		0		14,323		5,152		0		102,575
ii. tangible assets
1. Land, similar rights and buildings including buildings on land owned by third parties		197,833		– 67,334		– 2,276		0		792		15,507		288		113,796
2. Technical plant and equipment		112,270		– 35,981		– 577		150		2,538		1,711		3,552		80,241
3. Other equipment, factory and office equipment		106,257		– 37,208		– 873		27		6,585		7,634		633		67,787
4. Advances paid and construction in progress		1,507		– 1,043		– 2		0		2,182		5		– 1,663		976
		417,867		– 141,566		– 3,728		177		12,097		24,857		2,810		262,800
iii. financial investments
1. Participations in affiliated companies		5,648		– 372		0		– 293		693		25		0		5,651
2. Participations in associated companies		2,479		– 2,443		0		0		0		0		0		36
3. Other participations		320		0		0		0		272		286		0		306
4. Other loans		1,034		– 44		– 50		0		0		51		0		889
		9,481		– 2,859		– 50		– 293		965		362		0		6,882
		612,330		– 235,559		– 4,222		– 116		27,385		30,371		2,810		372,257
The following amount has been capitalized under item land and buildings in consequence of finance leases in which the kuka Group acts as the lessee:
land and buildings		3,365		–		85		–		–		–		–		3,450

		Accumulated Depreciation																Net carrying amount
in € thousands		Status as at Jan. 1, 2007		Reclassification as discontinued operations		Exchange rate differences		Changes to scope of consolidiation		Additions		Disposals		Reclassi- fications		Status as at Dec.31, 2007		Status as at Dec.31, 2007
i. intangible assets
1. Rights and similar assets		37,659		– 16,034		– 276		0		4,426		4,353		0		21,422		9,975
2. Self-developed software and other development costs		4,437		– 3,461		0		0		3,684		0		0		4,660		9,849
3. Goodwill		6,996		0		0		0		0		0		0		6,996		49,637
4. Advances paid		0		0		0		0		0		0		0		0		36
		49,092		– 19,495		– 276		0		8,110		4,353		0		33,078		69,497
ii. tangible assets
1. Land, similar rights and buildings including buildings on land owned by third parties		95,539		– 36,046		– 385		0		4,001		3,845		0		59,264		54,532
2. Technical plant and equipment		85,365		– 30,819		– 389		2		7,249		1,119		– 251		60,038		20,203
3. Other equipment, factory and office equipment		83,446		– 31,761		– 568		2		7,518		7,320		251		51,568		16,219
4. Advances paid and construction in progress		0		0		0		0		2		0		0		2		974
		264,350		– 98,626		– 1,342		4		18,770		12,284		0		170,872		91,928
iii. financial investments
1. Participations in affiliated companies		4,857		– 109		0		0		10		5		0		4,753		898
2. Participations in associated companies		200		– 200		0		0		0		0		0		0		36
3. Other participations		34		0		0		0		82		82		0		34		272
4. Other loans		523		– 44		– 50		0		0		1		0		428		461
		5,614		– 353		– 50		0		92		88		0		5,215		1,667
		319,056		– 118,474		– 1,668		4		26,972		16,725		0		209,165		163,092
The following amount has been capitalized under item land and buildings in consequence of finance leases in which the kuka Group acts as the lessee:
land and buildings		1,658		–		44		–		344		–		–		2,046		1,404

10 intangible assets

Changes to the individual items under intangible assets are disclosed in the schedule of movements in fixed assets. In the 2008 and 2007 financial years, no impairment losses were recognized on assets.

Goodwill

Recognized goodwill in the amount of € 49.6 million compares to € 49.6 million a year earlier and breaks down as follows:

Profit center in € millions		Dec.31, 2007		Dec.31, 2008
Body-in-White		40.7		40.7
Assembly systems		4.7		4.7
Robotics Automotive		3.8		3.8
Others / less than € 1 million		0.4		0.4
		49.6		49.6

Since 2007 the controlling and internal reporting of the Group has taken place through uniformly differentiated profit centers. Therefore, in principle, a single profit center represents the smallest cash-generating unit, making it the basis for the impairment test of goodwill. The customer service business in the Robotics division is proportionately allocated to the profit centers “Automotive” and “General Industry”.

The following table shows the discount rates for wacc before taxes used in the impairment tests performed in the 2008 financial year:

in %		2007		2008
Planning period		2008 – 2010		2009 – 2011
Systems		12.9		9.5
Robotics		13.2		9.8

In this context, the cost of equity capital was determined on the basis of segment-specific peer groups. As in the previous year, a growth discount of 0.5 percent was applied as perpetuity.

The cost of borrowed capital was derived from the refinancing costs of kuka Aktiengesellschaft.

The ratios for the cost of equity capital and the cost of borrowed capital that were thus determined were weighted on the basis of the average capital structure of the respective peer group. The expected average tax rate of the peer group of 35 percent was chosen as the tax rate.

A 1 percent higher wacc does not influence the impairment of goodwill. A reduction in sales revenues over the entire planning period by 10 percent with a correspondingly lower cash flow would result in goodwill in the amount of € 44.9 million.

Self-developed software and other product development costs

According to ias 38, self-developed software and other development costs must also be capitalized. For the purpose of such capitalization, kuka uses a definition of the costs of production that includes according to ias attributable direct costs as well as an appropriate allocation for overheads and depreciation.

Development costs are only recognized as assets in the kuka Group by kuka Roboter GmbH. The company is working on several projects involving performance and guidance software for robots as well as new applications in the area of medical technology. Total expenditures for research and development for the reporting period were € 33.7 million compared to € 30.8 million in 2007.

Development costs with a total carrying value of € 14.9 million from the years 2005 to 2008 compared to € 9.8 million the year prior have been capitalized according to ias 38. Net additions for 2008 totaled € 5.0 million (prior year: € 2.8 million). Amortization is applied using a unit-based or straight-line method over the respective expected useful life of three years or less.

11 tangible assets

The breakdown of the assets aggregated in the balance sheet items of the tangible assets, as well as changes over the reporting year and in 2007, are shown in section 9 of the annual report. The major focus of capital expenditures in the financial year is described in the management report.

Subsidies in the amount of € 0.1 million were deducted from the cost of purchase or cost of production for tangible assets in 2007.

The amounts for depreciation, amortization and impairment losses are as follows:

in € millions		2007		2008
scheduled		17.8		17.1
non-scheduled		1.0		0.0
depreciation of tangible assets		18.8		17.1

Previous years impairment losses of € 1.0 million were related to a machine of the Systems Division (write-down to the net realizable value) as well as a built-upon property in the Robotics Division (closing of the location as well as change of the useful life).

Finance lease agreements for land and buildings where the kuka Group is the lessee regularly include an option to buy. The agreements are based on interest rates of 2.25 percent p. a.. The following table shows the breakdown of future payments due for finance lease agreements as well as the present values for future leasing payments. The corresponding amounts are recognized under other liabilities.

in € millions		Dec.31, 2007 Total		Dec.31, 2008 Total		Up to one year
Minimum lease payments		0.1		0.0		0.0
Present value		0.1		0.0		0.0

commitments from leases and rental agreements

in € millions		Dec.31, 2007		Dec.31, 2008
up to one year		15.4		6.3
between one and five years		48.5		20.2
more than five years		53.1		11.5
commitments from leases and rental agreements		117.0		38.0

Commitments in connection with leases for passenger cars, office and factory buildings include liabilities from leases and rental agreements in connection with operating leases. The decline compared to last year is largely attributable to the change from operating to finance leasing in connection with the financing of a factory building for the production of car bodies for the Jeep Wrangler in Toledo, usa (cf. notes under 13).

Total rental expenses for the fiscal year were € 16.6 million compared to € 27.0 million in the prior year; rental income totaled € 0.4 million compared to € 2.0 million last year.

12 participations in associated companies and other financial investments

The breakdown of the items under financial non-current assets is shown in section 9.

The summary financial information about the associated companies is shown in the following table.

in € millions		2007		2008
Total assets		3.8		0.0
Total liabilities		3.0		0.0
Total sales revenue		4.5		0.0
Profit / loss for the period		0.0		0.0

The prior year’s numbers are largely associated with the sale of i.b.d. s.r.l, Turin / Italy, during the reporting year.

13 Finance lease

kuka Toledo Production Operations llc., Troy / Michigan / usa, which was consolidated for the first time in fiscal 2005, manufactures Jeep Wrangler bodies under the terms of a pay-on-production contract with Chrysler. The first unpainted car bodies associated with the project were delivered to Chrysler in July 2006. The project was financed through an operating lease agreement with a local corporation and a consortium of financing banks. kuka Aktiengesellschaft reached an agreement with Chrysler llc and the financing banks in the financial year regarding the prepayment of the financing of the manufacturing facility of its American subsidiary, kuka Toledo Production Operations llc (ktpo), which makes Chrysler’s Jeep Wrangler car bodies. The financing to take over legal ownership of the buildings and production systems totals € 77.1 million, and was prepaid using the kuka Group’s existing net liquid assets. As a result, this segment’s capital employed has risen significantly.

Because of the existing agreement to supply car bodies to Chrysler, the acquisition of the production system assets was not included on the balance sheet as an asset acquisition, but instead categorized as a finance lease in accordance with ifric 4 / ias 17 guidelines and booked as a receivable from finance leases. Leasing receivables of € 82 million and a current leasing receivable of € 3.3 million exist as of the balance sheet date. Sales revenues shown on ktpo’s balance sheet will thus be reduced by the fictitious leasing rate. The interest component included in the fictitious leasing rate is booked under financial result, while the repayment component of this repayment reduces the receivables as per schedule.

Due to the arrangement of the dealing as a full payout lease agreement future minimum lease payments correspond with the gross investment. The following table shows the transition to the present value of the outstanding minimum lease payments.

in € millions		2008
Future minimum lease payments / Finance lease gross investments		146.9
(of that not later than one year)		(10.8)
(of that later than one year and not later than five years)		(43.3)
(of that later than five years)		(92.8)
Unrealized financial income		– 61.6
present value of outstanding minimum lease payments		85.3
(of that not later than one year)		(3.3)
(of that later than one year and not later than five years)		(16.5)
(of that later than five years)		(65.5)

14 inventories

in € millions		Dec.31, 2007		Dec.31, 2008
Raw materials and supplies		48.1		50.4
Work in process		63.3		67.5
Finished goods, Goods purchase		21.9		25.0
Advances paid		16.7		8.6
inventories		150.0		151.5

The carrying amount of inventories written off in the amount of € 92.4 million compare with € 87.0 million in 2007 and have been recognized at net realizable value. The write-down, relative to gross value, was € 30.3 million versus € 30.2 million the year prior.

The carrying value of inventories subject to restraint on disposal is not material.

15 receivables

		Dec.31, 2007						Dec.31, 2008
in € millions		Total		of that up to one year		of that more than one year		Total		of that up to one year		of that more than one year
Trade receivables		178.9		178.7		0.2		164.8		164.4		0.4
Receivables from contruction contracts		93.0		93.0		0.0		167.1		167.1		0.0
Receivables from affiliated companies		3.6		3.6		0.0		0.4		0.4		0.0
receivables		275.5		275.3		0.2		332.3		331.9		0.4

Should Chrysler and / or General Motors or Ford become bankrupt, it is possible that this could impact the assets, financial position and profit or loss of the Group to the extent that the value of receivables would need to be adjusted.

The following table breaks down receivables by age and recoverability.

in € millions / Status as at Dec.31, 2008		Net carrying amount		neither impaired nor past due as at the balance sheet date		net carrying amount of impaired trade receivables		impaired trade receivables before recording of impairment losses		impair- ment loss		Total of past due, unimpaired receivables		not impaired as of the balance sheet date but in arrears by
														less than 30 days		30 to 6o days		61 to 90 days		91 to 180 days		more than 180 days
Trade receivables		164.8		110.7		2.7		9.5		– 6.8		51.4		22.1		10.8		5.4		5.9		7.2
Receivables from affiliated companies		0.4		0.4		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
total		165.2		111.1		2.7		9.5		– 6.8		51.4		22.1		10.8		5.4		5.9		7.2

in € millions / Status as at Dec. 31, 2007		Net carrying amount		neither impaired nor past due as at the balance sheet date		net carrying amount of impaired trade receivables		impaired trade receivables before recording of impairment losses		impair- ment loss		Total of past due, unimpaired receivables		not impaired as of the balance sheet date but in arrears by
														less than 30 days		30 to 60 days		61 to 90 days		91 to 180 days		more than 180 days
Trade receivables		178.9		123.9		1.4		8.8		– 7.4		53.6		23.3		9.4		5.2		9.7		6.0
Receivables from affiliated companies		3.6		3.6		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
total		182.5		127.5		1.4		8.8		– 7.4		53.6		23.3		9.4		5.2		9.7		6.0

With respect to existing receivables that were neither impaired nor in arrears, there were no indications as of the balance sheet date that the obligors would not meet their payment obligations. Receivables from construction contracts have no specific due date and are not impaired.

Trade receivables

Bad debt allowances on trade receivables developed as follows:

in € millions		2007		2008
Impairment losses / Status as at Jan. 1		7.4		7.4
Additions (Expenses related to impairment losses)		3.1		2.8
Use		– 2.3		– 2.1
Reversals		– 0.8		– 1.3
impairment losses / status as at dec. 31		7.4		6.8

The total amount of additions of € 2.8 million (2007 € 3.1 million) breaks down into additions for specific bad debt allowances of € 2.1 million (2007: € 2.1 million) and lump-sum bad debt allowances in the amount of € 0.7 million (2007: € 1.0 million). Reversals reflect € 1.0 million (2007: € 0.7 million) in specific bad debt allowances that were not required to be used as well as € 0.3 million (2007: € 0.1 million) in lump sum bad debt allowances that were not required to be used.

Gross receivables from construction contracts

For receivables from construction contracts, advances received have been offset against costs incurred in connection with the contract, including contributions to earnings on a per contract basis. As at the balance sheet date, costs incurred and earnings recognized in connection with long-term contracts in the amount of € 726.4 million were offset against advances received in the amount of € 559.3 million. In 2007 these figures were € 492.8 million and € 399.8 million respectively. This resulted in receivables of € 167.1 million compared to € 93.0 million the year prior and liabilities of € 54.6 million versus € 72.4 million a year earlier. Advances received in connection with long-term contracts exceed the costs incurred and the earnings portion.

Receivables from construction contracts totaling € 17.4 million had to be written off in the financial year due to the insolvency of a buyer.

16 other assets, prepaid expenses and deferred charges

		Dec.31, 2007						Dec.31, 2008
in € millions		Total		of that up to one year		of that more than one year		Total		of that up to one year		of that more than one year
Other assets, prepaid expenses and deferred charges		21.5		11.9		9.6		26.5		16.7		9.8

The following table shows the financial instruments recognized under other assets as outlined in ifrs 7 according to age and impairment:

in € millions		Net carrying amount		neither impaired nor past due as at the balance sheet date		net carrying amount of impaired trade receivables		impaired trade receivables before recording of impairment losses		impairment loss		Total of past due, unimpaired receivables		not impaired as of the balance sheet date but in arrears by
														less than 30 days		30 to 6o days		61 to 90 days		91 to 180 days		more than 180 days
Dec.31, 2007		15.4		15.0		0.4		3.1		– 2.7		0.0		0.0		0.0		0.0		0.0		0.0
Dec.31, 2008		19.9		19.4		0.5		2.9		– 2.4		0.0		0.0		0.0		0.0		0.0		0.0

With respect to existing other assets that were neither impaired nor in default, there were no indications as of the balance sheet date that the obligors would not meet their payment obligations.

Impairment losses on other assets developed as follows:

in € millions		2007		2008
Impairment losses / Status as at Jan. 1		4.4		2.7
Additions (Expenses related to impairment losses)		0.1		0.1
Use		– 1.2		0.0
Reversals		– 0.6		– 0.4
impairment losses / status as at dec. 31		2.7		2.4

17 cash and cash equivalents

This item comprises all funds recognized on the balance sheet as cash and cash equivalents, i. e. cash on hand, checks and cash balances with financial institutions, provided that they are available within three months.

The kuka Group maintains bank balances exclusively at financial institutions of sound credit worthiness. Furthermore, funds to be invested are distributed across several financial institutions in order to diversify risk.

18 discontinued operations

As of December 31, 2008, there were no discontinued operations nor assets held for sale.

19 equity / treasury shares

Changes to equity, including changes without effect on profit or loss are disclosed in the Schedule of income and expenses recognized directly in Group equity on page 105.

On March 18, 2008, the Executive Board of kuka Aktiengesellschaft resolved in accordance with article 71, para. 1, item 8 of the German Corporation Act (AktG), to exercise the authority granted at the Annual General Meeting of May 16, 2007 to buy back own shares and to acquire up to 2,660,000 shares of the company on the open stock market. The amount corresponds to up to 10 percent of current total share capital. The buyback took place between March 25, 2008 and August 29, 2008 at the latest, under the direction of a bank, which is obligated to ensure that the buyback of the shares on the stock market is carried out in accordance with the resolution at the Annual General Meeting dated May 16, 2007 and the instructions outlined in article 5, para. 1 and 2 of directive (eg) No. 2273 / 2003. Under the terms of this share buyback program, kuka Aktiengesellschaft bought back a total of 1,327,340 kuka shares valued at € 27,898,339.58. Moreover, the Executive Board is authorized again, subject to the approval of the Supervisory Board, to assign the treasury shares thus acquired to a third party as compensation for the acquisition of an equity interest.

The Executive Board was further authorized, subject to the approval of the Supervisory Board, to withdraw the treasury shares acquired on the basis of this authorization, without such withdrawal or the execution thereof requiring a further resolution of the Annual General Meeting. The Executive Board did not exercise this authorization during the financial year.

In 2008, the company purchased own shares for kuka employees as part of an employee stock ownership program [Article 71, para. 1 no. 2 of the AktG (German Corporation Act)] and resold these to the employees. A total of 114,861 shares of common stock were purchased and resold.

20 subscribed capital

The share capital totals € 69,160,000 (Prior year: € 69,160,000) and is divided into 26,600,000 individual no-par value shares issued to bearer. Each share is equal to one vote.

On the basis of a resolution by the Annual General Meeting of kuka Aktiengesellschaft of July 4, 2003, the capital stock is to be conditionally increased by up to € 19,500,000.00 by issuing up to € 7,500,000 new shares. The conditional capital increase shall only be carried out to the extent that option and / or conversion rights are exercised by the holders of option rights and / or conversion rights to be issued by the company or its directly or indirectly majority owned companies in Germany or abroad on or before July 4, 2008 (article 5, paragraph 6 of the articles of association).

On May 9, 2006, kuka Aktiengesellschaft partially exercised the respective authorization to issue options and or convertible bonds by privately placing a convertible bond issue guaranteed by kuka Aktiengesellschaft with a nominal value of € 69,000,000 through its 100-percent-owned Dutch subsidiary kuka Finance b. v.. Under the terms of the placement, the company is obliged to completely but not partially convert every bondholder’s bond valued at a nominal € 50,000 in accordance with their conversion rights at any time during the exercise period (July 8, 2006 to October 18, 2011) and at the conversion price of € 25.3833 per share to no-par value shares of kuka Aktiengesellschaft issued to the bearer. Capital is thereby conditionally increased – subject to the anti-dilution provisions in the bond terms and conditions – by a maximum of 2,718,322 shares. The bond was subsequently listed on the Euromtf market of the Luxembourg stock exchange.

A resolution passed at the Annual General Meeting of kuka Aktiengesellschaft on June 1, 2006 authorized the Executive Board to increase the company’s share capital on one or several occasions, subject to approval by the Supervisory Board, until May 31, 2011 up to a total of € 34,500,000 by issuing new shares in the name of the bearer against cash contributions and / or contributions in kind. The shareholders shall be granted subscription rights; however, subject to approval by the Supervisory Board, the Executive Board is authorized to exclude the shareholder subscription rights prescribed by law (i) for fractional amounts (ii) to the extent this is required in order to grant the holders’ subscription rights to new shares, as per the resolution passed at the Annual General Meeting on July 4, 2003, in the quantities to which they would be entitled by exercising their conversion or option rights related to convertible debentures and / or warrants issued by kuka Aktiengesellschaft or its companies (iii) for increases in equity against cash contributions or under the conditions described in more detail in the articles of association (article 4, paragraph 5, second paragraph, third subitem), and to the extent the number of shares issued under exclusion of subscription rights in accordance with article 186, paragraph 3, clause 4 AktG (German Corporation Act) does not exceed 10 percent of total share capital, neither at the point in time the authorization becomes effective nor the time of exercising the authorization (iv) for capital increases against contributions in kind for the purpose of acquiring companies or parts of companies (article 4, paragraph 5 of the articles of association).

21 capital reserve

The capital reserve in the amount of € 26.5 million applies to kuka ag and has not changed from the previous year.

22 revenue reserves

The revenue reserves in the amount of € 116.3 million (prior year: € 136.4 million) comprise:

• The accumulated retained earnings of kuka Aktiengesellschaft and its consolidated subsidiaries.
• Consolidation and currency translation effects.
• Measurement of financial derivatives (interest rate swaps, etc.) and actuarial gains and losses included in provisions for pensions.

23 minority interests

This item primarily comprises the minority stake held by third parties in kuka Enco Werkzeugbau spol. s.r.o., Dubnica, Slovakia. The changes to this item are detailed in the development of Group equity.

24 management of capital

The primary goal of managing capital for the kuka Group is to support ongoing business operations by providing adequate financial resources and increasing enterprise value.

This requires sufficient shareholders’ equity (Leverage ratio as the key indicator) and a minimum return on capital employed (roce as the key indicator) equal to internal corporate targets.

The roce figures achieved in the 2008 reporting year are discussed in the management report.

The kuka Group monitors its capital on the basis of net liquidity. Net liquidity represents cash and cash equivalents less short and long-term liabilities due to financial institutions. The development of net liquidity in the 2008 reporting year is presented in the management report.

25 pension provisions and similar obligations

Actuarial gains and losses are recognized directly in equity at the time in which they occur (Option 3 in accordance with ias 19.93A).

Accordingly, provisions for pensions developed as follows in the financial year 2008:

in € millions		Status as at Jan.1		Changes to the scope of consolidation, exchange rate differ- ences, reclassifi- cation in disc. Operations, Other		Consumption		Reduction		Additions		Actuarial gains and losses (directly in equity)		Status as at Dec.31
2007		140.3		– 54.7		6.0		0.0		4.1		– 9.8		73.9
2008		73.9		0.0		5.9		0.0		3.9		– 3.4		68.5

Pension provisions include liabilities from vested benefits and from current benefits paid to vested and former employees of the kuka Group as well as their surviving dependents. Depending on the legal, economic and tax situation in each of the countries concerned, various such retirement benefit systems are in place, that are, as a rule, based on employees’ length of service and compensation.

Since they are in the nature of a retirement benefit, liabilities of the us Group company b&k Corporation for post-employment medical benefits are also disclosed under pension provisions according to ias 19. Of the total provisions and accruals, these obligations similar to pensions, calculated according to the rules of ias 19, represent € 1.0 million compared to € 1.7 million in 2007. Liabilities for health insurance coverage in the current financial year generated a gain of € 0.4 million compared to expenses of € 0.1 million as a result of plan curtailments the year prior. The possible effects of an increase / reduction of 1 percent of the expected cost development are € 0.1 million.

Company retirement benefit coverage in the Group is provided through both defined contribution and defined benefit plans.

For the defined contribution plans, the company pays contributions to a public or private pension insurance carrier. Upon payment of the contributions, the company has no further obligations. Total payments for pensions under defined contribution plans in the amount of € 21.0 million compared to € 17.7 million in 2007 and are disclosed as expenses in the year in question. Under defined benefit plans, the company incurs an obligation to provide the benefits promised by the plan to current and former employees.

The only remaining funded benefit plans are in effect in the usa.

The amount of pension obligations (defined benefit obligation) was calculated by actuarial methods for which estimates are unavoidable. In addition to assumptions related to life expectancy, this involves assumptions detailed below, which are dependent on the economic environment for each country in question:

acturial assumptions

		Germany				usa				Others
Dec. 31		2007		2008		2007		2008		2007		2008
Demographic assumptions		rt 2005 G		rt 2005 G		rp 2000		rp 2000		ips55 (I); tv88 /90 (F)		ips55 (I); tv88 /90 (F)
Discount factor		5.50 %		6.25 %		6.00 %		6.00 %		4.50 – 5.50 %		5.60 %
Expected rate of return on assets		–		–		8.00 %		8.00 %		–		–
Wage dynamics		0.00 – 2.50 %		0.00 – 2.50 %		–		–		0.00 – 1.50 %		0.00 – 1.50 %
Pension dynamics		2.00 – 2.50 %		2.00 – 2.50 %		–		–		0.00 – 2.00 %		0.00 – 2.00 %
Changes in cost of medical services		–		–		5.00 – 9.00 %		5.00 – 8.00 %		–		–

Wage dynamics encompass future increases in wages and salaries that are estimated annually by reference to factors such as inflation and economic conditions, among others.

The expected returns are derived from consensus forecasts for the respective asset classes as well as bank discussions. The forecasts are based on experienced data, economic data, interest forecasts and stock market expectations.

For funded plans, the pension obligations calculated according to the projected- united-credit method are reduced by an amount equal to the fund assets. If the fund assets exceed the defined benefit obligations, an asset is recognized according to ias 19 and disclosed under other assets. To the extent that the fund assets do not cover the commitment, the net obligation is recognized as a liability under pension provisions.

Increases or decreases in either the present value of the defined benefit obligations or the fair value of the plan assets may give rise to actuarial gains or losses. This may be caused by factors such as changes in actuarial parameters, changes to estimates for the risk profile of the pension obligations and differences between the actual and expected returns on the fund assets. Actuarial gains and losses are recognized directly in equity and offset against revenue reserves in the year in which they occur.

funding status of defined benefit pension obligations

		Germany				usa				Others				Total
in € millions		2007		2008		2007		2008		2007		2008		2007		2008
Present value of pension benefits covered by provisions		70.6		64.8		1.7		0.9		1.1		1.2		73.4		66.9
Present value of funded pension benefits		–		–		3.6		4.0		0.0		0.0		3.6		4.0
Defined benefit obligation		70.6		64.8		5.3		4.9		1.1		1.2		77.0		70.9
Fair value of plan assets		–				3.1		2.4		0.0		0.0		3.1		2.4
net obligation		70.6		64.8		2.2		2.5		1.1		1.2		73.9		68.5
Overfunding, plan assets (–)		–		–		–		–		–		–		–		–
Unrecognized past service costs		–		–		0.0		0.0		–		–		0.0		0.0
balance sheet amount as of dec. 31		70.6		64.8		2.2		2.5		1.1		1.2		73.9		68.5
(of that pension provisions)		(70.6)		(64.8)		(2.2)		(2.5)		(1.1)		(1.2)		(73.9)		(68.5)
(of that asset (–))		(–)		(–)		(0.0)		(0.0)		(–)		(–)		(0.0)		(0.0)

As a result of the increase in market rates observed especially in the euro zone since the reference date for the prior year, higher discount rates were applied generally for the discounting of pension obligations resulting, ceteris paribus, in a lower defined benefit obligation. Details of the changes in defined benefit obligations for the financial year are shown in the following summary:

changes in defined benefit obligations

		Germany				usa				Others				Total
in € millions		2007		2008		2007		2008		2007		2008		2007		2008
Net obligations as of Jan. 1		104.8		70.6		37.7		5.3		70.7		1.1		213.2		77.0
(of which funded in a separate fund)		(–)		(–)		(32.0)		(3.6)		(68.8)		(0.0)		(100.8)		(3.6)
(of which funded by provisions)		(104.8)		(70.6)		(5.7)		(1.7)		(1.9)		(1.1)		(112.4)		(73.4)
Changes to the scope of consolidation		– 22.9		0.0		– 31.8		0.0		– 69.4		0.0		– 124.1		0.0
Current service costs		0.6		0.4		0.1		0.1		0.0		0.1		0.7		0.6
Interest expense		3.4		3.7		0.3		0.3		0.0		0.0		3.7		4.0
Plan changes		–		–		0.1		– 0.5		– 0.1		0.0		0.0		– 0.5
Payments		– 5.7		– 5.6		– 0.2		– 0.2		– 0.1		– 0.1		– 6.0		– 5.9
Acturial gains (–) / and losses (+)		– 9.6		– 4.3		– 0.2		– 0.4		0.0		0.1		– 9.8		– 4.6
Currency translation		–		–		– 0.7		0.3		0.0		0.0		– 0.7		0.3
Other changes		0.0		0.0		0.0		0.0		0.0		0.0		0.0		0.0
net obligations as of dec. 31		70.6		64.8		5.3		4.9		1.1		1.2		77.0		70.9
(of which funded in a separate fund)		(–)		(–)		(3.6)		(4.0)		(0.0)		(0.0)		(3.6)		(4.0)
(of which funded by provisions)		(70.6)		(64.8)		(1.7)		(0.9)		(1.1)		(1.2)		(73.4)		(66.9)

As was the case in the previous year, the defined benefit obligation also decreased in the reporting year owing to an increase to the discounting factor for domestic and foreign pension plans. The influence of the remaining valuation parameters was minimal. A change to the discounting factor of + / – 0.25 percent would lead to a higher / lower defined benefit obligation of € + / – 1.9 million.

Current service costs and interest expenses totaling € 4.6 million (prior year: € 4.4 million) compared to benefit payments of € 5.9 million during the financial year (prior year: € 6.0 million). The reduction of the defined benefit obligation results mainly in actuarial gains of € 4.6 million accrued during the financial year.

pension expense for defined benefit plans

		Germany				usa				Others				Total
in € millions		2007		2008		2007		2008		2007		2008		2007		2008
Current service costs		0.6		0.4		0.1		0.1		0.0		0.1		0.7		0.6
Interest expense		3.4		3.7		0.3		0.3		0.0		0.0		3.7		4.0
Expected return on plan assets		–		–		– 0.3		– 0.2		–		–		– 0.3		– 0.2
Plan curtailments		–		–		0.0		– 0.5		– 0.1		0.0		– 0.1		– 0.5
Unrecognized past service costs		–		–		0.1		0.0		–		–		0.1		0.0
pension expenses from defined benefit commitments		4.0		4.1		0.2		– 0.3		– 0.1		0.1		4.1		3.9

Pension expense for defined benefit plans decreased by € 0.2 million to € 3.9 million. This is mainly due to reductions in medical care coverage of b&k Corporation, Saginaw / usa. This is partly offset by the December 31, 2007 increase in the discount rate over that for the previous year, which resulted in higher interest expenses.

The statement of income and expenses recognized in Group equity includes the following amounts:

in € millions		2006		2007		2008
Cumulative gains (+) and losses (–) recognized directly in equity as at Jan. 1		0.0		3.3		13.1
Actuarial gains (+) and losses (–) of the financial year		3.3		9.8		3.4
cumulative gains (+) and losses (–) recognized directly in equity as at dec. 31		3.3		13.1		16.5

development of plan assets in the financial year

		usa				Others				Total
in € millions		2007		2008		2007		2008		2007		2008
Fair value as at Jan. 1		29.3		3.1		45.6		0.0		74.9		3.1
Changes to the scope of consolidation		– 26.2		0.0		– 45.6		0.0		– 71.8		0.0
Expected returns on plan assets		0.3		0.2		0.0		0.0		0.3		0.2
Acturial gains / losses		0.0		– 1.2		0.0		0.0		0.0		– 1.2
Currency translation		– 0.4		0.2		0.0		0.0		– 0.4		0.2
Employer contributions		0.2		0.2		0.0		0.0		0.2		0.2
Payments		– 0.1		– 0.1		0.0		0.0		– 0.1		– 0.1
fair value as at dec.31		3.1		2.4		0.0		0.0		3.1		2.4

The actual expenses from external pension funds were € 1.1 million (prior year gains: € 0.3 million).

As of December 31, 2008 the plan assets of € 2.4 million (prior year: € 3.1 million) broke down into shares in stock funds equal to 75 percent (prior year: 70 percent), holdings of bonds and separate assets with a corresponding investment focus equal to another 25 percent (prior year: 25 percent). Shares in a separate real estate fund (5 percent in 2007) were sold in the financial year.

Employer payments into the fund assets of € 0.2 million are expected in the 2009 financial year.

Amounts for the current year and the four previous years of pension obligations, the excluded assets and the assets exceeding benefit commitments are represented as follows:

in € millions		2004		2005		2006		2007		2008
Defined Benefit Obligation		242.8		222.2		213.2		77.0		70.9
Plan Assets		60.3		72.5		74.9		3.1		2.4
funded status		182.5		149.7		138.3		73.9		68.5

The following shows the experience-based adjustments for the current and previous year:

in %		2007		2008
Experience-based increase (decrease) of pension obligations		– 3.0		0.8
Experience-based increase (decrease) of plan assets		0.0		– 53.1

26 provision for taxes

in € millions		Status as at Jan. 1, 2008		Changes to the scope of consolidation, ex- change rate differences		Use		Reversals		Additions		Status as at Dec.31, 2008
provision for taxes		36.6		0.3		29.9		0.0		4.3		11.3

Of the total provision for taxes, € 9.9 million (prior year: € 34.9 million) are related to income taxes and € 1.4 million (prior year:  € 1.7 million) are related to other taxes.

The items included in the provision for taxes have a remaining maturity of up to one year.

27 other provisions and accruals

in € millions		Status as at Jan. 1, 2008		Changes to the scope of consolidation, ex- change rate differencess		Use		Reversals		Additions		Status as at Dec.31, 2008
Warranty commitments and risks from pending transactions		45.1		0.4		16.1		8.1		22.5		43.8
Liabilities arising from restructurings		3.8		– 0.1		1.6		1.5		5.8		6.4
Other provisions		77.4		0.7		46.2		9.9		35.3		57.3
other provisions and accruals		126.3		1.0		63.9		19.5		63.6		107.5

Other provisions and accruals for warranty commitments and risks from pending transactions include provisions for impending losses from pending transactions of € 20.5 million (prior year: € 16.9 million) and warranty risk of € 23.3 million (prior year: € 28.2 million).

The restructuring obligations represent settlements and restructuring expenses at several companies.

Of the other provisions, € 27.6 million (prior year: € 30.6 million) relate among other items to costs still to be incurred for orders already invoiced and litigation risk of € 4.1 million (prior year: € 8.7 million). The reversals are mainly related to the provisions for costs still to be incurred in the amount of € 3.7 million and provisions for litigation risk in the amount of € 4.1 million.

The other provisions have a remaining term of up to one year.

28 liabilities

2008

		Remaining maturity
in € millions		up to one year		between one and five years		more than five years		Dec.31, 2008 total
Liabilities due to banks		33.2		–		–		33.2
Convertible bond		0.4		61.3		0.0		61.7
financial liabilities		33.6		61.3		0.0		94.9
Liabilities from construction contracts		54.6		–		–		54.6
Advances received		36.7		–		–		36.7
Trade payables		149.1		–		–		149.1
Accounts payable to affiliated companies		0.2		–		–		0.2
Other liabilities
Notes payable		2.1		–		–		2.1
Other liabilities and deferred income		100.8		12.1		1.1		114.0
(of that for taxes)		(18.5)		(0.0)		(0.0)		(18.5)
(of that for social security payments)		(1.8)		(0.0)		(0.0)		(1.8)
(of that liabilities relating to personnel)		(54.2)		(7.0)		(0.7)		(61.9)
(of that for leases)		(0.0)		(0.0)		(0.0)		(0.0)
(of that fair values of foreign exchange and interest rate contracts)		(11.2)		(4.8)		(0.0)		(16.0)
liabilities		377.1		73.4		1.1		451.6

2007

		Remaining maturity
in € millions		up to one year		between one and five years		more than five years		Dec.31, 2007 total
Liabilities due to banks		0.1		0.0		0.0		0.1
Convertible bond		0.4		59.1		0.0		59.5
financial liabilities		0.5		59.1		0.0		59.6
Liabilities from construction contracts		72.4		0.0		0.0		72.4
Advances received		35.4		0.0		0.0		35.4
Trade payables		148.9		0.0		0.0		148.9
Accounts payable to affiliated companies		0.1		0.0		0.0		0.1
Other liabilities
Liabilities to associated companies		0.0		0.0		0.0		0.0
Notes payable		1.1		0.0		0.0		1.1
Other liabilities and deferred income		84.2		8.8		2.7		95.7
(of that for taxes)		(15.3)		(0.0)		(0.0)		(15.3)
(of that for social security payments)		(1.8)		(0.0)		(0.0)		(1.8)
(of that liabilities relating to personnel)		(48.6)		(6.9)		(2.7)		(58.2)
(of that for leases)		(3.7)		(0.1)		(0.0)		(3.8)
(of that fair values of foreign exchange and interest rate contracts)		(1.4)		(1.0)		(0.0)		(2.4)
liabilities		342.6		67.9		2.7		413.2

29 financial liabilities / financing

The remaining existing financial liabilities mainly represent the convertible bond issued in May of 2006 as well as the utilization of the existing cash lines from the syndicated loan.

fixed interest rate agreements (2008)

Financial instrument		Net carrying amount in € millions		Fair value in € millions		Original maturity		Notional interest rate
Convertible bond		61.7		50.2		2006 – 2011		3.75 % p. a.

fixed interest rate agreements (2007)

Financial instrument		Net carrying amount in € millions		Fair value in € millions		Original maturity		Notional interest rate
Convertible bond		59.5		78.9		2006 – 2011		3.75 % p. a.

The market value of the convertible bond was determined using the closing price in floor trading at the Frankfurt Stock Exchange on December 30, 2008.

variable interest rate liabilities to banks (2008)

Financial instrument / in millions		Net carrying amount		avg. Notional interest rate		Year of latest maturity
Liabilities due to banks		32.2 eur 32.2 eur		4.09 % p. a.		2009
Liabilities due to banks		0.7 gbp 0.7 eur		2.00 % p. a.		2009
Liabilities due to banks		1.0 brl 0.3 eur		30.00 % p. a.		2009

variable interest rate liabilities to banks (2007)

Financial instrument / in millions		Net carrying amount		avg. Notional interest rate		Year of latest maturity
Liabilities due to banks		0.4 brl 0.1 eur		34.23 % p. a.		2008

All averages are calculated as the arithmetic mean of the values of the individual financial instruments as at the financial statement reporting date, weighted by the respective carrying values in €.

Convertible bond

In May 2006, kuka placed a convertible bond with a face value of € 69 million, collateralized by kuka Aktiengesellschaft, via its subsidiary kuka Finance b. v.; Amsterdam / Netherlands. The bond was issued in denominations of € 50,000 each and grants rights for conversion in consideration of the 2007 dividend into up to 2,718,322 no-par value shares of kuka Aktiengesellschaft. The conversion price is € 25.3833 per share. The conversion rate is 1,969.8005 shares by unit of denomination. The adjustment related to dividend payments guarantees the anti-dilution provisions with respect to distributions in accordance with the bond terms and conditions. The conversion right can be exercised until the maturity date of the bond. The bond carries an interest coupon of 3.75 percent p. a.. Interest is paid in November of each year.

The bond matures on November 9, 2011 and will be redeemed by payment equal to the face value plus interest accrued up until that time. As of December 9, 2009, kuka has the right to call the bonds at any time at the nominal amount, also plus accrued interest, subject to the share price exceeding 130 percent of the conversion price within a period defined in the bond terms and conditions.

The convertible bond is listed on the Luxembourg exchange (isin de000a0grmc0 / wkn a0g rmc). The last price quoted for the bond on the Frankfurt stock exchange in 2008 was 72.80 percent (114.40 percent in 2007).

On the balance sheet, the convertible bond is broken down into an equity and a debt component. The market value of the debt component ( € 55.7 million) was determined on the basis of the market interest rate for a corresponding fixed-interest bond without conversion feature (7.63 percent). Including the issuing costs allocated proportionately to the equity and debt components, the effective interest rate rises to 8.25 percent. The resulting value of the equity component ( € 11.3 million) is recognized as part of the capital reserve and will not be changed until the due date or conversion. In the 2007 financial year, interest expense of € 4.9 million (prior year: € 4.7 million) was booked in connection with the bond account.

Syndicated loan

kuka Aktiengesellschaft and 31 subsidiaries had closed on December 22, 2006 a syndicated loan for € 475 million with a select group of banks. The lead banks of the syndicate are Landesbank Baden-Württemberg, Dresdner Bank ag and HypoVereinsbank ag. They are joined by Bayerische Landesbank, the Royal Bank of Scotland and Deutsche Bank. The syndicated loan agreement was executed effective January 31, 2007.

Following the successful sale of the Packaging Division in April of 2007, contractual adjustments to this syndicated loan became effective. Aside from the elimination of the 12 companies in this business division as parties to the contract, the term loan was repaid and the line of credit for lcs was reduced by € 20 million. Under this agreement, the kuka Group now still has access to € 115 million in revolving cash lines (including up to € 40 million for lcs) as well as € 190 million in credit lines for lcs. The latter are particularly important for kuka in connection with the financing of plant construction deals.

The first opportunity for an extension was utilized in the 2007 financial year with the approval of the consortium. The loan agreement currently runs through December 2010.

The availability of the financing is tied to the adherence to specific covenants. Adhering to the debt-equity and interest coverage ratio as well as maintaining a set level of Group equity was not a problem in the 2008 financial year.

The conditions for accessing the operating lines of credit and credit lines for lcs as well as the loan commitment fees are directly related to the debt-equity ratio (financial leverage) and are adjusted quarterly.

The receivables of the syndicate of banks from the financing agreement are collateralized by kuka companies. The collateral package includes an uncertified land charge on the industrial site in Augsburg totaling € 70.0 million. The kuka companies also took part in blank assignments and transfers by way of securities and pledged business shares.

The utilization of the line of credit for lcs of € 190 million totaled € 108.7 million as of the key date; the existing operating line of credit was utilized in the amount of € 30.1 million.

Credit lines from insurance companies

Credit lines for lcs in the amount of € 50 million have been committed by credit insurance companies. Utilization of these lines is equal to € 3.2 million in the case of EulerHermes Kreditversicherungs ag. No utilization has been made of the Zurich Group credit lines.

Asset-backed securities program

In December 2006, an abs program (Asset-Backed Securities) was issued with the support of Bayern lb. Under this program, trade receivables of kuka Roboter GmbH in an amount of up to € 25 million can be sold in regular tranches to the participating company, which is not included in the Group. The latter finances the purchase of the receivables by issuing securities on the capital market or through special credit lines provided by Bayern lb. The adequate credit worthiness of the receivables sold is guaranteed by a default guarantee from a credit insurer. In this connection, kuka Roboter GmbH absorbs the first 1.15 percent of the credit risk from the sale of the receivables.

As of the balance sheet date, utilization of the program was equal to € 15.7 million (December 31, 2007: € 13.9 million). A cash deposit of € 4.4 million (December 31, 2007: € 3.9 million) was furnished as security and is being reported under other assets. The claims of kuka Roboter GmbH for the management and settlement of the sold receivables are also included in this category at a present value of € 0.3 million (December 31, 2007: € 0.3 million). The continuing involvement of € 0.2 million (prior year: € 0.2 million) was completely written off as of the balance sheet date.

30 other non current / current liabilities and deferred income

Liabilities arising from finance leases are recognized at the present value of future lease payments and disclosed as other liabilities. Liabilities for vacation pay, flex-time credits and the statutory German early retirement scheme (Altersteilzeit), are recognized under other liabilities. Trade payables include payments due on outstanding supplier invoices.

31 financial risk management and financial derivates

a) Principles of risk management

The kuka Group is exposed in particular to risks from movements in exchange rates and interest rates that affect its assets, liabilities and forecast transactions. Financial risk management aims to limit and control these market risks through ongoing operational and finance activities. Derivative and non-derivative hedging instruments are used for this purpose, depending on the risk assessment; the Group basically only hedges the risks that affect its cash flow. Derivatives are exclusively used as hedging instruments, i. e., not for trading or other speculative purposes. To reduce the credit risk, hedging transactions are generally only concluded with leading financial institutions whose credit rating is excellent.

The fundamentals of the Group’s financial policy are established each year by the Board of Management and overseen by the Supervisory Board. Group Treasury is responsible for implementing the finance policy and for ongoing risk management. Certain transactions require the prior approval of the Financial Director, who is also regularly briefed on the current risk exposure.

Treasury regards effective management of the market risk as one of its main tasks. For this, the department performs simulation calculations using different most-likely and worst-case scenarios.

b) Currency risks

kuka is exposed to currency risks from its investing, financing, and operating activities. These are hedged at the time of their occurrence to the extent that they influence the Group’s cash flows, through the conclusion of derivative financial instruments with banks or by offsetting opposing payment flows. Hedging may also cover future planned transactions where hedging instruments with a short term (< 1 year) are used to cover currency risks. Foreign-currency risks that do not influence the Group’s cash flows, e. g. the risks resulting from the translation of assets and liabilities of foreign kuka operations into the Group’s reporting currency, are generally not hedged. These risks could also be hedged after approval by the Finance Director. In the area of investments, there were no major risks from foreign currency transactions on the kuka reporting date.

Foreign currency risks in the financing area are caused by loans in foreign currency that are extended to Group entities and liquid funds in foreign currency.

Treasury hedges the major risks arising from these. Currency derivatives are used to convert financial obligations and intragroup loans denominated in foreign currencies into the Group entities’ functional currencies. At the reporting date, there are no major financial liabilities in foreign currencies. All intragroup loans denominated in foreign currencies were hedged accordingly. On account of these hedging activities, kuka was not exposed to any significant exchange rate risks in the area of financing at the reporting date.

The individual kuka companies handle their operating activities mainly in the relevant functional currency. However, some kuka companies are exposed to corresponding exchange rate risks in connection with planned payments outside their own functional currencies. kuka uses currency derivatives to hedge these payments. On account of these hedging activities, kuka was not exposed to any significant exchange rate risks from its operating activities at the reporting date.

Currency risks as defined by ifrs 7 arise on account of financial instruments being denominated in a currency that is not the functional currency and being of a monetary nature. Differences resulting from the translation of financial statements into the Group’s presentation currency are not taken into consideration. Relevant risk variables are generally all non-functional currencies in which kuka has financial instruments.

For the presentation of market risks, ifrs 7 requires sensitivity analyses that show the effects of hypothetical changes of relevant risk variables (e. g. interest rates, exchange rates) on profit or loss and shareholders’ equity. The periodic effects are determined by relating the hypothetical changes in the risk variables to the balance of financial instruments at the reporting date. It is assumed that the balance at the reporting date is representative for the year as a whole.

The currency sensitivity analysis is based on the following assumptions:

• Major non-derivative monetary financial instruments (liquid assets, receivables, liabilities) are either directly denominated in the functional currency or are transferred to the functional currency through the use of derivatives. Exchange rate fluctuations therefore have no effects on profit or loss, or shareholders’ equity.
• Interest income and interest expense from financial instruments are also either recorded directly in the functional currency or transferred to the functional currency by using derivatives. For this reason, there can be no effects on the variables considered in this connection.
• In the case of fair value hedges designed for hedging currency risks, the changes in the fair values of the hedged item and the hedging instruments attributable to exchange rate movements balance out almost completely in the income statement in the same period. As a consequence, these financial instruments are not exposed to currency risks with an effect on profit or loss, or shareholders’ equity either.
• Currency derivatives are always assigned to non-derivative hedged items, so these instruments also do not have any currency effects.

The following currency scenarios arise for the main foreign currencies used by the kuka Group:

If the eur had gained 10 percent against the usd at December 31, 2008 (2007), Group profits would have been € 0.7 million higher (€ 0.1 million lower). If the eur had lost 10 percent against the usd at December 31, 2008 (2007), Group profits would have been € 0.8 million lower (€ 0.1 million higher).

If the eur had gained 10 percent against the Japanese yen at December 31, 2008 (2007), Group profits would have been € 0.1 million lower (€ 0.6 million higher). If the eur had lost 10 percent against the Japanese yen at December 31, 2008 (2007), Group profits would have been € 0.1 million higher (€ 0.6 million lower).

If the eur had gained 10 percent against the huf at December 31, 2008 (2007), Group profits would have been € 0.1 million lower (€ 0.0 million). If the eur had lost 10 percent against the huf at December 31, 2008 (2007), Group profits would have been € 0.1 million higher (€ 0.0 million).

If the eur had gained 10 percent against the gbp at December 31, 2008 (2007), Group profits would have been € 0.3 million lower (€ 0.1 million). If the eur had lost 10 percent against the gbp at December 31, 2008 (2007), Group profits would have been € 0.4 million higher (€ 0.1 million).

c) Interest rate risks

Risks from interest rate changes at kuka are essentially the result of short-term investments / credits in the €. These are not hedged at the reporting date.

Interest rate risks are presented by way of sensitivity analyses in accordance with ifrs 7. These show the effects of changes in market interest rates on interest payments, interest income and expense, other income components and, if appropriate, shareholders’ equity. The interest rate sensitivity analyses are based on the following assumptions:

• Changes in the market interest rates of non-derivative financial instruments with fixed interest rates only affect income if these are measured at their fair value. As such, all financial instruments with fixed interest rates that are carried at amortized cost (e. g. convertible bonds) are not subject to interest rate risk as defined in ifrs 7.
• Changes in market interest rates affect the interest income or expense of non-derivative variable-interest financial instruments, the interest payments of which are not designated as hedged items of cash flow hedges against interest rate risks.

If the market interest rates had been 100 basis points higher (lower) at December 31, 2008, profit or loss would have been € 0.1 million € higher (lower) [in 2007, with a positive net liquidity, the profit or loss would have been € 2.2 million lower (higher)]. The hypothetical effect of € 0.1 million results solely from the financial investments (credits) totaling € 41.3 million (€ 33.2 million) at variable interest rates.

d) Credit risks

The kuka Group is exposed to credit risk from its operating activities and certain financing activities. a default can occur if individual business partners cannot meet their contractual obligations and the kuka Group thus suffers a financial loss. With regard to financing activities, transactions are only concluded with counterparties that have at least a credit rating of at least a- / a1.

At the level of operations, the outstanding debts are continuously monitored in each area (locally). Business relations with critical major customers (e. g. us oems) and the associated credit risks are subject to separate monthly credit rating monitoring at Group Board level. Credit risks must be taken into account through individual impairments.

In the course of abs transactions, the designated receivables are managed separately. A security margin is provided as a cash reserve for the credit risk. The percentage of the provision for the credit risk has been statistically proven to be stable. A statement of the actual loan losses is prepared periodically and any excess payments to the cash reserve are refunded.

The maximum exposure to credit risk is represented by the carrying amounts of the financial assets that are carried in the balance sheet (including derivatives with positive market values). No agreements reducing the maximum exposure to credit risk had been concluded as of the reporting date.

e) Liquidity risks

In order to ensure the payment capability at all times and the financial flexibility of the kuka Group, a liquidity reserve is kept in the form of credit lines and cash funds. For this, kuka has, amongst other things, concluded a consortium credit agreement with a consortium of banks. Detailed information is provided in the Appendix under Heading 29 Financial liabilities / Financing in the section headed ‘Consortium Loan’.

The following figures show the commitments for undiscounted interest and redemption repayments for the financial instruments subsumed under ifrs 7:

December 31, 2008

in € millions		Cash flows 2009		Cash flows 2010		Cash flows 2011 – 2013		Cash flows 2014 ff.
Non-current financial liabilities		2.6		2.6		71.5		0.0
Current financial liabilities		33.6		0.0		0.0		0.0
Trade payables		149.1		0.0		0.0		0.0
Liabilities from construction contracts		54.6		0.0		0.0		0.0
Accounts payable to affiliated companies		0.2		0.0		0.0		0.0
Other non-current liabilities		0.0		1.7		3.9		0.1
(of that for leases)		(0.0)		(0.0)		(0.0)		(0.0)
(of that Derivatives with a hedging relationship) (hedge accounting)		(0.0)		(1.4)		(3.4)		(0.0)
(of that Derivatives without a hedging relationship) (hedge accounting)		(0.0)		(0.0)		(0.0)		(0.0)
Other current liabilities and provisions		67.9		0.0		0.0		0.0
(of that for leases)		(0.0)		(0.0)		(0.0)		(0.0)
(of that Derivatives with a hedging relationship) (hedge accounting)		(11.2)		(0.0)		(0.0)		(0.0)
(of that Derivatives without a hedging relationship) (hedge accounting)		(0.0)		(0.0)		(0.0)		(0.0)

December 31, 2007

in € millions		Cash flows 2008		Cash flows 2009		Cash flows 2010 – 2012		Cash flows 2013 ff.
Non-current financial liabilities		2.6		2.6		74.2		0.0
Current financial liabilities		0.1		0.0		0.0		0.0
Trade payables		148.9		0.0		0.0		0.0
Liabilities from construction contracts		72.4		0.0		0.0		0.0
Accounts payable to affiliated companies		0.1		0.0		0.0		0.0
Other non-current liabilities		0.0		0.7		0.2		0.0
(of that for leases)		(0.0)		(0.1)		(0.0)		(0.0)
(of that Derivatives with a hedging relationship) (hedge accounting)		(0.0)		(1.0)		(0.0)		(0.0)
(of that Derivatives without a hedging relationship) (hedge accounting)		(0.0)		(0.0)		(0.0)		(0.0)
Other current liabilities and provisions		49.7		0.0		0.0		0.0