KWS Group Annual Report 2004

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Annual Report
2004 /2005

150 Years KWS SAAT AG –
Changing Prospects over Time

KWS SAAT AG

Annual Report
2004/2005

150 Years of KWS SAAT AG –
Changing Prospects over Time

Table of contents

150 YEARS OF K WS

Chairman’s Foreword

1856 to date – Company history at a glance

Changing prospects over time

FISCAL YEAR 2004/2005

Report of the Supervisory Board

Agenda of the Annual Shareholders’ Meeting

KWS shares

Report on the performance of the KWS Group

Segments Overview

Sugar beet segment

Corn segment

Cereals segment

Breeding & services segment

Outlook for the 2005/2006 fiscal year

Risks for future development

Employees

Key figures of the KWS Group

ANNUAL FINANCIAL STATEMENTS OF THE KWS GROUP

Compliance declaration

Chairman’s Foreword

In 2006 KWS will look back over 150 years of history. Throughout this long journey, KWS has
always seen itself as a reliable partner of the farming community. Seed is the crucial production

tool of our customers and hence our maxim is: to develop innovative varieties to create economi-

cally interesting prospects – yesterday, today and for the future.

This 2004 /2005 Annual Report surveys a markedly good financial performance. This is particularly
gratifying in an anniversary year. KWS Group sales and earnings in the fiscal year outperformed
the previous year and exceeded expectations. The KWS Group posted sales of € 495 million. This

represents an increase of 11.4 %. Above all, the corn segment showed a further positive trend and

achieved the highest increase for the fifth consecutive year. Despite coming off a high level the

sugar beet segment excelled once more, particularly in markets outside the jurisdiction of the EU

Sugar Market Regime. In spite of a declining rye market, sales in the cereals segment remained
stable due to our strong range of varieties. Overall, the KWS Group’s operating result (EBIT) was
€ 56.3 million, an increase of 7.7 %. Net income for the year rose by 17 % to € 34.8 million.

Growth at KWS was driven mainly organically, but also through an acquisition. In December 2004
AgReliant – the joint venture founded in 2000 by KWS and our French partner company –
acquired Producers Hybrids in Nebraska, a corn and soybean seed marketing company. This
enables a continuous market penetration in the Western USA.

KWS has assumed a new role on the capital market. Until recently 90 % of the shares were in
firm hands; now they are available to a wider circle of investors, because of this significant
increase in the free float, from 8.2 % to 33.1 %. Südzucker AG and Hypovereinsbank decided
to place their shares on the capital market in December 2004. To safeguard the interests of the
company and our shareholders, we have been closely involved in the placement process. The
altered shareholder structure has meant that the share’s liquidity on the market has significantly
increased, and more investors now participate in the success of the company. With our successful
conversion to IFRS as well as the introduction of quarterly reports commencing the first quarter of
fiscal 2005 / 2006, KWS has fulfilled the criteria for admission to the Prime Standard of the German
Stock Exchange.

KWS remains the family-run, independent company it has been ever since 1856. In that year the
farmer, Matthias Christian Rabbethge, acquired the majority interest in the sugar factory in
Kleinwanzleben. This was the birth of KWS and dynamic growth followed. Above all, the succee-
ding generations made it their goal to increase sugar yield from raw beets and to create
a new source of income for the farming community. Using a polarimeter, Matthias Rabbethge Junior
selected beets according to their sugar content. The result of this progressive approach was
a “sugar beet” that helped the emerging business enterprise KWS to achieve an early break-
through. Ever since then, innovational energy in plant breeding has formed the basis of our com-
pany policy and our success.

The Executive Board of KWS SAAT AG (left to right):
Philip von dem Bussche | Sugar Beet, New Markets/Products
Dr. Hagen Duenbostel | Finance, Controlling, IT
Dr. Dr.h.c. Andreas J. Büchting (Chairman) | Corporate Affairs, R &D
Dr. Christoph Amberger | Corn, Cereals, Marketing

Chairman’s Foreword

With its sugar beet seed KWS was able to quickly expand into international markets. Eighteen
hundred ninety-eight saw the company’s expansion into the Ukraine, then and now the largest

sugar beet cultivation area in the world. Even before First World War we were in a position to meet

a quarter of global demand for sugar beet seed.

Agricultural intensification presented new challenges. Disease and pest infestation steadily spread.
As early as 1920, resistance breeding became a focal issue at Kleinwanzleben, thus assuring
yields in the field. In the 1980s and 1990s, for example, European sugar beet cultivation would

have been broken down by the Rhizomania virus if resistant varieties had not been developed.

KWS succeeded in developing rhizomania-tolerant varieties using classical breeding that again

guaranteed sugar beet growers new cultivation reliability.

With the commencement of corn breeding in 1955 we also set out on a new path. At that time
the South American plant was regarded as an exotic species in Germany. Today one cannot

imagine fodder troughs without it, and it has become the most important agricultural crop worldwi-

de. Due to its enormous biomass, corn could also serve as a renewable energy source. KWS

started early breeding special energy corn varieties, and today is leading in this field.

In the 1970s and 1980s KWS was one of the first to introduce cell biology and molecular genetics.
We are convinced of the advantages of biological progress. This also applies to “green genetic
engineering.” Genetic methods should be used where valuable genetic traits cannot be achieved
through conventional methods.

As in the past, KWS will continue to bank on the initiative and creativity of its employees. They are
undoubtedly the key to the excellent market position that KWS enjoys in the sector. Our employees
deserve our wholehearted recognition for their extraordinary commitment, their outstanding perfor-
mance, and their deep sense of responsibility.

Our thanks also go to our shareholders, customers and partners. Their reliable and mutually bene-
ficial relationships have contributed to the 150-year success story of KWS. Rest assured that we
will do everything to maintain these valuable relationships.

Dr. Dr.h.c. Andreas J. Büchting
Chairman of the Executive Board

» In 1838 about a dozen farmers and craftsmen join forces in Kleinwanzleben near

Magdeburg to found a sugar factory. In 1847 Matthias Christian Rabbethge moves to

Kleinwanzleben where he initially purchases a farm. He also acquires a stake in the

sugar factory. In the first few years this proves to be an unwise investment: beet

quality is poor, sugar yield is low. But Matthias Christian Rabbethge believes in the

success of beet sugar production and gradually acquires further shares in the factory.

By 1856 his stake amounts to more than 70 %. At this time his son Matthias Rabbethge

Junior is at college in Jena – his scientifically run beet breeding operation will be the

basis for the future success of the company. In the same year Matthias Christian

Rabbethge establishes a general partnership where he is joined by his future son-in-

law, Julius Giesecke. This is the birth of KWS. «

1838

Foundation of the Kleinwanzleben sugar factory as a joint stock

company

1856

Matthias Christian Rabbethge acquires the majority interest in

the sugar factory and forms a general partnership

1858

Marie Rabbethge, the daughter of Matthias Christian Rabbethge,

marries Julius Giesecke; at the same time Julius Giesecke’s

father, Adolf Giesecke, purchases half of Matthias Christian

Rabbethge’s stake in the sugar factory

1859

Matthias Rabbethge Junior starts beet breeding

1864

Rabbethge & Giesecke OHG fully acquires the Kleinwanzleben

sugar factory

1885

The OHG becomes “Zuckerfabrik Kleinwanzleben vormals

Rabbethge & Giesecke Aktiengesellschaft”

Source: Company archives in Kleinwanzleben – since 1991 again open to the public

Chairman’s Foreword

1 5 0 Y E A R S K W S • • • 1 5 0 Y E A R S K W S • • • 1 5 0 Y E A R S K W S • • • 1 5 0 Y E A R S K W S

K l e i n w a n z l e b e n 1 9 3 0

E i n b e c k 2 0 0 5

K W S C O M P A N Y H I S T O R Y A T A G L A N C E

Kleinwanzleben

Einbeck

s i n c e 1 9 6 1

Subsidiaries and associated companies
in Europe and overseas

1 9 4 5

New start in Einbeck

1 8 5 6

Foundation in Kleinwanzleben near Magdeburg from left
to right: Matthias Christian Rabbethge, Julius Giesecke,
Matthias Rabbethge Junior

1 9 0 0

A global sugar beet seed
market leader with branches
in the Ukraine and several
other countries

1 9 2 0

Start of cereal, fodder beet, and potato
breeding

s i n c e 1 9 5 5

Expansion of the breeding program to
include corn and oil and protein plants

1 8 8 5

Rabbethge & Giesecke OHG becomes
Zuckerfabrik Kleinwanzleben vormals
Rabbethge & Giesecke Aktiengesellschaft

1 9 7 2

First laboratory for cell biology

1 9 7 5

Inclusion of the abbreviation
KWS in the company name KWS
Kleinwanzlebener Saatzucht AG
vormals Rabbethge & Giesecke

1 9 6 7 / 6 8

Merger of Heine Peragis cereal breeding
with LOCHOW-PETKUS

1860

1870

1880

1890

1900

1910

1920

1930

1940

1950

1960

1970

1980

1 8 6 5

1 9 0 8

Cross breeding: Gregor Mendel lays the basis.

Hybrid breeding: Yield “Explosion.”

In 1856 Gregor Mendel, an Augus-
tinian monk, crosses red and white
flowering pea plants, observes their
offspring and concludes that there
must be two genes for each trait
but that only one is passed on: the
dominant gene, in his case causing
the red flowers, asserts itself in the
offspring. However, the recessive
gene is also retained, so that a num-
ber of the grandchildren once again
produce white blossom. Further-
more, Mendel observes that in other
plants the traits are combined and
the plants produce pink blossom.

Mendel recognizes that the traits
are inherited in a certain numerical
ratio and in 1865 publishes his re-
sults: Mendel’s Laws of Heredity.
Plant breeders still use these find-
ings today, crossing plants and
thus creating a number of new
genotypes from which they select
the most suitable. This is because
only plants with the best traits are
used for further breeding.

Mendel’s Laws of Heredity – mean-
while lost – are only rediscovered in
1900. Together with the findings of

chromosome theory, they build the
basis of genetics.

The next major step forward is
achieved only four decades after
the Laws of Heredity have been
published: In 1908 the American
G. M. Shull publishes the methods
which provide significant increases
in yields. Shull succeeds in creating
pure lines by repeated inbreeding
of corn plants. The subsequent cross
of inbred lines produces plants that
exhibit a veritable explosion in yield
compared to the original plants.
This phenomenon is called hetero-
sis: crossbred off-spring of these
inbred lines, known as hybrids,

show increased size, vigor and yield
compared to their parents. Today,
the majority of breeding programs
for corn, sugar beet, rape and rye
are based on hybrid breeding. The
next breakthrough in work on in-
bred lines occurs almost 60 years
after Shull: the so-called “double
haploid technology” allows to gen-
erate pure inbred lines in less than
one year by regeneration of intact
plants from single reproductive cells
and chemically induced doubling
of the reduced (haploid) chromo-
some set.

Cross breeding

Hybrid breeding

Biotechnology

M I L E S T O N E S I N P L A N T B R E E D I N G

1 9 8 4

Foundation of PLANTA Angewandte
Pflanzengenetik und Biotechnologie GmbH

1 9 9 6

Sales at KWS exceed the € 250 million mark

2 0 0 3

Overseas share of sales of the KWS Group
increases to 70 %

1 9 9 9

Change of corporate name to KWS SAAT AG

1 9 9 0

Repurchase of the breeding station in
Kleinwanzleben

1 9 8 8

KWS acquires 100 % stake in
BETASEED, INC., USA

2 0 0 0

t o d a y

The number of employees in the KWS Group
exceeds the 2,000 mark. Cooperation with
French partner LIMAGRAIN in North America:
foundation of the corn company AgReliant

KWS – market leader in plant breeding, with activities in more than 65 countries
worldwide

1985

1990

1995

2000

2005

2010

s i n c e 1 9 7 0

s i n c e 1 9 9 0

Biotechnology: A step towards the future.

For 30 years biotechnological tools
have been supplementing conven-
tional breeding and have prompted
major changes during this period:
biotechnology encompasses cell bio-
logy, genetic engineering and ge-
nomics. With the aid of cell biology
complete plants can be developed
from single plant cells – a prerequi-
site for genetic engineering.

Genetic engineering allows the in-
troduction of individual genes into

the genome of plants to improve
specific plant traits. Not only genes
from related plants but also from
different organisms can be com-
bined and completely new traits
introduced into the gene pool. In
practice, the major traits today
are disease and pest resistance
as well as herbicide tolerance. In
future, the specific engineering of
compounds or the development of
salt and drought resistant plants is
conceivable.

Genome research

Genome research: A new chapter in breeding.

The goal of plant genome research
is to decode the structure and
function of all genes (i. e. of the ge-
nome) of a plant species. Today,
for example, the sequencing of the
rice genome has been completed.
Further sequencing projects are
ongoing and the description of the
precise function of up to 50,000
genes of a species remains a future
challenge. For example, genome
research is able to identify genome
segments that are responsible for
the expression of agriculturally rel-

evant plant traits such as yield or
pest resistance.

In close cooperation with research
partners, KWS has been able to
identify, for example, corn genes and
genome segments that are involved
in determining cold tolerance, nitro-
gen efficiency and plant digest-
ibility. These examples illustrate
the major significance of genome
research in accelerating breeding
progress and the production of
more modern, improved varieties.

» You need a lot of grip to get on in agriculture.
You must always have the courage to try some-
thing new. «

Henning Gruß, farmer

Mr. Gruß, which development in plant breeding do you think was a landmark

for agriculture?

» Off the top of my head, the development of monogerm sugar beet seed in the 60s:

prior to this my father had to thin out the seedlings by hand. Today a single beet

When farmers need quality varieties and superior advice, they know they have a com-

petent partner in KWS. What today may be self-evident was not feasible for earlier

generations because each farmer was responsible for producing his own seed. A por-

tion of the harvest was retained and used as seed for the following year. It was not until

the middle of the 19th century that a few farmers started to specialize in breeding seed

and this led to the foundation of the first seed corporations, including KWS in 1856.

grows from one seed – and saves us farmers a lot of work. Another example is the

In the early 19th century, the Berlin chemist Andreas Sigismund Marggraf and his student

Hand in hand:
Agriculture and plant breeding.

rhizomania infestation at the beginning of the 90s: at that time KWS was the first

seed company to supply rhizomania-tolerant plants. Without these varieties we would

have had to give up sugar beet cultivation altogether. «

What is so special about KWS as a company?

» KWS offers quality products and an experienced consulting service. Whether I want

to plant a new variety, or I’m worried about pest or disease infestation or whether

I’m looking for crop alternatives, I will always find a competent contact at KWS.

When I first started in energy corn cultivation for the biogas plant of the public ser-

vices, KWS was able to supply, for example, a special energy corn variety. «

What are the future challenges for you as a farmer?

» You need a lot of grip to get on in agriculture. You must always have the cour-

age to try something new. Today, structural change is the challenge in agriculture.

To survive you have to either maximize productivity, grow and cooperate, or exploit

new sources of income. «

Franz Carl Achard discovered that sugar can be extracted from fodder beet. Almost at

In cooperation with its

the same time Napoleon declared the Continental Blockade of British colonial goods,

customers KWS develops

thus preventing the import of cane sugar. As a consequence, a flourishing European

high-quality products.

sugar industry quickly evolved. People like Matthias Rabbethge Junior recognized the

opportunity to achieve improved seed by selecting beets for their sugar content. This led

to a long-term improvement in the sugar yield of beet sugar production and ultimately to

a stable income for farmers.

Plant breeding transforms agriculture.

Controlled and scientifically based plant breeding is a young discipline with four
important milestones so far: the crossing of plants thanks to Mendel’s Laws of
Heredity in 1865, the discovery of hybrid breeding in 1908, the development of bio-
technology in the 1970s and, finally, DNA diagnostics in the 1990s. As a result, the
work of farmers has changed radically during the past 150 years. KWS has played
a significant role in many stages along the way. At the beginning of the 1980s, for
example, a virus – known as rhizomania – infested sugar beet in Germany and caused
losses of up to 50 % of the harvest. KWS launched the first healthy variety, thereby
ensuring continued sugar beet cultivation in the affected areas.

Competent consulting services as a
success factor.

KWS is working today, and will continue to do so in future, to provide solutions for these
challenges. Customer satisfaction enjoys top priority at KWS. In Germany alone, there
are 120 consultants who visit farmers to assist them in selecting the right seed for
their soil, to present new varieties, and to answer any questions on current plant culti-
vation. The relationship between KWS and farmers is based on give and take, because
KWS is also reliant on constructive feedback from farmers. This exchange generates
products tailor-made to their requirements on a long-term basis.

The discovery of sugar

in fodder beet generated

the momentum for sugar

beet breeding.

Perspektiven

Prospects

» Corn is much more than just a foodstuf f or
fodder. As a renewable raw material and energy
source it is the crop of the future. «

Dr. Walter Schmidt, Corn Breeding Germany

Mr. Schmidt, as a corn breeder, what do you regard as the most important

development in plant breeding?

» The most important milestone for corn breeding is the development of hybrid

breeding at the beginning of the 20th century. Naturally, in the course of time a

Corn, the immigrant success story.

Nowadays corn is planted in fields all over Germany and Europe. Fifty years ago,

it was still regarded as exotic in this country. Although the first corn plants arrived

in Germany as early as the 17th century, corn was not able to assert itself against

domestic cereal varieties. Up until 1945 only a mere 50,000 hectares of corn were

planted in Germany, and only in warmer regions such as the Rhine rift valley. Thanks

to newer varieties adapted to a cooler climate, around 1.7 million hectares of

corn are now planted and the KWS Group alone supplies seed for approximately

number of decisive discoveries have been made – but more important is what this

400,000 hectares.

development reveals: with the assistance of plant breeding we can utilize the in-

credible adaptability of nature. We are not working against nature but with her.

A success story penned by plant breeding.

And only in the cooperation between man and nature can we succeed. «

What is so special about KWS as a company?

» KWS thinks plant breeding, KWS lives plant breeding. Plant breeding has been

our core business for 150 years and not just one segment amongst many. All our

In 1955 KWS started to breed corn. During the past 50 years it has been success-

ful in significantly accelerating hybrid breeding using double haploid techniques.

KWS was the first seed company to completely convert its breeding program to
these techniques. Compared with conventional hybrid breeding the advantage lies
mainly in the speed of development: whereas in the past new inbred lines required
a development period of four to five years, the new lines can now be produced
within one year.

customers and employees benefit from this. If I’ve been observing corn for months

Corn is the crop of the future.

in the field and have a question for my colleagues in the biotechnology department,

then I just call them up – we know each other. At the same time, thanks to the size

of the company, we are able to carry out research ourselves. This combination is

what makes KWS so successful. «

What are the future challenges for corn breeding?

» Corn is much more than just a foodstuff or fodder. As a renewable raw material

and energy source it is the crop of the future and its potential is a huge challenge

for us breeders. For me personally, energy corn is currently the most important

issue. Fossil energy is nearing depletion and it is up to all of us to drive forward the

development of plants for future energy production and to open up new paths. «

To continue to meet future customer requirements and to contribute significantly
to safeguarding global nutrition, the company will pursue its efforts in plant breed-
ing. Hence KWS is committed to the concept of extracting the best from plants
through careful research and development. Corn especially offers a wide range
of opportunities for the future, not only as food and fodder but meanwhile as a
renewable raw material or energy source.

Corn starch, for example, is used increasingly in the production of paper and
synthetics, as an adhesive or in the chemical industry. The development of spe-
cial energy corn for biogas is still in its infancy. However, successes in breeding
to increase biomass yield are already impressive. For KWS this project presents one
of the greatest challenges because the issue of renewable energy will become
increasingly interesting due to finite resources. KWS is working at full speed to
create the basis for economic biogas production.

The future belongs to

innovative varieties which

are resistant to pests and

offer high yields.

Energy plants – an alternative

for the environment, agriculture

and the consumer.

Kennzahlen

Prospects

» Genetic engineering is certainly not always the
solution to every problem. But it offers oppor-
tunities that would not be available using purely
conventional methods. «

Dr. Anja Matzk, Regulatory Affairs Biotechnology

Kennzahlen

Ms. Matzk, as a scientist, which discovery do you regard as revolutionizing

plant breeding?

» Green genetic engineering and the possibilities it has opened up for plant breed-

ing – this has fascinated me since my college days. However, despite all the buzz

Biotechnology – tomorrow’s answers.

Many of us can still remember the incredible summer of 2003, but sunshine also

has its shady side: the negative effects of a very hot period on vegetation and

plant growth are examples of the challenges that an eventual climate change poses

for agriculture. Companies such as KWS are able to contribute to meeting these

challenges. Biotechnology will play a key role here.

let’s not lose track of the fact that genetic engineering is just a tool that is used

Biotechnology opens up new opportunities.

alongside many others in plant breeding. It is most certainly not the solution to every

problem. But it does offer opportunities that would not be available using purely

conventional methods. «

What makes KWS so special?

» The willingness to engage in dialogue and its openness, particularly in the debate

on genetically improved seed, are unique at KWS. Society has always been, and

will continue to be, afraid of anything new. But it is of greatest importance to take

people’s concerns seriously and to communicate new developments openly. This

is the best way to establish a trusting relationship. KWS has done this from the

beginning, and will continue to do so in future. «

Which issues confront plant breeding in the 21st century?

» The main issues confronting us are the consequences of climate change, global

population growth and the increasing scarcity of resources. Plant breeding can

make a huge contribution here. Therefore, we must invest in research and develop-

ment today. The demands for high-performance seed are continually increasing;

using innovative tools we can meet this challenge. «

Biotechnology makes use of results from the molecular analysis of plant features.
Since the 1980s KWS has been developing methods based on cell and molec-

ular biotechnology. Today, using molecular methods we are able to identify and

track valuable traits such as resistance to diseases in our varieties and to intro-

duce them into existing lines by controlled cross breeding. In addition, using “green

genetic engineering” we can transfer important traits from other organisms into
our crops.

Using green genetic engineering we can create resistant varieties that reduce
the need for pesticides. There are also benefits for human health: scientists, for
example, are working on deactivating the gluten in wheat that would result in
fewer allergic reactions. Genetic engineering also plays a role in the development
of industrial raw material from plants: individual usage of potato starch is only
possible upon modification of the compound by genetic engineering.

As early as 1972, KWS established the first laboratory for cell biology. In 1984 the
KWS subsidiary “PLANTA Applied Plant Genetic Engineering and Biotechnology
Ltd” was founded, followed by the inauguration of a new biotech center, the “Bio-

technikum,” in 1999. This biotechnology service and development center is one of
the most efficient and modern installations in the whole industry.

Solutions in dialogue.

Despite the potential of genetic engineering, Germany is home to a heated and
often emotional debate on this new technological tool. Yet, a wide reservoir of ex-
perience exists with genetically modified plants: in the past year alone more than
80 million hectares worldwide were planted with genetically modified plants, more
than seven times the total agricultural acreage in Germany. To establish trust, KWS
is committed to open dialogue and careful consideration of the opportunities and
risks, on a case-by-case basis – the best way to meet the challenges of the future.

The architecture of the KWS

biotech center reflects the

transparency and openness

of the company.

100 experts from biotech-

nology provide innovation

at KWS.

26
26

Perspektiven
Kennzahlen

Prospects

» Today, many companies are only just beginning
to appreciate the importance of an international
presence. This has been a significant success
factor for KWS from the beginning. «

Dr. Alexej Ugarov, Sales Sugar Beet Eastern Europe

Dr. Ugarov, what do you regard as being the most significant development in the

seed sector?

» The opening to the Eastern European market is a great development opportunity,

but also a challenge. The potential is enormous: Russia and Ukraine alone with a cul-

tivation area of 150 million hectares correspond to half the acreage of the EU. I was

born in Russia, and so it’s particularly interesting for me to be able to offer the people

in this region high-quality seed and to communicate the related know-how. These

Seed knows no boundaries.

Beet seed from Kleinwanzleben was already an international sales hit at the end of

the 19th century. As a result, KWS established a series of branches abroad fairly early on.

In 1898 a subsidiary was founded in the Ukraine, then as now the world’s largest beet

cultivation area. In 1910 “Kleinwanzleben” meets one quarter of global demand for

sugar beet seed. Following both world wars, KWS concentrates on resuming its

ties abroad and resuscitating its export activities. Despite losing its headquarters in

Kleinwanzleben, together with its research and production facilities, KWS varieties

were already being sown in 1948 in Denmark, England, France and Switzerland, as well

as in Turkey and Yugoslavia.

Reliable and long-lasting

customer ties are founded on

Today, KWS SAAT AG generates 75 % of its sales abroad through its 46 subsidiaries

high-performance products.

and associated companies. Worldwide, KWS is represented in 68 countries in the tem-

markets are not new territories for KWS. The company is returning to its roots, since

perate climate zone through its breeding and sales activities.

KWS already owned a subsidiary in Ukraine in 1898. «

What is so special about KWS as a seed company?

» Today, many companies are only just beginning to appreciate the importance of

an international presence. This has been a significant success factor for KWS from

the beginning. This implies not only exporting to the sales markets of this world:

more importantly, KWS works together with the local people and adapts its varieties

to the conditions of the individual regions. Genetic resources can thus be benefi-

cial worldwide. «

What are the challenges facing a seed company from the marketing viewpoint?

» In our industry you need to be very patient. This applies not only to variety devel-

opment but also to sales strategies. Eastern Europe had to stabilize politically

first. Today, we have a sustainable agricultural policy in place in Russia so that

farmers are able to invest. They are placing more emphasis on quality, and KWS is

their ideal partner. «

New markets, new challenges.

Following German reunification, the Central, Eastern and Southeastern European mar-
kets offer the most substantial growth potential for sales of agricultural-quality seed.
As a result, the seed must be specifically adapted to meet the needs and requirements
of the respective target markets. Genetic traits are not the only important issue: tech-
nical properties, in particular, must also be considered. A further consideration is the
strong demand for consulting and other services as a result of increasing privatization
of Eastern European operations.

In the meantime, the KWS Group has established 12 companies in the Eastern and
Southeastern European markets. Also, breeding stations are being set up or expanded
in Russia, Poland, Hungary and Romania, to enable KWS varieties to be adapted to
perfectly meet local requirements.

Diversity as competitive advantage.

Only by being successful in its core markets, a company can acquire the potential to
open up new markets. For almost 50 years the USA and Canada have belonged to
KWS’s core markets – markets that are shaped by strong competitive and innovative
pressures. The evidence for this lies, above all, in the development of genetically im-
proved varieties. In North America the demand for these special varieties has increased
enormously over the past ten years as a result of their economic and ecological advan-
tages. The share of sales accounted for by the genetically improved corn varieties of
AgReliant, our North American joint venture, is currently 60 %; for soya varieties it is 90 %.

As a seed specialist KWS is well placed in the various markets and the most varied
product segments to always be able to supply farmers with the most innovative and
reliable varieties.

Over the course of 150 years

KWS has evolved to become

an international seed specialist

for our most important crops.

Kennzahlen

Prospects

Fiscal Year
2004/2005

» 150 years of K WS – as an independent seed
specialist we measure our products against
the criteria of sustainabilit y – with the goal of
underpinning competitive agricultural activity in
a healthy environment. «

Report of the Supervisory Board

The consultations of the Supervisory Board in fiscal 2004/2005 focused on the European Com-

value of the share, the Supervisory Board decided to propose

Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft,

mission’s proposals for the reform of the EU Sugar Market Regime and the challenges this

presents for KWS.

Dr. Guenther H. W. Stratmann, Chairman of the Supervisory Board

The strategic approach being followed by KWS consists in
achieving further increases in the product yields of sugar beet
varieties with the aim of improving the productivity and com-
petitiveness of European sugar beet cultivation. This is based
on the premise that we not only maintain but actually intensify
our efforts in the area of sugar beet breeding. Further expan-
sion of the corn segment was also discussed. The members
investigated a number of potential acquisitions, as a result of
which we acquired a North American distribution company,

Producers Hybrids, and set up new companies in Bulgaria
and the Czech Republic. Another topic that was discussed in
detail was the rape and energy corn businesses, for which
expectations are high.

Also central to the Supervisory Board’s discussions were the
issues surrounding KWS’ future presence on the capital
market in the wake of its successful placement of 25 % of its
shares in December 2004. In order to change the nominal

to the Shareholders’ Meeting on January 18, 2006 a 1:10 share

Hanover, the independent auditor chosen by the Shareholders

split and an increase in the capital stock of € 2.8 million from

Meeting and commissioned by the Supervisory Board, has

corporate funds. It was also decided to apply for admission to

audited the financial statements of KWS SAAT AG that were

the Prime Standard.

prepared by the Executive Board for fiscal 2004/2005 and the

financial statements of the KWS Group (consolidated financial

The Supervisory Board held five meetings with the Executive

statements), as well as the management report of KWS SAAT

Board in the period under review. It received continuous up-

AG and the KWS Group (Group management report), includ-

dates on the situation of KWS SAAT AG and the KWS Group

ing the bookkeeping, and awarded them its unqualified audit

as well as on the profitability and general development of the

certificate.

various business and dealt in detail with matters of corporate

policy and other fundamental issues of corporate planning.

The Supervisory Board received and examined the financial

On the basis of these deliberations, the Supervisory Board

statements and management reports of KWS SAAT AG and

approved the submitted measures and business transactions

the KWS Group, along with the report by the independent audi-

requiring its consent. The Supervisory Board was furnished with
regular written reports from the Executive Board on the status
of business development, profitability, significant business
deals and special questions. In addition to being kept up-to-
date and discussing issues of importance, the Chairman of the
Supervisory Board also took part in several meetings of the
Executive Board on focal topics. The Supervisory Board has
set up a committee for Executive Board affairs that held one
meeting and reported on its work to the Supervisory Board.

tor of KWS SAAT AG and the KWS Group and the proposal on
utilization of the net profit for the year made by KWS SAAT AG
and also received detailed explanations of questions on the
agenda at its meeting to discuss the financial statements on
November 23, 2005. Based on the findings of its examination,
the Supervisory Board does not raise any objections. It gives
its consent to the financial statements of KWS SAAT AG,
which are thereby approved. The Supervisory Board also
gives its consent to the statements of the KWS Group. It also

Supervisory Board

Dr. Carl-Ernst Büchting
Einbeck
Honorary Chairman

Dr. Guenther H. W. Stratmann
Düsseldorf
Attorney-at-law
Chairman

Dr. Arend Oetker
Berlin
Businessman
Deputy Chairman

Philip von dem Bussche
Bad Essen
Farmer
Until September 30, 2005

Goetz von Engelbrechten
Uelzen
Farmer
Since November 7, 2005

Eckard Halbfaß
Einbeck
Deputy Chairman of the Works
Committee of KWS SAAT AG

Jürgen Kunze
Einbeck
Chairman of the Works Committee
of KWS SAAT AG

Prof. Dr. Ernst-Ludwig Winnacker
Munich
President of “Deutsche
Forschungsgemeinschaft (DFG)”

Report of the Supervisory Board

Invitation to the Annual Shareholders’ Meeting
on January 18, 2006

endorses the proposal by the Executive Board on how to

Following Christopher Ahrens’ departure from the Executive

utilize the profits of KWS SAAT AG.

Board of KWS SAAT AG he was replaced on October 1, 2005

by Philip von dem Bussche, currently President of “Deutsche

The Management Board cordially invites you to the Annual Shareholders’ Meeting on Wednes-

The Supervisory Board is sad to report the death, on June 28,

Landwirtschaftsgesellschaft (DLG),” who took over responsibil-

2005, of former Executive Board member Armin Leidloff aged

ity for the sugar beet segment and new markets/products, as

85 years. In 1955 he became the Executive Board member

well as for the regions Germany and Central and Eastern

responsible for sales, and he succeeded in reopening and

Europe. Philip von dem Bussche, who has a distinguished

developing markets which had for the most part been closed

record as an agricultural expert, has been serving on the Super-

day, January 18, 2006 at 11 a.m. at the Company’s business premises in 37574 Einbeck,

Grimsehl straße 31.

to KWS during the period immediately after World War II. Dur-

visory Board of KWS since May 2000, from which he resigned

Agenda

ing the 27 years that he worked for KWS, Armin Leidloff laid

to take up his activities on the Executive Board.

the foundations for our company’s revival and growth. In recog-

nition of this achievement, the company will always hold him in

The vacancy thus created on the Supervisory Board was soon

grateful memory.

After 19 years with the company, Dr. Christopher Ahrens
retired from the Executive Board of KWS SAAT AG on
June 30, 2005. Christopher Ahrens was the Executive Board
member responsible for the successful development of our
sugar beet segment, and from 1989 was also responsible for
rebuilding the sales structures in our Eastern European mar-
kets. In addition to this, he represented KWS on numerous
national and international committees and boards, and his
presidency of the International Seed Federation (ISF), as well
as his commitment to the Deutsch-Russischer Kooperations-
rat (council for cooperation between Germany and Russia)
deserve special mention here. Indeed, for all his extremely
successful endeavors for the benefit of the company, the Super-
visory Board owes Christopher Ahrens its special thanks.

With effect from July 1, 2005 the Supervisory Board appointed
acting Executive Board member Dr. Hagen Duenbostel a regu-
lar member of the Executive Board.

closed. On November 7, 2005, at the request of the Executive

Board, the District Court of Göttingen registered Goetz von

Engelbrechten as a member of the Supervisory Board of KWS
SAAT AG. Goetz von Engelbrechten is a graduate in business
administration and a farmer, and lives in Uelzen. He had previ-
ously worked for KWS for 20 years. Most recently, he was re-
sponsible for KWS’ cereals segment, before moving to Nord-
zucker AG in 1992, first as a member of its Executive Board
until, in 2003, he was appointed to its Supervisory Board. At
Nordzucker he was recently engaged in helping the company to
meet the commercial challenges of sugar market reform.

This appointment by the court is to be superseded by a share-
holders’ vote. At the official Shareholders’ Meeting on January
18, 2006 Goetz von Engelbrechten will therefore be proposed
for reelection to the Supervisory Board for the remainder of his
current mandate.

The Supervisory Board expresses its recognition and thanks
to the Executive Board and all employees for the work they
have done.

Einbeck, November 23, 2005

Dr. Guenther H. W. Stratmann
Chairman of the Supervisory Board

Presentation of the adopted annual financial statements of KWS SAAT AG, the annual

financial statements of the KWS Group as approved by the Supervisory Board (con-

solidated financial statements), the management reports for KWS SAAT AG and the

KWS Group for the fiscal year from July 1, 2004 to June 30, 2005, and the report of the

Supervisory Board

2. Resolution on the appropriation of the net retained profit

3. Resolution on the granting of discharge to the members of the Management Board

4. Resolution on the granting of discharge to the members of the Supervisory Board

Resolution on a capital increase from corporate funds and the re-division of capital stock

after appropriate amendment of the Articles of Association

Resolution on changes to the Articles of Association pursuant to the law on Corporate

Integrity and Modernization of the Right to Contest Shareholders’ Resolutions (Gesetz

zur Unternehmensintegrität und Modernisierung des Anfechtungsrechts (UMAG))

7. Election of a new member of the Supervisory Board

8. Election of the auditor for fiscal year 2005/2006

Report of the Supervisory Board

Agenda

KWS shares

KWS SAAT AG’s capital market actions are preparing the basis for the future. In compliance with

In the year under review, operating income rose by 8 % and

oversubscribed 1.9 times). After a brief period of consolidation,

EU Regulation 1606/2002 relating to publicly traded companies, KWS replaced its accounting

system that was based on the Handelsgesetzbuch (HGB – German Commercial Code) with one that

is based on the generally accepted International Financial Reporting Standards (IFRS).

net income for the year by 17 %. To continue the earnings-

the price is currently moving mostly sideways around the 700 €

based dividend policy of recent years, the Executive Board

mark, which translates into an increase of around 20 % over

and the Supervisory Board are therefore proposing an in-

the past fiscal year.

creased dividend of 12 (11) € per share to the Annual Share-

holders’ Meeting.

With the introduction of quarterly reports starting in the first

quarter of fiscal 2005/2006 and adoption of the IFRS, KWS

The generally positive mood in Germany’s stock markets con-

has now fulfilled the criteria for admission to the Prime Stand-

tinued during 2005. Despite record oil prices, the DAX man-

ard segment of the German Stock Exchange, which also quali-

aged to rise by 20 % while the SDAX even rose by 30 %.

fies it to be included in the select SDAX index. A 1-for-10 share

split will be proposed at the forthcoming Annual Shareholders’

KWS SAAT AG share performance was vir tually unrelated to

Meeting. The higher number of shares at a lower price will

the performance of the SDAX. Most of the share’s growth im-

make investing in KWS shares a more attractive option for

petus resulted from the placement of 25 % of the Company’s

private investors and is also expected to increase the liquidity

shares on the capital market in December 2004 (which was

of the shares.

Shareholder structure (on June 30, 2005)

56.3 %
Families Büchting /
Arend Oetker /
Giesecke

10.6 %
Tessner
Beteiligungs GmbH

It also succeeded in placing the large blocks of shares held by

Südzucker AG and Bayerische Hypo- und Vereinsbank with

institutional investors, thereby increasing the free float, which

is important for the share’s liquidity, from 8 % to 33 %.

The company has been admitted to the Regulated Market of

Frankfurt Stock Exchange since June 30, 2005, which has
brought the shares to the attention of investors. The newly add-
ed investor relations section on KWS’ website (www.kws.com)
features exten sive information about and around the company’s
shares.

KWS share price, July 1, 2004 to June 30, 2005

140,00

130,00

120,00

110,00

100,00

90,00

33.1%
Free float

Data on KWS shares

WKN (German Securities Code) / ISIN Securities ID

707400 / DE0007074007

Stock market symbol

Stock markets

Number of shares

KWS shares, indexed

SDAX performance index, indexed

Opening price on July 1, 2004 (Frankfurt)

Closing price on June 30, 2005 (Frankfurt)

Highest (closing) price in the fiscal year (March 7, 2005)

KWS

Xetra, Frankfurt, Hanover

660,000

¤ 600.00

¤ 725.00

¤ 769.00

¤ 570.00

Jul
04

Aug
04

Sep
04

Oct
04

Nov
04

Dec
04

Jan
05

Feb
05

Mar
05

Apr
05

May
05

Jun
05

Lowest (closing) price in the fiscal year (September 7, 2004)

KWS shares

Report on the performance of the KWS Group

The KWS Group continued its successful growth during fiscal 2004/2005. Its strong financial base

comprises a total of 46 (42) subsidiaries and associated com-

PETKUS Group thus remains one of the strongest cereal

allowed it to expand its market position and open up new markets abroad.

The new KWS FORUM – a center for visitors and employees – marks the completion of the investment program at the
Einbeck site.

As far as net sales and income were concerned, the KWS
Group exceeded even its own expectations. Net income for
the year reached a new high, whith our main product seg-
ments sugar beet and corn each made an equal contribution
to positive business growth. The cereals segment remained
stable at last years’ level.

The past fiscal year was primarily characterized by expansion
abroad. Our competitive positions in the Southern and South-
Eastern European and North American markets were strength-
ened further. KWS also increased its investment in the corn

segment by expanding its sales channels and opening a new
production plant in France.

Our extensive investment program at our Einbeck headquarters
is now complete. The new KWS FORUM – an Information Cen-
ter for visitors and employees – means that we now have the
facilities to properly welcome the large numbers of customers
and business associates from all over the world.

KWS continues to grow outside Germany

Apart from KWS SAAT AG, the consolidated KWS Group

panies. New subsidiaries were formed in Bulgaria and the Czech

breeders in Europe.

Republic, whereas our IT services company “MOD Manage-

ment Organisation und Datenverarbeitung Consulting GmbH”

Higher expenditures for structural changes

was divested via a management buyout. With the inclusion of

The KWS Group is still geared for expansion. The past fiscal

the Russian subsidiary and two German subsidiaries, the total

year saw further up-front expenditures aimed at building up

number of fully consolidated companies now amounts to 41

markets in South-Eastern Europe and distribution structures

(37). As in the previous year, four foreign companies were pro-

in North America. As a result, selling costs rose by 13.7 % to

portional consolidated. Another two (two) companies are in-

€ 88.7 (78.0) million and now equal 17.9 (17.6) % of net sales.

cluded in the KWS Group’s financial statements at equity.

Cost of production rose by 11.5 % to € 312.4 (280.0) million,

Sharp growth in net sales

which was proportionate to net sales. As a result, gross profit

increased by 11.3 %, to € 183.0 (164.5) million. And despite

In the year under review, the KWS Group’s net sales rose to

extraordinary costs incurred as a result of our adoption of In-

the highest level ever in the company’s history. The Group

ternational Accounting Standards, admini strative costs fell to

posted total sales of € 495.3 (444.5) million, an increase of
11.4 %, far exceeding even its own expectations. As predict-
ed, sales abroad rose even more sharply than at home, and
now account for 75 (73) % of total sales.

Overview of product segments

Sugar beet maintains its position in the world market

The KWS Group maintained its market position in the sugar
beet product segment and achieved net sales of € 217.9
(193.6) million for the year under review. In the markets out-
side the EU’s 25 member nations, the Group even posted a
17 % sales volume increase. In view of the potential further
decline in cultivation areas within the EU in the wake of Sugar
Market Regime regulations, this growth in business is very
gratifying.

Corn continues to be a main growth driver

With a 13.7 % growth in net sales to € 217.6 (191.3) million in
the year under review, the corn segment again exceeded last
years’ sales levels. KWS posted sharp growth in North Ameri-
ca. Genetically improved products are in strong demand, par-
ticularly in the US. These new varieties now account for almost
60 % of net sales in this market.

Cereals remain constant

7.9 % and amounted to € 39.1 (37.1) million of net sales.

At € 1.1 (2.9) million, the balance of other operating income
and other operating expenses was once again positive. Other
operating income rose sharply, largely as a result of favorable
exchange rates and increases in research subsidies grants.
Other operating expenses, however, rose even more sharply.
They included valuation adjustments to allowances on receiv-
ables and short-term provisions to take account of increasing
risk levels in our growth markets.

High operating result

The operating result for the KWS Group improved by almost
8 % year-on-year, despite the Group’s continued structural
expansion in Southern and South-Eastern Europe and the in-
vestments such a high-growth region requires. In the year
under review, all segments made a substantial contribution
to operating result, which amounted to € 56.3 (52.3) million.
Particularly gratifying was the corn segment, where operating
result increased by 13.2 %, bringing the segment’s share to
18.8 (17.9) %. By contrast, the contributions to earnings made
by the sugar beet and cereals segments fell to 55.1 (61.0) %
and 6.5 (6.8) % respectively. The breeding & service segment
increased its contribution to earnings this fiscal year from
14.3 to 19.6 %.

At € 52.4 (52.7) million, net sales have remained stable in our
cereals product segment, with lower sales of rye being com-
pensated for by higher wheat sales. All other types of cereals
maintained their levels from the previous year. The LOCHOW-

Financial results slightly lower

A smaller contribution from the potato business coupled with
necessary amortization of goodwill resulted in a negative net
income from participations of € – 0.5 (1.3) million. The year

Management Report

under review saw an improvement in interest expenses, which

Growth also visible in balance sheet indicators

dropped to € – 4.4 million despite an increase in the amount of

With an increase of € 78.1 million in the Group’s total assets to

funds committed to € – 5.4 million. Income was also generated

€ 572.4 million, its equity ratio fell slightly to 57.1 (59.5) %. As

Value added in the KWS Group

through financial instruments used to hedge against fluc-

a result, the company’s capital resources remain excellent.

tuations in interests and foreign exchange rates. The net

The approximately 15 % increase in total assets is mainly at-

finan cial income reported by the KWS Group was € – 4.9 (– 4.2)

tributable to changes in working capital. Last year’s excellent

million. As a result, income from ordinary operations was

harvests, coupled with prime yields, resulted in significantly

€ 51.4 (48.1) million.

Tax rate reduced

increased inventories in spite of higher net sales volumes.

Totaling € 296.5 (236.0) million, inventories and receivables

accounted for around 50 % of total assets. The increase in

The KWS Group’s total tax expenditures fell by 9.6 % to € 16.6

receivables is primarily due to longer payment terms on growth

(18.4) million, reducing the tax rate from 38.2 % to 32.3 %. The

markets. On the balance sheet date, cash and cash equiva-

causes included tax income from previous years and lower

lents, including securities, amounted to € 52.9 (58.3) million.

effective tax charges in our growth markets. Without the tax

At € 24.0 (44.9) million, net cash was reduced due to the in-

income from prior years, the tax rate in Germany would not
have decreased.

crease in inventories and receivables.

Net income reaches highest ever level

Despite continuing high levels of structural costs in its new
markets, the KWS Group posted net income for the year of
€ 34.8 million – well in excess of the previous year’s figure of
€ 29.8 million. Return on net sales rose from 6.7 to 7.0 %.

Equity rose by about 11 % to € 326.6 (294.0) million, and fully
covers noncurrent assets and inventories. Debt capital rose to
€ 245.8 (200.4) million. While long-term borrowings remained
constant at around € 95 million, short-term borrowings rose by
€ 45,9 million. These items were covered at a rate of 161 % by
cash and cash equivalents and receivables.

Expansion of production and sales capacities

Cash flow characterized by major investments

KWS expanded its production and sales capacities by in-
vesting € 36.5 (23.9) million in property, plant and equipment
and intangible assets. Its largest investments were the acqui-
sition of US company Producers Hybrids and the expansion
of its corn production plant in the south of France; the Infor-
mation Center for visitors and employees at the Einbeck site
was also completed.

The cash flow (DVFA/SG) amounted to € 47.0 million, which
represents a year-on-year increase of € 4.0 million. The ratio of
cash flow to net sales was 9.5 (9.7) %, which underlines the
KWS Group’s great financial strength. At the same time, the
net funds used in investing activities rose to € 30.1 (21.8) mil-
lion, while increased inventories and receivables accounted for
€ 60,5 million.

From the total of € 36.9 (24,7) million invested by KWS,
41.3 % went to North and South America, 34.8 % to Ger many,
22.6 % to other European countries and 1.3 % to other for-
eign countries. More than half of its investments were made
in the corn segment, and more than a third in the breeding &
services segment.

During the fiscal year, the KWS Group posted depreciation
and amortization of € 16.8 million. Once again, investments
exceeded depreciation/amortization by a significant margin.

Proposed appropriation of profits

For the year under review, KWS SAAT AG reported net income
of € 15.4 million, compared to € 14.8 million for the previous
year. In January 2005, a dividend of € 11.00 per share was
paid for fiscal 2003 /2004, resulting in a total distribution of
€ 7.3 million. The Executive and Supervisory Boards will pro-
pose payment of a dividend of € 12.00 per share at the
Annual Shareholders’ Meeting 2006, making the total distri-
bution this year € 7.9 million. € 7.7 (7.4) million were allocated
to revenue reserves.

Creation

Distribution

15 %
Other third-party
goods and services

3 %
Depreciation,
amortization,
impairment losses

11%
Public sector

4 %
(cid:1)(cid:2)(cid:3)(cid:4)(cid:2)(cid:5)(cid:6)

1%
Minority
interest

31%
Value
added

51%
Raw materials
and supplies,
purchased goods
and services

5 %
Shareholders

16 %
Company

63 %
Employees

Total output ¤ 518.7 million

Value added ¤ 160.5 million

Value added

In fiscal year 2004/2005, the KWS Group generated total out-
put of € 518.7 (461.4) million, consisting of net sales of € 495.3
(444.5) million and other income of € 23.4 (16.9) million.

Deducting the costs of raw materials and supplies and of
third-party goods and services attributable to cost of sales
totaling € 261.7 (214.6) million, depreciation, amortization, and
impairment losses of € 16.8 (16.7) million and other third-party
goods and services of € 79.7 (74.4) million gives value added
of € 160.5 (155.7) million.

The distribution was as follows: Employees received € 101.4
million, including social insurance and retirement benefit costs,
compared with € 98.3 million in the previous year. Interest paid
to lenders remained constant at € 6.5 million, and public sector
received € 17.8 (21.0) million. Value added of € 1.2 (1.6) million
was distributed to minority shareholders. The shareholders will
receive a dividend of € 7.9 million, with the result that € 25.7
(21.0) million will be retained by the company.

Management Report

Sugar beet segment

In KWS’ legacy segment excellent product performance generated new levels of growth. The

Business growth was also positive in Eastern Europe, despite

more than planned in 2004 because of unusually favorable

sugar beet segment further improved its leading position on the market, posting its highest net

sales ever in fiscal 2004/2005.

far-reaching import restrictions imposed by the Ukraine. Sales

weather conditions. In addition, the amount of saleable seed

in the Russian Federation already account for 7 % of total net

was higher than planned. While this increase in inventories

sales for the sugar beet segment. Increased sales were also

ensures an excellent supply of product that meets KWS’

recorded in Asia, primarily in Turkey, Iran and China.

renowned high quality standards, it also leads to a devaluation

of inventories. To avoid oversupply in the current fiscal year,

Smaller markets such as Scandinavia and the Netherlands

seed multiplication has been reduced in 2005.

also developed positively for KWS. In these markets, which

tend to be difficult for KWS because of the competitive situa-

After receiving US regulatory approval for commercialization of

tion, we nevertheless managed to increase our net sales and

market shares.

The operating result for the segment fell slightly to € 31.0 (31.9)

genetically modified sugar beets resistant to Roundup Ready®
in March 2005, BETASEED began preparations for seed
multi plication of Roundup Ready® (RR) resistant varieties.
Therefore, it is possible for RR varieties to start enhancing

million, while the return on net sales rate dropped to 14.2

KWS’ US product portfolio in 2007. For political reasons,

(16.5) %. These figures already include substantial valuation
adjustments to inventories. Seed production rose about 25 %

however, these varieties cannot be marketed in Europe at
this time.

Sugar beet segment sales in millions of ¤

56.6

140.1

43.1

150.5

45.1

172.8

Foreign sales

Domestic sales

Total sales

KWS obtained the world’s first approval for distributing a herbicide-tolerant sugar beet in March 2005.

In the year under review, segment sales rose by 12.6 % to
€ 217.9 (193.6) million. Although the area under cultivation in
the European Union remained almost unchanged from the
previous year at 2.2 million hectares, KWS nevertheless
achieved 10 % higher net sales of € 141 million in this region.
The expected reduction in areas under cultivation following
the EU’s Sugar Market Regime makes the 17 % increase
in net sales outside the EU’s 25 states to € 77 million particu-
larly significant. Our single most important market outside the

EU is North America, which contributed a good 14 % to the
segment’s net sales. Our local subsidiary BETASEED maintains
a stable share of 67 % on this market.

All our European regions, without exception, experienced good
sales seasons. We were particularly successful in the four
largest markets of France, Germany, Poland and Italy. Our
market share was higher in Germany and significantly higher in
France. Sales increased significantly in Italy and Poland.

196.7

193.6

217.9

2002 /2003
HGB

2003 /2004
IFRS

2004 /2005
IFRS

Management Report

Corn segment

The corn segment proved to be the most rapidly growing product segment within the KWS Group

In Germany we maintained our market-leading position through

further strengthened the com pany’s position as No. four on

once again. The North American business in particular, but also the oil and field seed business

within the segment, grew at above-average rates.

two sales channels, KWS and AgroMais, both of which gen-

the corn market in North America.

erated increases in net sales. This development was further

supported by a new market segment that offers special corn

Corn sales rose by 31 %, with the total net sales of AgReliant

varieties for the generation of biogas. This market segment

Genetics LLC (USA) and AgReliant Genetics INC. (Canada)

already represents 5 % of the cultivated area in Germany, and

rising by 28 % to € 166.6 (130.0) million.

KWS has already started to breed varieties specially designed

for this purpose. We are therefore in an excellent position to

Genetically improved varieties are increasingly becoming the

meet the demand on this rapidly growing market.

standard in the US. Approximately half of the corn seed

AgReliant sells is genetically improved. US farmers have a

Positive growth continued at our North American joint venture

distinct preference for varieties that already combine multiple

AgReliant for the fifth consecutive year since setting this com-

genetic improvements. AgReliant is one of the few seed com-

pany in partnership with French breeder LIMAGRAIN, the busi-

panies able to offer corn varieties with a combination of three

ness is continuing to develop well. Fifty percent of AgReliant’s

genetically created resistances against a herbicid, the corn

net sales are consolidated in the KWS Group. Fiscal 2004/2005
saw further consolidation among our competitors in the North
American market for corn and soybean seed – a market envi-
ronment which favored AgReliant’s continued growth, which
was both organic and acquisition-driven. At the end of De-
cember 2004, AgReliant purchased Nebraska-based seed
company Producers Hybrids. This acquisition complements
AgReliant’s already excellent market position in the Eastern
and Northern Corn Belt. And with AgReliant’s share of the
overall market now standing at around 6 %, the acquisition

borer and the corn root worm borer – so-called ”triple stacks”.

Rapeseed as a source of energy

The rapeseed business almost doubled compared to last year
to € 6.1 million. The greatest increase was posted by the two
high-yielding hybrid varieties MIKA and ALKIDO. Rapeseed is
becoming increasingly important as a source of energy in the
form of biodiesel. In Germany, biodiesel is used both as a pure
fuel and for blending with mineral diesel oil. A significant mar-
ket for biodiesel is also developing in France.

Special varieties of cord for generating biogas support positive growth in the corn segment.

Corn segment sales in millions of ¤

Net sales for the corn segment increased by 13.8 % to € 217.6
(191.3) million. The segment also posted an improvement in
oper ating results, which rose to € 10.6 (9.4) million, up 13.2 %.

pronounced on French maize markets. Although KWS was
able to maintain its market position, it was unable to match the
previous year’s net sales.

All in all, our corn business in Europe was adversely affected
during the past fiscal year by the decline in cultivation areas.
The market volume of grain maize, in particular, fell sharply
as a result of lower prices. KWS nevertheless managed to
achieve a year-on-year increase in net sales and improve its
market share for the region. Southern Europe, and Italy in
particular, recorded especially sharp growth rates. This shows
that we are beginning to reap the benefits of invest ments
made in previous years in breeding late-maturity group varie-
ties and setting up an associated sales organization. In the
year under review, the decline in cultivation areas was most

In the South-East Europe region, which is very important for
the segment’s medium-term growth prospects, not every
country met its net sales target as planned levels of market
penetration have still not been attained in some of them. We
will therefore further increase our commitment in the region. In
Hungary and Romania, KWS has reinforced its long-term pos-
ition by establishing new breeding programs. The Central
Europe Region is already making a significant contribution to
the segment’s income. The same applies to the countries of
Northern Europe, where KWS has traditionally held market
shares in excess of 20 %.

42.0

130.0

43.0

148.3

172.0

191.3

217.6

48.7

168.9

Foreign sales

Domestic sales

Total sales

2002 /2003
HGB

2003 /2004
IFRS

2004 /2005
IFRS

Management Report

Cereals segment

The KWS Group’s cereals business is constant year-on-year, although the market continues to

The success of our cereal breeding activities, which consist

market. The continued growth of wheat and barley in combi-

be tough.

The share of foreign sales has increased to 47.5 % on European core markets for cereals and rapeseed.

Europe enjoyed record cereal harvests in 2004, which made
marketing difficult and led to significant price reductions. In the
key European markets of Germany, France and the United
Kingdom, cultivated areas remained constant in the 2005
sowing season at 16.7 million hectares. A reduced level of
seed rotation, however, had a negative effect on the certified
seed market. The predominance of wheat continued, and
while rye cultivation in Germany declined by about 10 %, how-
ever, sales of certified seed were stable.

During the past fiscal year, net sales for the segment, which
is served by the LOCHOW-PETKUS Group, remained con-
stant year-on-year at € 52.4 (52.7) million. The proportion of
international net sales within the segment continued to rise
from 42.5 % to 47.5 % – further validating LOCHOW-PETKUS’s
growth strategy on the key European markets. Segment
earnings remained unchanged at € 3.6 (3.6) million, with
improvements in the wheat business compensating for lower
rye sales.

of an integrated network of breeding and testing stations

nation with our outstanding range of rye products has further

stretching across the whole of North-West Europe, is reflect-

strengthened LOCHOW-PETKUS’s position as a leading Euro-

ed in the fact that we have been granted marketing approval

pean cereal breeding company. And with its 25 % share of the

for a further 21 (39) varieties this year. Our most exciting new
variety is POLLINO, a hybrid rye based on the PollenPlus®
concept which LOCHOW-PETKUS developed. Its outstand-

wheat multiplication area in Germany, LOCHOW-PETKUS is

now the largest wheat breeder in the country. In order to

ensure that these positive developments in the cereals seg-

ing pollen donating ability considerably reduces the risk of

ment continue, the company has increased its involvement in

ergot fungus infestation. This represents major progress in

basic research by participating in wheat and barley genome

breeding, especially in light of POLLINO’s potentially high

research projects.

agro nomic performance.

The fact that LOCHOW-PETKUS’s varieties now account for

26 % share in its English subsidiary CPB TWYFORD, making it

On July 1, 2005, LOCHOW-PETKUS acquired the remaining

around 90,000 hectares of multiplication area is a forceful

the sole shareholder.

reminder of the extent to which the company has captured the

Cereals segment revenue in millions of ¤

29.3

20.3

30.3

22.4

27.5

Foreign sales

Domestic sales

Total sales

24.9

49.6

52.7

52.4

2002 /2003
HGB

2003 /2004
IFRS

2004 /2005
IFRS

Management Report

Breeding & services segment

New products for global markets: corn as a source of energy for Germany, rapeseed hybrids for

In addition, specialty varieties were promoted in official field

brake this correlation and to simultaneously increase both root

the United Kingdom, malting barley for Russia and herbicide-tolerant sugar beet for the US. They

all come from the breeding & services segment of KWS.

The number of international marketing approvals for new varieties increased from 231 to 241 last year.

The Institute for Plant Breeding represents the core of the
breeding & services segment. With its wide range of breeding
and research activities it lays the basis for the product seg-
ments of KWS. In addition, the breeding & services segment
includes: KWS corporate functions, its potato activities – in
the form of its share in the SAKA-RAGIS Group – and its farm
operations.

The segment’s success in fiscal year 2004/2005 is reflected in
its net sales, which rose by 7.2 %, to € 110.4 (103.0) million,
but even more so in its operating income, which rose by 48.6 %

to € 11.1 (7.4) million. 93 % of the segment’s net sales came
from KWS-internal royalties paid by the product segments for
the development of varieties. Sales of farm products and
breeding services to third parties reached € 7.4 (6.9) million.

The number of international marketing approvals for KWS
varieties rose to 241 (231) – proof that our product pipeline will
be well filled for several years to come. Many of our candi-
dates were successful in official variety tests, resulting in 125
(99) approvals for sugar beet, 88 (85) for corn, 21 (39) for
cereals and 7 (8) for oil and catch crops.

trials, for example corn varieties particularly suited for the pro-

yield and sugar content of new varieties.

duction of biogas, as a source of renewable energy. Against a

background of finite fossil fuels, increasing environmental and

As another consequence of the Sugar Market Reform, resist-

climatic concerns and rising energy prices, the use of biomass

ance breeding will become even more important in future.

for the production of energy is on the rise. Experts predict that

Rationalization in sugar beet cultivation will lead to a concen-

in Germany up to two million hectares might be allocated for

tration of the beet acreage in the vicinity of sugar factories.

the cultivation of energy crops in the near future. However,

These areas may succumb to serious infestation with patho-

achieving this goal is and will continue to be a tremendous

gens, in particular beet nematodes. KWS is developing

challenge for agronomy and plant breeding. Breeding for bio-

highly productive nematode-resistant sugar beet varieties

mass represents a paradigm change. To date, corn is the major

and thus offers a ground-breaking solution to better position

“energy crop”. KWS currently offers conventional silage corn

the company to face the pending reform of the EU Sugar

varieties (GAVOTT, CAMPESINO, SAMPAIO), which provide

Market Regime.

high dry mass yields required for cost-efficient energy produc-

tion in biogas plants. Employing new breeding approaches,
KWS will increase the dry mass production of corn to approxi-
mately 300 dt/ha, from the current level of 150 – 180 dt/ha.
The first pure “energy corn” varieties are expected to obtain
approval in the spring of 2007.

KWS successfully breeds first genetically engineered
sugar beet

The genetically engineered Roundup-Ready (RR) sugar beet is
the result of a cooperative effort between KWS and Monsanto.
The cultivation of herbicide-tolerant sugar beet allows the
reduction of chemical plant protection, resulting in lower pro-
duction costs for the farmer. The commercial cultivation of RR
sugar beet has already been approved in the US. The export
of processed products to important markets such as Canada,
Japan, Australia, New Zealand, and the Philippines is already
permitted. In the US, the first large-scale cultivation of RR
sugar beet is expected for 2007. Though not approved for
commercial cultivation in the EU, yet, RR sugar beet also
offers major potential for Europe, particularly in view of the
envisaged EU Sugar Market Reform.

EU Sugar Market Reform – KWS breeders accept the

challenge

The pending reform of the EU Sugar Market Regime will place
sugar beet in greater competition with sugar cane. This re-
quires even greater efforts to improve sugar beet productivity.
Sugar beet breeders at KWS are facing up to the challenge. A
major issue for sugar beet breeding is the negative correlation
between root yield and sugar content. The breeding goal is to

Integrating the results of genome research into corn
breeding

The genome represents the sum of all genes of an organism.
Genome research is concerned with the decoding of genes
in order to analyze the structure and interaction of genetic
information. For several years, KWS has been engaged in
inter na tional plant genome research projects (GABI and
EUREKA). Taking corn as an example, genes have been
identified that are involved in the determination of agron-
omically important properties such as cold tolerance, nitrogen
efficiency and plant digestibility. The first results are already
being applied in practical corn breeding at KWS.

Potato activities at SAKA-RAGIS

2004 /2005 was a difficult year for potatoes. High harvest
volumes and consequently low prices across the EU led to
major marketing problems for both table and processing
potatoes. This in turn led to a decline in cultivation area and
a higher percentage of farm-saved tubers being used in the
2005 planting season. As a result of this negative market
cycle, KWS’ associated company, SAKA-RAGIS, posted
significantly lower (44.5 %) net sales than the previous year.
Income was also unsatisfactory.

Management Report

Outlook for the 2005/2006 fiscal year

The reform of the European Sugar Market Regime will have a significant impact on the current

fiscal year 2005/2006.

While the corn segment is expected to continue the rapid

growth enjoyed in recent years and last fall’s cereal grain plant-

ings resulted in solid net sales growth, the effects of the Sugar
Market Regime on our sugar beet segment are difficult to
predict. Overall, however, the KWS Group expects to be able

We are again expecting pronounced growth in both sales and
earnings in the corn segment during the current fiscal year.
Furthermore, with our new high-yielding varieties and efficient

production and sales organizations within the various markets,

we are expecting further increases in net sales in all regions,

to compensate for the sugar beet segment’s expected drop in

particularly in North America, South-Eastern Europe and

net sales with increases in the corn segment.

Southern Europe, but also in Germany as a result of the add-

Originally, the EU’s resolutions on the reform of the sugar

market were supposed to be passed in 2005. Now it is doubt-
ful that this will happen before the coming sowing season in
April 2006. In any case, the resolutions will come too late to
adjust to the new conditions. This is particularly true with re-
spect to seed production, because we had to produce the
seed for the coming sowing season in the 2005 cultivation
year without being able to estimate how the cultivation area in
Europe would develop. Given that it amounted to 2.2 million
hectares in 2005, we are now working on a basis of 1.7 million
hectares in 2006.

The proposals for the sugar market reform include one-time
opt-out allowances for both the sugar industry and farmers.
Whether farmers will take advantage of these already in 2006
will depend on the ability to shut down sugar refineries over
the short term or on the availability of alternative crops for the
individual farmer. We therefore do not intend to undertake any
major restructuring in either seed production or marketing in
the current fiscal year. We also do not intend to reduce our
breeding activities to any extent, as in the long term the main
objective must be to further increase the genetic superiority of
sugar beet over sugar cane.

Nevertheless, we are preparing for a decline in cultivation
areas of up to 20 % in the high-margin markets of the EU’s 25
states over the course of this fiscal year, while we expect to
see continued growth outside of the EU’s 25 states.

ed impetus to growth provided by biomass.

We are also expecting sharp increases in sales of rapeseed,
especially in Germany, France and Poland. The market for bio-
diesel made from rapeseed will also continue to grow during
the current fiscal year, helping European governments to meet
their Kyoto Protocol commitments to reduce CO2 emissions.

The renewed excellent grain harvest of 2005 is having a nega-
tive effect on our current business in the cereals segment.
As considerable quantities of last year’s consumption grain
have yet to be marketed, no recovery in prices is in sight. As
this difficult market situation continues, less certified seed is
being used for sowing in the fall of 2005. However, thanks to
the continuing stabilization of the rye business, net sales for
the segment as a whole are expected to be only slightly lower
than last year’s.

Most of the effects of the sugar market reform described
above are expected to be felt in fiscal 2005/2006, while the
effects of compensatory measures implemented in the sugar

beet segment, together with the continued expansion of mar-

kets outside the EU’s 25 states, will only be felt over the me-
dium-term. On the other hand, since we expect the significant
growth in the corn segment to continue, we are expecting the
KWS Group’s financial statements for 2005/2006 to show a
slight overall increase in net sales with reduced earnings.

Otherwise, there have been no events of particular significance
since the end of last fiscal year.

Innovation drives KWS’ work – 36 % of employees work in research and development.

Management Report

Risks for future development

The KWS Group is subject to the usual economic and political risks in the countries in which it

currently has no identifiable liquidity risks. Receivables risk is

payments to farmers of 60 % of their lost income. At the same

operates. The following section provides an overview of industry- and company-related risks and

describes its risk management goals and methods.

minimized through efficient credit management with set credit

time, a voluntary restructuring program involving further com-

limits and the associated monitoring of customers’ credit rat-

pensation payments will be aimed at encouraging the sugar

ings and payment behavior.

industry and farmers in general to bail-out of sugar production.

Product and production risks

International trade policies are the main reason for the reform

Reductions in the cultivation areas for sugar beet, corn and

of the sugar market. On the one hand, the EU is committed

rye were amply compensated for by gains in market share and

through the “Everything But Arms” initiative to open its mar-

increased net sales in other product areas, particularly for

kets to agricultural products from the poorest developing

rapeseed and wheat. This is how our broad product range and

countries starting in 2009. On the other hand, it already re-

the geographical distribution of our production sites contribute

exports surplus sugar originally imported from countries in

to the diversification of risks.

Africa, the Caribbean and the Pacific (the ACP states). In

addition, the WTO panel ruling of April 28, 2005 prohibits both

Sugar beet cultivation in Europe will have to become even

the export of European cane sugar and the re-export of ACP

more efficient if its economic and ecological advantages are to
provide leverage in the competition with sugar cane over the
long term. As in the past, sugar beet breeding will be of crucial
importance in this process. The advantages of sugar beet
include the fact that, despite its comparable yield potential, it
requires less use of pesticides and fertilizers and much less
water than sugar cane and can be included in resource-saving
annual crop rotation programs. Despite all this, sugar cane
cultivation is expanding rapidly, especially in tropical areas,
where it often involves excessive rainforest clearing.

Weather conditions have considerable influence on the
breeding and multiplication processes of plant breeders.
Weather conditions in 2004 /05 led to record harvests, result-
ing in increased inventories. Provisions for possible losses on
inventories resulted in additional charges. We counteract
storm damage and climate change by dispersing breeding
and production sites throughout the temperate climate zones
around the globe.

Risks arising from the reform of EU Sugar Market

Recognizing perspectives – at KWS that means: grasping entrepreneurial opportunities and considering risks.

Risk management

Key risks from operating activities

Regime

Risk management, which is an integral part of the KWS Group’s
planning, controlling and reporting processes, is aimed at
systematically identifying, evaluating, controlling and docu-
menting risks. It comprises strategic controlling, operational
controlling, the quality and process monitoring system and an
early warning system to identify serious risks.

Our business operations are subject to the usual market risks
resulting from sales and currency uncertainties.

Financial and currency risks

The usual derivative instruments are used to hedge interest
rate and currency risks, which tend mainly to stem from for-
eign currency seed sales and breeding expenses. As a result
of its reliable credit sources and liquidity management, KWS

The agricultural policy framework in particular has a major
impact on our sugar beet seed business. On June 22, 2005
the EU Commission published its latest proposals for the
forthcoming reform of the EU’s Sugar Market Regime. They
include merging A and B quotas, reducing sugar prices by
39 % to € 386 per ton and reducing sugar beet prices by 43 %
to € 25.05 per ton. This process is to be completed gradually
until the end of farming year 2007/2008 and cushioned by

sugar, as they represent subsidized agricultural exports. As a
result, the EU will have to greatly reduce the amount of sugar
it produces if it is to meet its obligations to the ACP states and
other less-developed countries.

Research and development

A further risk lies in European – and in particular German –
reser vations about genetically engineered crops in agriculture.
The cultivation area of such plants is growing steadily in many
countries. In Europe, however, their market launch on any sig-
nificant scale is not in sight, and in Germany it has been ef-
fectively ruled out by the amendment to the Genetic Engineer-
ing Act in the summer of 2004. As a consequence, both
research and commercial cultivation are facing severe com-
petitive disadvantages, although increasing quantities of prod-
ucts from genetically engineered plants are being imported –
and have been consumed here for more than 15 years now,
apparently without posing any identifiable risk.

Other risks

From a risk perspective, decisions regarding investments in
construction and research projects present a particular chal-
lenge. Decisions of this kind are prepared and implemented in
accordance with specific rules governing responsibilities and
approval processes.

Management Report

Employees

Creative people are innovative and always come up with new ideas. They think “outside the box”

24 months. The agreed adjustments to wages and salaries will

We aim to recruit from within our own ranks. As recruiting is

and constantly question standards and rules. To do so, they must have courage, determination

and confidence.

An excellent working climate creates commitment: and that includes freedom.

KWS encourages these attributes in a number of ways. Suc-
cessful managers allow creative team members the freedom
to be innovative. Making good use of this freedom requires not
only courage, but suitable structures and processes that test
the practicability and economic potential of new ideas.

This kind of freedom was one of the topics discussed at KWS’
first International Management Circle. In the fall of 2004, KWS
managers from all over the world met for the first time at our
breeding station in Seligenstadt, near Würzburg, to exchange
information and ideas. Taking advantage of this new network
they discussed the various aspects of corporate development
and expressed great satisfaction at the expertise gained

during the event. This gathering is to become an annual event,
with staff development a permanent item on the agenda.

Facts and figures

Fiscal 2004/05 saw KWS’ workforce grow to 2,550 (2,516)
people, 797 (793) of whom are employed by KWS SAAT AG.
That’s around one third of all employees.

At KWS SAAT AG, personnel expenses rose by 2.5 % to € 37.2
(36.3) million. Within the KWS Group as a whole, personnel
expenses rose by 3.2 % to € 101.4 (98.3) million. The current
wage agreement, which includes a distinctive social com-
ponent, took effect on July 1, 2005 and will remain in force for

come into force in two stages. On July 1 of each respective

becoming increasingly international, we are now finding that

year, pay for all groups will be raised by a fixed amount. An-

we can employ some of our trainees in our foreign subsidiaries

other achievement of the pay talks was the merging of various

once they have successfully completed their training – an

variable one-time payments and their first-time inclusion in the

option which turned out to be very popular.

pay agreement as a performance-based entitlement.

At the same time, we are also expanding our trainee program.

For KWS, we also signed a works agreement with the works

Our training program includes placements in different areas of

council committing the company to contribute to the child

the business, which helps trainees to really get to know the

care costs of KWS employees starting on July 1, 2005.

company. We have also made it compulsory to attend special

seminars designed for the various trainee programs, and we

Focus on continuing training and development

organize individually tailored trips abroad. Trainees rate these

In an average year, KWS provides agricultural, technical and/

components of their trainee program very highly.

or commercial training for 76 (75) trainees. The proportion of

the workforce undergoing training at KWS SAAT AG has re-
mained at around 9.5 % for several years now. We thus make
a major contribution to the training offered in the region and
train more people than we actually need ourselves. For this
reason, it is not possible to offer permanent employment to all
trainees after they complete their programs.

In this way, we systematically acquire qualified junior employees
with intercultural experience for all areas of the KWS Group.

Now, as ever, openness and trust are fundamental to the rela-
tionship between people and the company they are working
for. We make this possible.

KWS Group employees by role

KWS Group employees by age

36 %
Research and
Development

16 %
Administration

4 %
60 and above

13 %
20 to 29

18 %
50 to 59

27 %
Sales and
Marketing

31%
30 to 39

21%
Production

34 %
40 to 49

Management Report

Annual Financial Statements
of the KWS Group 2004 /2005

Key Figures of the KWS Group

Fiscal year

04/05*

03/04*

figures in millions of €
02/03

01/02

00/01

Net sales

495.3

444.5

424.3

433.7

392.8

Operating income
as a % of net sales

Net income
as a % of net sales

Cash flow (after tax)

Equity

Equity ratio in %

Balance sheet total

Return on equity in %

Return on assets in %

56.3
11.4

34.8
7.0

47.0

326.6

57.1

572.4

10.8

7.5

52.3
11.8

29.8
6.7

43.0

294.0

59.5

494.4

10.1

6.5

50.0
11.8

28.9
6.8

52.1

226.1

52.5

431.0

14.2

7.2

51.8
12.0

29.7
6.9

53.4

211.7

49.2

430.1

15.4

7.8

52.9
13.5

28.1
7.2

48.8

201.2

48.6

414.1

17.0

8.2

Fixed assets

185.6

169.2

120.7

124.0

115.3

Capital expenditure

Depreciation

Average number of employees

Personnel costs

Performance of KWS
shares in €

Lowest price

Highest price

Dividend per share

36.9

16.8

2.550

101.4

570

769

12.0

24.7

16.7

2.516

98.3

470

684

11.0

20.7

21.1

2.336

97.0

451

535

11.0

34.2

18.2

2.233

97.8

450

540

11.0

24.9

17.7

2.106

84.1

520

690

11.0

* under IFRS

Key Figures

Income Statement
for the period July 1, 2004 through June 30, 2005

Note No.

June 30, 2005

Previous year

€ thousands

Note No.

2004 / 05

Previous year

€ thousands

Net sales

Cost of sales

Gross profit on sales

Selling expenses

General and administrative expenses

Other operating income

Other operating expenses

Operating income

Interest and other income

Interest and other expenses

Share of profit from affiliated companies

Other income from equity investments

Net financial income / expenses

Result of ordinary activities

Income taxes

Net income for the year

Share of minority interest

Net income after minority interest

Earnings per share (in €)

(16)

(17)

(18)

(19)

(20)

(22)

495,326

312,357

182,969

88,655

39,108

21,275

20,155

56,326

2,042

6,484

–488

–4,926

51,400

16,616

34,784

1,196

33,588

50.89

444,492

280,026

164,466

77,987

37,113

13,742

10,816

52,292

1,662

7,091

1,128

146

– 4,155

48,137

18,373

29,764

1,575

28,189

42.71

Balance Sheet
at June 30, 2005

ASSETS

Intangible assets

Biological assets

Property, plant, and equipment

Investments in affiliated companies

Other financial assets

Deferred tax assets

Noncurrent assets

Inventories

Trade receivables

Available-for-sale securities

Cash and cash equivalents

Other current assets

Current assets

Total assets

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(8)

28,923

141,987

6,045

8,586

12,768

19,640

132,765

7,777

8,913

9,969

198,373

179,127

106,083

190,452

20,844

32,011

24,674

374,064

572,437

74,839

161,165

7,469

50,819

20,952

315,244

494,371

EQUITY AND LIABILITIES

Note No.

June 30, 2005

Previous year

€ thousands

Subscribed capital

Capital reserve

Retained earnings

Minority interest

Equity

Long-term provisions

Long-term borrowings

Deferred tax liabilities

Other long-term liabilities

Noncurrent liabilities

Short-term provisions

Short-term borrowings

Trade payables

Current tax payables

Other liabilities

Current liabilities

Liabilities

Total equity and liabilities

(11)

(12)

(13)

17,000

5,530

283,343

20,739

326,612

69,278

7,858

16,836

1,140

95,112

56,646

20,987

37,417

8,294

27,369

150,713

245,825

572,437

17,000

5,530

252,243

19,218

293,991

69,937

6,243

17,961

1,389

95,530

34,105

7,179

27,717

11,317

24,532

104,850

200,380

494,371

Annual Financial Statements: Balance Sheet

Annual Financial Statements: Income Statement

Statement of Changes in Fixed Assets 2004 / 05
Values in € thousands, unless otherwise specified.

Gross values

Changes in

Balance

Currency

the consol.

Balance

1.7. 2004

translation

group

Additions Disposals Transfers 30.6. 2005

Balance

1.7. 2004

Amortization/depreciation

Net book values

Changes in

Currency

the consol.

Reversal of

impairment

Balance

translation

group

Additions

losses

Disposals Transfers

30.6. 2005

year

Intangible assets

Patents, industrial property rights,

and software

Goodwill

Biological assets

Animal livestock

Plants

Property, plant, and equipment

Land and buildings

Technical equipment and machinery

Operating and office equipment

Payments on account

Financial assets

Affiliated companies

Other financial assets

12,923

39,580

111

–165

1,781

9,083

173

153

14,464

48,621

52,503

130

–165

10,864

326

63,085

128,639

102,938

52,879

4,681

763

1,251

599

275

– 680

134

5,515

6,252

4,284

9,591

3,471

3,520

135,028

1,681

2,447

110,527

3,709

886

55,073

1,577

–6,932

6,038

8,790

24,073

32,863

39,933

78,467

37,972

242

979

503

–148

988

568

–148

1,556

–1

–477

4,094

6,118

5,006

289,137

2,888

– 484

25,642

10,438

– 79

306,666

156,372

1,724

– 404

15,218

7,777

8,918

16,695

–323

381

1,808

390

– 323

457

2,198

6,045

8,586

14,631

–4

– 4

Assets

358,398

3,023

– 972

36,963

12,966

384,446

189,240

1,790

– 556

16,774

112

175

9,534

24,628

4,930

23,993

4,133

15,507

34,162

28,923

19,640

3,663

1,850

2,718

–77

40,611

83,160

40,908

94,417

27,367

14,165

6,038

88,706

24,471

14,907

4,681

8,231

164,679

141,987

132,765

8,406

6,045

8,586

7,777

8,913

14,631

16,690

198,841

185,605

169,158

Annual Financial Statements: Assets

Statement of Changes in Fixed Assets 2003 / 04
Values in € thousands, unless otherwise specified.

Gross values

Changes in

Balance

Currency

the consol.

Balance

1.7. 2003

translation

group

Additions Disposals Transfers 30.6. 2004

Balance

1.7. 2003

Amortization/depreciation

Net book values

Changes in

Currency

the consol.

Reversal

of impairment

Balance

translation

group

Additions

losses

Disposals Transfers

30.6. 2004

year

Intangible assets

Patents, industrial property rights,

and software

Goodwill

Biological assets

Animal livestock

Plants

Property, plant, and equipment

Land and buildings

Technical equipment and machinery

Operating and office equipment

Payments on account

Financial assets

Investments in affiliated companies

Other financial assets

13,488

38,893

–116

– 224

52,381

– 340

120,422

103,794

53,198

5,992

– 2

– 681

– 645

– 672

– 68

283,406

– 2,066

9,956

6,618

16,574

–1

– 1

Assets

352,445

– 2,409

380

911

829

12,923

39,580

8,777

23,426

–34

1,291

829

52,503

32,203

9,578

4,441

4,014

4,564

3,844

3,164

128,639

6,560

1,908

102,938

4,281

620

52,879

115

– 5,692

4,681

39,741

78,822

37,197

–342

–436

–309

22,597

14,800

289,137

155,760

–1,087

1,932

1,748

–2,363

115

2,363

7,777

8,918

1,985

1,863

16,695

25,873

17,511

358,398

187,964

–1,057

777

681

1,458

4,013

6,293

4,928

15,234

16,696

828

3,488

6,292

3,755

13,535

14,363

–89

8,790

24,073

4,133

15,507

4,711

15,468

32,863

19,640

20,179

39,933

78,467

37,972

88,706

24,471

14,907

4,681

80,681

24,972

16,002

5,991

156,372

132,765

127,646

7,777

8,913

9,957

6,616

16,690

16,573

189,240

169,158

164,481

Annual Financial Statements: Assets

Statements of Changes in Equity
Values in € thousands, unless otherwise specified.

Parent Company

Minority Interests

Group Equity

Comprehensive Other Group Income

Subscribed

Capital

Group equity

from currency

Other

Accumulated

Adjustments

capital

reserve

from earnings

translation

transactions

Equity

Minority

interest

Adjustments

from currency

Other

translation

transactions

Equity

Balance as at June 30, 2003

17,000

5,530

234,198

256,728

17,511

274,239

Dividends paid

Changes in the consolidated group

Other changes

Consolidated net income

Other recognized gains (losses)

– 7,260

28,189

–3,082

Total consolidated gains (losses)

28,189

– 3,082

Balance as at June 30, 2004

17,000

5,530

255,127

– 3,082

Dividends paid

Changes in the consolidated group

Other changes

Consolidated net income

Other recognized gains (losses)

Total consolidated gains (losses)

–7,260

33,588

3,603

198

683

260

226

–7,260

28,189

–2,884

25,305

–513

622

1,575

274,773

19,195

–7,260

683

260

33,588

3,829

–545

–90

570

1,196

37,417

1,196

Balance as at June 30, 2005

17,000

5,530

281,455

521

1,367

305,873

20,326

–513

622

1,575

1,598

–7,773

622

29,764

–2,861

26,903

19,218

293,991

–545

–90

570

1,196

390

1,586

20,739

–7,805

593

830

34,784

4,219

39,003

326,612

390

413

Annual Financial Statements: Equity

Cash Flow Statement

Notes to the Cash Flow Statement
Figures in € thousands, unless otherwise specified; previous-year values in parentheses.

Note

€ Thousands

The cash flow statement, which has been prepared according to IAS 7

(D) Supplementary information on the

2004 / 05

Previous year

(indirect method), shows the changes in cash and cash equivalents of

cash flow statement

Net income (including minority interest) before extraordinary items

Depreciation / reversal of impairment losses (–) on property, plant, and equipment

Increase /decrease (–) in long-term provisions
Other noncash expenses / income (–)

Cash earnings according to DVFA/SG

Increase /decrease (–) in short-term provisions

Net gain (–) / loss from the disposal of assets

Increase (–)/decrease in inventories, trade receivables, and other assets
not attributable to investing or financing activities

Increase /decrease (–) in trade payables and other liabilities not attributable to
investing or financing activities

34,784

16,774

– 659

–3,664

47,235

23,242

–266

– 63,017

3,887

Net cash from operating activities

(A)

11,081

Proceeds from disposals of property, plant, and equipment

Payments (–) for capital expenditure on property, plant, and equipment

Proceeds from the disposal of intangible assets

Payments (–) for capital expenditure on intangible assets

Proceeds from disposal of financial assets

Payments (–) for financial assets

Proceeds from the disposal of consolidated companies
and other business units

Payments (–) for the acquisition of consolidated companies
and other business units

2,477

–23,169

152

–3,996

2,198

– 381

218

– 7,635

29,764

16,696

–872

–3,102

42,486

–210

158

– 11,711

5,886

36,609

1,125

– 22,598

–1,291

1,863

–856

Net cash from investing activities

(B)

– 30,136

– 21,755

Proceeds from additional capital

Dividend payments (–) to shareholders parent and minority

Proceeds from issuing bonds and borrowings

Payments (–) to redeem bonds and borrowings

1,200

–7,805

41,182

–25,759

Net cash from financing activities

(C)

8,818

Net cash changes in cash and cash equivalents

Effect of exchange rate changes on assets

Effect of exchange rate changes on equity

Others

Changes in cash and cash equivalents due to exchange rate,
consolidated group, and measurement changes

Cash and cash equivalents at beginning of year

–10,237

–1,234

3,993

2,045

4,804

58,288

Cash and cash equivalents at end of year

(D)

52,855

620

–7,773

5,912

– 27,806

-29,047

–14,193

1,353

–3,059

200

–1,506

73,987

58,288

the KWS Group in the three categories of operating activities, investing

activities, and financing activities. The effects of exchange rate changes

As in previous years, cash and cash equivalents are composed of cash (on

and changes in the consolidated group have been eliminated from

hand and balances with banks) and current available-for-sale securities.

the respective balance sheet items, except those affecting cash and

cash equivalents.

Cash and cash equivalents includes € 6,214 thousand (€ 8,414 thou-

sand) from partially consolidated companies.

(A) Cash flows from operating activities

Information on acquisitions

and disposals of subsidiaries

and other business units

2004 / 05

year

Total amount of all purchase prices

Total amount of sales prices

Total amount of cash components
of purchase prices

Total amount of cash components
of sales prices

Total amount of all cash and
cash equivalents acquired with
the companies

Total amount of all cash and cash
equivalents sold with the companies

9,468

218

7,635

218

2,265

127

Amounts of other
assets and liabilities
acquired or sold with
the companies

2004 / 05

Previous year

acquired

sold

acquired

sold

Assets

1,799

378

Current assets, incl. pre-

paid expenses (excluding

cash and cash equivalents)

12,673

1,051

Provisions

Liabilities,

850

104

incl. deferred income

14,239

1,226

The cash proceeds from operating activities are primarily determined by

the cash earnings according to DVFA / SG, which increased by € 4,749

thousand to € 47,235 thousand. The proportion of DVFA/SG cash earn-

ings included in sales was 9.5 % (8.6 %). The increase in inventories and

receivables used € 63,017 thousand (€ 11,711 thousand). The cash pro-

ceeds from operating activities include interest income of € 1,681 thou-

sand (€ 1,567 thousand) and interest expense of € 3,224 thousand

(€ 3,929 thousand). Income tax payments amounted to € 24,567 thou-

sand (€ 12,436 thousand).

(B) Cash flows from investing activities

A net total of € 30,136 thousand (€ 21,755 thousand) was required to

finance investing activities. An amount of € 27,165 thousand (€ 23,889

thousand) was paid for intangible and tangible assets and an amount of

€ 381 thousand (€ 856 thousand) for financial assets. There were total

cash receipts of € 4,827 thousand (€ 2,990 thousand) for disposals of

assets. In the fiscal year under review, interests in companies were

acquired for a total purchase consideration of € 9,468 thousand and

sold for a total disposal consideration of € 218 thousand; € 7,635 thou-

sand of the purchase consideration and 100 % of the disposal consider-

ation was cash.

Financing activities resulted in cash proceeds of € 8,818 thousand

(– € 29,047 thousand). The profit distributions related to the dividends

of € 7,260 thousand (€ 7,260 thousand) paid to the shareholders of KWS

SAAT AG and profit distributions of € 545 thousand (€ 513 thousand)

paid to other shareholders of fully consolidated subsidiaries. In addition,

there were new borrowings of € 41,182 thousand (€ 5,912 thousand)

and liabilities of € 25,759 thousand (€ 27,806 thousand) were repaid.

Annual Financial Statements: Cash Flow Statement

Annual Financial Statements: Notes to the Cash Flow Statement

Segment reporting
Figures in € thousands, unless otherwise specified; previous-year values in parentheses.

In accordance with its internal reporting system, the KWS Group is

activities represented by its investment in the SAKA-RAGIS Group and

Segment information

primarily organized by the following business segments:

its agricultural operations and consulting services for the KWS Group

Sugar beet

Corn

Cereals

Breeding & services

and other customers are assigned to this segment.

Segment sales contains both sales from third parties (external sales)

and sales between the segments (intersegment sales). The prices for

Considered a core competence for the KWS Group’s entire product

intersegment sales are determined on an arm’s-length basis.

range, plant breeding, including the related biotechnology research,

is essentially concentrated at the parent company in Einbeck. All the

breeding material, including the relevant information and expertise about

The research and development function is contained in the breeding

how to use it, is owned by KWS SAAT AG, with respect to sugar beet

& services segment. Because of their minor importance within the

and corn, and by LOCHOW-PETKUS GMBH, with respect to cereals.

KWS Group, the distribution and production of oil and field seed are

Research and breeding are also performed by the wholly-owned

reported in the cereals and corn segments, depending on the legal en-

German subsidiary PLANTA ANGEWANDTE PFLANZENGENETIK UND

Sugar beet

Corn

Cereals

tities involved.

BIOTECHNOLOGIE GMBH and breeding activities are conducted by

Breeding & services

Segment sales

Internal sales

External sales

2004/05

Previous year

2004/ 05

Previous year

2004/ 05

Previous year

217,908

217,842

54,645

110,382

193,688

191,422

53,684

102,973

238

2,267

102,946

160

969

96,103

217,908

217,604

52,378

7,436

193,645

191,262

52,715

6,870

Description of segments

Sugar beet

ten other German and foreign subsidiaries and affiliated companies,

as in the previous year.

KWS Group

600,777

541,767

105,451

97,275

495,326

444,492

The results of the multiplication, processing and distribution activities

SAKA-RAGIS PFLANZENZUCHT GBR breeds and distributes po-

The breeding & services segment generates 93.3 % (93.3 %) of its sales

71,7% (74,0%) of total sales are recorded in Europe (including Germany).

for sugar beet seed are reported under the sugar beet segment. Under

tatoes in the KWS Group. This company is 45 % owned by the fully

from the other segments. The sales of this segment represents 1.5 %

the leadership of KWS SAAT AG, thirteen (twelve) foreign subsidiaries

consolidated RAGIS KARTOFFELZUCHT- & HANDELSGESELLSCHAFT

(1.5 %) of the Group’s external sales.

The operating income of each segment is reported as the segment

and affiliated companies and one (zero) subsidiary in Germany are active

MBH. The operating income of RAGIS KARTOFFELZUCHT- & HAN-

result. The segment results are presented on a consolidated basis.

in this segment.

Corn

DELSGESELLSCHAFT MBH is included in the operating income of the

The sugar beet segment is the largest contributor of external sales,

breeding & services segment, but the operating income of SAKA-RAGIS

accounting for 44.0 % (43.6 %) of external sales, followed by corn with

Depreciation and amortization charges of € 16,774 thousand

PFLANZENZUCHT GBR and SAKA RAGIS AGRAR-PRODUKTE GMBH

43.9 % (43.0 %) and cereals with 10.6 % (11.9 %).

(€ 16,696 thousand) allocated to the segments relate exclusively to

KWS MAIS GMBH is the lead company for the corn segment. In ad-

& CO. KG, in which RAGIS KARTOFFELZUCHT- & HANDELSGESELL-

dition to KWS MAIS GMBH, business activities are conducted by one

SCHAFT MBH holds a 36 % interest, are reported as part of finance

German company (as in the previous year) and fourteen (twelve) foreign

costs under “Share of profit of affiliated companies.”

companies of the KWS Group. The production and distribution activities

of this segment relate to corn for grain and silage corn, and to oil and

Consulting services include the systems business of KWS SAAT AG

field seed.

Cereals

and its agricultural operations, KWS KLOSTERGUT WIEBRECHTS-

HAUSEN GMBH, KWS SAATFINANZ GMBH, which mainly handles insur-

ance for KWS, and EURO-HYBRID GESELLSCHAFT FÜR GETREIDE-

The lead company of this segment, which essentially concerns the

ZÜCHTUNG M B H.

production and distribution of hybrid rye, wheat, and barley, as well as

oil and field seed, is LOCHOW-PETKUS GMBH, an 81 %-owned sub-

The other services performed for the KWS product segments es-

sidiary of KWS SAAT AG, with its three (three) foreign subsidiaries and

sentially include all the management services of KWS SAAT AG, such

affiliated companies in France, Great Britain, and Poland.

as holding company and administrative functions, including strategic

Breeding & services

development projects, which are not directly charged to the product

segments or indirectly allocated to them by means of an appropriate

This segment includes the centrally controlled corporate functions of

cost formula.

research and breeding, as well as services for the KWS product seg-

ments of sugar beets, corn and cereals. In addition, the Group’s potato

External sales
by region

Germany

Europe (excluding Germany)

Americas

Rest of world

2004 / 05

124,628

230,590

117,550

22,558

Previous
year

119,423

209,386

99,656

16,027

495,326

444,492

intangible assets and property, plant, and equipment. An impairment

loss on goodwill of € 564 thousand was recognized for SAKA-RAGIS

PFLANZENZUCHT GBR; it is reported as part of finance costs.

The other noncash items recognized in the income statement re-

late to noncash changes in the allowances on inventories and receiv-

ables, and in provisions. In all of the segments this item consisted of

net expenses.

Annual Financial Statements: Segment Reporting

Notes to the Annual Financial Statements
Figures in € thousands, unless otherwise specified; previous-year values in parentheses.

Segment

earnings

Depreciation

Other

The KWS Group (KWS-Konzern) is a consolidated group as defined

Prohibition on recognition of future internal expenses (e.g. deferred

and amortization

noncash items

Assets

Liabilities

in the International Financial Reporting Standards (IFRSs) published by

maintenance) under IAS 37

2004 /05

year

2004 /05

year

2004 / 05

year

2004 / 05

year

2004 / 05

year

Sugar beet

Corn

Cereals

31,015

31,899

4,658

4,564

8,719

7,788

146,254 136,117

20,972

18,930

10,600

9,368

1,937

1,178

6,701

25,452

189,060 130,573

86,862

63,893

3,638

3,575

1,547

1,382

215

627

27,734

24,927

7,208

6,567

Breeding & services

11,073

7,450

8,632

9,572

13,086

3,246

133,961 128,646

78,318

73,033

the International Accounting Standards Board (IASB), London, taking into

Translation of monetary receivables and liabilities at the closing rate

account the interpretations of the International Financial Reporting Com-

under IAS 21

mittee (IFRIC). The consolidated financial statements of the KWS Group

Market value accounting mandatory for some financial instruments

were prepared for the first time under these international standards

under IAS 39

as of June 30, 2005, applying IFRS 1. For the purpose of previous-year

Interest portion from additions to pension provisions reported under

comparison, the figures for the 2003/04 fiscal year, which is based on

net interest

the opening balance sheet as of July 1, 2003, have been determined

Total segments

Others

497,009 420,263

193,360 162,423

accordingly. The requirements of section 292a of the Handelsgesetzbuch

The differences between carrying amounts in the HGB and IFRS balance

75,428

74,108

52,465

37,957

(HGB – German Commercial Code) for the exemption from the prepar-

sheets had the following effects on equity as of the balance sheet date:

KWS Group

56,326 52,292

16,774

16,696

28,721 37,113

572,437 494,371

245,825 200,380

The operating assets of the segments are composed of intangible

assets, property, plant, and equipment, inventories and all receivables,

other assets, and prepaid expenses that can be charged directly to the

segments or indirectly allocated to them by means of an appropriate

cost formula.

Investments in long-term
assets by segment

Sugar beet

Corn

Cereals

2004 / 05

4,037

18,708

1,558

Previous
year

3,769

3,116

1,053

Cash and cash equivalents and/or current available-for-sale securities

are allocated to the segments only to the extent that the allocation of

operating liabilities makes it necessary to increase operating assets by a

corresponding amount.

The operating liabilities attributable to the segments include the borrow-

ings reported on the balance sheet, less provisions for taxes and the

portion of other liabilities that cannot be charged directly to the seg-

ments or indirectly allocated to them by means of an appropriate cost

formula. Borrowings are added to operating liabilities only when they

exceed the available cash. Assets or liabilities that have not been alloca-

ted to the segments are reported as “Others”.

Capital expenditure on assets was mainly attributable to the corn

segment and amounted to € 18,708 thousand (€ 3,116 thousand). 41 %

Breeding & services

12,584

16,808

36,887

24,746

Investments in long-term
assets by region

2004 / 05

Previous
year

Germany

12,826

16,181

Europe (excluding Germany)

North and South America

Rest of world

8,341

15,252

468

3,228

4,170

1,167

36,887

24,746

ation of consolidated financial statements under German commercial law

(HGB) have been met. The consolidated financial statements discharge

06 / 30 / 2003 06 / 30 / 2004

the obligations of LOCHOW-PETKUS GMBH, Bergen, and KWS MAIS

GMBH, Einbeck, to produce their own financial statements. The following

Equity according to HGB

226,103

270,439

standards (rev. 2003) were used before they became effective: IFRS 1,

Fixed assets

IFRS 3, IFRS 5, IAS 1, IAS 2, IAS 8, IAS 10, IAS 16, IAS 17, IAS 21,

Current assets

IAS 24, IAS 27, IAS 28, IAS 31, IAS 32, IAS 33, IAS 40, and IAS 39

Deferred tax assets

(rev. 2004).

General disclosures

Basis of accounting

Deferred tax liabilities

Pension provisions

Other provisions

Minority interests

Other adjustments

43,742

10,764

7,684

– 20,020

– 9,389

30,821

16,657

12,695

– 3,905

– 6,169

– 8,546

38,817

–16,135

– 25,997

669

The first-time adoption of the IFRSs as of July 1, 2003 led to the follow-

ing significant changes compared with the previous accounting method

under the HGB:

Equity according to IFRSs

274,239

293,991

Although net income according to IFRSs is € 1,064 thousand, the differ-

Classification of the balance sheet into noncurrrent and current assets

ence recognized in equity narrowed by € 24,584 thousand in 2003 / 04.

and noncurrent and current liabilities under IAS 1

New rules for consolidated financial statements under HGB (section 308

Amortization of goodwill discontinued and replaced by a requirement

(3) of the HGB no longer applies) required assets to be remeasured,

to perform an annual impairment test under IFRS 3

which led to an increase in equity of € 18,026 thousand, taking deferred

Straight-line depreciation under IAS 16 (previously reducing-balance

tax liabilities into account. In addition, the first-time adoption of German

depreciation with change of method)

Accounting Standard (GAS) 10, which requires deferred tax assets and

Measurement of biological assets at fair value under IAS 41

liabilities to be determined and reported on a gross basis, resulted in an

Deferred taxes computed using the liability method under IAS 12

increase in equity of € 8,879 thousand.

(17 %) of capital expenditure was made in North and South America and

Operating assets by region

2004 / 05

year

Pension provisions measured using the accrued benefit method under

35 % (65 %) in Germany, mainly in Einbeck.

Germany

212,808

207,729

Europe (excluding Germany)

165,922

122,741

North and South America

Rest of world

111,630

6,649

84,629

5,164

497,009

420,263

IAS 19 (previously entry-age normal method)

Annual Financial Statements: Segment Reporting

Notes: General Information

The income statement shows the following differences affecting net profit

The differences in the cash flow statement are as follows:

or loss for 2003 / 04:

Income statement 2003 / 04

HGB

Reconciliation

IFRS

Cash flow statement 2003 / 04

779

–7,326

8,105

2,230

293

– 3,355

– 2,489

4,716

– 3,888

828

–602

1,430

366

1,064

1.61

444,492

280,026

164,466

77,987

37,113

13,742

10,816

52,292

– 4,155

48,137

18,373

29,764

1,575

28,189

42.71

Net sales

Cost of sales

Gross profit on sales

Selling expenses

General and administrative expenses

Other operating income

Other operating expenses

Operating income

Net financial income / expenses

Result of ordinary activities

Income taxes

Net income for the year

Minority interest

443,713

287,352

156,361

75,757

36,820

17,097

13,305

47,576

– 267

47,309

18,975

28,334

1,209

Net income for the year after minority interest

27,125

Earnings per share (€)

41.10

There were significant differences as a result of higher depreciation of

property, plant, and equipment under IFRSs; the fact that goodwill

is no longer amortized accounts for a difference of € 2,752 thou-

sand. Under IFRSs, the interest portion from additions to provisions

for pensions, partial retirement, and long-service awards is reported

under interest and similar expenses. This change increases the IFRS

operating profit by € 3,162 thousand and increases finance costs by

the same amount.

Net income for the year

Depreciation of property, plant, and equipment / reversal of impairment losses

Change in long-term provisions

Other noncash expenses / income

Cash earnings according to DVFA / SG

Change in short-term provisions

Net gains / losses from the disposal of assets

Change in inventories, trade receivables, and other assets

Change in trade payables and other liabilities

Net cash from operating activities

Cash receipts from sales of assets

Cash payments for capital items

HGB

28,334

19,637

828

–3,152

45,647

1,620

–35

–14,256

3,741

36,717

3,460

–26,060

IFRS

29,764

16,696

– 872

–3,102

42,486

–210

158

–11,711

5,886

36,609

2,990

– 24,745

Net cash from investing activities

– 22,600

– 21,755

Proceeds from increases in equity

Dividends paid and redemption of equity

Proceeds from noncurrent liabilities

Repayment of noncurrent liabilities

622

–7,773

5,912

–26,539

620

–7,773

5,912

– 27,806

Net cash from financing activities

– 27,778

– 29,047

Net cash change in cash and cash equivalents

Cash effect of changes in the exchange rate and in the consolidated group

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Cash on hand and balances with banks

Current available-for-sale securities

Cash and cash equivalents

–13,661

–1,852

73,832

58,319

50,819

7,500

58,319

–14,193

–1,506

73,987

58,288

50,819

7,469

58,288

Notes: General Information

Companies consolidated in the KWS Group

Joint ventures are carried according to the percentage of equity held in

Classification of the balance sheet and the income statement

Property, plant, and equipment

The consolidated financial statements of the KWS Group include the

the companies concerned using IFRS 3.

The costs for the functions include all directly attributable costs, inclu-

Property, plant, and equipment is measured at cost less depreciation.

single-entity financial statements of KWS SAAT AG and its subsidiaries

ding other taxes and research and development expenses. Research

A loss is recognized for an impairment expected to be permanent. In

in Germany and other countries in which it directly or indirectly controls

Subsidiaries and joint ventures are consolidated and associated com-

grants are not deducted from the costs to which they relate, but re-

addition to directly attributable costs, the cost of self-produced plant or

more than 50 % of the voting rights. In addition, joint ventures are pro-

panies measured at equity only if such recognition is considered ma-

ported gross under other operating income.

equipment also includes a proportion of the overheads and deprecia-

portionately consolidated, according to the percentage of equity held in

terial for the fair presentation of the financial position and results of

those companies. Subsidiaries and joint ventures that are considered

operations of the KWS Group. As part of the elimination of intra-Group

Accounting policies

tion / amortization, but no finance charges. Straight-line depreciation

of buildings is based on a useful life of 50 years. The useful lives of tech-

immaterial for the presentation and evaluation of the financial position

balances, borrowings, receivables, liabilities, and provisions are netted

Consistency of accounting policies

nical equipment and machinery range from 5 to 15 years, and for opera-

and performance of the Group are not included.

between the consolidated companies. Intercompany profits not realized

The accounting policies are largely unchanged from the previous year.

ting and office equipment from 3 to 10 years. Low-value assets are fully

at Group level are eliminated from intra-Group transactions. Sales, in-

All estimates and assessments as part of accounting and measure-

expensed in the year of purchase; they are reported as additions and

Consolidation methods

come, and expenses are netted between consolidated companies, and

ment are continually reviewed; they are based on historical patterns and

disposals in the year of purchase in the statement of changes in non-

The single-entity financial statements of the individual subsidiaries and

intra-Group distributions of profit are eliminated.

expectations about the future regarded as reasonable in the particular

current assets. Impairment losses on property, plant, and equipment are

joint ventures included in the consolidated financial statements were

circumstances.

uniformly prepared on the basis of the accounting and measurement

Deferred taxes on consolidation transactions recognized in income

methods applied at KWS SAAT AG; they were audited and given un-

are calculated at the tax rate applicable to the company concerned.

Intangible assets

recognized according to IAS 36 whenever the recoverable amount of

the assets is less than its carrying amount. The recoverable amount is

the higher of the asset’s net realizable value and its value in use (value

qualified audit opinions by independent auditors. For fully or propor-

These deferred taxes are aggregated with the deferred taxes recognized

Purchased intangible assets are carried at cost less amortization over

of future cash flows expected to be derived from the asset).

tionately consolidated units acquired before July 1, 2003, the Group

in the separate financial statements.

a useful life of three to ten years. Impairment losses on intangible assets

exercised the option allowed by IFRS 1 to maintain the consolidation

with finite useful lives are recognized according to IAS 36. Goodwill and

Investments in affiliated companies and other financial assets

procedures chosen to date. The goodwill reported in the HGB financial

Minority interests are recognized in the amount of the imputed percent-

intangible assets with indefinite useful lives are not amortized, but tested

Investments are measured at cost. The cost of equity-accounted invest-

statements as of June 30, 2003 was therefore transferred unchanged to

age of equity in the consolidated companies.

for impairment at least once a year. The procedure for the impairment

ments is increased or decreased by proportionate changes in equity.

the opening IFRS balance sheet. For acquisitions made after June 30,

test is explained in the notes to the balance sheet. Intangible assets

Assets available for sale are carried at market value if this can be reliably

2003, capital consolidation follows the purchase method by allocating

Currency translation

acquired as part of business combinations are carried separately from

measured. Unrealized gains and losses, including deferred taxes, are

the cost of acquisition to the Group’s interest in the subsidiary’s equity

Under IAS 21, the financial statements of the consolidated foreign sub-

goodwill if they are separable according to the definition in IAS 38 or

recognized directly in the revaluation reserve under equity. Permanent

at the time of acquisition. Any excess of interest in equity over cost is

sidiaries and joint ventures that conduct their business as financially,

result from a contractual or legal right, and fair value can be reliably

impairment losses are recognized immediately through the income

recognized as an asset, up to the amount by which fair value exceeds

economically, and organizationally independent entities are translated

measured.

statement. Borrowings are carried at amortized cost.

the carrying amount. Any goodwill remaining after first-time consoli-

into euros using the functional currency method as follows:

dation is recognized under intangible assets.

Biological assets

Inventories

According to IFRS 3, goodwill is not amortized, but tested for impair-

Balance sheet items at the exchange rate on the balance sheet date.

sales proceeds, less costs to sell.

slow-moving items. In addition to directly attributable costs, the cost of

Income statement items at the average exchange rate for the year

Pursuant to IAS 41, biological assets are measured at the expected

Inventories are carried at cost less an allowance for obsolescent or

ment at least once a year (impairment-only approach). Investments in

The difference resulting from the application of annual average rates

non-consolidated companies are carried at cost.

to the net profit for the period in the income statement is taken directly

Investments in affiliated companies are measured at equity and were

recognized in the consolidated financial statements at the time of acqui-

sition or first-time consolidation. Goodwill is reported in a separate ac-

count under intangible assets.

to equity.

sales also includes indirect labor and materials including depreciation

under IAS 2. Under IAS 41, biological assets are measured at the ex-

pected sales proceeds, less costs to sell. The measurement procedure

used is based on standard industry value tables.

Notes: General Information

Receivables and other assets

Consolidated group and changes in the consolidated group

As of December 31, 2004, AGRELIANT GENETICS LLC., Westfield,

Companies carried at-equity

Receivables and other current assets are recognized at nominal values.

IN, USA paid a purchase price of € 18,848 thousand to acquire non-

Individual risks and the general credit risk are accounted for with appro-

Number of companies

current assets of € 3,387 thousand and current assets of € 9,621 thou-

2004 / 05

Previous year

priate allowances.

Current securities

Available-for-sale securities are carried at market value. Unrealized gains

and losses, including deferred taxes, are recognized directly in the revalu-

ation reserve under equity.

Deferred taxes

Including

2004 / 05

previous year

KWS SAAT AG

Domestic Foreign Total Domestic Foreign Total

Consolidated

Consolidated at

quota

At-equity

–

Deferred taxes are calculated on differences between the IFRS carrying

amounts of assets and liabilities and their tax base, and on loss carryfor-

Total

sand and assumed liabilities of € 7,941 thousand from PRODUCERS

HYBRIDS in North America. The purchased goodwill of € 13,781 thou-

sand is included in an amount of € 7,800 thousand in additions to

intangible assets, according to the proportionate consolidation of

AGRELIANT GENETICS LLC. In fiscal year 2004/ 05, PRODUCERS

HYBRIDS contributed € 1,577 thousand to the operating income of the

KWS Group. If the acquisition date had been July 1, 2004, the sales of

the KWS Group would have been unchanged, and operating income

would have been € 1,000 thousand lower.

wards; they are reported on a gross basis. Under IAS 12, deferred taxes

The financial position and results of operations of proportionately con-

are calculated on the basis of the applicable local income tax.

The companies are listed under item number 30.

solidated and equity-accounted companies are as follows:

Provisions for pensions and other employee benefits

Changes in the fully consolidated companies relate to

Proportionately consolidated companies

Under IAS 19, obligations from direct pension commitments are meas-

ured using actuarial principles under the accrued benefit valuation

the following newly established subsidiaries of KWS MAIS GMBH

2004 / 05

Previous year

Noncurrent assets

Current assets

20,202

11,254

21,917

10,861

Total assets

31,456

32,778

Equity

Noncurrent liabilities

Current liabilities

Total equity

and liabilities

20,226

6,844

4,386

19,731

8,185

4,862

31,456

32,778

Net sales

9,590

14,993

Net profit for the year

1,626

4,814

method. Gains or losses from unplanned changes in accrued benefits

KWS SEMENA BULGARIA E.O.O.D., Sofia, Bulgaria

and from changes in actuarial assumptions are disregarded if the change

KWS OSIVA S.R.O., Velké Mezirici, Czech Republic

moves within a 10 % corridor of the accrued benefits. Only if the gains or

losses exceed this threshold will they be distributed over the remaining

the acquisition of the following subsidiary of KWS INTERSAAT GMBH

working lives and included in the provision.

DELITZSCH PFLANZENZUCHT GMBH, Winsen (Aller), Germany

Other provisions

the first-time consolidation of the following subsidiary of KWS SAAT AG

Tax and other provisions account for all discernible risks and contingent

EUROHYBRID GMBH, Einbeck, Germany, and its subsidiary

liabilities. Depending on circumstances, they are measured at the most

KWS RUS O.O.O., Moscow, Russian Federation

probable amount or at the expected value.

Liabilities

MOD MANAGEMENT, ORGANISATION UND DATENVERARBEITUNG

CONSULTING GMBH, Einbeck, Germany, was disposed of as part of

Noncurrent assets

Current assets

26,690

61,569

15,583

47,722

Total assets

88,259

63,305

Equity

Noncurrent liabilities

Current liabilities

Total equity
and liabilities

44,301

1,983

41,975

35,026

1,264

27,014

88,259

63,304

Liabilities are recognized at their repayment amounts.

a management buy-out.

Net sales

92,804

67,931

Contingencies

As of March 31, 2005, KWS INTERSAAT GMBH acquired the 100 %

Net profit for the year

10,024

4,602

The contingent liabilities recognized in the balance sheet correspond to

interest in DELITZSCH PFLANZENZUCHT GMBH, Winsen (Aller) at a

the loan amounts drawn down as of the balance sheet date.

purchase price of € 44 thousand. Pursuant to IFRS 3, the difference

from first-time consolidation of € 898 thousand was recognized as other

operating income of the KWS Group. Since the date of acquisition,

DELITZSCH PFLANZENZUCHT GMBH has reduced the KWS Group’s

operating profit by € 174 thousand. If the acquisition date had been

July 1, 2004, the sales of the KWS Group would have been € 1,900

thousand higher, and operating income would have been € 300 thou-

sand higher.

Notes: General Information

Notes to the Balance Sheet
Figures in € thousands, unless otherwise specified; previous-year figures in parentheses.

(1) Assets

perspectives into account. A standard discount rate of 7.1 % has been

(6) Deferred tax assets

Trade receivables increased by € 29,287 thousand, from € 161,165

The statement of changes in noncurrent assets contains a break-

beyond the detailed planning horizon in order to allow for extrapolation

Under IAS 12, deferred tax assets are calculated as the difference

includes € 3,060 thousand (€ 11,035 thousand) receivables from re-

down of assets summarized in the balance sheet and shows how they

in line with the expected inflation rate. Tests provided evidence that,

between the IFRS balance sheet amount and the tax base. They are

lated parties. The increase is mainly due to sales growth in some mar-

changed in 2004/05. Capital expenditure on assets was € 36,887 thou-

with one exception, the goodwill recognized in the consolidated bal-

reported on a gross basis and total € 12,768 thousand (€ 9,969 thou-

kets with significantly longer payment terms, particularly in Eastern and

assumed to calculate present values. No growth rate has been applied

thousand to € 190,452 thousand, an increase of + 18.2 %; this amount

sand (€ 24,745 thousand), plus € 76 thousand (€ 1,129 thousand) from

ance sheet and determined for the cash-generating units is not impaired.

sand), of which € 84 thousand (€ 8 thousand) will be carried forward

Southern Europe.

the share in net profit of equity-accounted affiliated companies attri-

An impairment loss of € 564 thousand was recognized on goodwill allo-

for the future use of tax losses

butable to the KWS Group, so that total additions to assets amounted

cated to an associated company. In the previous year, one item of good-

to € 36,963 thousand (€ 25,874 thousand). The management report de-

will was written off in full and an impairment loss of € 667 thousand had

scribes the significant additions to assets. Depreciation and amortization

to be recognized.

(7) Inventories

amounted to € 16,774 thousand (€ 16,696 thousand).

Other current assets also include current financing receivables, tax

assets und prepaid expenses.

Current financing receivables include an amount of € 866 thousand

(€ 862 thousand) receivable from related parties.

(3) Property, plant, and equipment

06 / 30 / 2005

year

(2) Intangible assets

This item includes purchased varieties, rights to varieties and distribu-

sand) and depreciation amounted to € 15,218 thousand (€ 15,234

tion rights, software licenses for electronic data processing, and good-

thousand). The increase in capital expenditure was mainly due to the

will. Additions to intangible assets amounting to € 10,864 thousand

expansion of production capacity in the corn segment in France.

Capital expenditure amounted to € 25,642 thousand (€ 22,598 thou-

(€ 1,291 thousand) relate primarily to goodwill from the acquisition of

PRODUCERS HYBRIDS in North America and subsequent expenditure

for the interest in AGRELIANT GENETICS LLC. Amortization of intan-

(4) Investments in affiliated companies

Raw materials and consumables

Work in process

Immature biological assets

Finished goods

9,020

34,391

5,015

57,657

7,855

22,705

5,022

39,257

Current receivables include an amount of € 658 thousand (€ 1,115 thou-

sand) due after more than one year.

(9) Securities

106,083

74,839

Securities amounting to € 20,843 thousand (€ 7,469 thousand) relate

primarily to short-term liabilities securities and fund shares.

gible assets amounted to € 1,556 thousand (€ 1,459 thousand); this

Inventories increased by € 31,244 thousand, or + 41.8 %, net of write-

charge is included in the relevant functional costs, depending on the

This item relates to equity-accounted investments in affiliated compa-

downs totaling € 27,162 thousand (€ 20,082 thousand). Immature bio-

operational use of the intangible assets.

nies. Total additions of € 76 thousand represent the share in net profit of

logical assets relate to living plants in the process of growing (before

(10) Cash

the affiliated companies attributable to the KWS Group. Total disposals

harvest). Public subsidies of € 1,132 thousand were granted for the total

In order to meet the requirements of IFRS 3 in combination with IAS 36

of € 1,808 thousand relate to profit distributions within the consolidated

area under cultivation of around 4,500 ha.

Cash of € 32,011 thousand (€ 50,819 thousand) consists of balances

and to determine any impairment of goodwill, cash-generating units

group. The balance sheet date of SAKA-RAGIS AGRARPRODUKTE

have been defined in line with internal reporting guidelines. In the KWS

GMBH & CO. KG (December 31) differs from that of the KWS Group.

Group, these units are the legal entities. To test for impairment, the

Inclusion of this company on the basis of the annual financial statements

(8) Current receivables

carrying amount of each entity is determined by allocating the assets

as of December 31, 2004 has not had any significant impact on the

and liabilities, including attributable goodwill and intangible assets. An

consolidated financial statements.

impairment loss is recognized if the recoverable amount of an entity is

less than its carrying amount. The recoverable amount is the higher of

the entity’s net realizable value and its value in use (value of future cash

(5) Other financial assets

flows expected to be derived from the entity). The impairment test uses

the expected future cash flows on which the medium-term plans of the

Investments in non-consolidated subsidiaries and shares in coopera-

companies are based; these plans, which cover a period of four years,

tives and GmbHs that are of minor significance, totaling € 4,136 thou-

have been approved by the Executive Board. They are based on histor-

sand, are reported in this account. The mutual investment in our French

ical patterns and expectations about future market development.

partner RAGT SEMENCES S.A. is carried at cost of € 4,000 thousand.

Listed shares are carried at market value of € 90 thousand; the HGB

For the European and American markets, the key assumptions on which

balance sheet as of June 30, 2003 included an amount of € 38 thousand

corporate planning is based include assumptions about price trends

under other financial assets. This account also includes interest-bearing

for seed, in addition to the development of market shares and the regu-

home-building loans to employees and other interest-bearing loans

latory framework. Company-internal projections take the assumptions

totaling € 360 thousand.

of industry-specific market analyses and company-related growth

Trade receivables

Other current assets

06 / 30 / 2005

190,452

24,674

Previous
year

161,165

20,952

Current receivables

215,126

182,117

with banks and cash on hand. The cash flow statement explains the

change in this item compared with the previous year.

The financial assets consist primarily of bank balances and cash on

hand, trade receivables, other receivables, and securities. The credit

risk is mainly related to trade receivables. The amount recognized in the

balance sheet is net of allowances for receivables expected to be un-

collectible, estimated on the basis of historical patterns and the current

economic environment. The credit risk on cash and derivative financial

instruments is limited because they are kept with banks that have been

given a good credit rating by international rating agencies. There is no

significant concentration of credit risks, because the risks are spread

over a large number of contract partners and customers.

Notes: Notes to the Balance Sheet

(11) Equity

As of the balance sheet date, the Subscribed capital of KWS SAAT AG

was € 17,000,000.00, unchanged form the previous year. The 660,000

bearer shares are subdivided as follows:

21,000 certificates for

1 share each

21,000 shares

15,400 certificates for

10 shares each

154,000 shares

9,700 certificates for

50 shares each

485,000 shares

Equity (including minority interest) increased by € 32,621 thousand, from

€ 293,991 thousand to € 326,612 thousand. For details, see the state-

ment of changes in equity.

(12) Noncurrent liabilities

Long-term provisions

Long-term financial liabilities

Deferred tax liabilities

Other long-term liabilities

06 / 30 / 2005 Previous year

69,278

7,858

16,836

1,140

69,937

6,243

17,961

1,389

95,112

95,530

Long-term
provisions

07 / 01 / 2004

Changes in the
consol. group

Additions

Consumptions

Reversals

06 / 30 / 2005

Pensions provisions

Other provisions

65,467

4,470

–865

4,298

699

4,083

583

69,937

– 834

4,997

4,666

111

156

65,602

3,676

69,278

The accrued benefit is reconciled to the provisions reported in the con-

(13) Current liabilities

solidated financial statements as follows:

06 / 30 / 2005

06 / 30 / 2004

Accrued benefit entitlements

Actuarial losses

73,874

– 8,272

Trade payables to affiliates

65,792

Trade payables

37,417

27,695

–325

Trade payables

37,417

27,717

65,602

65,467

06 / 30 / 2005 Previous ye ar

The benefit obligations changed as follows during the fiscal year:

2004 / 05

2003 / 04

Current liabilities to banks

Current liabilities to affiliates

Current liabilities to investees

and investors

Other current financial liabilities

2,925

14,078

610

3,374

4,180

1,079

1,920

Pension provisions at beginning of
fiscal year

Changes in consolidated group

Cost of additional benefit
entitlements

Interest cost on benefit entitlements
added in previous years

Pension payments

Pension provisions
at end of fiscal year

65,467

64,708

Current financial liabilities

20,987

7,179

927

3,260

4,083

Current provisions

56,646

34,105

1,104

Tax liabilities

8,294

11,317

3,162

3,507

Current finance lease liabilities

Deferred income

Other current liabilities

27,302

24,472

65,602

65,467

Other liabilities

27,369

24,532

In addition, the benefit obligation was backed by a guarantee that

exactly matches the present value of the obligation of € 2,525 thousand

(defined contribution plan).

Short-term liabilities increased by a total of € 45,863 thousand to

The long-term financial liabilities include loans from banks amounting to

liabilities to related parties increased by € 12,999 thousand.

€ 6,041 thousand (€ 6,072 thousand). Of the long-term loans, an amount

of € 1,807 thousand is scheduled to be repaid in each of 2006 / 07 and

The tax liabilities of € 8,294 thousand (€ 11,317 thousand) include

2007/ 08. The remaining loans payable of € 2,427 thousand have remai-

amounts for the year under review and the period not yet concluded by

ning maturities through 2015.

the external tax audit.

€ 150,713 thousand. Due to increasing intra-Group financing, financial

150,713

104,850

Retirement benefits are based on defined benefit obligations, deter-

The discount rate was 4.25 %, compared with 5.25 % the year before.

Under IAS 12, deferred tax liabilities are calculated as the difference be-

mined by years of service and pensionable compensation.

tween the IFRS balance sheet amount and the tax base. They are repor-

No income or expense was recognized as a result of changes in retire-

ted on a gross basis and total € 16,836 thousand (€ 17,961 thousand).

Pension provisions are measured using the accrued benefit method

ment obligations or benefits payable.

under IAS 19, on the basis of assumptions about future development.

The assumptions in detail are that wages and salaries will increase by

Interest cost on pension provisions is recognized in finance income or

2.00 % (2.25 %) annually and pensions by 1.25 % (1.25 %) annually.

cost. The cost of new pension entitlements that arose during the fiscal

year is recognized in functional costs.

Notes: Notes to the Balance Sheet

Short-term

provisions

Obligations from

sales transaction

Obligations from

purchase transaction

Other obligations

Changes in the

07 / 01 / 2004

consol. group

Addition

Consumptions

Reversals

06 / 30 / 2005

10,675

14,017

9,413

34,105

251

330

221

802

16,828

9,608

22,097

14,839

12,616

8,473

416

546

366

17,730

23,282

15,634

53,764

30,697

1,328

56,646

(14) Contingent liabilities

The remaining maturities of currency hedges are less than one year. Of

the interest-rate derivatives, hedges with a nominal volume of € 37,113

As in the previous year, there are no contingent liabilities to report.

thousand will mature within one year. Transactions with a volume of

€ 32,000 thousand have remaining maturities of more than 5 years.

(15) Other financial obligations

06 / 30 / 2005

There was a € 1,331 thousand (€ 3,571 thousand) obligation from un-

completed capital expenditure projects .

Obligations under rental agreements
and leases

Due in fiscal year 2005 / 06

The management report describes the objectives and methods of the

Due 2006/ 07 through 2009 /10

risk management system.

Due after 2009/10

Common derivative financial instruments, which are recognized at mar-

ket values on the balance sheet date under IAS 39, are used to hedge

4,799

12,038

1,947

18,784

interest rate and foreign currency risks. The derivative financial instru-

The leases relate primarily to IT equipment and fleet vehicles; € 1,003

ments are measured according to the mark-to-market method, which

thousand was paid under these leases in the year under review. The

uses recognized mathematical models, such as present value or Black-

main leasehold obligations relate to land under cultivation.

Scholes, to calculate option values, taking their volatility, remaining ma-

turity, and capital market interest rates into account.

Nominal
volume

Carrying
values

Market
values

06 / 30 / 2005

Currency hedges

21,594

Interest-rate hedges

101,339

189

–400

189

– 400

122,933

–211

Notes to the Income Statement
Figures in € thousands, unless otherwise specified; previous-year values in parentheses.

2004 / 05

(16) Net sales

Income statement for
the period July 1, 2004
through June 30, 2005

year

€

% of

€

% of

millions

sales millions

sales

Net sales

Cost of sales

495.3

100.0

444.5

100.0

312.3

63.1

280.0

63.0

Gross profit on sales

183.0

36.9

164.5

37.0

Selling expenses

88.7

17.9

78.0

17.6

General and administrative

expenses

Other operating income

Other operating expenses

39.1

21.3

20.2

7.9

4.3

4.0

37.1

13.7

10.8

8.4

3.1

2.4

Operating income

56.3

11.4

52.3

11.7

Net financial income / expenses

–4.9

–1.0

–4.2

–0.9

Result of ordinary
activities

51.4

10.4

48.1

10.8

Income taxes

16.6

3.4

18.3

4.1

Net income for the year

34.8

7.0

29.8

6.7

Shares of minority interest

1.2

0.2

1.6

0.4

By product category

2004 / 05

Previous year

Certified seed sales

440,485

393,581

Royalties income

Basic seed sales

Services fee income

Other sales

By region

Germany

Europe

Americas

Rest of world

31,475

28,067

7,446

2,949

6,893

2,784

12,971

13,167

495,326

444,492

2004 / 05

Previous year

124,628

230,590

117,550

22,558

119,423

209,386

99,656

16,027

495,326

444,492

For further details of sales, see segment reporting. Sales are re-

cognized when the agreed goods or services have been supplied and

risk and title pass to the buyer. Any rebates or discounts are taken

into account.

Net income after
minority interest

33.6

6.8

28.2

6.3

The cost of sales increased by € 32,331 thousand to € 312,357 thou-

sand, or 63.1 % (63.0 %) of sales. The total cost of goods sold was

€ 106,882 thousand. This amount includes additional allowances on

inventories totaling € 7,080 thousand, charged to segment results as

follows: sugar beet € 6,522 thousand, corn € 308 thousand, cereals

€ 41 thousand, and breeding & services € 209 thousand. Research and

development is recognized as an expense in the year it is incurred; in the

year under review, this amounted to € 71,342 thousand (€ 67,999 thou-

sand the year before). Development costs for new varieties are not re-

cognized as an asset because evidence of future economic benefit can

only be provided after the variety has been officially certified.

The € 10,668 thousand increase in selling expenses to € 88,655

thousand is mainly due to expanded activities in the North America

and South / South-East Europe regions. This is 17.9 % of sales, up from

17.6 % the year before.

General and administrative expenses went up by € 1,995 thousand

to € 39,108 thousand, representing 7.9 % of sales, after 8.4 % the

year before.

Notes: Notes to the Balance Sheet

Notes: Notes to the Income Statement

(17) Other operating income

Other operating expenses increased significantly, particularly due to

(20) Income taxes

Deferred taxes are calculated on the basis of the following temporary

2004 / 05

Previous year

receivables, of which € 1,781 thousand was charged to the sugar beet

Income tax expense is computed as follows:

balance sheet and its tax base:

higher risks in the Group’s growth markets and resulting allowances on

differences between the carrying amount of an asset or liability in the

Income from sales of

fixed assets

Income from the reversal

of provisions

Exchange rate gains and

gains from currency and

interest rate hedges

Income from recoveries on

receivables written off

Research grants

Income relating to previous periods

Income from cost allocations

Income from loss
compensation received

Miscellaneous other
operating income

1,072

235

1,448

1,605

5,647

3,115

827

2,416

424

699

301

1,556

1,279

167

segment and € 1,387 thousand to the corn segment.

(19) Net financial income /expenses

2004 / 05

Previous year

Interest income

Interest expense

Income from other financial

assets

Reversal of impairment losses
on other long-term investments

Interest expenses on donation
of pension provisions

1,681

3,224

360

1,567

3,929

3,260

3,162

8,441

5,785

Net interest expense

– 4,442

– 5,429

2004 / 05

Previous year

Income taxes, Germany

Income taxes, other countries

11,768

8,680

10,911

8,447

Current expenses

from income taxes

20,448

19,358

Thereof from previous years

–2,828

711

Deferred taxes, Germany

Deferred taxes, other countries

–4,057

225

Deferred tax income / expense

–3,832

–1,506

521

–985

Reported income tax
expense

16,616

18,373

Deferred

tax assets

Deferred

tax liabilities

06 / 30 / 2005

year

06 / 30 / 2005

year

Intangible assets

Biological assets

Property, plant,

and equipment

Financial assets

170

102

579

631

14,505

15,328

167

Inventories

4,483

2,884

Current assets

811

2,172

Noncurrent liabilities

718

547

Current liabilities

5,999

3,665

Tax loss carryforward

408

397

539

165

197

640

198

730

151

146

443

209

318

12,768

9,969

16,836

17,961

21,275

13,742

Other operating income was up by € 7,533 thousand, mainly due to

favorable exchange rate movements and higher research grants.

(18) Other operating expenses

Profit from affiliated
companies

Impairment losses on goodwill
from affiliated companies

Income from equity investments

Net income from
equity investments

Net financial
income /expenses

564

1,128

146

– 484

1,274

– 4,926

– 4,155

2004 / 05

Previous year

873

3,168

941

904

1,136

275

Legal form expenses

Allowances on receivables

Counterparty default

Exchange rate losses and

losses on currency and interest

rate hedges

Losses from sales of

fixed assets

Expenses relating to previous

periods

Other expenses

4,311

3,033

expense was € 987 thousand lower.

rates applicable in the country in which they are based.

€ 1,758 thousand and turning into a loss of € – 484 thousand. The share

For the German Group companies, deferred tax was calculated at 38.1 %.

of profit of affiliated companies relates to potato activities. Net interest

For foreign Group companies, deferred tax was calculated using the tax

805

391

2,134

7,923

415

4,662

20,155

10,816

Adjusted for tax relating to previous periods, KWS pays 38.1 % tax in

Germany. Corporate income tax of 25.0 % (25.0 %) and solidarity tax of

5.5 % (5.5 %) are applied uniformly to distributed and retained profits. In

addition, municipal trade income tax is payable on profits generated in

Germany. Trade income tax is applied at a weighted average rate of

Other consolidation
transactions

Deferred taxes
recognized

16.0 % (unchanged from the previous year). Since this tax is deductible

No deferred tax assets were recognized for loss carryforwards of € 3,839

as an operating expense, the total tax rate is 38.1 % (38.1 %).

thousand (€ 5,182 thousand), because the companies concerned will

only start generating profits from which they can be deducted in 2008,

Under German tax law, both German and foreign dividends are 95% tax

after the tax loss utilization period has expired.

exempt.

The profits generated by Group companies outside Germany are taxed

ents of equity would currently result in an unrecognized entitlement to

Full distribution to shareholders of all taxable and non-taxable compon-

The previous year’s finance cost increased by € 771 thousand to

at the rates applicable in the country in which they are based.

a reduction in corporation tax of € 8,645 thousand (€ 9,173 thousand).

€ – 4.926 thousand, with net income from equity investments falling by

Notes: Notes to the Income Statement

The following schedule reconciles the expected income tax expense to

(21) Personnel costs / employees

As part of share purchase plans, shares in KWS SAAT AG were acquired

(23) Total remuneration of the Supervisory

the reported income tax expense. The calculation assumes an expected

and sold to eligible employees under payroll tax incentives.

Board and Executive Board and of former

tax expense, applying the German tax rate to the profit before tax of the

2004 / 05

Previous year

members of the Supervisory Board and

Executive Board of KWS SAAT AG

Wages and salaries

80,606

78,059

(22) Net income for the year

entire Group:

Earnings before

income taxes

Expected income

tax expense *

Difference in income tax

liability outside Germany

Tax portion for:

Tax-free income

Expenses not deductible
for tax purposes

Temporary differences and
losses for which no deferred
taxes have been recognized

Tax credits

Taxes relating to previous years

Other tax effects

Reported income
tax expense

2004 / 05

Previous year

Social security contributions,

expenses for pension plans

51,400

48,137

19,583

18,340

and benefits

20,821

20,225

101,427

98,284

Personnel costs went up by € 3,143 thousand to € 101,427 thousand,

an increase of 3.2 %. The number of employees (including trainees and

–890

– 312

interns) increased by 34 (or + 1.4 %) to 2,550.

–260

–669

Compensation increased by 3.3 % to € 80,606 thousand. Social secur-

ity contributions, expenses for pension plans and benefits were € 596

2,643

147

thousand higher than in the previous year. An amount of € 2,057 thou-

sand was recognized as an expense for defined contribution plans in the

year under review.

Employees*

2004 / 05

Previous year

–226

–1,211

–2,828

–195

711

118

Germany

Rest of Europe

Americas

16,616

18,373

Rest of world

1,172

1,212

530

678

170

619

481

204

Effective tax rate

32.3 %

38.2 %

Total

2,550

2,516

*Tax rate in Germany

38.1 %

*Annual average

Other taxes, primarily real estate tax, are allocated to the relevant

Of the above number, 452 (425) employees are included according

functions.

to the percentage of equity held in the companies that employ them.

906 (852) employees are employed by an unchanged number of four

proportionately consolidated investees. If these persons are included in

full, the workforce total is 3,043 (2,943).

In January of

2005

2004

2003

2002

2001

Shares issued to employees under share purchase plans

Shares issued

Cost of acquisition

Preferred price

No.

T €

239

135

when purchasing one share

when purchasing two shares

€

440.00

1,015.00

250

123

336.00

826.00

279

137

297.00

748.00

284

139

296.00

746.00

231

150

386.00

925.00

Net income for the year went up by € 5,020 thousand to € 34,784 thou-

variable compensation based on the dividend paid. Providing that the

sand, representing a return on sales of 7.0 %, up from 6.7 % the year

annual meeting of shareholders resolves the proposed dividend, total

before. The net profit for the period after minority interest is € 33,588

compensation of the members of the Supervisory Board will be € 238

thousand, or € 50.89 for each of the 660,000 shares on issue.

thousand (€ 221 thousand), excluding value-added tax. € 170 thousand

The members of the Supervisory Board receive fixed compensation and

(€ 153 thousand) of the total compensation is performance-related.

Supervisory Board
compensation 2004 / 05

Dr. Guenther H. W. Stratmann*

Dr. Arend Oetker **

Philip Freiherr von dem Bussche

Eckhard Halbfaß

Jürgen Kunze

Prof. Dr. Ernst-Ludwig Winnacker

*Chairman; **Deputy Chairman

Fixed

€

24,000.00

12,000.00

8,000.00

Performance-related

€

60,000.00

30,000.00

20,000.00

Total

€

84,000.00

42,000.00

28,000.00

68,000.00

170,000.00

238,000.00

In the year under review, Dr. Guenther H. W. Stratmann was a partner

in the consulting firm Freshfields Bruckhaus Deringer, Düsseldorf. In this

period, this firm invoiced KWS € 192 thousand (€ 21 thousand) for con-

sulting services.

In fiscal year 2004 / 05, total Executive Board compensation amounted to

€ 2,391 thousand (€2,018 thousand). Variable compensation of € 1,573

thousand (€ 1,211 thousand), calculated on the basis of the net profit for

the period of the KWS Group, includes compensation of € 19 thousand

(€ 19 thousand) for duties performed in subsidiaries. In addition, an amount

of € 489 thousand was added to pension provisions under IAS 19.

Executive Board
compensation 2004 / 05

Dr. Dr.h.c. Andreas J. Büchting*

Dr. Christopher Ahrens

Dr. Christoph Amberger

Dr. Hagen Duenbostel

*Chairman

Fixed

€

277,229.48

220,108.98

176,137.38

144,210.75

Performance-related

€

429,078.95

286,052.62

Total

€

706,308.43

649,187.93

605,216.33

430,263.37

817,686.59

1,573,289.47

2,390,976.06

Notes: Notes to the Income Statement

Compensation of former members of the Executive Board and their

(27) Declaration of compliance with the

(29) Supervisory Board and Executive Board

Jürgen Kunze

surviving dependents amounted to € 721 thousand (€ 700 thousand).

German Corporate Governance Code

of KWS SAAT AG

Einbeck

Pension provisions recognized for this group of persons amounted to

€ 6,194 thousand (€ 5,782 thousand) as of June 30, 2005.

KWS SAAT AG has issued the declaration of compliance with the

German Corporate Governance Code required by section 161 of the

Supervisory Board

Dr. Carl-Ernst Büchting

Aktiengesetz (AktG – German Stock Corporation Act) and made this

Einbeck

Chairman of the Works Council of KWS SAAT AG

Prof. Dr. Ernst-Ludwig Winnacker

Munich

(24) Loans to members of the Supervisory Board

accessible to its shareholders.

Honorary Chairman

President of Deutsche Forschungsgemeinschaft (DFG – German

and Executive Board of KWS SAAT AG

One employee representative in the Supervisory Board repaid his loan

(28) Related party disclosures

(€ 1 thousand) as scheduled in the year under review. No new loans have

been issued.

As part of its operations, KWS procures goods and services world-

wide from a large number of business partners, including companies in

which KWS has an interest. Business dealings with these companies

(25) Shareholdings of members of the

are always conducted on an arm’s length basis; from the KWS Group’s

Supervisory Board and Executive Board

perspective, these dealings have not been material. As part of Group

(as of September 30, 2005)

financing, short-term loans are taken out from and granted to sub-

sidiaries at market interest rates. A total of 14 shareholders declared to

Dr. Arend Oetker indirectly holds a total of 165,001 shares in KWS

KWS SAAT AG in 2002 that as a result of mutual allocations, they

SAAT AG. All together, the members of the Supervisory Board hold

respectively hold more than 50% of the voting rights. No other related

165,078 shares in KWS SAAT AG.

parties have been identified for whom there is a special reporting require-

Dr. Dr.h.c. Andreas J. Büchting holds 10,002 shares in KWS SAAT AG.

ment under IAS 24.

(26) Audit of the annual financial statements

On January 18, 2005, the annual meeting of shareholders of KWS

SAAT AG elected the accounting firm Deloitte & Touche GmbH to be

the Group’s auditors for fiscal year 2004 / 05.

Fee paid to the external auditors under
section 285 sentence 1 no. 17 of the HGB

a) Audit of the consolidated financial statements

b) Certification and valuation services

c) Tax consulting

d) Other services

Total fee paid in 2004 / 05

T €

302

157

510

For fiscal year 2005 / 06, fees for consulting services (excluding auditing)

of € 100 thousand are expected.

Dr. Guenther H. W. Stratmann

Düsseldorf

Attorney-at-law

Chairman

Membership of other legally mandated Supervisory Boards:
apetito AG, Rheine (Deputy Chairman)

Membership of comparable German and foreign oversight boards:
Fendt GmbH, Marktoberdorf
apetito catering GmbH, Rheine (Deputy Chairman)

Dr. Arend Oetker

Berlin

Businessman

Deputy Chairman

Membership of other legally mandated Supervisory Boards:
Schwartau GmbH & Co. KGaA, Bad Schwartau (Chairman)
Cognos AG, Hamburg
Degussa AG, Düsseldorf
Merck KGaA, Darmstadt

Membership of comparable German and foreign oversight boards:
Hero AG, Lenzburg (President)
Baloise Holding AG, Basel
TT-Line GmbH, Hamburg (Chairman)
E. Gundlach GmbH & Co. KG, Bielefeld
Leipziger Messe GmbH, Leipzig
Gerling Versicherung-Beteiligungs AG, Cologne

Philip von dem Bussche

Bad Essen

Farmer

Until September 30, 2005

Membership of comparable German and foreign oversight boards:
VTV Vereinigte Tierversicherungsgesellschaft a.G., Wiesbaden

Goetz von Engelbrechten

Uelzen

Farmer

Research Foundation)

Membership of other legally mandated Supervisory Boards:
Bayer AG, Leverkusen
MediGene AG, München

Executive Board

Dr. Dr.h.c. Andreas J. Büchting

Einbeck

Chairman

Corporate Affairs, R&D

Membership of legally mandated Supervisory Boards:
NORD/ LB Norddeutsche Landesbank, Hanover
Conergy AG, Hamburg

Dr. Christopher Ahrens

Einbeck

Sugar Beet, Eastern Europe

Until June 30, 2005

Dr. Christoph Amberger

Northeim

Corn, Cereals, Marketing

Philip von dem Bussche

Einbeck

Sugar Beet, New Markets / Products

Since October 1, 2005

Membership of comparable German and foreign oversight boards:
VTV Vereinigte Tierversicherungsgesellschaft a.G., Wiesbaden

Dr. Hagen Duenbostel (deputy*)

Einbeck

Finance, Managerial Accounting, IT

* Deputy until June 30, 2005, regular member of the Executive Board

Since November 7, 2005

since July 1, 2005

Membership of other legally mandated Supervisory Boards:
Nordzucker AG, Braunschweig

Eckhard Halbfaß

Einbeck

Deputy Chairman of the Works Council of KWS SAAT AG

Notes: Notes to the Income Statement

Notes: Other disclosures

(30) Significant subsidiaries and affiliated

companies

A list of shareholdings of KWS SAAT AG is filed with the Commercial

subsidiaries and associated companies were included in the consoli-

dated group:1)

Sugar beet

Corn

Cereals

Breeding &

services

(31) Proposal for the appropriation of net

retained profits

A proposal will be made to the annual meeting of shareholders that

The balance of € 80,000.00 is to be carried forward to the new account.

an amount of € 7,920,000.00 of KWS SAAT AG’s net retained profit of

€ 8,000,000.00 should be distributed as a dividend of € 12.00 (€ 11.00)

The dividend will be paid on dividend coupon no. 58.

for each of the 660,000 shares.

100 % BETASEED INC.2)
Shakopee, MN/ USA

90 % KWS MAIS GMBH

81% LOCHOW-PETKUS GMBH

100 % PLANTA ANGEWANDTE

Einbeck

Bergen

100 % KWS FRANCE S.A.R.L.3)

Roye/ France

100% KWS BENELUX B.V.5)
Amsterdam /Netherlands

74 % CPB TWYFORD LTD.8)

Thriplow/Great Britain

100 % DELITZSCH PFLANZEN-
ZUCHT GMBH 11)
Winsen (Aller)

100 % KWS RUS O.O.O.14)

Moskow/Russian Federation

100 % KWS ITALIA S.P.A.

Forli /Italy

100% KWS SEMENA S.R.O.5)

Zahorska Ves/Slovakia

100 % KWS SEMENA D.O.O.5)
Ljubljana/Slovenia

100% KWS MAIS FRANCE S.A.R.L.5)

Sarreguemines/France

100% KWS AUSTRIA SAAT GMBH 5)

100 % LOCHOW-PETKUS
POLSKA SP.Z O.O.8)
Kondratowice/Poland

49 % SOCIETE DE

MARTINVAL S.A.9)**
Mons-en-Pévèle/France

100 % KWS POLSKA SP.Z O.O.

Linz/Austria

Poznan/Poland

100 % KWS SCANDINAVIA AB 11)
Stockholm/ Sweden

100 % KWS SEMILLAS IBERICA S.L.11)

Barcelona/Spain

100 % SEMILLAS KWS CHILE LTDA.
Santiago de Chile /Chile

100 % KWS SEME YU D.O.O.

Belgrad/Serbia and Montenegro

100% KWS SEMINTE S.R.L.5)
Bucharest/Romania

100% KWS SJEME D.O.O.5)
Zagreb/Croatia

100% KWS OSIVA S.R.O.5)

Velke Mezirici/Czech Republic

100% KWS SEMENA

BULGARIA E.O.O.D.5)
Sofia/Bulgaria

100 % SEMENA AG

Basel/ Switzerland

100% AGROMAIS SAATZUCHT GMBH 5)

Everswinkel

100 % ACH SEEDS INC.4)
Eden Prairie, MN/ USA

96,8% KWS ARGENTINA S.A.5)
Balcarce/Argentinia

67 % KWS TÜRK TARIM TICARET
LIMITED SIRKETI 11)
Eskisehir/Turkey

94 % PAN TOHUM ISLAH
VE ÜRETME A.S.13)
Ankara/ Turkey

51% RAZES HYBRIDES S.A.R.L.3)

Alzonne/France

50 % AGRELIANT GENETICS LLC.6)**

Westfield, IN / USA

50 % AGRELIANT GENETICS INC.**
Chatham, Ontario/ Canada

50 % KWS RAGT HYBRID KFT. 7)**

Györ/ Hungary

PFLANZENGENETIK UND
BIOTECHNOLOGIE GMBH***
Einbeck

100 % KWS INTERSAAT GMBH

Einbeck

100 % KWS SEEDS INC.10)

Shakopee, MN/USA

100 % GLH SEEDS INC.2)

Shakopee, MN/USA

100 % KWS SAATFINANZ GMBH

Einbeck

100 % KWS SEMENCES S.A.R.L.
Sarreguemines/France

100 % SOCIETE DES MAIS

EUROPEENS S.A.R.L.3)
Sarreguemines/France

100 % RAGIS KARTOFFELZUCHT &

HANDELSGESELLSCHAFT MBH
Einbeck

44,5 % SAKA-RAGIS

PFLANZENZUCHT GBR 12)*
Hamburg

35,8 % SAKA RAGIS AGRARPRODUKTE

GMBH & CO. KG12)*
Hamburg

100 % KWS KLOSTERGUT

WIEBRECHTSHAUSEN GMBH
Northeim-Wiebrechtshausen

100 % EURO HYBRID GESELLSCHAFT
FÜR GETREIDEZÜCHTUNG mbH
Einbeck

Einbeck, October 20, 2005

KWS SAAT AG

EXECUTIVE BOARD

A. Büchting

C. Amberger

P. von dem Bussche

H. Duenbostel

* Carrying amount equals proportion of equity held under section 312 of the HGB (equity accounting)

7) Investee of KWS MAIS GMBH

** Proportionate consolidation

*** Profit transfer agreement

8) Subsidiary of LOCHOW-PETKUS GMBH

9) Participation of LOCHOW-PETKUS GMBH

1) The percentages stated relate to the interest held by the parent

10) Subsidiary of KWS INTERSAAT GMBH and KWS SAAT AG

2) Subsidiary of KWS SEEDS INC.

3) Subsidiary of KWS SEMENCES S.A.R.L.

4) Subsidiary of BETASEED INC.

5) Subsidiary of KWS MAIS GMBH

6) Investee of GLH SEEDS, INC.

Notes: Other disclosures

11) Subsidiary of KWS INTERSAAT GMBH

12) Participation of RAGIS KARTOFFELZUCHT- & HANDELSGESELLSCHAFT MBH

13) Subsidiary of KWS SAAT AG and KWS TÜRK TARIM TICARET LIMITED SIRKETI

14) Subsidiary of EURO HYBRID GMBH and KWS SAATFINANZ GMBH

June 30, 2005

Notes: Other disclosures

Auditors’ Report

Compliance declaration

We have audited the annual financial statements of the KWS Group

evaluated on the basis of test samples within the framework of the

consisting of the Balance Sheet, the Income Statement, the State-

audit. The audit includes assessing the accounting principles used

ment of Changes in Equity, the Cash Flow Statement and the Notes

and any significant estimates made by the Executive Board, as well

We have complied with the practices recommended by the ‘Government Commission on

for the fiscal year from July 1, 2004 to June 30, 2005, all of which were

as evaluating the overall presentation of the consolidated financial

prepared by KWS SAAT AG, Einbeck. The preparation and the content

statements. We believe that our audit provides a reasonable basis for

of the financial statements according to the International Financial

our opinion.

Reporting Standards (IFRS) as applicable in the EU are the responsi-

bility of the Executive Board of the company. Our task, on the basis of

In our opinion, the consolidated financial statements give a true and

the audit we have conducted, is to give an opinion as to whether the

fair view of the assets, financial position, earnings and cash flows for

consolidated financial statements are in accordance with the IFRS.

the Group’s fiscal year in accordance with IFRS.

We conducted our audit of the annual financial statements in accord-

On the basis of our audit, which also extends to the management report

ance with German auditing regulations and generally accepted stan-

prepared by the Executive Board for the fiscal year from July 1, 2004

the German Corporate Governance Code’ during the year under review with the exception

of the recommendations listed under II below.

II.

During the 2004 / 05 fiscal year, KWS SAAT AG did not implement the following provisions

of the code:

dards for the audit of financial statements promulgated by the Institut

to June 30, 2005, we have no reservations to note. In our opinion, the

The excess recommended by clause 3.8 GCCG in the D & O insurance coverage for the

der Wirtschaftsprüfer (German Institute of Certified Public Accountants).

management report of the Group provides an accurate impression

According to these standards, the audit must be planned and executed

overall of the situation of the Group and adequately presents the risks

in such a way that it is possible to judge, with reasonable certainty,

for future development. In addition, we confirm that the consolidated

Supervisory and Executive Boards is still not provided for in the policy in question.

whether the consolidated financial statements are free from material

financial statements and the management report of the Group for the

An Audit Committee in conformance with clause 5.3.2 GCCG has not been established.

misstatements. Knowledge of the business activities and the economic

fiscal year from July 1, 2004 to June 30, 2005 satisfy the requirements

and legal operating environment of the Group and evaluations of pos-

for the company’s exemption from its duty to prepare consolidated

sible errors are taken into account. The evidence supporting the

financial statements and a Group management report in accordance

amounts and disclosures in the consolidated financial statements is

with German law.

Instead regular and intensive discussions are conducted between the Chairman of the

Supervisory Board, the Executive Board and the statutory auditors. The five other mem-

bers of the Supervisory Board are also included appropriately.

Hanover, November 4, 2005

DELOITTE & TOUCHE GMBH

WIRTSCHAFTSPRÜFERGESELLSCHAFT (AUDITORS)

The GCCG recommends (clause 7.1.2) that consolidated financial statements and interim

reports be published within 90 days and 45 days respectively. We have not complied with

the recommendation due to the considerable additional costs we incurred this year as a

result of changing to the international accounting standard IFRS this year. It will be pos-

sible to comply with the publication deadlines in reporting year 2005 / 2006.

Dr. F. Beine

AUDITOR

Th. Römgens

AUDITOR

Einbeck, November 23, 2005

The Supervisory Board

The Executive Board

Auditors’ Report

Compliance declaration

KWS SAAT AG

Grimsehlstraße 31 | D-37555 Einbeck | P. O. Box 14 63

Phone: ++49(0)5561/311-0 | Fax: ++49 (0) 5561/311-322

www.kws.com | e-mail: info@kws.de

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