KWS Group Annual Report 2007

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FY2007 Annual Report · KWS Group

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Annual Report
2007I2008

KWS SAAT AG

Key Figures of the KWS Group

Figures in € millions, unless otherwise speciﬁ ed

Segments of the KWS Group

Fiscal year

Net sales

Operating income

as a % of net sales

Net income

as a % of net sales

Operative cash ﬂ ow

2007/08

2006/07

2005/06

2004/05

2003/04

599.1

537.9

505.0

495.3

444.5

70.1

11.7

54.6

9.1

74.6

63.9

11.9

38.2

7.1

51.1

46.7

9.2

28.4

5.6

53.4

56.3

11.4

34.8

7.0

11.1

52.3

11.8

29.8

6.7

36.6

Net cash from investing activities

– 18.1

– 26.7

– 20.1

– 30.1

– 21.8

Equity

Equity ratio in %

Balance sheet total

Return on equity in %

Return on assets in %

Fixed assets

Capital expenditure

Depreciation

398.0

366.1

338.0

326.2

294.0

59.3

60.0

58.6

57.0

59.5

671.1

609.8

577.0

572.4

494.4

15.3

9.2

11.6

6.8

8.9

5.3

10.8

7.4

10.1

6.5

197.1

189.4

188.6

185.6

169.2

30.4

17.0

27.2

16.1

23.8

17.0

36.9

16.8

24.7

16.7

Average number of employees

2,856

2,739

2,652

2,550

2,516

Personnel costs

119.0

111.3

109.1

101.4

98.3

Performance of KWS shares in €

Dividend per share

Earnings per share

Operative cash ﬂ ow per share

1.70

7.74

11.30

1.40

5.61

7.74

1.20 *

1.20 **

1.10 **

4.16

8.09

5.09 **

4.27 **

1.68 **

5.55 **

Equity per share

60.31

55.47

51.21

49.42 **

44.55 **

* Dividend of € 1.00 plus anniversary bonus of € 0.20
** Value after share split

Sugarbeet
KWS SAAT AG
As well as 15 subsidiaries and afﬁ liated companies*
Net sales € 194.8 million
Operating income € 28.1 million

Corn
KWS MAIS GMBH
As well as 15 subsidiaries and afﬁ liated companies
Net sales € 328.9 million
Operating income € 23.2 million

Cereals
KWS LOCHOW GMBH
As well as 3 subsidiaries and afﬁ liated companies
Net sales € 67.4 million
Operating income € 9.0 million

Breeding & Services
KWS SAAT AG
As well as 9 subsidiaries and afﬁ liated companies
Net sales € 121.8 million (net sales of third parties € 8.0 million)
Operating income € 9.8 million

* Subsidiaries and afﬁ liated companies see page 78

This translation of the original German version of the Annual Report has
been prepared for the convenience of our English-speaking shareholders.
The German version is legally binding.

KWS SAAT AG

Grimsehlstrasse 31 • 37555 Einbeck • P.O. Box 1463
Phone +49 (0) 5561/311-0 • Fax +49 (0) 5561/311-322
www.kws.com • e-mail: info@kws.com

Photos/illustrations:
Dominik Obertreis • Eberhard Franke • KWS Group archive • Peter Heller
Stefan Blume • Thomas Gasparini

Table of contents

Chairman’s Foreword

Spotlight topic: The bright promise of bioenergy

Report of the Supervisory Board

Corporate Governance Report

Compliance declaration in accordance with section 161 AktG (German Stock Corporation Act)

The KWS share

Report on the performance of the KWS Group

Sugarbeet segment

Corn segment

Cereals segment

Breeding & services segment

Outlook for the 2008/2009 ﬁ scal year

Risks for future development

Employees

Compensation Report

Disclosures in accordance with section 289 (4) and section 315 (4) HGB
(German Commercial Code)

Annual Financial Statements of the KWS Group

Auditor’s Report

Agenda of the Annual Shareholders’ Meeting / Financial calendar

Table of contents I 5

Chairman’s Foreword

We are pleased to report that KWS performed well again
this year. Riding the wave of the global rise in prices for
agricultural raw materials and the related intensiﬁ cation of
agricultural production, KWS surpassed its outstanding
performance of 2006/2007 in terms of both net sales and
proﬁ t. We grew net sales by 11 %, and our operating result
(EBIT) rose by 10 % in the year under review.

We – that is the 2,856 employees of KWS SAAT AG and its
44 subsidiaries and afﬁ liated companies who devote their
talents and hard work to developing forward-looking crops
at around 70 locations throughout the world. The Executive
Board would like to express its thanks – on behalf of the
Supervisory Board as well – to all employees in Germany
and abroad for their commitment in enabling this extraordi-
nary success.

The gratifying performance in 2007/2008 shows in parti-
cular that the measures we have taken to expand corn
business are now gaining traction. Sales of corn in the
strategically important growth regions of Southeastern
Europe, as well as in Germany and France, increased
substantially. Despite the sharp depreciation of the US
dollar, our joint venture AgReliant in the U.S. contributed
to the corn segment’s growth. Moreover, the segment
beneﬁ ted from higher demand for our highyielding rape-
seed hybrids.

KWS’ cereals business is bundled at the KWS LOCHOW
Group. It developed well, with growing sales volumes for
our winter cereal varieties. High consumer prices and the
suspension of the policy of laying areas fallow encouraged
farmers to signiﬁ cantly expand cultivation of wheat, rye
and barley.

While prices for cereals, corn and soybean rose worldwide,
sugar prices stagnated in the last business year. That had
a negative impact on the sales volumes of sugarbeet seed
since many farmers, especially in Eastern Europe, chose
to cultivate cereals. As anticipated, cultivation area in the
EU 27 declined as part of the reform of the Sugar Market
Regime. In contrast, American farmers exploited the op-
portunity of increasing their productivity with genetically
modiﬁ ed (Roundup Ready) sugarbeet varieties from KWS.

Climate change and the growing demand for food, as well
as the constantly increasing hunger for energy, are the
main global challenges facing agriculture and plant breeding
in the 21st century. Productivity in agriculture can certainly
be increased by further progress in plant breeding to meet
the steadily growing need for food and fodder, regenerative
raw materials and more environmentally friendly sources of
bioenergy.

Sharp economic ﬂ uctuations occur more and more fre-
quently along this growth path. However, what is important
for a plant breeder like KWS is to analyze longterm trends
and respond promptly to them. For more than 150 years,
KWS has developed successful and innovative varieties for
the production of food, fodder and energy. In our research
and development work, we address not only the wide
diversity of sales markets, but also the different forms of
agriculture, developing and marketing seed for conven-
tional and ecological cultivation as well as genetically modi-
ﬁ ed varieties. Our goal is to provide customers with expert
consulting for their speciﬁ c needs and supply them with
the varieties that are right for each individual. In this way,
KWS helps increase agricultural yields continuously and
reduce the use of pesticides. At the same time, our prod-
ucts permit the sparing use of scarce resources such as
fertilizer and water.

We owe KWS’ success to the relationship of trust we have
with our customers, our business partners and our em-
ployees. We express our most sincere thanks to everyone
involved for this gratifying and successful collaboration.
These thanks go especially to our shareholders for their
trust in our business model and its orientation toward
longterm success.

With best regards from Einbeck on behalf of the entire
Executive Board,

Philip von dem Bussche
Chairman of the Executive Board

Chairman’s Foreword I 7

left to right:

Philip von dem Bussche – Corporate Affairs, Sugarbeet, Human Resources

Dr. Hagen Duenbostel – Finance, Controlling, Information Technology, Legal

Dr. Christoph Amberger – Corn, Cereals, Marketing

Dr. Léon Broers (Deputy) – Research and Breeding, Energy plants

Only a fool never experiments.«

Charles Darwin, natural scientist

DNA analysis reveals whether the crossing experiment was a success and

the new generation has the desired property.

Spotlight topic:
The bright promise of bioenergy

Today’s global developments pose great challenges for modern civilization, as the world’s population

and energy consumption continue to grow. Bioenergy, which is a means of producing energy from

plants, offers sustainable, environmentally friendly and efﬁ cient solutions for the future.

What is biomass?
The term ‘biomass’ can denote any organic substance.
Biomass can be used as a source of all forms of energy –
heat, electricity and fuel. Different kinds of biomass are
used in keeping with their energy properties and suitability.
For example, in Germany heat is provided mainly by solid
fuels such as wood. In contrast, electricity and fuels are
typically produced by transforming energy plants into liquid
or gaseous sources of bioenergy – i. e. biofuels and biogas.
Such energy forms obtained from biomass are commonly
described by the collective term bioenergy.

Background of bioenergy production
According to a study by the IEA, global energy consump-
tion will increase by up to 55 % by 2030, largely as a result
of growing demand in Asia. The increasing concentration
of greenhouse gases (such as CO2) in the atmosphere is
attributable largely to the use of fossil energy sources such
as coal or oil. Studies by the University of Bern found that
the concentration of CO2 is now around 28 % higher than
the highest value in the past 800,000 years. Consequently,
sharp ﬂ uctuations in temperature can no longer be blamed
solely on natural inﬂ uences such as solar activity. The cli-
mate-friendly generation of energy is thus a key challenge
to curbing climate change in our age.

Bioenergy – environmentally friendly and efﬁ cient
Plants absorb and store carbon dioxide in the environment
by means of photosynthesis. If they are decomposed or
burned, they release the carbon dioxide back into the at-
mosphere – in exactly the same amount as they had ab-
sorbed. Plants are therefore a CO2-neutral energy source.
When biomass is cultivated and prepared for use, carbon
dioxide is released as a result of the use of auxiliary fossil
energy; however, the CO2 balance of bioenergy overall is
far better than that of fossil sources.

CO2 savings potential through bioenergy

CO2 -equivalent in gram/km
Potential for reducing CO2 vs. gasoline

Gasoline

Diesel

Natural gas

Bioethanol
from sugarbeet

Biodiesel from
rapeseed

Biogas from
energy corn

210

170

150

120

100

110

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Source: Institut für Energetik und Umwelt, 2008

If renewable energy had not been used in Germany in 2007,
total CO2 emissions there (approx. 774 million tons) would
have been 115 million tons higher. This reduction is largely
attributable to the use of biomass, which is more climate-
friendly than fossil fuels. The reduction is equivalent to the
CO2 that would be emitted if around 8 million cars were to
travel around the world.

Sources of renewable energy in Germany (2007)

Photovoltaics
1.6 %

Wind
17.6%

Geothermics
1.0%

Water 9.2 %

Solar thermics
1.7 %

Biofuels
20.8 %

Biomass for
electricity
10.6 %

Biomass
for heat
37.6 %

Biomass 68.9 %

8.6% of the energy provided in Germany (2007) is based
on renewable energies

Emission trading within the EU was introduced in 2005 to
provide initial economic incentives for investments in new
technologies. The goal of emission trading is to promote
ecologically effective measures through economic means.
However, more innovations will be needed to continue cut-
ting production costs and to further the independence of
the national energy industry.

Biomass now delivers around 6 % of all energy consumed
in Germany and is, above all in the form of wood, by far the
largest source of renewable energy. However, the techni-
cal possibilities for exploiting energy plants are still in their
infancy. First-generation biofuels (biodiesel and bioethanol),
for example, use only part of the whole plant and are thus
inherently inefﬁ cient. With second-generation biofuels, on
the other hand, the entire plant is used to produce energy.
The production of biogas is such a second-generation
technology. Biogas is formed by the microbiological de-
composition of organic substances under anaerobic con-
ditions. The biogas yield and energy content of the gas
depend on the substrates used.

In addition, biogas production plants are “fed” with damp
raw materials. There is no need to dry them. The dregs that
result from the fermentation process are returned to the
ﬁ elds as a natural fertilizer, completing the nutrient cycle.
As a result, energy-intensive mineral fertilizers can be
dispensed with to a large extent.

New perspectives thanks to plant breeding
KWS already has a wide-ranging breeding program that
will produce even higher energy yields from plants in the
future. The energy efﬁ ciency and cost-effectiveness of
producing bioenergy from regenerative plants depends in
large part on the speciﬁ c properties of the energy plants
used. In leveraging an energy plant’s yield potential, the plant
is assessed on the basis of four criteria throughout the
many years of the breeding process: (1) biomass formation,
(2) energy yield, (3) speed of transformation into energy,
(4) process costs.

In its breeding program, the KWS Group invests selectively
in future-oriented products such as corn, sugarbeet, sor-
gh um, rye and sunﬂ owers. At the heart of this process is
the concept of using the entire plant. Our economic goal
is to maximize efﬁ ciency per unit area and to enable an in-
dependent energy supply. We also aim at enabling energy
production with an environmentally friendly CO2 balance,
a closed nutrient cycle and a diversity of varieties through
crop rotation. The 20 % increase in yields achieved in six
years of breeding are the basis for our continuing research
and, with the aid of the ecological and economic potential
of bioenergy, represent solution approaches for future de-
velopments.

Energy plants: Yields and potential

Energy yield in kWh per ha

120,000

100,000

80,000

60,000

40,000

20,000

Biodiesel

Bioethanol

Biogas

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Future energy yield
Energy yield now

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1 ha of energy corn generates enough electrical power to supply a family of ﬁve with electricity for one year*

Spotlight topic I 11

Source: BMU, 2008

* KWS, Verband der Elektrizitätswirtschaft, 2001

Report of the Supervisory Board

left to right: Dr. Dietmar Stahl, Employee Representative, Jürgen Bolduan, Employee Representative, Dr. Arend Oetker,

Deputy Chairman, Cathrina Claas, Hubertus von Baumbach, Dr. Dr. h. c. Andreas J. Büchting, Chairman

The Supervisory Board carefully accompanied, advised
and monitored the management of KWS SAAT AG in ac-
cordance with the law and the company’s articles of as-
sociation throughout ﬁ scal 2007/2008. It was involved at
an early stage of all key decisions of strategic and funda-
mental importance for the company and was provided
by the Executive Board with prompt and extensive infor-
mation in written and oral form. Following thorough delib-
erations, the Supervisory Board approved the submitted
measures and business transactions requiring its consent.
Its detailed discussions focused on corporate policy, corpo-
rate and ﬁ nancial planning, individual projects, the com-
petitive risk situation and risk management, the general
development of the various businesses and proﬁ tability.
The Chairman of the Supervisory Board was also in close
contact with the Chairman of the Executive Board and the
Executive Board as a whole outside of the meetings of the
Supervisory Board, and he took part in key meetings of
the Executive Board, where he discussed special occur-
rences and the general development of the various busi-
nesses and closely followed important decision-making
processes. The Supervisory Board held ﬁ ve meetings in

ﬁ scal 2007/2008. All its members participated in at least
four of the ﬁ ve meetings. The regularly scheduled election
of a newly constituted Supervisory Board was held at the
Annual Shareholders’ Meeting on December 13, 2007.

Focal areas of deliberations
The strong growth of the corn segment was a focus of
several meetings of the Supervisory Board. The issues
discussed included expanding the international distribution
organization and growing production capacities and the
breeding infrastructure. The Supervisory Board discussed
and approved the investments required for this.

In addition, deliberations focused on opportunities for new
business activities, such as a signiﬁ cantly broader range of
energy plants and the launch of seed potato business as
part of a new joint venture. Potential risks, such as the legal
action against approval of genetically modiﬁ ed sugarbeet
in the U.S., the European moratorium on conventional seed
dressing agents and the global increase in multiplication
costs, were discussed intensively.

At the suggestion of the Committee for Executive Board
Affairs, the Supervisory Board reviewed the compensation
system for the Executive Board, including key contractual
elements, and dealt with compliance matters.

Annual and consolidated ﬁ nancial statements
and auditing
Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft,
Hanover, the independent auditor chosen at the Shareholders’
Meeting and commissioned by the Supervisory Board, has
audited the ﬁ nancial statements of KWS SAAT AG that were
prepared by the Executive Board for ﬁ scal 2007/2008 and
the ﬁ nancial statements of the KWS Group (consolidated
ﬁ nancial statements), as well as the management report of
KWS SAAT AG and the KWS Group (group management
report), including the accounting reports, and awarded
them its unqualiﬁ ed audit certiﬁ cate.

The Supervisory Board received and discussed the ﬁ nancial
statements and management reports of KWS SAAT AG
and the KWS Group, along with the report by the inde-
pendent auditor of KWS SAAT AG and the KWS Group
and the proposal on utilization of the net proﬁ t for the year
made by KWS SAAT AG. It also held detailed discussions
of questions on the agenda at its meeting to discuss the
ﬁ nancial statements on October 29, 2008. The auditor took
part in the meeting and reported on the main results of the
audit. The Supervisory Board endorsed the results of the
audit with no objections, among other things as a result of
the vote by the Audit Committee. It gave its consent to the
ﬁ nancial statements of KWS SAAT AG, which are thereby
approved. The Supervisory Board also gave its consent to
the statements of the KWS Group. It also endorses the
proposal by the Executive Board on the appropriation of
the proﬁ ts of KWS SAAT AG.

Corporate Governance and committees
Other focal issues of the Supervisory Board were Corpo-
rate Governance and control. It followed and discussed the
further development of the Corporate Governance Stand-
ards and drove their implementation forward in cooperation
with the Executive Board. The Executive Board and Super-
visory Board issued a new compliance declaration on Oc-
tober 29, 2008.

The Committee for Executive Board Affairs held one
meeting, which focused on compensation structures and
the ﬁ nancing out of pension obligations for the Executive
Board. At the meeting of the Supervisory Board on October
30, 2007, Philip von dem Bussche was appointed as a
member and Chairman of the Executive Board for ﬁ ve more
years effective January 1, 2008. Dr. Christoph Amberger
was appointed a member of the Executive Board for ﬁ ve
more years effective July 1, 2008. In addition, the Nominat-
ing Committee convened ahead of the Annual Shareholders’
Meeting on December 13, 2007, to draw up nominations
for the upcoming election of the Supervisory Board.

At the end of the Annual Shareholders’ Meeting on
December 13, 2007, Dr. Dr. h. c. Andreas J. Büchting
resigned his post on the Executive Board after 30 years
of work. As a result, the Executive Board again com-
prises four members; however, it is the ﬁ rst time that it
has not had a member from the founding families since
the company was established.

Philip von dem Bussche is now responsible for Corporate
Affairs, Sugarbeet and Human Resources. The other mem-
bers of the Executive Board are responsible for the follow-
ing: Dr. Christoph Amberger (Corn, Cereals, Marketing),
Dr. Hagen Duenbostel (Finance, Controlling, Information
Technology, Legal), Dr. Léon Broers (Breeding and Research,
Energy Plants).

On December 13, 2007, the Annual Shareholders’ Meeting
elected Dr. Andreas J. Büchting, Hubertus von Baumbach
and Cathrina Claas as new members representing the
shareholders on the Supervisory Board, while Dr. Arend
Oetker was reelected. Jürgen Bolduan and Dr. Dietmar
Stahl were appointed as new members representing German
employees on the Supervisory Board. Due to his consid-
erable services to the company, Dr. Carl-Ernst Büchting
has been Honorary Chairman of the Supervisory Board
since 1993.

Report of the Supervisory Board I 13

At its constitutive meeting after the Annual Shareholders’
Meeting on December 13, 2007, the new Supervisory
Board elected Dr. Andreas J. Büchting as its Chairman
and formed the following committees:

a member of the Supervisory Board, our company beneﬁ ted
above all from his extensive knowledge of the European
sugar industry in times of radical change.

Chairman

Members

Audit Committee

Hubertus von Baumbach

Andreas J. Büchting, Cathrina Claas

Committee for Executive Board Affairs

Andreas J. Büchting

Arend Oetker, Cathrina Claas

Nominating Committee

Andreas J. Büchting

Arend Oetker, Cathrina Claas

Following the constitutive meeting of the Supervisory Board,
the Audit Committee held an initial meeting, at which it
decided to compile a set of bylaws, which have been posted
on KWS’ homepage (www.kws.com). In two further meet-
ings, the committee dealt with issues including risk man-
agement and compliance. Moreover, the Audit Committee
discussed the semiannual and quarterly reports with the
Executive Board before they were published. At its meeting
on October 6, 2008, which the Executive Board and audi-
tor also attended, the annual ﬁ nancial statements and ac-
counting were discussed.

Thanks
In December 2007 Dr. Guenther H. W. Strat mann ended
his 15 years of work on the Supervisory Board of KWS
SAAT AG. His successful period of ofﬁ ce is reﬂ ected in the
company’s development, which he helped shape signiﬁ -
cantly with his entrepreneurial spirit, international legal ex-
perience and economic expertise. We would like to express
our most sincere thanks for his professional leadership and
the critical eye with which he followed the work of the Ex-
ecutive Board.

Apart from Dr. Guenther H. W. Stratmann, two other out-
standing members retired from the Supervisory Board.
One was Goetz von Engelbrechten, a personality who
has followed KWS closely and always constructively for
decades inside and outside the company. In his work as

Prof. Dr. Dr. h. c. Ernst-Ludwig Winnacker gave the
company new impetus with his scientiﬁ c expertise, superb
oversight and immense wealth of experience. KWS has
beneﬁ ted frequently from his many insightful remarks and
suggestions. The Supervisory Board would like to offer
its most sincere thanks to both former members for their
unstinting commitment in helping the KWS Group move
forward.

Jürgen Kunze and Eckhard Halbfaß, employee representa-
tives who had served for many years on the Supervisory
Board, also made a great contribution to its work with their
relevant suggestions. Both resigned effective December 13,
2007, since they will be retiring during the new period of
ofﬁ ce. The company also expresses its thanks to them.

The Supervisory Board expresses its thanks to the Execu-
tive Board and all employees of KWS SAAT AG and its
subsidiaries once more for their successful contributions
and their commitment in ﬁ scal 2007/2008.

Einbeck, October 29, 2008

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

Corporate Governance Report

Responsible, value-oriented governance geared toward
people has been a tradition at KWS for more than 150 years.
It is not only ﬁ rmly integrated in its company guidelines – it
is lived by executives in a relationship of trust with employees.
We therefore support the goals of the German Corporate
Governance Code. The Executive Board and Supervisory
Board have dealt in considerable detail with the code. KWS
SAAT AG complies with its recommendations, with only a
few exceptions speciﬁ c to the company and its industry.

Management with a sense of responsibility
As a medium-sized agricultural company with a rich tradition,
we are not only committed to the recommendations of the
German Corporate Governance Code and their business
management perspective when making decisions, but also
to ethical principles. External dialog is a very important part
of this, since we work to ensure that our business activities
are transparent to our shareholders as well as to our cus-
tomers, consumers and the public. With our “management
with a sense of responsibility”, we at KWS go beyond the
recommendations of the German Corporate Governance
Code. The business principles are binding on everyone
and are essentially based on four pillars:

• Compliance
• Integrated management system and risk management
• Responsibility for the environment and society
• Communication and transparency

An important guide for all employees is the Code of Business
Ethics, an abridged version of which has been published
on our homepage. One special focus of the Code is on
regulating conﬂ icts of interest. A separate international anti-
corruption guideline precisely deﬁ nes the freedom of action
that KWS employees have. The effectiveness and sustain-
ability of the compliance system are reviewed regularly by
the independent auditor.

Identifying negative developments in good time and
countering them effectively
For more than ten years, KWS has used an integrated
management system that documents all the relevant proc-
esses and regulations in the company. A key component
is the risk management system. It governs how risks in the
individual segments are identiﬁ ed by means of a key pa-
rameter control system. A clear distribution of responsibili-
ties ensures that negative effects resulting from market
changes, technological developments and changes in
general political and social conditions, for example, can
be countered quickly and effectively. We report in detail
on opportunity and risk management on pages 36/37.

Creating and strengthening trust is the maxim of our regu-
lar and open reporting. We continuously inform our share-
holders on the progress of our business in press releases
and quarterly reports. We report new developments that
may impact the share price in ad hoc releases. All relevant
information is published promptly on our homepage under
“Investor Relations” so as to ensure equal treatment of all
shareholders.

Relationship of trust and cooperation between the
Executive Board and the Supervisory Board
The focus of good corporate governance is a cooperative
relationship of trust between the managing, supervisory and
decision-making bodies, with the aim of ensuring value-
oriented corporate governance and effective monitoring.
This is the task of the Executive Board and the Supervisory
Board, supported by legal experts and auditors.

The Executive Board develops the company’s strategic
orientation in collaboration with the Supervisory Board and
manages the KWS Group under its own responsibility. It
conducts business transactions in a value-oriented manner,
with the goal of ensuring the company’s long-term success.
In making decisions, the Executive Board takes care to

Report of the Supervisory Board I Corporate Governance Report I 15

Compliance declaration in
accordance with section
161 AktG (German Stock
Corporation Act)

The KWS share

ensure fair competition and the well-being of all employees
and to fulﬁ ll its responsibility to customers, shareholders
and society.

In its constitutive meeting on December 13, 2007, the newly
elected Supervisory Board appointed Dr. Dr. h. c. Andreas
J. Büchting, the former Chairman of the Executive Board,
as its chairman. As a company with a family-owned charac-
ter, KWS has consciously deviated from the recommenda-
tion of the Corporate Governance Code with this decision.
KWS does not want to lose the extensive knowledge, ex-
perience and contacts of Andreas J. Büchting. They are
important components of KWS’ success and corporate
culture. Many studies have shown that companies in which
members of the shareholding families are involved over a
long time operate with above-average success.

To meet the recommendations of the Corporate Govern-
ance Code, the Supervisory Board has formed an Audit
Committee.

I. The Executive Board and Supervisory Board of KWS

SAAT AG declare in compliance with section 161 AktG
(German Stock Corporation Act) that – with the excep-
tion of the points stated under II – the company has
complied with the recommendations of the German
Corporate Governance Code in the version dated June 14,
2007, since the last compliance declaration on October
30, 2007, and has complied, does now comply, and will
comply in the future with the recommendations of the
German Corporate Governance Code in the version
dated June 6, 2008.

II. Clause 5.4.4.: The former Chairman of the Executive

Board of KWS SAAT AG, Dr. Dr. h. c. Andreas J. Büchting,
has – due to his extensive knowledge and experience
in the very specialized sector of plant breeding – been
elected Chairman of the Supervisory Board. It accords
with the character and the recipe for success of a com-
pany with a tradition of family ownership for representa-
tives of the families to be involved in inﬂ uential positions.

There are no personal conﬂ icts of interest on the part of
Supervisory Board members that might result from agree-
ments to provide consulting or services for additional
remuneration. The Report of the Supervisory Board on
page 12 provides details on the work of the Supervisory
Board and its cooperative relationship of trust with the
Executive Board in the past ﬁ scal year.

Clause 7.1.2.: KWS SAAT AG publishes its consolidat-
ed ﬁ nancial statements and interim reports within the
period of time deﬁ ned in the regulations for the Prime
Standard of Deutsche Börse. Observance of the rec-
ommended deadlines of 90 and 45 days respectively
is not ensured because of the seasonal course of
business.

The Annual Shareholders’ Meeting
The Annual Shareholders’ Meeting makes decisions on im-
portant matters, such as the appropriation of proﬁ ts, capi-
tal measures or changes to the Articles of Association. It
also elects the members of the Supervisory Board and
selects the auditor of the ﬁ nancial statements. Each share
entitles its holder to one vote. To make it easier for share-
holders to cast their votes, proxies can be appointed to
vote on their behalf and in accordance with their instruc-
tions at the Annual Shareholders’ Meeting. We also publish
the Notice of Annual Shareholders’ Meeting and the Annual
Report on our Internet site.

This declaration has also been published on our home-
page at www.kws.com.

Einbeck, October 29, 2008

For the Supervisory Board
Dr. Dr. h. c. Andreas J. Büchting

For the Executive Board
Philip von dem Bussche

The number of publicly traded plant breeding companies
worldwide is extremely small, especially if you only look at
companies that, like KWS, focus on plant breeding and
seed production. In this regard, our share is a rarity – and
one that is enjoying steadily growing attention as part of
the strong interest in agriculture.

KWS is a company with a rich tradition, one characterized
by family ownership, and – as a result of the intensity of its
research – it is geared toward the future. With our breed-
ing and distribution activities in 70 countries in the moderate
climatic zone, we are one of the world’s top 5 in the indus-
try. We have a broadly diversiﬁ ed product range: We are
the world’s No. 1 for sugarbeet seed, as well as the German
market leader, No. 2 in Europe and No. 4 in the U.S. for
corn. We are the leader in Germany and second in Europe
in cereals. Moreover, we have an extensive portfolio for
the production of biogas, biodiesel and bioethanol from
biomass.

The company’s success in global competition is based on
its many years of experience, intense research, successful
international partnerships and independence. Plant breeding
is a very complex business, and it is affected by many fac-
tors, including some – like the weather – that we cannot
inﬂ uence. The time factor plays a particularly large role.
Despite cutting-edge biotechnology methods, it still takes
about ten years to develop a new variety and get it ready for
the market. That is why this process of creating value neces-
sitates a great degree of strategic planning and continuity.

Following a phase of consolidation in the sugarbeet segment,
KWS is back on the path to growth in all segments in the
ﬁ scal year 2008/2009 now underway. The stock market
has already rewarded KWS’ strong business promise and,
in particular, has priced in our future proﬁ t potentials. In the
period from July 1, 2007, to June 30, 2008, the share price
increased by more than 13 percent to € 145. The compara-
tive German index for small enterprises, the SDAX, lost about
35 % in value over the same period.

Shareholder structure
on June 30, 2008

Sentiment on the international capital markets continued
its downward spiral at the beginning of the new ﬁ scal year.
KWS’ share was not able to escape this trend, especially
since higher food prices have kindled a controversial debate
on bioenergy production. Despite KWS’ good operating
performance, its share has since dropped signiﬁ cantly from
its peaks in mid-June 2008.

Performance of the KWS share vs. SDAX

SDAX
KWS

160

140

120

100

7
0
/
7
0

7
0
/
8
0

7
0
/
9
0

7
0
/
0
1

7
0
/
1
1

7
0
/
2
1

8
0
/
1
0

8
0
/
2
0

8
0
/
3
0

8
0
/
4
0

8
0
/
5
0

8
0
/
6
0

8
0
/
7
0

8
0
/
8
0

8
0
/
9
0

8
0
/
0
1

Corporate Governance Report I Compliance declaration I KWS share I 17

Everywhere, a presentiment precedes

knowledge.«

Alexander Freiherr von Humboldt, natural scientist

We are gathering knowledge of nature’s building blocks in international genome

research projects.

Report on the performance of the KWS Group

The growing demand for high-quality food, increasing energy needs and climate change are the global

challenges facing agriculture in the 21st century. High-quality seed is the crucial ingredient for the resource-

efﬁ cient intensiﬁ cation of agricultural production of food, fodder and bioenergy. Thanks to our wide-ranging

product portfolio, we again beneﬁ ted from increasing global demand in ﬁ scal year 2007/2008. Growth

in the corn and cereals segments was particularly strong. As expected, however, our sugarbeet seed

business declined in the wake of reform of the European Sugar Regime. Sales and income at the KWS

Group again posted double-digit increases.

In the race to meet growing demand, worldwide agricul-
tural production is experiencing an ever faster process of
rationalization. At the same time, government subsidies are
being reduced. As a result, farmers must generate more of
their income from market revenue. Thanks to higher selling
prices for agricultural consumer goods, many farms were
able again last year to make structural adjustments and
improve their yield per unit area by means of modern culti-
vation methods and efﬁ cient operating resources. Use of
certiﬁ ed high-yielding seed plays a crucial role here. This
meant that our business developed dynamically, both in
our growth markets and in our core markets.

Consolidation in sugarbeet
Due to the sluggish trend in the price of sugar and the re-
form of the European Sugar Market Regime, the worldwide
cultivation area for sugarbeet fell by 17 %. This development
also impacted KWS, the global leader for sugarbeet seed.
Net sales in the segment were down only slightly from the
previous year, however, since our business performance
varied depending on the region. Sugarbeet cultivation in the
European Union was restricted to the anticipated extent in
the 2008 growing season, and net sales in the EU 27 fell
sharply. In contrast, business outside the EU increased
strongly despite declining cultivation areas, above all in
North America as a result of ﬁ rst-time sales of genetically
modiﬁ ed sugarbeet.

Corn grows in all regions
Our corn business developed very well in all sales regions.
We sharply increased our sales volumes, especially in the
strategic growth region of Southeastern Europe, as well as
in our domestic market of Germany and in Europe’s largest
agricultural market, France. The North American joint ven-
ture AgReliant contributed to the segment’s growth in net
sales, despite the weak US dollar.

Cereals proﬁ t from high consumer prices
The cultivation of cereals in Europe picked up signiﬁ cantly

as a result of the sharp increase in prices for them. The
KWS LOCHOW Group, in which KWS’ cereals activities are
bundled, successfully shared in this trend. In particular, net
sales of hybrid rye increased by around a third. Sales vol-
umes of winter barley also developed positively, while slight
losses in market share were posted by the wheat business.

Strong rise in net sales to about € 600 million
In the year under review, the KWS Group’s net sales rose
by 11.4 % to € 599.1 (537.9) million. Domestic business
developed well, with net sales growing by 14.1 % to € 151.1
(132.4) million. The weak US dollar dampened the positive
performance abroad. Due to higher sales volumes, sales in
foreign countries as a ratio of total sales remained virtually
constant at 75 % (76 %). On the basis of the previous year’s
exchange rates, the group’s net sales would have been
€ 622 million.

Net sales in the sugarbeet segment fell by 2.6 % to € 194.8
(199.9) million, accounting for 33 % of the ﬁ gure for the
group. The corn segment far exceeded our expectations,
recording an increase in net sales of 19.4 % to € 328.9
(275.5) million and now accounting for 55 % of our business
volume. The cereals product segment grew its net sales by
23.7 % to € 67.4 (54.5) million, or 11 % of the KWS Group’s
total sales.

Economies of scale improve return on net sales
The cost of sales increased above-proportionately in re-
lation to the growth in sales by 15.7 % to € 305.4 (263.9)
million. Gross proﬁ t rose by 7.2 % to € 293.7 (274.0) million.

Selling and administrative expenses increased less than
proportionately to net sales. We were able to achieve sig-
niﬁ cant economies of scale here. Selling expenses rose
by 4.5 % to € 106.1 (101.5) million, mainly as a result of
rigorous expansion of the KWS brand across all product
segments and further strategic marketing projects. They
fell relative to net sales to 17.7 % (18.9 %). Starting in ﬁ scal

Generations of trust in a brand: the result of continuous breeding progress and personal customer care.

group earnings. Our breeding & services segment posted
stable income of € 9.8 (10.1) million, accounting for 14.0 %
(15.8 %) of the group’s earnings.

Financial results proﬁ t from sale of afﬁ liated company
Net ﬁ nancial income/expense improved by € 11.3 million to
€ 5.3 (– 6.0) million. This includes a proﬁ t of € 5.8 million
from sale of our potato business at the beginning of the
ﬁ scal year. The interest result improved due to far higher
liquidity and an increase in the level of interest rates. It
should also be noted that the net ﬁ nancial result was im-
pacted last year by a non-recurring charge of € 3.1 million
as a result of the ﬁ nancing out of pension provisions. The
result from ordinary activities improved by 30.2 % to € 75.4
(57.9) million. As a result, the gross return on net sales in-
creased by 1.8 percentage points to 12.6 % (10.8 %).

2007/2008, research and development expenses, which
were included last year in the cost of sales, are reported
separately due to their great importance. They rose by
7.2 % to € 80.6 (75.2) million in the period under review.

Administrative expenses increased to € 42.3 (38.5) million
as a result of numerous maintenance measures, IT projects
and higher energy costs and amounted to 7.1 % (7.2 %) of
net sales. At € 5.4 (5.1) million, the balance of other operat-
ing income and other operating expenses was at the level
of the previous year.

Operating income sets new record
The operating income for the KWS Group increased by
9.7 % to the best-ever mark of € 70.1 (63.9) million. The
decline in sales in the high-margin EU market was not able
to be compensated for in the sugarbeet segment, where
operating income fell to € 28.1 (35.1) million. Its contribution
to group income declined to 40.1 % (55.0 %). Operating
income in the corn segment improved to € 23.2 (13.3) million
despite further expansion of distribution structures and
production capacities in Southeastern Europe and North
America and accounted for 33.1 % (20.9 %) of the group’s
earnings. The cereals segment beneﬁ ted mainly from hybrid
rye business and its high contribution to margins. Operating
income rose to € 9.0 (5.3) million and was 12.8 % (8.3 %) of

Report on the performance I KWS Group I 21

Equity rose to € 398.0 (366.1) million, and fully covered non-
current assets and inventories. Debt capital increased by a
total of € 29.4 million to € 273.1 (243.7) million, in particular
as a result of unpaid royalties, while ﬁ nancial borrowings
were reduced as planned to € 6.5 (8.4) million. Short-term
borrowings rose by € 27 million to € 182.5 million and were
covered at a rate of 196 % (181 %) by cash and cash equiv-
alents and trade receivables.

Operating activities generate high cash ﬂ ow
Net cash from operating activities increased by € 23.5 million
to € 74.6 (51.1) million. The ratio of cash ﬂ ow to net sales im-
proved to 12.4 % (9.5 %), underlining the KWS Group’s great
ﬁ nancial strength. Net funds used in investing activities were
€ 30.1 (26.7) million while proceeds of € 12.0 million were
obtained largely from the disposal of RAGIS KARTOFFEL-
ZUCHT- & HANDELSGESELLSCHAFT MBH, Einbeck, yield-
ing a free cash ﬂ ow of € 56.5 (24.4) million, with net cash
used in ﬁ nancing activities at € 11.6 (11.1) million. Net cash
consequently improved markedly to € 106.5 (59.7) million.

Proposed appropriation of proﬁ ts
For the year under review, KWS SAAT AG achieved net in-
come of € 24.1 million, compared to € 18.3 million for the
previous year. Of this, € 12.0 (9.0) million has already been
allocated to the revenue reserves of KWS SAAT AG. Fol-
lowing a dividend of € 1.40 for ﬁ scal 2006/2007, the Execu-
tive and Supervisory Boards will propose payment of a
dividend of € 1.70 for each of the 6,600,000 shares at the
Annual Shareholders’ Meeting, making the total distribution
to shareholders this year € 11.2 (9.2) million. € 0.9 million will
be carried forward to the new account.

The KWS Group
Apart from KWS SAAT AG, the consolidated KWS Group
comprised a total of 44 (45) subsidiaries and associated
companies in ﬁ scal 2007/2008. A total of 42 (41) companies
were fully consolidated and 3 foreign companies were pro-
portionally consolidated. Two companies that had been
included in the KWS Group’s ﬁ nancial statements at equity
were sold effective July 1, 2007 (see list of consolidated
companies on page 78). A new breeding company was
established in Russia.

Creation of value added

Value added
32%

Total output
€ 633.8 million

Raw materials
and supplies,
purchased
goods and
services
39 %

Other third-party
goods and services
26%

Distribution of value added

Depreciation, amortization,
impairment losses 3 %

Minority interest
2%

Value added
€ 201.0 million

Company
20%

Share-
holders 6%

Public sector
11%

Lenders
2%

Employees
59 %

In ﬁ scal year 2007/2008, the KWS Group generated total
output of € 633.8 (563.2) million, consisting of net sales
of € 599.1 (537.9) million and other income of € 34.7 (25.3)
million.

The costs of raw materials and supplies and of third-party
goods and services attributable to cost of sales totaled
€ 247.1 (286.6) million. Deduction of depreciation, amortiza-
tion, and impairment losses of € 17.0 (16.1) million and other
third-party goods and services of € 168.7 (81.6) million
gives value added of € 201.0 (178.9) million.

The distribution was as follows: Employees received € 119.0
(111.3) million, including social insurance and retirement
beneﬁ t costs. Interest paid fell by € 3.6 million to € 5.1 million.
The public sector received € 22.3 million, compared with
€ 20.7 million in the previous year. Value added of € 3.5
(1.1) million was distributed to minority shareholders. The
shareholders will receive a dividend of € 11.2 million, with
the result that € 39.9 (27.9) million will be retained by the
company.

The potato is the most important arable crop after corn, wheat and rice. About 20 million ha of potatoes are grown worldwide.

Above-proportionate rise in net income
Total tax expenditures rose by 5.6 % to € 20.8 (19.7) million,
resulting in a reduction in the tax rate for the group from
34.0 % in the previous year to 27.6 %. This is due in particu-
lar to the 2008 corporate income tax reform in Germany,
under which the rate of corporate income tax was cut from
25 % to 15 %.

A sharp increase in gross proﬁ t and a lower tax rate meant
that the KWS Group’s net income increased by 42.9 % to
€ 54.6 (38.2) million. The return on net sales after tax rose
by 2 percentage points from 7.1 % to a gratifying 9.1 %.

Investments in expanding production
Our capital spending on property, plant and equipment was
aimed largely at further improving seed quality and expand-
ing breeding and production capacities. The largest indi-
vidual investments related to a processing plant for corn
seed in Romania, greenhouses and extension of the ofﬁ ce
building in Einbeck. The KWS Group invested a total of
€ 30.4 (27.2) million in the year under review. Depreciation
and amortization was € 17.0 (16.1) million, meaning that,
once again, investments exceeded depreciation by a signiﬁ -

cant margin. Of the total investments by the KWS Group,
46 % went to Germany, 31 % to the rest of Europe, 19 % to
North and South America and 4 % to other countries. Just
under half of investments were made in the breeding &
services segment and almost a third in the corn segment.

Solid assets situation
Total assets increased in ﬁ scal 2007/2008 by € 61.3 million
to € 671.1 (609.8) million. Equity rose by € 31.9 million as
a result of the good proﬁ ts situation. The KWS Group has
solid ﬁ nancing, with an equity ratio of 59.3 % (60.0 %).

Net working capital fell slightly in the ﬁ scal year. Receivables
in the corn segment increased by € 23 million as a reﬂ ection
of our business expansion, while inventories were reduced
by € 7 million. In the sugarbeet segment, net working capi-
tal decreased slightly.

Totaling € 310.0 (294.8) million, inventories and trade re-
ceivables accounted for around 46 % (48 %) of total assets.
On the balance sheet date, cash and cash equivalents,
including securities, amounted to € 113.0 (68.1) million.

Report on the performance I KWS Group I 23

Energy lies in quality.«

Friedrich Wilhelm Nietzsche, writer and philosopher

Resistance to pests and diseases are the most important qualities of our varieties.

After all, only a healthy plant can deliver a full yield.

Sugarbeet segment

Net sales at our sugarbeet segment were almost on a par with the previous year, despite a huge decline

in cultivation area worldwide. Market volume slumped by 17 % in the last growing season, but KWS’ net

sales in the segment fell by only 2.6 % in ﬁ scal 2007/2008.

There were three major inﬂ uencing factors in the year under
review. The main positive impact came from the enormous
demand for our genetically modiﬁ ed herbicide-resistant
sugarbeet varieties in North America. They are resistant to
the active substance glyphosate (Roundup). In their very
ﬁ rst year, these special varieties captured a market share
of over 60 %. Compared with conventional means of com-
bating weeds, American sugarbeet farmers were able to
reduce crop protection costs by a third and reduce the use
of special herbicides considerably with these innovative
varieties.

In the EU 27, in contrast, virtually the entire sugar quota was
returned in ﬁ scal 2007/2008, something we had originally
expected to see happen in 2006/2007. A signiﬁ cant inﬂ u-
ence on this were the high consumer prices for corn, wheat,
soybean and rapeseed, which reached record levels in the
year under review and induced many farmers, in particular
in Eastern Europe, to switch from sugarbeet to other crops.

(– 51 thousand ha), Germany (– 39 thousand ha) and
Hungary (– 30 thousand ha), while sugarbeet cultivation
was discontinued completely in Bulgaria.

There was a worldwide decline in sugarbeet cultivation
area of 17.1 % to 4.25 (5.13) million ha, due not only to sugar
quota returns in the EU, but also to the already mentioned
high consumer prices for corn, cereals, soybean and rape-
seed. Sugarbeet cultivation areas in Ukraine, the Russian
Federation and the U.S. were especially affected by this.

Net sales in the KWS Group’s sugarbeet segment were
€ 194.8 (199.9) million, down slightly from the previous year.
The losses in sales as a result of these declines in area
were largely compensated for by higher revenue in the U.S.
Net sales outside the EU increased by 13.1 % to € 87.2
(77.1) million. Our net sales in the EU 27 fell by 12.4 % to
€ 107.6 (122.8) million, below-proportionately in relation to
the decline in area.

Cultivation area in the EU 27 fell by 16.3 % to a total of
1.49 (1.78) million ha. The area used to produce quota
sugar declined to 1.27 (1.58) million ha. The area for in-
dustrial beet, among other things for the production of
ethanol, rose slightly to 222 (197) thousand ha. The largest
declines in area were in Poland (– 53 thousand ha), France

Higher unit costs, accompanied by a decline in net sales and
negative exchange rate inﬂ uences, reduced the segment’s
income by 19.9 % to € 28.1 (35.1) million. Thanks to rigorous
cost optimization in sales and administration, the segment’s
return on net sales stabilized at a satisfactory 14.4 %, on
a par with the long-term average. The previous year’s

Sugarbeet segment sales in millions of €

36.5

158.3

194.8

Leaf health is a key breeding objective. The sugarbeet assimilates energy through its leaves to form its body and store sugar.

extraordinarily high return on net sales of 17.6 % was also
aided by the marketing of inventories for which allowances
had already been charged. The sugarbeet segment still gen-
erates the highest return in the KWS Group.

The regions
Business in Germany was impacted by large reductions in
cultivation area, which fell from 407 thousand ha to 368
thousand ha. KWS also suffered slight losses in market
share as a result of ﬁ ercer competition. However, it re-
mained the market leader by far with a share of just over
53 %. Areas in France also fell from 394 thousand ha to
343 thousand ha, with the result that we were not able to
quite achieve the previous year’s high net sales.

There were also reductions in area of almost 50 thousand
ha in Northern Europe. However, the decline in net sales
was only slight thanks to good variety performance and
concomitant increases in market share. Cultivation area in
Central Europe was reduced by more than 70 thousand ha,
and we also lost market share in this region as a result of
the competition’s aggressive discount policy. Southeastern

Europe also experienced signiﬁ cant reductions in areas.
Apart from quota returns in Hungary and Bulgaria, high
cereal prices in Croatia and Serbia were also responsible
for farmers’ switching to other crops. Overall, the area in
this region fell by approximately 34 % to 136 thousand ha.

The largest reduction in cultivation area – more than 400
thousand ha – was in Eastern Europe. Nevertheless, we
were able to retain our market share there, despite intense
competition.

Our development in North America and other foreign coun-
tries was positive. Sales volumes for Roundup Ready variet-
ies in the U.S. were as planned, meaning our North American
subsidiary Betaseed was able to grow its market share to
almost 60 %. However, this was impacted negatively by the
weakening of the US dollar by some 12 %.

Our sales situation in Turkey was good, compared with
the previous year when an oversupply meant no sales
whatever to the Turkish sugar industry. Our business in
China and Japan also picked up.

Report on the performance | Sugarbeet segment I 27

Corn segment

Thanks to its many and varied uses, corn is the world’s most important ﬁ eld crop. Demand increases

year by year, with the result that there were even some bottlenecks in seed availability in the 2008

growing season. In this market climate, we were able to expand our corn business in all sales regions.

The resultant 19.4 % increase in net sales to € 328.9 (275.5)
million far exceeded our expectations. In our strategically
important growth region of Southeastern Europe, we even
boosted net sales by over 60 %. Our up-front investments
in the region over many years are thus gaining traction. We
were also able to increase sales volumes by 20 % both in
our home market of Germany and in France, Europe’s larg-
est agricultural market. Our North American joint venture
AgReliant also helped grow the segment’s net sales in the
year under review despite a 7 % decline in corn area and a
considerable strain because of the weak US dollar.

Area for cultivating cereals in Europe increased, primarily
at the expense of winter rapeseed. Nevertheless, we man-
aged to grow sales in this subarea of the corn segment by
just over 20 %. This is attributable to the rapid pace at
which farmers are switching from pureline varieties to high-
performing hybrids.

As a result of the good sales volume and comparably low
production costs for seed multiplication in 2007, the seg-
ment’s income rose by 74 % to € 23.2 (13.3) million.

The regions
Soybean cultivation grew sharply in the U.S., in particular at
the expense of corn cultivation areas, which fell by just over
7 % year-on-year to 35.3 million ha. Only by expanding its
range of varieties with multiple-resistant genetically modi-
ﬁ ed products was AgReliant (a 50:50 joint venture with the
French breeding group Limagrain/Vilmorin) able to maintain
its market share year-on-year and increase its net sales
slightly to € 235 (227) million. It retained its market position
as the fourth-largest vendor of corn seed in North America.
AgReliant was able to record strong growth in soybean
seed, where, however, margins are lower.

Corn cultivation area in Europe increased in 2008 by around
5 % year-on-year. Moreover, we were able to improve our
market position in all of Europe’s regions. The sales season
in Germany, in the markets of Northwestern Europe, in
France and in the markets of Central and Southeastern
Europe went especially well, so that we are now in second
position in European corn business. We were able to con-
solidate our leadership in Germany and the other Northern
European markets for early-maturing corn varieties.

Corn segment sales in millions of €

77.2

251.7

328.9

Grain corn is the world’s most important fodder. The harvest from one hectare can be used to produce 15,000 l of milk,

2,000 kg of beef or 3,000 kg of pork.

Oil seed contributed about 14.2 % to the corn segment’s
net sales. This subarea mainly comprises distribution of
winter rapeseed, sunﬂ owers and soybeans in North America.
Winter rapeseed performed especially well in the countries
of Central and Southeastern Europe. In the EU 27, the
share of hybrid rapeseed varieties is now 40 %. This is also
attributable to the decision to focus more on breeding
rapeseed hybrids, along with the development of pureline
varieties in France.

In the 2008 growing season, the sunﬂ ower cultivation area
increased signiﬁ cantly to around 12 million ha. Approximately
70 % of this area is in Russia and Ukraine, where we were
able to sell signiﬁ cant volumes for the ﬁ rst time in the year
under review. Further areas of about 15 % for sunﬂ ower
cultivation are in Southeastern Europe. We were able to
expand our market share there thanks to our good presence
in this region.

Seed availability
The growing demand for corn seed in all regions of Europe
is accompanied by expansion in seed multiplication. We
build on established partnerships that have proven their
strength over the past 10 years. At the same time, we in-
vest in seed processing technology wherever this partner-
ship concept cannot be implemented. In the current ﬁ scal
year, for example, we started building a seed processing
plant in Romania and initiated construction of a plant in
Ukraine. Further projects are planned for the coming years
to ensure the global and regional supply of seed and the
high quality of KWS seed in all of Europe’s markets.

Report on the performance | Corn segment I 29

Cereals segment

The LOCHOW-PETKUS cereals breeding company has a rich tradition and bundles the KWS Group’s

cereal activities. We implemented a brand change in this segment effective February 1, 2008: LOCHOW-

PETKUS GmbH was renamed KWS LOCHOW GMBH.

New color.
Same quality.

Welcome to the future – welcome to orange!

Now everyone can see what has been the
case for 40 years: LOCHOW-PETKUS and
KWS belong together. On February 1, 2008
our blue will become orange.

www.kws-lochow.de

This step means that our international cereal activities will
beneﬁ t from the KWS brand and that the traditional name
LOCHOW is retained in the domestic market of Germany.
This measure was implemented against the backdrop of
very positive business development.

Lengthy periods of drought in the summer of 2007 led to
signiﬁ cantly lower yields in the production of cereals for
consumption and seed. The resulting price increases in the

cereals sector led in turn to above-average demand for
seed in the fall sowing season that it was not possible to
meet satisfactorily. In particular, the KWS LOCHOW Group
sold its entire inventory of hybrid rye varieties and increased
net sales by 23.7 % to € 67.4 (54.5) million. We also proﬁ ted
from a strong increase in cultivation area for cereals for con-
sumption in the 2008 harvest season in Germany due to
reduction in the EU’s obligatory fallow land quota. The most
important foreign markets were still in the UK, Poland and
France. With a stable share slightly more than 50 % from
sales abroad, KWS LOCHOW is ﬁ rmly established among
European cereal breeders.

The unusual market situation in the past ﬁ scal year entailed
a sharp increase in the volume of seed sales. Consequently,
we were able to post higher net sales for all the main crops:
hybrid rye, wheat, barley and rapeseed. The main contribu-
tor to net sales and income was hybrid rye, sales of which
were around 34 % up year-on-year. We were able to grow
our market share for hybrid rye, with its strong contribution
to proﬁ ts, to 58 % (48 %) in Germany and about 60 % (54 %)
in Poland. The share of hybrid rye relative to our rye busi-
ness as a whole increased to around 95 %. The potential
proﬁ t contribution from barley and wheat breeding is still
unsatisfactory due to the high levels of farm saved seed,
meaning that the funds available for promising breeding
programs are severely limited.

The positive and in some cases exceptional inﬂ uences in
the year under review resulted overall in a considerable in-
crease in the cereals segment’s income of around 70 % to
€ 9.0 (5.3) million. The high return on net sales of 13.4 %
means a sharp increase in earnings strength (9.8 %) over
the previous year.

Compared with wheat and barley, rye is especially high-yielding in dry locations.

Moreover, this cereal is far more robust in withstanding leaf diseases.

Cereals segment sales in millions of €

33.0

34.4

67.4

Report on the performance | Cereals segment I 31

Breeding & services segment

KWS’ core competence lies in developing innovative, high-yielding varieties adapted to their location for –

at present – 70 countries around the world. Other differentiating features of our products are resistance to

disease and pests, as well as their speciﬁ c properties for use as food, fodder or raw materials to produce

energy. The product portfolio is rounded out by customized treatments, meaning our customers world-

wide can choose from several thousand articles.

In the calendar year 2008, KWS was awarded 266 (267)
distribution approvals for new varieties internationally as
part of ofﬁ cial testing: 114 (108) for sugarbeet, 90 (112) for
corn, 56 (26) for cereals and 6 (21) for the product area of
oil seed. The approved varieties are made available to the
product segments in exchange for royalties at a level cus-
tomary in the market.

Apart from breeding and research, the central corporate
functions and farming are operated in this segment. Farm-
ing also accounts for most of the segment’s external sales
of € 8.0 (8.1) million. Including the internal royalties gener-
ated from development of varieties, net sales at the seg-
ment in ﬁ scal year 2007/2008 increased to € 121.8 (109.0)
million. However, income was € 9.8 (10.1) million, only at
the level of the previous year, due to the sharp increase in
product development costs and numerous projects in the
central functions, in particular for brand development.

Success in genome research
As a result of genome research, several plant genomes
have been sequenced either completely (Arabidopsis, rice,
poplar, corn, soybean) or partially (barley, sugarbeet, rape-
seed) over the past ten years. As part of this work, it has

been possible to acquire extensive knowledge in the area
of molecular biology, something that brings with it advan-
tages for our traditional crossing and selection processes.
Various genome research programs into sugarbeet and
corn have produced numerous molecular markers – DNA
sections that mark the propensities for a speciﬁ c property.
Molecular markers thus make it possible to identify features
in the plant for a wide range of breeding objectives (e. g.
quality, resistance to disease, tolerance to cold) early on in
the laboratory instead of later, in lengthy ﬁ eld trials.

One of the molecular markers used is the SNP (single
nucleotide polymorphisms) marker. It permits high-through-
out applications. As a result of the high-throughout potential
of marker technology, larger populations can be selected
more quickly for several properties. That means that know l-
edge of the properties of the existing breeding material will
increase dramatically, enabling even more precise breeding.
Our PLANTA marker laboratory has achieved remarkable
technological progress in this ﬁ eld and in ﬁ scal 2007/2008
developed a multi-parallel DNA analysis system. Thanks to
the introduction of this high-throughput technology (SNP
multiplex analysis) and the associated dramatic reduction
in costs, the volume of analysis results for sugarbeet and

Marketing approval for new varieties

114

266

The secret of plant breeding lies in diversity: The larger the pool of different plants (genotypes) is,

the more valuable are the new crossings that can be produced from them.

corn will increase almost tenfold in ﬁ scal year 2008/2009.
Ultimately, the many low-cost molecular markers are also a
prerequisite for being able to test completely new applica-
tions for complex breeding objectives.

Development of modern plant breeding
Year after year, KWS invests in the further technical devel-
opment of modern plant breeding. In particular, they include
long-term, molecular genome research projects aimed at
improving our crops where traditional breeding is no longer
able to. The resultant inventions can be protected by pat-
ents, which give KWS an exclusive right to use the patented
invention for a limited period of time. Adequate patent pro-
tection thus promotes technical progress and increases
productivity in agriculture. Glyphosate-resistant sugarbeet
is one example of such a technical development. KWS was
granted a patent for it in the U.S. in February 2008.

However, we also achieved technological successes in other
areas. KWS has been awarded patent protection for the
tissue-speciﬁ c and storage-induced promoters it has de-
velo ped; other patent applications are also being processed.
Promoters are control units that regulate reading of genetic
information (genes).

Expansion of breeding activities in new markets
Developing varieties that are ideally adapted to their loca-
tion is only possible through selection in the target market.
For instance, strategic expansion of KWS’ corn breeding
program in Hungary has just been completed. There has
already been initial success in the testing of medium-late
maturity hybrids. Moreover, initial steps have been taken
to establish a new corn breeding program with additional
testing locations in Romania, Bulgaria, Ukraine and Russia.

Report on the performance | Breeding & services segment I 33

Outlook for the 2008/2009 ﬁ scal year

In the current ﬁ scal year, we continue to expect the KWS Group to grow its net sales by up to 10 %, and

we expect that all product segments will likely contribute to this growth. This also goes for the sugarbeet

segment, following the phase of consolidation in the previous year. In addition, we will generate revenue

from our new potato business for the ﬁ rst time.

The objectives of reform of the Sugar Market Regime in the
European Union were largely achieved in the year under
review. All that remains to be returned is a quota of 0.3 million
tons of sugar, corresponding to a further reduction in area
of approximately 30 thousand ha. Assuming this, we ex-
pect our sugarbeet sales volumes in the EU 27 to stabi-
lize at the level of ﬁ scal 2007/2008, especially given the fact
that we have a competitive advantage in Europe in the ﬁ eld
of nematode-resistant varieties. We see growth opportu-
nities in Eastern Europe. Falling consumer prices for other
crops make it more interesting for farmers to grow sugar-
beet. Ukraine’s accession to the WTO also means a signiﬁ -
cant reduction in protectionist tariff rates, which had virtually
prevented us from exporting to Ukraine in the past years.
Moreover, we plan to expand sales volumes of our Round-
up Ready varieties in the U.S. Based on these anticipated
increases in net sales, we assume at present that we will
be able to compensate largely for the rising cost of sales
and that income at the segment will remain at the level of
the year before.

While slight growth is forecast again in corn cultivation areas
in the U.S., we expect areas in Europe to stagnate. Nev-
ertheless, we are planning to increase total net sales in
our corn segment, above all by growing sales volumes in
France and Southeastern and Southern Europe, and by
increasing sales of genetically modiﬁ ed varieties in America.
However, the segment’s income will be strained by far
higher production costs since the multiplication agree-
ments for products to be sold in 2009 were concluded on
the basis of the high consumer prices in the fall of 2007.

This resulted in sharp price increases for seed multiplication
in the various production countries. It is not yet possible
to determine the extent to which these cost increases can
be passed on, due to ﬁ erce competition in the market. As
things now stand, we will likely not be able to repeat the
good result of 2007/2008.

In the cereals segment, the liberalization of markets re-
sulting from the restriction of EU intervention will continue
to have a positive impact on net sales. Above all, we ex-
pect to grow sales volumes for hybrid rye in Germany and
Poland and give a further positive boost to this business
activity. We therefore anticipate that the segment will con-
tinue its positive net sales and income trend.

The seed potato company Van Rijn – KWS B. V., which
was launched on July 1, 2008, plans to generate net sales
of approximately € 30 million, half of which will be reported
for the KWS Group’s breeding & services segment, and
break even in its very ﬁ rst ﬁ scal year.

In summary, in the current ﬁ scal year we expect income
once again on a par with the high level of the previous
year, on the strength of an increase in net sales in the
KWS Group.

There have been no other events of particular signiﬁ cance
since the end of last ﬁ scal year.

Selective pollination is carried out in the rapeseed breeding garden. Extreme care is vital.

Breeding station in Russia
Since 2006, KWS has been conducting performance tests
to a small extent and on its own responsibility in Lipezk
(Central Black Earth region). We plan in the short and me-
dium term to establish further trial locations outside the
Central Black Earth region in the North Caucasus and Volga/
Ural region. These investments will ensure that sugarbeet,
corn, summer cereal and winter rye products developed
speciﬁ cally for the Russian and other Eastern Euro pean
markets will be available in the future and enable the KWS
Group to expand its market position.

To this end, a separate breeding infrastructure is being built
up in Russia. The cornerstone for the new KWS breeding
station near Lipezk was laid at the beginning of July 2008.
€ 2.8 million has initially been invested to build the station,
where performance tests and other breeding work are to
be carried out for the crops sugarbeet, corn and cereals,
in addition to agrotechnical trials. Moreover, we intend to
invest in special technology for trials in the coming years,
as well.

Repositioning in the potato market
The KWS Group has repositioned itself in potato breeding.
On July 1, 2008, the new joint venture “Van Rijn – KWS B.V.”
launched its international activities in breeding, producing
and distributing seed potatoes. As a result, KWS has re-
gained an independent, strategic position in this market.

The 50:50 joint venture, which is headquartered in Poeldijk
near The Hague, operates in around 60 countries with its
four subsidiaries in France, the UK, Romania and Morocco
and its network of multiplication and distribution partners.
Breeding activities are conducted in Emmeloord, the center
of potato breeding in the Netherlands.

Van Rijn – KWS B. V. has a competitive portfolio of varieties
for processing and for consumption as fresh produce. Its
market position in Northern and Southern Europe and in
North Africa is based on longstanding partnerships of the
Van Rijn Group in the potato, fruit and vegetable value
chain. Entry into the markets of Eastern and Southeastern
Europe opens up signiﬁ cant growth potentials in the me-
dium term.

Report on the performance | Breeding & services segment | Outlook I 35

Risks for future development

KWS acts in an entrepreneurial fashion to exploit market
opportunities. The goal of our value-oriented corporate
governance is to leverage all proﬁ table strategic potentials.
That entails risks. How these risks are handled in entrepre-
neurial fashion is a crucial factor of business success. Op-
portunities and risks are always analyzed and assessed
systematically. Responsible corporate decisions are then
made on the basis of this information.

Evaluation of opportunities
Recognizing and leveraging opportunities secures long-
term commercial success. KWS identiﬁ es opportunities by
means of a permanent observation of the market and in-
tensive dialog with customers, business partners and sci-
entiﬁ c institutions. The key to rapid and ﬂ exible exploitation
of opportunities when they arise lies in the independence
and the long years of breeding experience of KWS and its
subsidiaries. A lean, medium-sized organizational structure
and an active exchange of knowledge based on trust en-
able agility in responding to such opportunities.

The main opportunities arise from the global trend of grow-
ing demand for food, fodder and energy. This trend is inﬂ u-
enced by the world’s growing population and increasing
prosperity in individual regions. As their incomes rise, peo-
ple demand higher-quality food and use more energy. Re-
serves of fossil fuels and land that can be used for agricul-
ture on our planet are limited. That is why solutions for
cost-effective, resource-saving and efﬁ cient production of
food are growing in importance. We have explained how
KWS will leverage these opportunities in entrepreneurial
fashion in the “Outlook for the 2008/2009 ﬁ scal year” sec-
tion on page 35 of this management report.

Risk management
A suitable risk management system is needed to system-
atically and efﬁ ciently evaluate, document and control risks,
the likelihood of their occurrence and their potential effects.
KWS has ﬁ rmly established such a system in its corporate
planning and controlling and in its reporting system. The
risk management system is based on strategic planning
and investment controlling, continuous operational control-
ling and the quality and process monitoring systems. The
efﬁ ciency of the risk management system is ensured by a
clear assignment of responsibilities and internal control and
was checked by the auditors as part of their audit of the
annual ﬁ nancial statements. External auditing by experi-
enced auditors is conducted at KWS and is a key compo-
nent of risk management in ensuring that internal controls

work. Several audits are held each year, covering processes
and organizational units. The goals are to optimize internal
control systems and to increase efﬁ ciency.

The KWS Group is subject to the usual economic and po-
litical risks in the countries in which it and its subsidiaries
operate. In addition, the risks described below may signiﬁ -
cantly impair KWS’ net sales, ﬁ nancial position and perfo r m-
ance. These risks have been identiﬁ ed. However, other
risks that have not yet been recognized or have been un-
derestimated may also inﬂ uence its business. No risks
that pose a threat to the company’s existence have been
identiﬁ ed to date. There was no signiﬁ cant change in the
risk situation in ﬁ scal 2007/2008 compared with the pre-
vious year.

Market risks
The medium-term sales risk depends on product perform-
ance and the competitive situation. KWS addresses this
challenge with systematic analyses of the market and com-
petition and by permanently developing higher-quality seed
for innovative, high-yielding plants. KWS counters the risk
of a decline in cultivation areas with its efforts to win market
share and grow sales in other areas of production. A wide-
ranging product portfolio contributes to diversiﬁ cation of
risks. The company ensures the high quality of its products
through strict internal quality standards and monitoring.
KWS tackles the risks involved in investing in acquisitions
and research and construction projects by means of ef-
ﬁ cient controlling and professional project management. It
also addresses the liquidity risk with professional cash man-
agement, sufﬁ cient long-term, syndicated credit lines – of
which only some were made use of in the year under review –
and a comfortable equity ratio of 59.3 %. It uses extensive
trade credit insurance to counter the risk of losing receiv-
ab les in risky regions and business segments. The risk of
interest rate changes and currency risks are addressed
through the usual standardized hedging instruments.

Political risks
In the strongly regulated agriculture industry, political risks
have a signiﬁ cant impact on business development. The
new EU Sugar Market Regime, which came into effect on
July 1, 2006, and will remain in force until September 30,
2015, has a serious effect on KWS, the world market leader
in sugarbeet seed. However, it has so far largely been pos-
sible to cushion the declines in net sales in the EU 27 by
higher sales volumes outside the EU, in particular in the
U.S. and Turkey.

for cultivation of Roundup Ready sugarbeet awarded in
March 2005. Although we expect the ruling to be positive
for us, a risk to our business in North America cannot be
fully ruled out.

A further risk is the suspension of approval for a number
of common pesticides for treating seed by the German
Federal Ofﬁ ce of Consumer Protection and Food Safety. If
this directive remains in force, it would necessitate signiﬁ -
cant impairment to the value of already treated stocks and
a loss of value created from the way we treat our products.

Weather-related risks
The agricultural production process of breeding and multi-
plying seed depends to a large extent on the weather.
KWS counteracts the risk of production losses as a result
of bad weather with a broad product range that needs a
variety of weather conditions for a successful harvest. Seed
multiplication is distributed over various locations in Europe
and North America. Contraseasonal multiplication is carried
out in the winter half-year in Chile and Argentina if there are
bottlenecks in seed availability.

Demand for high-yielding energy plants is dependent on
the price of fossil fuels and on general regulatory condi-
tions, such as government market incentive programs for
startup ﬁ nancing for the investments needed for bioenergy
production, admixture ratios for biofuels or regulations on
direct feeding of biogas into existing natural gas networks,
to name a few examples.

We believe that the Genetic Engineering Act (GenTG) adop-
ted by the German Parliament on January 25, 2008, is not
efﬁ cacious, since it impedes the use of state-of-the-art, in-
ternationally acknowledged breeding methods in Germany.
It entails serious competitive disadvantages for agriculture,
research institutions and medium-sized enterprises such
as KWS, in particular because it fails to deﬁ ne the issue of
liability precisely and because the exact plot of areas has to
be reported in the location registry.

It is not only direct legislative procedures that impact busi-
ness operations. Reservations on the part of the population
can also inﬂ uence opportunities for business development.
For example, there is strong disapproval of “green genetic
engineering” in agriculture, especially in Europe. World-
wide, on the other hand, genetically improved crops are
cultivated on more than 110 million hectares a year, with
remarkable economic and ecological advantages. In the
U.S. in particular, it is mainly genetically improved varieties
that are cultivated and that are helping to solve problems
in agriculture. However, rapid market penetration of our
herbicide-resistant, genetically modiﬁ ed sugarbeet varieties
(Roundup Ready) in the U.S. has also provoked opposition
from opponents of genetic engineering in that country. On
January 23, 2008, environmental protection associations
ﬁ led legal action against the United States Department of
Agriculture (USDA), with the aim of revoking the approval

KWS sets a clear signal for freedom of research and innovation in Germany – 450 employees support and protect seed sowing in

an outdoor trial with genetically modiﬁ ed sugarbeet in the Northeim district.

Report on the performance | Risks I 37

Employees

Our employees have a personal relationship of trust with customers worldwide – the foundation of our

company’s success. The reliability of each employee of KWS and the quality of our products are the

factors that create and nurture our customers’ conﬁ dence in our company.

Together with its subsidiaries, KWS SAAT AG is a leading
global seed company. 2,856 employees in 70 countries
worked for the KWS Group worldwide in 2007/2008. Our
success is founded on the combination of traditional values
with cutting-edge technology and comprehensive know-
how. As a result, the company, with its tradition of family
ownership, has grown in the international markets for more
than 150 years. Our employees deliver on our promises to
our customers. Their motivation, abilities and hard work are
vital to the entire company’s success. That is why the cru-
cial task of HR management is to ensure that employees
are deployed in a way that best reﬂ ects their skills, potential
and personal inclinations.

Leadership and encouragement
KWS’ HR management is geared to maximizing the achieve-
ments, motivation and development of employees and en-
suring that they are assigned effectively and as best possible
at the company. Three key tasks were formulated in 2006 by
the International Management Circle (IMC): leadership – a
common management philosophy; change – controlling and
communicating change processes; and analysis of poten-
tials – early identiﬁ cation and encouragement of special
talents and top performers.

Five training courses, in which 44 managers from 26 coun-
tries took part, were held to qualify and develop executives.
They focused on the global implementation of the company’s
shared philosophy. In addition, executives are given regular
training on employee leadership methods and support in
developing their capacities as a manager and role model.

Overcoming uncertainties in the change process
To help address changing customer needs and identify
at an early stage the long-term trends that are common
among individual areas, the people and the organization
of modern companies are subject to a state of permanent
change. A company’s success depends in large measure
on how this change process is handled and communicated.
After all, changes sometimes do not motivate employees,
but rather irritate or disconcert them. That is why KWS
attaches special importance to integrating its employees in
change processes at an early stage. The Works Committee

is closely involved in such processes in order to ensure
a common understanding for change processes and their
nature.

Identifying and developing potential
Early recognition of potential, encouragement of top per-
formers and their effective deployment are important ele-
ments in the development of managers and experts. In order
to identify and help develop employees with high potential,
KWS held two Orientation Centers last year – each lasting
several days – in which top management also participated.
20 junior executives from six countries took part.

Another key aspect apart from identifying the various tal-
ents is training and continuing education to ensure that
our employees can unfold their talents to the full. In ﬁ scal
2007/2008, KWS invested more than € 600 thousand in
employee development alone. In all, 109 seminars, lasting
an average of two days each, were attended by more than
1,000 participants. KWS also offers an extensive range of
language courses to promote the intercultural skills of its
workforce and help it adapt to the requirements of global
business. KWS gives junior personnel the chance to gat her
experience internationally. We offer business administration
apprentices the possibility of working at subsidi aries abroad
for several weeks.

Participants in KWS’ training program: If continuing education is made to be fun, the outcome is motivation and team spirit.

KWS builds on trust
We attach special importance to promoting our employees’
achievement, motivation and development. After all, people
who are assigned in accordance with their abilities and
whose talents are encouraged, and also act independently
and responsibly, enjoy their work and identify with the
company.

Employees in ﬁ gures
In the ﬁ scal year 2007/2008, the KWS Group workforce
grew by 4.3 % to 2,856 (2,739) people worldwide, of whom
860 (777) were at KWS SAAT AG. Personnel expenses at
the KWS Group rose to € 119.0 (111.3) million; KWS SAAT
AG accounted for € 43.2 (37.7) million of this. The future of
KWS lies in ensuring that its junior staff members receive
good training. Moreover, the company is aware of its social
responsibilities in its home region and has been training
young people for years – in numbers in excess of what we
actually need ourselves. In the ﬁ scal year 2007/2008, 75
(72) apprentices and 10 (12) trainees were employed. The
company offers a wide variety of vocations: industrial clerks
in the area of business administration, technical assistants
and laboratory technicians in the ﬁ eld of agricultural re-
search, and in the technical ﬁ eld as industrial mechanics,
energy-tech engineers specializing in plant engineering,
and electronics engineers for operations technology.

KWS Group employees by regions

KWS Group employees by functions

KWS Group employees by age

Rest of world 2 %

America
31 %

Germany
44 %

Europe
(excluding Germany)
23%

Administration
15%

R & D
36%

Production
19%

40–49
33%

30–39
29 %

20–29
14%

Sales and
marketing 30%

60 and
above 4 %

50–59
20%

Report on the performance | Employees I 39

We are just a small particle of a whole,
but everyone has an inﬁ nitely great

responsibility.« Konrad Lorenz, physician and zoologist

In the agricultural production process, we share this responsibility with our customers,

since careful use of natural resources is indispensable.

Compensation Report

The Supervisory Board’s compensation is set by the Annual
Shareholders’ Meeting at the proposal of the Executive
Board and Supervisory Board. It is based on the size of the
company, the duties and responsibilities of the members of
the Supervisory Board and the company’s economic situa-
tion. The remuneration includes not only a ﬁ xed payment,
but also a variable component based on the dividend paid.
Accordingly, Supervisory Board members receive ﬁ xed
compensation of € 8,000 and a dividend-related payment
of € 2,000 for each € 0.10 by which the dividend per share
exceeds € 0.20.

The Chairman of the Supervisory Board receives three
times and his or her deputy one-and-a-half times the total
compensation of an ordinary member. There is currently

no extra compensation for work on committees. The Chair-
man of the Audit Committee receives one-and-a-half times
the total compensation of an ordinary member of the Su-
pervisory Board, provided he or she does not hold the
ofﬁ ce of Chairman or Deputy Chairman of the Supervisory
Board. The members of the Supervisory Board are reim-
bursed for all expenses – including value-added tax – that
they incur while carrying out the duties of their position.

Providing that the annual meeting of shareholders re-
solves the proposed dividend, total compensation of the
members of the Supervisory Board will be € 333 thousand
(€ 272 thousand), excluding value-added tax. In all 79 %
(75 %) or € 263 thousand (€ 204 thousand) of the total
compensation is performance-related.

Supervisory Board compensation 2007/08 in €

Dr. Guenther H. W. Stratmann*1

Dr. Andreas J. Büchting*2

Dr. Arend Oetker**

Hubertus v. Baumbach***2

Jürgen Bolduan2

Cathrina Claas2

Goetz von Engelbrechten1

Eckhard Halbfaß1

Jürgen Kunze1

Dr. Dietmar Stahl2

Prof. Dr. Ernst-Ludwig Winnacker1

* Chairman; ** Deputy Chairman; *** Chairman of the Audit Committee

1 until December 2007, 2 since December 2007

Fixe d

12,000.00

6,000.00

4,000.00

P erfor m ance-
relate d

45,000.00

22,500.00

15,000.00

Total

57,000.00

28,500.00

19,000.00

70,000.00

262,500.00

332,500.00

The Executive Board’s compensation is set by the Commit-
tee for Executive Board Affairs of the Supervisory Board
and is based on the size and activity of the company, its
economic and ﬁ nancial situation and the level and structure
of the compensation received by members of the Executive
Board at comparable companies. It is composed of a ﬁ xed
and a performance-related component. There are no stock-
based components.

Executive Board compensation 2007/08 in €

Dr. Andreas J. Büchting*

Dr. Christoph Amberger

Philip von dem Bussche**

Dr. Hagen Duenbostel

Dr. Léon Broers (Deputy)

The ﬁ xed compensation is paid as a monthly salary. Apart
from these salaries, there is also non-monetary compensa-
tion, such as a company car or phone. There are also ac-
cident insurance policies for the members of the Executive
Board. The performance-related compensation is calcu-
lated on the basis of an individual percentage of the net
proﬁ t for the year for the KWS Group. Payments for duties
performed in subsidiaries and associated companies were
€ 37 thousand (€ 24 thousand) and are offset against the
performance-related payment. There is an absolute upper
limit for the variable compensation.

Fixe d

B eneﬁ ts
in kin d

P erfor m ance-
relate d

Total

112,500.00

42,623.51

304,538.49

459,662.00

180,000.00

22,331.82

547,668.18

750,000.00

202,500.00

16,680.84

553,319.16

772,500.00

180,000.00

19,047.42

550,952.58

750,000.00

150,000.00

24,986.05

304,538.49

479,524.54

825,000.00

125,669.64

2,261,016.90

3,211,686.54

* Chairman, partially until December 2007; ** Chairman since December 2007

Pension obligations are granted in the form of an obligation
to provide beneﬁ ts, with the annual pensions ranging be-
tween € 130 thousand and € 140 thousand. In ﬁ scal 2007/
2008, € 117 thousand (€ 296 thousand) was allocated to
the pension provisions in accordance with IAS 19 for pension
obligations to members of the Executive Board. Pension
provisions of € 1,018 thousand (€ 901 thousand) were
formed for the following members of the Executive Board
of KWS SAAT AG:

Compensation of former members of the Executive Board
amounted to € 883 thousand (€ 738 thousand). Pension
provisions recognized for this group of persons amounted
to € 2,745 thousand (€ 3,055 thousand) as of June 30, 2008.

No loans were granted to members of the Executive Board
and Supervisory Board in the year under review.

Pension commitments in €

Dr. Christoph Amberger

Dr. Hagen Duenbostel

07/01/2007

P erso n nel
ex p enses

ex p enses
Interest

06/30/2008

678,801.00

44,698.00

36,930.00

760,429.00

221,758.00

25,266.00

11,025.00

258,049.00

900,559.00

69,964.00

47,955.00

1,018,478.00

Report on the performance | Compensation Report I 43

Annual Financial Statements of the
KWS Group 2007/2008

Disclosures in accordance with section 289 (4) and
section 315 (4) HGB (German Commercial Code)
The Executive Board provides the following explanations
of the information in accordance with section 289 (4) and
section 315 (4) HGB (German Commercial Code) in the
group management report:

Kommanditgesellschaft Dr. Arend Oetker Vermögens-
verwaltungsgesellschaft mbH & Co., Berlin

• The voting shares, including mutual allocations, of the
shareholders stated below each exceed 10 % and total
10.6 %.

The subscribed capital of KWS SAAT AG is € 19,800,000.
It is divided into 6,600,000 no-par bearer shares. Each
share grants the holder one vote at the Annual Shareholders’
Meeting.

Hans-Joachim Tessner, Goslar
Tessner Beteiligungs GmbH, Goslar
Tessner Holding KG, Goslar

There may be limitations on the voting rights for the shares
under the provisions of the German Stock Corporation Act
(AktG). For example, shareholders are barred from voting
under certain conditions (section 136 AktG). In addition, no
voting rights accrue to the company on the basis of the
shares it holds (section 71b AktG). The Executive Board is
not aware of any contractual restrictions relating to voting
rights or transfer of shares.

The company has been informed of the following direct or
indirect participating interests in the capital of KWS SAAT
AG in excess of 10 % of the voting rights in accordance
with section 21 and section 22 of the German Securities
Trading Act (WpHG):

• The voting shares, including mutual allocations, of the
members, foundations and companies of the families
Büchting/Giesecke and Arend Oetker listed below each
exceed 10 % and total 56.3 %.

Dr. agr. Carl-Ernst Büchting, Einbeck
Dr. Andreas J. Büchting, Einbeck
Christiane Stratmann, Meerbusch
Dorothea Schuppert, Augsburg
Michael C.-E. Büchting, Basel
Annette Büchting, Bremen
Stephan O. Büchting-Hansing, Ammerbuch-Entringen
Elke Giesecke, Altenberge
Christa Nagel, Springe
AKB Stiftung, Hannover
Büchting Beteiligungsgesellschaft mbH, Hannover
Dr. Arend Oetker, Berlin

Shares with special rights that grant powers of control have
not been issued by the company.

There is no special type of voting control for the participat-
ing interests of employees. Employees who have an inter-
est in the company’s capital exercise their control rights in
the same way as other shareholders.

At KWS SAAT AG, members of the Executive Board are
appointed and removed as provided for in section 84 AktG.
In compliance with sections 179 ff. AktG, amendments to
the Articles of Association of KWS SAAT AG require a reso-
lution to be adopted by the Annual Shareholders’ Meeting,
by a majority of at least three quarters of the capital stock
represented in adopting the resolution. The power to make
amendments to the Articles of Association that only affect
the wording (section 179 (1) sentence 2 AktG), has been
conferred on the Supervisory Board in accordance with the
Articles of Association of KWS SAAT AG.

The Executive Board is not now authorized to issue or buy
back shares.

Signiﬁ cant agreements subject to the condition of a change in
control pursuant to a takeover bid have not been concluded.
Moreover, there are no compensation agreements between
the company and the members of the Executive Board or
employees governing the case of a change in control.

Einbeck, October 7, 2008

KWS SAAT AG
THE EXECUTIVE BOARD

Balance
sheet

at June 30, 2008;
ﬁ gures in € thou-
sands, unless other-
wise speciﬁ ed

ASSETS

Intangible assets

Property, plant and equipment

Other ﬁ nancial assets

Noncurrent tax assets

Deferred tax assets

Noncurrent assets

Inventories and biological assets

Trade receivables

Available-for-sale securities

Cash and cash equivalents

Current tax assets

Other current assets

Subtotal of current assets

Noncurrent assets held for sale

Current assets

Total assets

EQUITY AND LIABILITIES

Subscribed capital

Capital reserve

Retained earnings

Minority interest

Equity

Long-term provisions

Long-term borrowings

Trade payables

Deferred tax liabilities

Other long-term liabilities

Noncurrent liabilities

Short-term provisions

Short-term borrowings

Trade payables

Current tax payables

Other liabilities

N ote N o.

06/30/2008

Previo us
year

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(8)

(11)

34,471

35,435

157,086

147,914

5,531

7,182

6,011

7,124

16,858

16,315

221,128

212,799

85,829

90,565

224,163

204,238

17,958

94,973

7,113

19,934

19,980

48,075

7,814

15,889

449,970

386,561

10,437

449,970

396,998

671,098

609,797

19,800

5,530

19,800

5,530

351,777

320,718

20,911

20,036

(12)

398,018

366,084

Income statement

for the period July 1, 2007 through June 30, 2008; ﬁ gures in € thousands,
unless otherwise speciﬁ ed

Net sales

Cost of sales

Gross proﬁ t on sales

Selling expenses

Research and development expenses

General and administrative expenses

Other operating income

Other operating expenses

Operating income

Interest and other income

Interest and other expenses

Share of proﬁ t from afﬁ liated companies

Other income from equity investments

Net ﬁ nancial income/expenses

Result of ordinary activities

Income taxes

Net income for the year

Share of minority interest

60,872

59,263

Net income after minority interest

N ote N o.

(19)

(20)

(21)

(22)

(23)

(25)

2007/08

599,089

305,423

293,666

Previo us
year

537,930

263,969

273,961

106,096

101,485

80,576

42,257

24,267

18,890

70,114

3,765

5,139

5,779

848

5,253

75,367

20,816

54,551

3,494

51,057

75,205

38,505

22,575

17,472

63,869

3,112

8,708

– 500

– 6,023

57,846

19,674

38,172

1,124

37,048

Earnings per share (in €)

7.74

5.61

(13)

2,629

1,983

13,815

11,259

90,558

88,238

3,842

36,863

22,639

30,940

3,887

2,440

16,683

4,530

86,803

71,282

4,510

39,838

19,151

20,688

Subtotal of current liabilities

182,522

155,469

Liabilities directly connected to noncurrent assets
held for sale

Current liabilities

Liabilities

(11)

(14)

1,441

182,522

156,910

273,080

243,713

Total equity and liabilities

671,098

609,797

Annual Financial Statements | Balance sheet I Income statement I 47

Statement of changes in ﬁ xed assets
2007/2008 and 2006/2007

Figures in € thousands, unless otherwise speciﬁ ed

translatio n
C urrency

C han g es in the
c o nsol. gro u p

A d ditio ns

Gross values

Disp osals

Transfers

translatio n
C urrency

C han g es in the
c o nsol. gro u p

A d ditio ns

Disp osals

Transfers

Amortization/depreciation

Net book values

Patents, industrial property rights
and software

Goodwill

Intangible assets

Land and buildings

Technical equipment
and machinery

Operating and ofﬁ ce equipment

Payments on account

Balance
07/01/2007

20,657

25,582

46,239

– 288

– 1,399

– 1,687

145,239

– 3,401

120,824

53,049

4,279

– 2,842

– 1,747

– 216

Property, plant and equipment

323,391

– 8,206

2,476

1,213

2,476

1,213

Balance
06/30/2008

21,634

24,183

45,817

Balance
07/01/2007

10,137

– 121

667

10,804

– 121

8,514

349

2,228

152,231

47,048

– 1,363

5,911

4,980

8,500

6,818

3,565

3,696

120,771

660

53,377

– 6,586

5,971

27,905

10,738

– 2

332,350

Financial assets

6,181

– 42

170

Assets

375,811

– 9,862

– 42

30,387

12,121

Balance
07/01/2006

6,006

384,173

Balance
06/30/2007

14,986

26,640

41,626

– 93

– 656

– 749

6,826

157

6,983

1,112

– 564

– 523

20,657

25,582

46,239

Patents, industrial property rights
and software

Goodwill

Intangible assets

Land and buildings

Technical equipment
and machinery

Operating and ofﬁ ce equipment

Payments on account

139,868

– 469

3,859

1,435

3,389

145,239

44,227

– 326

116,392

52,312

4,394

– 84

164

4,925

4,805

6,191

3,159

4,520

2,586

120,824

317

53,049

– 6,333

4,279

86,245

38,258

– 15

140

Property, plant and equipment

312,966

– 492

295

19,780

9,117

– 41

323,391

168,730

– 201

Afﬁ liated companies

Other ﬁ nancial assets

Financial assets

6,074

8,755

14,829

422

861

897

– 5,213

– 2,993

– 8,206

6,181

764

89,711

38,718

– 2,158

– 1,338

175,477

– 4,859

170

186,451

– 4,980

Balance
07/01/2006

9,985

1,232

11,217

– 38

– 1

– 39

1,873

1,212

1,873

1,212

3,906

182

6,625

4,283

6,719

3,265

14,814

10,166

305

16,992

11,378

Balance
06/30/2008

Previous
year

– 137

135

– 2

10,679

667

11,346

10,955

23,516

34,471

10,520

24,915

35,435

49,409

102,822

98,191

87,322

38,533

33,449

14,844

5,971

31,113

14,331

4,279

175,264

157,086

147,914

475

5,531

6,011

187,085

197,088

189,360

Balance
06/30/2007

Previous
year

1,278

1,096

10,137

1,278

1,096

– 564

667

10,804

10,520

24,915

35,435

5,001

25,338

30,339

3,754

768

160

47,048

98,191

95,641

6,534

4,280

2,926

4,015

14,568

7,709

219

– 162

– 813

89,711

38,718

31,113

14,331

4,279

30,147

14,054

4,394

175,477

147,914

144,236

170

6,011

6,074

7,991

14,065

Assets

369,421

– 1,208

309

27,185

11,126

– 8,770

375,811

180,711

– 240

16,065

8,805

– 1,377

186,451

189,360

188,640

Annual Financial Statements | Statement of changes in fixed assets I 49

Statement of changes in equity

Figures in € thousands, unless otherwise speciﬁ ed

S u bscrib e d ca pital

C a pital reserve

e q uity fro m earnin gs
A ccu m ulate d gro u p

A djust m ents fro m cur-
rency translatio n
R evaluatio n
reserve

Other transactio ns

E q uity

Parent company

Comprehensive other
group income

M in ority interest

A djust m ents fro m cur-
rency translatio n

Minority interests

Comprehensive other
group income

Other transactio ns

E q uity

Group equity

Balance as at June 30, 2006

19,800

5,530

298,174

– 4,763

– 9

610

319,342

18,761

– 139

18,622

337,964

Dividends paid

Other changes

Consolidated net income

Other recognized gains (losses)

Total consolidated gains (losses)

– 7,920

37,048

– 2,470

Balance as at June 30, 2007

19,800

5,530

327,302

– 7,233

Dividends paid

Other changes

Consolidated net income

Other recognized gains (losses)

Total consolidated gains (losses)

– 9,240

1,560

51,057

– 12,326

51,057

– 12,326

– 7,920

37,048

– 2,422

34,626

– 16

594

346,048

– 9,240

1,560

51,057

– 12,318

38,739

Balance as at June 30, 2008

19,800

5,530

370,679

– 19,559

594

377,107

– 264

1,124

19,648

– 426

– 1,993

3,494

20,723

531

392

– 200

192

– 4

– 264

1,124

527

1,651

20,036

– 426

– 1,993

3,494

– 200

3,294

20,911

– 8,184

38,172

– 1,895

36,277

366,084

– 9,666

– 433

54,551

– 12,518

42,033

398,018

Annual Financial Statements | Statement of changes in equity I 51

Cash ﬂ ow statement

Figures in € thousands, unless otherwise speciﬁ ed

Notes to the cash ﬂ ow statement

Figures in € thousands, unless otherwise speciﬁ ed; previous-year ﬁ gures in parentheses

Net income

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

Increase/decrease (–) in long-term provisions

Other noncash expenses/income (–)

Cash earnings

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 ﬁ nancing activities

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

Net cash from operating activities before external ﬁ nancing of pension provisions

External ﬁ nancing of pension provisions

Net cash from operating activities

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 ﬁ nancial assets

Payments (–) for ﬁ nancial assets

Proceeds from the sale of consolidated companies and other business units

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

N ote

2007/08

54,551

16,992

1,565

– 8,830

64,278

20,089

– 6,051

Previo us
year

38,172

16,065

– 1,113

– 5,147

47,977

7,923

– 375

– 27,090

– 7,353

23,354

74,580

14,216

62,388

– 11,256

(A)

74,580

51,132

848

1,783

– 26,668

– 24,024

– 2,476

– 4,390

170

– 6

12,025

– 1,969

– 62

– 95

Net cash from investing activities

(B)

– 18,075

– 26,737

Equity capital increase with no effect on proﬁ ts

Dividend payments (–) to shareholders parent and minority

Payments (–) to redeem borrowings

Net cash from ﬁ nancing activities

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

Cash and cash equivalents at end of year

– 9,666

– 1,927

– 8,184

– 2,955

(C)

– 11,593

– 11,068

44,912

13,327

– 36

68,055

(D)

112,931

893

– 1,939

154

– 892

55,620

68,055

The cash ﬂ ow statement, which has been prepared ac-
cording to IAS 7 (indirect method), shows the changes in
cash and cash equivalents of the KWS Group in the three
categories of operating activities, investing activities, and
ﬁ nancing activities. The effects of exchange rate changes
and changes in the consolidated group have been elimi-
nated from the respective balance sheet items, except
those affecting cash and cash equivalents.

(A) Cash ﬂ ows from operating activities
The cash proceeds from operating activities are primarily
determined by cash earnings. They were € 64,278 thou-
sand, € 16,301 thousand higher than the previous year. The
proportion of cash earnings included in sales was 10.7 %
(8.9 %). Lower inventories, higher receivables and an in-
crease in current provisions and liabilities resulted in cash
proceeds of € 10,302 thousand (€ 14,411 thousand). The
cash proceeds from operating activities also include inter-
est income of € 3,342 thousand (€ 3,052 thousand) and
dividend income of € 1,153 thousand (138 thousand) as
well as interest expense of € 1,607 thousand (€ 2,051 thou-
sand). € 0 (11,256) thousand was paid out for the external
ﬁ nancing of pension commitments. Income tax payments
amounted to € 21,324 thousand (€ 14,679 thousand).

(B) Cash ﬂ ows from investing activities
A net total of € 18,075 thousand (€ 26,737 thousand)
was required to ﬁ nance investing activities. An amount of
€ 29,144 thousand (€ 28,414 thousand) was paid for intan-
gible and tangible assets and an amount of € 6 thousand
(€ 62 thousand) for ﬁ nancial assets. There were total cash
receipts of € 1,019 thousand (€ 1,834 thousand) for dis-
posals of assets. In the ﬁ scal year under review, shares in
afﬁ liated companies were sold at a total price of € 12,025
thousand.

(C) Cash ﬂ ows from ﬁ nancing activities
Financing activities resulted in cash outﬂ ows of € 11,593
thousand (€ 11,068 thousand). The dividend payments to
shareholders parent and minority related to the dividends
of € 9,240 thousand (€ 7,920 thousand) paid to the share-
holders of KWS SAAT AG, as well as proﬁ t distributions
paid to other shareholders of and capital reductions at fully
consolidated subsidiaries of € 426 thousand (€ 264 thou-
sand). In addition, borrowings of € 1,927 thousand (€ 2,955
thousand) were repaid.

(D) Supplementary information on the cash ﬂ ow
statement
As in previous years, cash and cash equivalents are
composed of cash (on hand and balances with banks)
and current available-for-sale securities.

Cash and cash equivalents includes € 9,217 thousand
(€ 15,031 thousand) from partially consolidated companies.

Information on acquisitions and disposals of
sub sidiaries and other business units

Total amount of all purchase prices

2007/08

Total amount of sales prices

12,025

Total amount of cash components
of purchase prices

Total amount of cash components
of sales prices

Total amount of all cash and cash
equi valents acquired with the com-
panies

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

12,025

Previo us
year

153

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

ac q uire d

sold

ac q uire d

sold

2007/08

Previous year

Assets

7,393

207

Current assets, incl.
prepaid ex penses
(excluding cash and
cash equivalents)

Provisions

Liabilities, incl.
deferred income

3,072

1,302

1,208

– 90

3,009 –1,630

Annual Financial Statements | Cash flow statement I Notes to the cash flow statement I 53

Segment reporting

Figures in € thousands, unless otherwise speciﬁ ed; previous-year ﬁ gures in parentheses

Breeding & services
This segment includes the centrally controlled corporate
functions of research and breeding, as well as services for
the KWS product segments of sugarbeet, corn and cereals
and consulting services for the KWS Group and other
customers.

Considered a core competence for the KWS Group’s entire
product range, plant breeding, including the related bio-
technology research, is essentially concentrated at the
parent company in Einbeck. All the breeding material,
including the relevant information and expertise about
how to use it, is owned by KWS SAAT AG, with respect
to sugarbeet and corn, and by KWS LOCHOW GMBH,
with respect to cereals. Research and breeding are also
performed by the wholly-owned German subsidiary
PLANTA ANGEWANDTE PFLANZENGENETIK UND BIO-
TECHNOLOGIE GMBH and breeding activities are con-
ducted by eight (ten) other German and foreign subsidi-
aries and afﬁ liated companies.

Consulting services include the systems business of
KWS SAAT AG and its agricultural operations, KWS
KLOSTERGUT WIEBRECHTSHAUSEN GMBH, KWS
SAATFINANZ GMBH and EUROHYBRID GESELL-
SCHAFT FÜR GETREIDEZÜCHTUNG MBH.

The other services performed for the KWS product seg-
ments essentially include all the management services of
KWS SAAT AG, such as holding company and administra-
tive functions, including strategic development projects,
which are not directly charged to the product segments or
indirectly allocated to them by means of an appropriate
cost formula.

In accordance with its internal reporting system, the KWS
Group is primarily organized by the following business
segments:

• Sugarbeet
• Corn
• Cereals
• Breeding & services

The research and development function is contained in the
breeding & services segment. Because of their minor im-
portance within the KWS Group, the distribution and pro-
duction of oil and ﬁ eld seed are reported in the cereals and
corn segments, depending on the legal entities involved.

Description of segments

Sugarbeet
The results of the multiplication, processing and distribu-
tion activities for sugarbeet seed are reported under the
sugarbeet segment. Under the leadership of KWS SAAT
AG, fourteen foreign subsidiaries and afﬁ liated companies
and one subsidiary in Germany are active in this segment,
as in the previous ﬁ scal year.

Corn
KWS MAIS GMBH is the lead company for the corn seg-
ment. In addition to KWS MAIS GMBH, business activities
are (as in the previous year) conducted by one German
company and fourteen foreign 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 ﬁ eld seed.

Cereals
The lead company of this segment, which essentially
concerns the production and distribution of hybrid rye,
wheat, and barley, as well as oil and ﬁ eld seed, is KWS
LOCHOW GMBH, an 81 %-owned subsidiary of KWS
SAAT AG, with – as in the previous year – its three foreign
subsidiaries and afﬁ liated companies in France, Great
Britain, and Poland.

Segment information

Segment sales contains both sales from third parties
(external sales) and sales between the segments (interseg-
ment sales). The prices for intersegment sales are deter-
mined on an arm’s-length basis. Uniform royalty rates per
segment are used as the basis for this.

The breeding & services segment generates 93.4 % (92.6 %)
of its sales from the other segments. The sales of this seg-
ment represents 1.3 % (1.5 %) of the group’s external sales.
The corn segment is the largest contributor of external
sales, accounting for 54.9 % (51.2 %) of external sales, fol-
lowed by sugarbeet with 32.5 % (37.2 %) and cereals with
11.3 % (10.1 %).

2007/08

Previo us
year

2007/08

Previo us
year

2007/08

Previo us
year

Segment sales

Internal sales

External sales

194,796

329,131

69,401

121,755

715,083

199,880

275,689

57,195

109,043

641,807

212

2,018

113,737

115,994

160

2,727

100,990

103,877

194,769

328,919

67,383

8,018

199,880

275,529

54,468

8,053

599,089

537,930

Sugarbeet

Corn

Cereals

Breeding & services

KWS Group

External sales by region

2007/08

Previo us
year

Germany

151,106

132,437

Europe (excluding Germany)

263,298

244,818

Americas

Rest of world

KWS Group

160,342

141,956

24,343

18,719

599,089

537,930

69.1 % (70.1 %) of total sales are recorded in Europe
(including Germany).

The other noncash items recognized in the income
statement relate to noncash changes in the allowances
on inventories and receivables, and in provisions.

The operating income of each segment is reported as the
segment result. The segment results are presented on a
consolidated basis.

Depreciation and amortization charges of € 16,687
thousand (€ 15,631 thousand) allocated to the segments
relate exclusively to intangible assets and property, plant,
and equipment.

Annual Financial Statements | Segment reporting I 55

2007/08

Previo us
year

2007/08

Previo us
year

2007/08

Previo us
year

2007/08

Previo us
year

2007/08

Previo us
year

Segment
earnings

Depreciation
and
amortization

Other noncash
items

Assets

Liabilities

Notes

Figures in € thousands, unless otherwise speciﬁ ed; previous-year ﬁ gures in parentheses

Corn

Cereals

Breeding &
services

Sugarbeet

28,081

35,104

23,230

13,321

8,968

5,341

3,770

2,575

1,529

3,904

18,119

3,855

135,817

136,941

30,553

27,462

2,462

14,166

13,656

217,339

199,317

119,688

105,537

1,250

285

543

33,376

30,586

8,638

8,431

9,835

10,103

8,813

8,015

3,864

– 6,694

150,568

140,090

63,957

60,782

Total segments

70,114

63,869

16,687

15,631

36,434

11,360

537,100

506,934

222,836

202,212

Others

133,998

102,863

50,244

41,501

KWS Group

70,114

63,869

16,687

15,631

36,434

11,360

671,098

609,797

273,080

243,713

The operating assets of the segments are composed of
intangible assets, property, plant, and equipment, inven-
tories and all receivables, other assets, and prepaid ex-
penses that can be charged directly to the segments or
indirectly allocated to them by means of an appropriate
cost formula.

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 borrowings reported on the balance sheet, less provi-
sions for taxes and the portion of other liabilities that can-
not be charged directly to the segments or indirectly allo-
cated 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 allocated to the segments are reported as
“Others.”

Capital expenditure on assets was mainly attributable to
the breeding & services segment, where it amounted to
€ 13,865 thousand (€ 15,787 thousand), and the sugarbeet
segment, where it amounted to € 4,275 thousand (€ 4,868
thousand). 46 % (56 %) of capital expenditure was made in
Germany, mainly in Einbeck, and 32 % (21 %) in Europe
(excluding Germany).

Investments in long-term assets by segment

Sugarbeet

Corn

Cereals

Breeding & services

KWS Gruppe

2007/08

Previo us
year

4,275

8,293

3,948

13,865

30,381

4,868

3,612

2,496

15,787

26,763

Investments in long-term assets by region

2007/08

Previo us
year

Germany

13,885

14,887

Europe (excluding Germany)

North and South America

Rest of world

KWS Gruppe

9,579

5,845

1,072

5,526

5,513

837

30,381

26,763

Operating assets by region

2007/08

Previo us
year

Germany

201,714

194,521

Europe (excluding Germany)

185,261

176,776

North and South America

141,148

127,452

Rest of world

KWS Gruppe

8,977

8,185

537,100

506,934

The KWS Group (KWS Konzern) is a consolidated group as
deﬁ ned in the International Financial Reporting Standards
(IFRS) published by the International Accounting Standards
Board (IASB), London, taking into account the interpreta-
tions of the International Financial Reporting Interpretations
Committee (IFRIC) and in addition the commercial law regu-
lations to be applied pursuant to section 315a (1) of the HGB
(German Commercial Code). The consolidated ﬁ nancial
statements discharge the obligations of KWS LOCHOW
GMBH, Bergen, and KWS MAIS GMBH, Einbeck, to pro-
duce its own ﬁ nancial statements. The following standards
and interpretations have already been published, but have
not yet been applied: Amendments to IAS 1, 16, 19, 20,
23, 27, 28, 29, 31, 32, 36, 38, 39, 40, 41, IFRS 1, 2, 3, 5, 8
and IFRIC 12–14. Since these relate to supplementary dis-
closure obligations, there will be no effects on the balance
sheet or income statement. The possible effects of the
other changes are currently being examined. IFRS 7 was
applied for the ﬁ rst time in the year under review. The
statements were prepared under the assumption that the
operations of the company will be continued.

General disclosures

Companies consolidated in the KWS Group
The consolidated ﬁ nancial statements of the KWS Group
include the single-entity ﬁ nancial statements of KWS SAAT
AG and its subsidiaries in Germany and other countries in
which it directly or indirectly controls more than 50 % of the
voting rights. In addition, joint ventures are proportionately
consolidated, according to the percentage of equity held in
those companies. Subsidiaries and joint ventures that are
considered immaterial for the presentation and evaluation
of the ﬁ nancial position and performance of the group are
not included.

Consolidation methods
The single-entity ﬁ nancial statements of the individual sub-
sidiaries and joint ventures included in the consolidated
ﬁ nan cial statements were uniformly prepared on the basis
of the accounting and measurement methods applied at
KWS SAAT AG; they were audited by independent audi-

tors. For fully or proportionately consolidated units ac-
quired before July 1, 2003, the group exercised the option
allowed by IFRS 1 to maintain the consolidation proced u res
chosen to date. The goodwill reported in the HGB ﬁ nancial
statements as of June 30, 2003 was therefore transferred
unchanged at its carrying amount to the opening IFRS
balance sheet. For acquisitions made after June 30, 2003,
capital consolidation follows the purchase met h od by
allocating the cost of acquisition to the group’s interest
in the subsidiary’s equity at the time of acquisition. Any
excess of interest in equity over cost is recognized as
an asset, up to the amount by which fair value exceeds
the carrying amount. Any goodwill remaining after ﬁ rst-time
consolidation is recognized under intangible assets. Ac-
cording to IFRS 3, goodwill is not amortized, but tested for
impairment at least once a year (impairment only approach).
Investments in non-consolidated companies are carried
at cost. Goodwill is reported under intangible assets.

Joint ventures are carried according to the percentage of
equity held in the companies concerned using IAS 31.

Subsidiaries and joint ventures are consolidated and asso-
ciated companies measured at equity only if such recogni-
tion is considered material for the fair presentation of the
ﬁ nancial position and results of operations of the KWS
Group. As part of the elimination of intra-group balances,
borrowings, receivables, liabilities, and provisions are net-
ted between the consolidated companies. Intercompany
proﬁ ts not realized at group level are eliminated from intra-
group transactions. Sales, income, and expenses are
netted between consolidated companies, and intra-group
distributions of proﬁ t are eliminated.

Deferred taxes on consolidation transactions recognized
in income are calculated at the tax rate applicable to the
company concerned. These deferred taxes are aggregated
with the deferred taxes recognized in the separate ﬁ nancial
statements.

Minority interests are recognized in the amount of the im-
puted percentage of equity in the consolidated companies.

Annual Financial Statements | Segment reporting | Notes | General disclosures I 57

Currency translation
Under IAS 21, the ﬁ nancial statements of the consolidated
foreign subsidiaries and joint ventures that conduct their
business as ﬁ nancially, economically, and organizationally
independent entities are translated into euros using the
functional currency method as follows:

• Income statement items at the average exchange

rate for the year.

• Balance sheet items at the exchange rate on the

balance sheet date.

The difference resulting from the application of annual
average rates to the net proﬁ t for the period in the income
statement is taken directly to equity.

Classiﬁ cation of the balance sheet and the income
statement
The costs for the functions include all directly attributable
costs, including other taxes. Research and development
expenses were included to date in the cost of sales and are
now reported separately for reasons of transparency. The
previous year’s gross proﬁ t on sales has been adjusted
accordingly. Research grants are not deducted from the
costs to which they relate, but reported gross under other
operating income.

Accounting policies

indeﬁ nite useful life is not amortized, but tested for impair-
ment at least once a year. The procedure for the impair-
ment test is explained in the notes to the balance sheet.
Intangible assets acquired as part of business combina-
tions are carried separately from goodwill if they are sepa-
rable according to the deﬁ nition in IAS 38 or result from a
contractual or legal right, and fair value can be reliably
measured.

Property, plant, and equipment
Property, plant, and equipment is measured at cost less
straight-line depreciation. A loss is recognized for an im-
pairment expected to be permanent. In addition to directly
attributable costs, the cost of self-produced plant or equip-
ment also includes a proportion of the overheads and
depreciation/amortization, but no ﬁ nance charges. Depre-
ciation of buildings is based on a useful life of up to 50 years.
The useful lives of technical equipment and machinery
range from 5 to 15 years, and for operating and ofﬁ ce
equipment from 3 to 10 years. Low-value assets are fully
expensed in the year of purchase; they are reported as
additions and disposals in the year of purchase in the
statement of changes in noncurrent assets. Impairment
losses on pro perty, plant, and equipment are recognized
according to IAS 36 whenever the recoverable amount of
the assets is less than its carrying amount. The recover-
able amount is the higher of the asset’s net realizable value
and its value in use (value of future cash ﬂ ow expected to
be derived from the asset).

Consistency of accounting policies
The accounting policies are largely unchanged from the
previous year. All estimates and assessments as part of
accounting and measurement are continually reviewed;
they are based on historical patterns and expectations
about the future regarded as reasonable in the particular
circumstances.

Intangible assets
Purchased intangible assets are carried at cost less straight-
line amortization over a useful life of three to ten years.
Impairment losses on intangible assets with ﬁ nite useful
lives are recognized according to IAS 36. Goodwill with an

Financial instruments
Financial instruments are in particular ﬁ nancial assets and
ﬁ nancial liabilities. The ﬁ nancial assets consist primarily of
bank balances and cash on hand, trade receivables, other
receivables, and securities. The credit risk mainly com-
prises trade receivables. The amount recognized in the
balance sheet is net of allowances for receivables expected
to be uncollectible, estimated on the basis of historical
patterns and the current economic environment. The credit
risk on cash and derivative ﬁ nancial instruments is limited
because they are kept with banks that have been given a
good credit rating by international rating agencies. There
is no signiﬁ cant concentration of credit risks, because the

risks are spread over a large number of contract partners
and customers. The entire credit risk is limited to the re-
spective carrying amount. Comments on the risk manage-
ment system can be found in the management report.

The fair value of ﬁ nancial liabilities with a long-term ﬁ xed
interest rate is determined as present values of the pay-
ments related to the liabilities, using a yield curve applicable
on the balance sheet date.

Investments are measured at cost. The cost of at equity ac-
counted investments is increased or decreased by propor-
tionate changes in equity. Assets available for sale are
carried at market value if this can be reliably measured.
Unrealized gains and losses, including deferred taxes, are
recognized directly in the revaluation reserve under equity.
Permanent impairment losses are recognized immediately
through the income statement. Loans are carried at amor-
tized cost.

The ﬁ nancial liabilities comprise in particular trade payables,
borrowings and other liabilities.

The fair value of ﬁ nancial instruments is determined on the
basis of the market information available on the balance
sheet date and in accordance with the measurement met h-
ods applied.

The other noncurrrent ﬁ nancial assets are essentially
available for sale and are carried at market value where
possible. If a market value cannot be determined, the
amortized costs are carried as an alternative.

The carrying amount of receivables ﬁ xed-income securities
and cash is assumed as the fair value due to their short
term and the ﬁ xed-interest structure of the investments.

Derivative instruments held for trading are carried at market
values in accordance with IAS 39 and may have a positive
or negative value. This relates essentially to common de-
rivative ﬁ nancial instruments that are used to hedge interest
rate and foreign currency risks. In particular, the derivative
ﬁ nancial instruments are measured using recognized math-
ematical models, such as present value or Black-Scholes,
to calculate option values, taking their volatility, remaining
maturity, and capital market interest rates into account.

Subsequent measurement of the ﬁ nancial instruments
depends on their classiﬁ cation in one of the following
categories deﬁ ned in IAS 39:

• Loans and receivables

This category mainly comprises trade receivables, other
receivables, loans and cash, including ﬁ xed-income
short-term securities. Loans are measured at cost.
Loans that carry no interest or only low interest are
measured at their present value. Discernable risks are
taken into account by recognition of an impairment loss.
After their initial recognition, the other ﬁ nancial assets in
this category are measured at amortized cost using the
effective interest method, minus impairments. Receiv-
ables that do not carry any interest or only low interest
and with a term of more than twelve months are dis-
counted. Necessary value impairments are based on
the expected credit risk and are carried in separate
impairment accounts. Receivables are derecognized
if they are settled or uncollectible. Other assets are
derecognized at the time they are disposed of or if
they have no value.

• Financial assets at fair value

Held-for-trading securities acquired with the intention
of being sold in the short term are assigned to this cat-
egory. Derivate ﬁ nancial instruments with a positive
market value are also categorized as held for trading,
unless they are designated hedging instruments in ac-
cordance with IAS 39. They are measured at fair value.
Changes in value are recognized in income. Securities
are derecognized after being sold on the settlement
date.

• Available-for-sale ﬁ nancial assets

This category covers all ﬁ nancial assets that have not
been assigned to one of the above categories. In prin-
ciple, securities are classed as available for sale, un-
less a different classiﬁ cation is required due to the fact
that they have an explicit purpose. Equity instruments,

Annual Financial Statements | Notes | General disclosures I 59

such as shares in (unconsolidated) afﬁ liated companies
and shares held in listed companies, are also included
in this category. In principle, ﬁ nancial instruments in
this category are measured at their fair value in subse-
quent recognition. The changes to their fair value in
subsequent recognition are recognized as unrealized
gains and losses directly in equity in the revaluation
reserve. The realized gains or losses are not recog-
nized as proﬁ t or loss until they are disposed of. If there
is objective evidence of permanent impairment on the
balance sheet date, the instruments are written down
to the lower value. The amount carried in the revalua-
tion reserve is derecognized in equity. Any subsequent
decreases in the impairment loss are recognized di-
rectly in equity.

• Financial liabilities measured at amortized cost

All ﬁ nancial liabilities, with the exception of derivative
ﬁ nancial instruments, are measured at amortized cost
using the effective interest method. The liabilities are
derecognized at the time they are settled or when the
reason why they were formed no longer exists.

• Financial liabilities at fair value

This category covers derivative ﬁ nancial instruments
that have a negative market value and are categorized
in principle as held for trading. Derivates that are desig-
nated hedging instruments in accordance with IAS 39
are excluded from this provision.

Derivatives
Derivatives cannot be designated as hedging instruments
pursuant to the regulations of IAS 39. They are measured
at their market value. The changes in their market value are
recognized in the income statement. Derivatives are derec-
ognized on their day of settlement.

Inventories and biological assets
Inventories are carried at cost less an allowance for obso-
lescent or slow-moving items. In addition to directly attrib-
utable costs, the cost of sales also includes indirect labor

and materials including depreciation under IAS 2. Under
IAS 41, biological assets are measured at the expected
sales proceeds, less costs to sell. The measurement pro-
cedure used is based on standard industry value tables.

Assets for sale
In accordance with IFRS 5, assets for sale are measured
at the lower of carrying amount and fair value less costs to
sell at the time they are intended to be sold.

Deferred taxes
Deferred taxes are calculated on differences between the
IFRS carrying amounts of assets and liabilities and their tax
base, and on loss carryforwards; they are reported on a
gross basis. Under IAS 12, deferred taxes are calculated
on the basis of the applicable local income tax.

Provisions for pensions and other employee beneﬁ ts
Under IAS 19, obligations from direct pension commitments
are measured using actuarial principles under the accrued
beneﬁ t valuation method. Gains or losses from unplanned
changes in accrued beneﬁ ts and from changes in actuarial
assumptions are disregarded if the change moves within
a 10 % corridor of the accrued beneﬁ ts. Only if the gains or
losses exceed this threshold they will be recognized as in-
come and distributed over the remaining working lives and
included in the provision.

Other provisions
Tax and other provisions account for all discernible risks
and contingent liabilities. Depending on circumstances,
they are measured at the most probable amount or at the
expected value.

Contingent liabilities
The contingent liabilities recognized in the balance sheet
correspond to the loan amounts drawn down as of the
balance sheet date.

Consolidated group and changes in the consolidated
group

Number of companies including KWS SAAT AG

D o m estic

F oreig n

Total

D o m estic

F oreig n

Total

2007/08

Previous year

Consolidated

Consolidated
at quota

At equity

Total

The companies are listed under item number (32).

Changes in the fully consolidated companies relate to
establishment of the new wholly-owned subsidiary of
KWS INTERSAAT GMBH
• KWS SCANDINAVIA A/S, Guldborgsund, Denmark

establishment of the new wholly-owned subsidiary of
KWS RUS OOO, Moscow, Russia
• KWS R&D RUS LTD., Lipezk, Russia

and ﬁ rst-time consolidation of the wholly-owned subsidiary
of KWS SAAT AG
• RAGIS KARTOFFELZUCHT- UND HANDELSGESELL-
SCHAFT MBH, Klein Wanzleben, which is to run the
KWS Group’s future potato activities.

On the other hand KWS SAAT AG sold its 100 % stake in
RAGIS KARTOFFELZUCHT- & HANDELSGESELLSCHAFT
MBH, Einbeck, effective July 1, 2007.

The sale resulted in the disposal of the following assets and
liabilities (previous year: € 0 thousand):

Investments in afﬁ liated companies

Other ﬁ nancial assets

Noncurrent tax receivables

Other assets

Total assets

Pension provisions

Other provisions

Tax liabilities

Trade payables

Other liabilities

Total liabilities

2007/08

5,213

2,180

370

2,674

10,437

1,040

150

2,975

4,216

The previously unconsolidated subsidiary
• ZKW ZÜCHTUNGSGESELLSCHAFT KLEIN WANZLE-
BEN MBH, Klein Wanzleben, which was merged with
KWS KLOSTERGUT WIEBRECHTSHAUSEN GMBH
effective July 1, 2007

In addition, KWS INTERSAAT GMBH sold its 100 % stake in
KWS SCANDINAVIA AB, Stockholm, Sweden, in the year
under review at the proportion of equity held of € 25 thou-
sand.

Annual Financial Statements | Notes | General disclosures I 61

The ﬁ nancial position and results of operations of proportionately consolidated and at equity accounted companies are as
follows:

2007/08

Previo us
year

2007/08

Previo us
year

Noncurrent assets

Current assets

Total assets

Equity

Noncurrent liabilities

Current liabilities

Total equity and liabilities

Net sales

Net proﬁ t for the year

Proportionately consolidated
companies

Companies carried
at equity

25,621

78,696

104,317

49,332

752

54,233

104,317

126,775

7,966

27,571

77,713

105,284

53,781

802

50,701

105,284

120,899

11,922

20,000

10,000

30,000

22,700

2,800

4,500

30,000

9,500

1,200

The companies carried at equity in the previous year re-
lated solely to the potato activities that were sold effective
July 1, 2007, and had been assigned to the breeding &

services segment. The details for ﬁ scal 2006/07 corre-
sponded to the ﬁ gures anticipated at the time of the
intended sale.

Notes to the balance sheet

Figures in € thousands, unless otherwise speciﬁ ed; previous-year ﬁ gures in parentheses

(1) Assets
The statement of changes in noncurrent assets contains a
breakdown of assets summarized in the balance sheet and
shows how they changed in 2007/08. Capital expenditure
on assets was € 30,387 thousand (€ 27,185 thousand).
The management report describes the signiﬁ cant additions
to assets. Depreciation and amortization amounted to
€ 16,992 thousand (€ 16,065 thousand).

(2) Intangible assets
This item includes purchased varieties, rights to varieties
and distribution rights, software licenses for electronic data
processing, and goodwill. Additions to intangible assets
amounting to € 2,476 thousand (€ 6,983 thousand) relate
primarily to the acquisition of software licenses. Amortiza-
tion of intangible assets amounted to € 1,873 thousand
(€ 1,278 thousand); this charge is included in the relevant
functional costs, depending on the operational use of the
intangible assets.

The goodwill recognized as an asset relates mainly to the
company AGRELIANT GENETICS LLC. (€ 15,595 thou-
sand) in the corn segment and the companies SOCIETE
DE MARTINVAL S.A. (€ 3,706 thousand) and KWS UK LTD.
(€ 1,693 thousand) in the cereals segment.

In order to meet the requirements of IFRS 3 in combination
with IAS 36 and to determine any impairment of goodwill,
cash-generating units have been deﬁ ned in line with inter-
nal reporting guidelines. In the KWS Group, these units
are the legal entities. To test for impairment, the carrying
amount of each entity is determined by allocating the
assets and liabilities, including attributable goodwill and
intangible assets. An 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 en-
tity’s net realizable value and its value in use (value of fu-
ture cash ﬂ ows expected to be derived from the entity).
The impairment test uses the expected future cash ﬂ ows
on which the medium-term plans of the companies are
based; these plans, which cover a period of four years,
have been approved by the Executive Board. They are
based on historical patterns and expectations about future
market development.

For the European and American markets, the key assump-
tions on which corporate planning is based include as-
sumptions about price trends for seed, in addition to the
development of market shares and the regulatory frame-
work. Company-internal projections take the assumptions
of industry-speciﬁ c market analyses and company-related
growth perspectives into account.

A standard discount rate of 8.0 % (7.9 %) has been as-
sumed to calculate present values. A growth rate of 1.5 %
(1.5 %) has been assumed beyond the detailed planning
horizon in order to allow for extrapolation in line with the
expected inﬂ ation rate. Tests provided evidence that the
goodwill recognized in the consolidated balance sheet and
determined for the cash-generating units is not impaired.
No impairment losses were required.

(3) Property, plant, and equipment
Capital expenditure amounted to € 27,905 thousand
(€ 19,780 thousand) and depreciation amounted to
€ 14,814 thousand (€ 14,568 thousand). The management
report describes the signiﬁ cant capital expenditure.

(4) Financial assets
Investments in non-consolidated subsidiaries and shares
in cooperatives and GmbHs that are of minor signiﬁ cance,
with an amortized cost totaling € 988 thousand (€ 1,398
thousand), are reported in this account since a market
value cannot be reliably determined. As a result, the mutual
investment in our French partner RAGT SEMENCES S.A.
is carried at an unchanged cost of € 4,000 thousand. Listed
shares are carried at market value of € 68 thousand
(€ 97 thousand). This account also includes interest-bearing
homebuilding loans to employees and other interest-
bearing loans totaling € 475 thousand (€ 516 thousand).
Amortization of ﬁ nancial assets amounted to € 305 thou-
sand (€ 219 thousand).

(5) Noncurrent tax receivables
This relates to the present value of the corporate income
tax credit balance, which was last determined at Decem-
ber 31, 2006, and will be paid in 10 equal annual amounts
starting on September 30, 2008.

Annual Financial Statements | Notes | General disclosures | Notes to the balance sheet I 63

(6) Deferred tax assets
Under IAS 12, deferred tax assets are calculated as the
difference between the IFRS balance sheet amount and
the tax base. They are reported on a gross basis and total
€ 16,858 thousand (€ 16,315 thousand), of which € 2,290
thousand (€ 1,285 thousand) will be carried forward for the
future use of tax losses.

(8) Current receivables

Trade receivables

Current tax assets

Other current assets

06/30/2008

Previo us
year

224,163

204,238

7,113

7,814

19,934

15,889

251,210

227,941

(7) Inventories and biological assets

Trade receivables amounted to € 224,163 thousand, an
increase of 9.8 % over the ﬁ gure of € 204,238 thousand
for the previous year; this amount includes € 309 thousand
(€ 926 thousand) receivables from related parties.

The already overdue trade receivables that have not
been written down fully amount to € 7,226 thousand
(€ 896 thousand).

There are no indications on the balance sheet date that
customers who owe trade receivables that have not been
written down and are not overdue will not meet their pay-
ment obligations.

Raw materials and consumables

Work in process

Immature biological assets

Finished goods

06/30/2008

Previo us
year

15,290

26,518

7,348

36,673

85,829

13,147

27,078

6,092

44,248

90,565

Inventories decreased by € 4,736 thousand, or – 5.2 %, net
of writedowns totaling € 30,262 thousand (€ 32,190 thou-
sand). Immature biological assets relate to living plants in
the process of growing (before harvest). The ﬁ eld inven-
tories of the previous year have been harvested in full and
the ﬁ elds have been newly tilled in the year under review.
Public subsidies of € 1,363 thousand (€ 1,261 thousand),
for which all the requirements were met at the balance
sheet date, were granted for the total area under cultivation
of 4,289 (4,218) ha. Future subsidies depend on the further
development of European agricultural policy.

≤ 60 d ays

61–120 d ays

121–180 d ays

> 180 d ays

06/30/2008

Trade receivables

Other receivables

06/30/2007

Trade receivables

Other receivables

Carrying
amount

224,163

3,144

227,307

204,238

4,487

208,725

Of which: neither
written down nor
overdue on the
balance sheet
date

Of which: not written down on the
balance sheet date and overdue in the
following time frames

Of which: written
down and not
overdue on the
balance sheet
date

181,535

16,141

6,986

1,390

3,140

184,675

16,141

6,986

1,390

174,733

15,115

4,076

4,462

179,195

15,115

4,083

347

5,249

5,267

10,885

3,822

The following allowances have been made for possible
risks of non-payment:

Allowances for receivables

07/01

A d ditio n

Disp osal

R eversal

06/30

2007/08

19,707

2006/07

17,322

2,499

5,660

3,923

2,212

3,925

14,358

1,063

19,707

Other current assets also include current ﬁ nancing receiv-
ables and prepaid expenses.

Current ﬁ nancing receivables include an amount of € 68
thousand (€ 11 thousand) receivable from related parties.

(10) Cash
Cash of € 94,973 thousand (€ 48,075 thousand) consists
of balances with banks and cash on hand. The cash ﬂ ow
statement explains the change in this item compared with
the previous year, together with the change in securities.

(11) Noncurrent assets held for sale
The at equity accounted investments in potato business,
which was sold effective July 1, 2007, and all further related
assets were reported in the previous year.

(12) Equity
The fully paid-up subscribed capital of KWS SAAT AG is
still € 19,800,000.00. The bearer shares are certiﬁ cated
by a global certiﬁ cate for 6,600,000 shares. The company
does not hold any shares on its own.

Current receivables include an amount of € 124 thousand
(€ 470 thousand) due after more than one year.

Equity (including minority interest) increased by € 31,934
thousand, from € 366,084 thousand to € 398,018 thou-
sand. For details, see the statement of changes in equity.

(9) Securities
Securities amounting to € 17,958 thousand (€ 19,980 thou-
sand) relate primarily to short-term liabilities securities and
fund shares.

Annual Financial Statements | Notes | Notes to the balance sheet I 65

(13) Noncurrent liabilities

The planned assets changed as follows during the ﬁ scal year:

Long-term provisions

Pension provisions

Other provisions

07/01/2007

55,403

3,860

59,263

C han g es in the
c o nsol. gro u p,
currency

126

888

1,014

A d ditio n

4,599

558

5,157

C o nsu m ptio n

3,820

293

4,113

R eversal

421

449

06/30/2008

56,280

4,592

60,872

06/30/2008

Previo us
year

Long-term provisions

60,872

59,263

Long-term ﬁ nancial borrowings

Trade payables

Deferred tax liabilities

Other long-term liabilities

2,692

1,983

13,815

11,259

90,558

3,887

2,440

16,683

4,530

86,803

Retirement beneﬁ ts are based on deﬁ ned beneﬁ t obliga-
tions, determined by years of service and pensionable
compensation.

Pension provisions are measured using the accrued beneﬁ t
method under IAS 19, on the basis of assumptions about
future development. The assumptions in detail are that
wages and salaries will increase by 2.80 % (2.00 %) annu-
ally and pensions by 2.00 % (1.50 %) annually.

The discount rate was 6.40 %, compared with 5.00 % the
year before.

No income or expenses were recognized as a result of
changes in retirement obligations or beneﬁ ts payable or
from the adjustment to assumptions. For beneﬁ t obliga-
tions backed by a guarantee by an insurance company, the
planned assets of € 7,416 thousand (€ 8,174 thousand) cor-
respond to the present value of the obligation.

The interest expenses on the remaining pension provisions
are recognized in net-ﬁ nancial income/expenses or cost.
The expenses of the new pension entitlements that arose
during the ﬁ scal year are recognized in functional costs.

The accrued beneﬁ t is reconciled to the provisions reported in the consolidated
ﬁ nancial statements as follows:

Accrued beneﬁ t entitlements at beginning of ﬁ scal year

Cost of additional beneﬁ t entitlements

Interest expenses on beneﬁ t entitlements acquired in previous years

Changes in consolidated group and currency

Changes in actuarial gains/losses

Pension payments

Accrued beneﬁ t entitlements at end of ﬁ scal year

Present value of planned assets

Actuarial gains/losses

Pension provisions at end of ﬁ scal year

2007/08

Previo us
year

73,207

72,802

1,744

3,213

1,169

3,573

126

– 1,040

– 5,711

4,207

68,372

13,577

550

3,847

73,207

14,086

1,485

– 3,718

56,280

55,403

Present value of planned assets at July 1

Expected gains from planned assets

Changes in actuarial gains/losses

Employer's contribution to external social security bodies

Payments from external social security bodies

Adjustments to the planned assets

Present value of planned assets at June 30

2007/08

14,086

866

– 770

Previo us
year

5,012

1,111

11,256

605

13,577

222

– 3,082

14,086

In addition, the beneﬁ t obligation from salary conversion was
backed by a guarantee that exactly matches the present val-
ue of the obligation of € 3,744 thousand (€ 4,113 thousand)
(deﬁ ned contribution plan).

The long-term ﬁ nancial borrowings include loans from banks
amounting to € 2,629 thousand (€ 3,045 thousand).

The remaining loans payable have remaining maturities
through 2017.

Under IAS 12, deferred tax liabilities are calculated as the
difference between the IFRS balance sheet amount and
the tax base. They are reported on a gross basis and total
€ 13,815 thousand (€ 16,683 thousand).

(14) Current liabilities

Short-term provisions

Current liabilities to banks

Current liabilities to afﬁ liates

Other current ﬁ nancial liabilities

Short-term borrowings

Trade payables to afﬁ liates

Trade payables to third party

Trade payables

Tax liabilities

Other liabilities

Liabilities directly connected to noncurrent assets held for sale

06/30/2008

Previo us
year

88,238

71,282

2,784

3,275

993

760

475

3,842

4,510

36,863

39,804

39,838

22,639

19,151

30,940

20,688

1,441

182,522

156,910

Short-term liabilities increased by a total of € 25,612 thou-
sand to € 182,522 thousand.

The tax liabilities of € 22,639 thousand (€ 19,151 thousand)
include amounts for the year under review and the period

not yet concluded by the external tax audit. Liabilities in
direct connection with noncurrent assets held for sale
relate to the liabilities disposed of as part of sale of the
potato activities.

Annual Financial Statements | Notes | Notes to the balance sheet I 67

The carrying amounts and fair values of the ﬁ nancial instruments are as follows:

receiva bles
L o ans an d

Financial assets
at fair value

A vaila ble-for-sale
ﬁ nancial assets

Total carryin g
a m o u nt

Financial instruments

Balance as at June 30, 2008
Financial assets

Other ﬁ nancial assets

Trade receivables

Securities

Cash and cash equivalents

Other current assets

Derivative ﬁ nancial instruments

Total per category

Fair values

Carrying amounts

5,531

224,163

17,958

94,973

19,333

601

224,163

17,958

94,973

19,333

362,559

356,427

601

5,531

224,163

17,958

94,973

19,333

601

5,531

362,559

Financial lia bilities
a m ortize d c ost
m easure d at

Financial lia bilities
at fair value

Total carryin g
a m o u nt

Financial instruments

Fair values

Carrying amounts

2,491

1,983

11,259

3,842

36,863

29,179

1,761

87,378

2,629

1,983

11,259

3,842

36,863

29,179

85,755

1,761

2,629

1,983

11,259

3,842

36,863

29,179

1,761

87,516

Balance as at June 30, 2008
Financial liabilities

Long-term borrowings

Long-term trade payables

Other noncurrent liabilities

Short-term borrowings

Short-term trade payables

Other liabilities

Derivative ﬁ nancial instruments

Total per category

07/01/2007

C han g es in the
c o nsol. gro u p,
currency

A d ditio n

C o nsu m ptio n

R eversal

06/30/2008

49,331

– 6,629

62,014

33,971

2,073

68,672

11,165

10,786

71,282

– 353

– 6,982

5,513

12,747

80,274

10,880

8,801

53,652

179

432

2,684

5,619

13,947

88,238

Short-term provisions

Obligations from
sales transaction

Obligations from
purchase transaction

Other obligations

(15) Derivative instruments

N o m inal
v olu m e

C arryin g
a m o u nts

M arket
v alues

06/30/2008

Currency hedges

38,096

– 1,845

Interest-rate hedges

Commodity hedges

39,600

10,765

543

Of the currency hedges, € 4,839 thousand have remaining
maturities of more than one year. Of the interest-rate de-
rivatives, hedges with a nominal volume of € 14,000 thou-
sand will mature within one to ﬁ ve years. Transactions with
a volume of € 20,600 thousand have remaining maturities
of more than 5 years. The commodity hedges have remain-
ing maturities of less than one year.

In order to assess the risk of exchange rate changes, the
sensitivity of a currency to ﬂ uctuations was determined.
After the euro, the US dollar is the most important currency
in the KWS Group. All other currencies are of minor impor-
tance. The average exchange rate in the ﬁ scal year was
1.49 USD/€. If the US dollar depreciated by 10 %, net sales
would decline by around 3 % and operating income like-
wise by around 3 %. If the US dollar appreciated by 10 %,
net sales and income would each rise by 3 %. Equity would
change by up to € 1.2 million in the event of such a change
in the exchange rate.

In order to assess the risk of interest rate changes, the
sensitivity of interest rates to ﬂ uctuations was determined.
The average rate of interest in the ﬁ scal year was 4.5 %.
A 1 % increase in the rate of interest would add a further
€ 0.5 million to interest result; a reduction of 1 % would
reduce it by € 0.5 million. Equity would change by up to
€ 0.4 million in the event of such a change in the rate of
interest.

In order to assess the risk of changes in commodity prices,
the sensitivity of commodity prices to ﬂ uctuations was

determined. A 10 % increase in commodity prices would
increase the cost of sales by around 5 %; a fall would re-
duce it by around 5 %. Equity would change by around
€ 11 million in the event of such a change in commodity
prices.

(16) Financial instruments
The table below presents the net gains/losses carried
in the income statement for ﬁ nancial instruments in each
measurement category.

2007/08

Previo us
year

Available-for-sale
ﬁ nancial assets

Financial assets at fair value

Loans and receivables

Financial liabilities measured
at amortized cost

Financial liabilities at fair value

6,626

5,783

– 427

114

– 932

– 1,707

– 3,575

– 1,696

384

The net income from ﬁ nancial assets includes income and
expenses from ﬁ nancial assets apart from income from the
sale of the potato activities (€ 5,779 thousand). The net
gain/loss from loans and receivables mainly includes ef-
fects from changes in the allowances for impairment. The
net gains/losses from ﬁ nancial assets at fair value and ﬁ -
nancial liabilities at fair value mainly include changes in the
market value of derivative ﬁ nancial instruments. The net
losses from ﬁ nancial liabilities measured at amortized cost
mainly consist of interest expense.

Interest income from ﬁ nancial assets that are not measured
at fair value and recognized in the income statement was
€ 3,424 thousand (€ 2,793 thousand). Interest expenses for
ﬁ nancial borrowings were € 1,707 thousand (€ 2,000 thou-
sand).

Annual Financial Statements | Notes | Notes to the balance sheet I 69

receiva bles
L o ans an d

Financial assets
at fair value

A vaila ble-for-sale
ﬁ nancial assets

Total carryin g
a m o u nt

Financial instruments

Notes to the income statement

Figures in € thousands, unless otherwise speciﬁ ed; previous-year ﬁ gures in parentheses

Balance as at June 30, 2007
Financial assets

Other ﬁ nancial assets

Trade receivables

Securities

Cash and cash equivalents

Other current assets

Derivative ﬁ nancial instruments

Total per category

Fair values

Carrying amounts

6,010

204,238

19,980

48,075

15,296

593

204,238

19,980

48,075

15,296

294,193

287,590

593

6,010

204,238

19,980

48,075

15,296

593

6,010

294,193

Financial lia bilities
a m ortize d c ost
m easure d at

Financial lia bilities
at fair value

Financial instruments

Balance as at June 30, 2007
Financial liabilities

Long-term borrowings

Long-term trade payables

Other noncurrent liabilities

Short-term borrowings

Short-term trade payables

Other liabilities

Derivative ﬁ nancial instruments

Total per category

Fair values

Carrying amounts

3,766

2,440

4,530

4,510

39,838

20,489

199

75,772

3,887

2,440

4,530

4,510

39,838

20,489

75,694

199

Total carryin g
a m o u nt

3,887

2,440

4,530

4,510

39,838

20,489

199

75,893

None of the reported ﬁ nancial instruments will be held until
it ﬁ nally matures.

which a total of € 1,769 thousand (€ 2,089 thousand) was
paid in the year under review. The main leasehold obliga-
tions relate to land under cultivation.

(17) Contingent liabilities
As in the previous year, there are no contingent liabilities
to report.

(18) Other ﬁ nancial obligations
There was a € 3,961 thousand (€ 2,571 thousand) obligation
from uncompleted capital expenditure projects.

The leases relate primarily to full-service agreements for IT
equipment and ﬂ eet vehicles, which also include services for

Obligations under rental
agreements and leases

Due in ﬁ scal year 2008/2009

Due 2009/10 through 2012/2013

Due after 2012/13

06/30/2008

6,065

8,055

2,266

Previo us
year

7,509

9,951

2,494

16,386

19,954

Income statement for the period July 1, 2007 through June 30, 2008

Net sales

Cost of sales

Gross proﬁ t on sales

Selling expenses

Research and development expenses

General and administrative expenses

Other operating income

Other operating expenses

Operating income

Net ﬁ nancial income/expenses

Result of ordinary activities

Income taxes

Net income for the year

Shares of minority interest

Net income after minority interest

€ millio ns

% of sales

€ millio ns

% of sales

2007/08

Previous year

599.1

305.4

293.7

106.1

80.6

42.3

24.3

18.9

70.1

5.3

75.4

20.8

54.6

3.5

51.1

100.0

51.0

49.0

17.7

13.5

7.1

4.2

3.2

11.7

0.9

12.6

3.5

9.1

0.6

8.5

537.9

263.9

274.0

101.5

75.2

38.5

22.6

17.5

63.9

– 6.0

57.9

19.7

38.2

1.1

37.1

100.0

49.1

50.9

18.9

13.9

7.2

4.2

3.2

11.9

–1.1

10.8

3.7

7.1

0.2

6.9

(19) Net sales

By product category

2007/08

Previo us
year

Certiﬁ ed seed sales

545,063

488,536

Royalties income

Basic seed sales

Services fee income

Other sales

By region

Germany

Europe

Americas

Rest of world

30,267

28,011

6,898

3,082

5,649

3,234

13,779

12,500

599,089

537,930

151,106

132,437

263,298

244,818

160,342

141,956

24,343

18,719

599,089

537,930

For further details of sales, see segment reporting.

Sales are recognized 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.

The cost of sales increased by € 41,454 thousand to
€ 305,423 thousand, or 51.0 % (49.1 %) of sales. The total cost
of goods sold was € 143,851 thousand (€ 132,853 thousand).

Allowances on inventories totaling € 1,929 thousand, less
than the previous year’s € – 3,061 thousand, were required.
They were charged to segment results as follows: charged
to corn € 952 thousand (€ 3,829 thousand) and to breed-
ing & services € 88 thousand (€ – 709 thousand); there was
a reduction of € 2,821 thousand (€ 312 thousand) in the
allowances at the sugarbeet segment and of € 148 thou-
sand (€ – 253 thousand) at cereals.

Research and development is recognized as an expense
in the year it is incurred; in the year under review, this
amounted to € 80,576 thousand (€ 75,205 thousand the
year before). Development costs for new varieties are not
recognized as an asset because evidence of future eco-
nomic beneﬁ t can only be provided after the variety has
been ofﬁ cially certiﬁ ed. The € 4,611 thousand increase in
selling expenses to € 106,096 thousand is mainly due to

Annual Financial Statements | Notes | Notes to the balance sheet | Notes to the income statement I 71

expanded activities in the North America and Southern/
Southeastern Europe regions. This is 17.7 % of sales, down
from 18.9 % the year before.

Legal form expenses

Allowances on receivables

Counterparty default

2007/08

Previo us
year

843

2,499

302

800

5,660

1,172

10,781

3,792

129

1,349

2,987

856

1,893

3,299

18,890

17,472

2007/08

Previo us
year

3,589

1,707

131

3,052

2,052

3,213

6,655

167

Exchange rate losses and losses on
currency and interest rate hedges

Losses from sales of ﬁ xed assets

Expenses relating to previous periods

Other expenses

(22) Net ﬁ nancial income/expenses

Interest income

Interest expenses

Income from securities

Income from other ﬁ nancial assets

Reversal of impairment losses
on other long-term investments

Interest expenses on donation
of pension provisions

Interest expense for other
long-term provisions

Interest expense for ﬁ nance leasing

Net interest expense

– 1,374

– 5,596

Proﬁ t from afﬁ liated companies

5,779

– 500

Net income from subsidiaries
and joint ventures

Impairment losses on goodwill
from afﬁ liated companies

Depreciations of subsidiaries

Net income from equity
investments

1,147

305

138

6,627

– 427

Net ﬁ nancial income/expenses

5,253

– 6,023

The net ﬁ nancial result increased by a total € 11,276 thou-
sand to € 5,253 thousand. In the previous year, the interest
expenses on donation of pension provisions contained
€ 3,082 thousand for adjustment of the planned assets as part
of the pension obligations, with the result that net ﬁ nancial
income/expenses was € – 1,374 thousand compared with
€ – 5,596 thousand the year before. Net income from equity
investments increased by € 7,054 thousand to € 6,627 thou-
sand, in particular due to disposal of the potato business.

General and administrative expenses increased by
€ 3,752 thousand to € 42,257 thousand, representing 7.1 %
of sales, after 7.2 % the year before.

(20) Other operating income

2007/08

Previo us
year

Income from sales of ﬁ xed assets

401

1,231

Income from the reversal
of provisions

3,133

3,372

Exchange rate gains and gains from
currency and interest rate hedges

6,240

5,692

Income from recoveries on
receivables written off

Income from reversal of allowances
of receivables

Research grants

Income relating to previous periods

Income from cost allocations

Income from loss
compensation received

Miscellaneous other
operating income

3,925

1,620

658

174

1,063

1,561

1,034

461

8,005

8,150

24,267

22,575

Income from foreign exchange transactions, reversals of pro-
visions and allowances for receivables that were no longer
required, together with book proﬁ ts from disposals of prop-
erty, plant and equipment and research grants received, re-
sulted in other operating income totaling € 24,267 thousand,
compared with € 22,575 thousand the year before.

(21) Other operating expenses
Other operating expenses indicate in particular the lower
risk of counterparty defaults, whereas the cost of foreign
exchange cover and losses on currency and interest rate
hedges increased sharply. Of the necessary allowances
for receivables, € 1,468 thousand (€ 2,987 thousand) was
charged to the sugarbeet segment, € 1,004 thousand
(€ 2,521 thousand) to the corn segment, € 27 thousand
(€ 0 thousand) to the cereals segment and € 0 thousand
(€ 152 thousand) to the breeding & services segment.

(23) Income taxes
Income tax expense is computed as follows:

2007/08

Previo us
year

Income taxes, Germany

10,141

10,514

Income taxes, other countries

14,671

10,762

Current expenses
from income taxes

Thereof from previous years

Deferred taxes, Germany

24,812

21,276

1,483

465

709

– 111

Deferred taxes, other countries

– 4,461

– 1,491

Deferred tax income/expense

– 3,996

– 1,602

Reported income tax
expense

20,816

19,674

The 2008 German Corporate Tax Reform Act was passed
in July 2007 and means that, adjusted for tax relating to
previous periods, KWS pays tax in Germany at a rate of
29.1 %. Corporate income tax of 15.0 % (25.0 %) and soli-
darity tax of 5.5 % (5.5 %) are applied uniformly to distrib-
uted and retained proﬁ ts. In addition, municipal trade in-
come tax is payable on proﬁ ts generated in Germany. Trade
income tax is applied at a weighted average rate of 13.3 %
(16.0 %), resulting in a total tax rate of 29.1 % (38.1 %).

The “Law on Tax Measures Accompanying Introduction of
the Societas Europaea and Amending Further Tax Regula-
tions” (SEStEG), which was passed at the end of 2006,
means that the corporate income tax credit balance at De-
cember 31, 2006, can be realized. It will be paid out in ten
equal annual amounts from 2008 to 2017. The German
group companies carried these claims as assets at their
present value totaling € 7,182 thousand (€ 7,124 thousand)
at June 30, 2008.

Under German tax law, both German and foreign dividends
are 95 % tax exempt.

The proﬁ ts generated by group companies outside Ger-
many are taxed at the rates applicable in the country in
which they are based.

For the German group companies, deferred tax was cal-
culated at 29.1 % (38.1 %). For foreign group companies,
deferred tax was calculated using the tax rates applicable
in the country in which they are based.

Deferred taxes are calculated on the basis of the following
temporary differences between the carrying amount of an
asset or liability in the balance sheet and its tax base:

2007/08

Previo us
year

2007/08

Previo us
year

Deferred
tax assets

Deferred
tax liabilities

425

351

Intangible assets

Property, plant
and equipment

Financial assets

Inventories

Current assets

Noncurrent
liabilities

4,151

4,933

2,696

369

Current liabilities

2,091

126

193

4,937

1,990

2,526

5,049

Tax loss
carryforward

Other consol.
transactions

Deferred taxes
recognized

2,290

1,285

252

203

11,086

12,938

498

217

196

1,355

2,112

235

197

616

220

16,858

16,315

13,815

16,683

In the year under review, deferred taxes of € 446 thousand
(€ 149 thousand) were directly credited to equity, without
recognition in proﬁ t or loss. Tax loss carryforwards of
€ 4,058 thousand (€ 11,123 thousand) were regarded as
not being able to be utilized, with the result that no de-
ferred tax assets were able to be recognized as an asset
for them. The anticipated taxable proﬁ ts projected in the
medium-term plans of the companies were used for this in
principle; these plans, which cover a period of four years,
have been approved by the Executive Board. They are
based on historical patterns and expectations about future
market development.

The following schedule reconciles the expected income tax
expense to the reported income tax expense. The calcula-
tion assumes an expected tax expense, applying the Ge r-
man tax rate to the proﬁ t before tax of the entire group:

Annual Financial Statements | Notes | Notes to the income statement I 73

2007/08

Previo us
year

Earnings before income taxes

75,367

57,846

Expected income tax expense *

21,932

22,039

Difference in income tax liability
outside Germany

– 416

– 162

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

– 1,768

– 10

1,850

2,097

– 1,916

3,144

– 356

– 8,133

1,483

709

– 10

Reported income tax expense

20,816

19,674

Effective tax rate

27.6 %

34.0 %

* Tax rate in Germany 29.1 % (38.1) %

Other taxes, primarily real estate tax, are allocated to the
relevant functions.

(24) Personnel costs/employees

2007/08

Previo us
year

Wages and salaries

93,705

88,564

Social security contributions,
expenses for pension plans
and beneﬁ ts

25,298

22,688

119,003 111,252

Personnel costs went up by € 7,751 thousand to € 119,003
thousand, an increase of 7.0 %. The number of employees
(including trainees and interns) increased by 117 (or +4.3 %)
to 2,856.

Compensation increased by 5.8 % to € 93,705 thousand.
Social security contributions, expenses for pension
plans and beneﬁ ts were € 2,610 thousand higher than in
the previous year. An amount of € 6,074 thousand (€ 5,992
thousand) was recognized as an expense for deﬁ ned con-
tribution plans, including state pension insurance, in the
year under review.

Employees*

Germany

Rest of Europe (without Germany)

Americas

Rest of world

Total

* Annual average

2007/08

Previo us
year

1,260

1,179

670

872

633

884

2,856

2,739

Of the above number, 528 (568) employees are included
according to the percentage of equity held in the compa-
nies that employ them. 1,057 (1,137) employees are em-
ployed by now three proportionately consolidated inves-
tees. If these persons are included in full, the workforce
total is 3,385 (3,308). The reported number of employees
is greatly inﬂ uenced by seasonal labor.

(25) Net income for the year
Net income for the year rose by € 16,379 thousand to
€ 54,551 thousand, representing a return on sales of 9.1 %,
up from 7.1 % the year before. The net proﬁ t for the period
after minority interest is € 51,057 thousand, and € 7.74
(€ 5.61) for each of the 6,600,000 shares on issue. The
dividend distributed is geared to the earnings strength of
the KWS Group; the goal is to ensure adequate internal
ﬁ nancing of further business expansion in the long term.
The equ ity ratio is currently 59.3 %, following 60.0 % in the
previous year.

(26) Total remuneration of the Supervisory Board and
Executive Board and of former members of the Super-
visory Board and Executive Board of KWS SAAT AG
The members of the Supervisory Board receive ﬁ xed
compensation and variable compensation based on
the dividend paid. Providing that the annual meeting of
shareholders resolves the proposed dividend, total com-
pensation of the members of the Supervisory Board will
be € 333 thousand (€ 272 thousand), excluding value-
added tax. € 263 thousand (€ 204 thousand) of the
total compensation is performance-related.

In the year under review, Dr. Guenther H. W. Stratmann
was a partner in the consulting ﬁ rm Freshﬁ elds Bruckhaus
Deringer, Düsseldorf. In this period, this ﬁ rm invoiced KWS
€ 34 thousand (€ 147 thousand) for consulting services.

(29) Declaration of compliance with the German
Corporate Governance Code
KWS SAAT AG has issued the declaration of compliance
with the German Corporate Governance Code required
by section 161 of the Aktiengesetz (AktG – German Stock
Corporation Act) and made this accessible to its share-
holders.

(30) Related party disclosures
As part of its operations, KWS procures goods and serv-
ices worldwide from a large number of business partners,
including companies in which KWS has an interest. Busi-
ness dealings with these companies are always conducted
on an arm’s length basis; from the KWS Group’s perspec-
tive, these dealings have not been material. As part of
group ﬁ nancing, short-term loans are taken out from and
granted to subsidiaries at market interest rates. A total of
14 shareholders declared to KWS SAAT AG in 2002 that as
a result of mutual allocations, they respectively hold more
than 50 % of the voting rights. No other related parties have
been identiﬁ ed for whom there is a special reporting re-
quirement under IAS 24.

In ﬁ scal year 2007/08, total Executive Board compensa-
tion amounted to € 3,212 thousand (€ 2,372 thousand).
Variable compensation of € 2,261 thousand (€ 1,491 thou-
sand), calculated on the basis of the net proﬁ t for the
period of the KWS Group, includes compensation of
€ 37 thousand (€ 24 thousand) for duties performed in
subsidiaries. The ﬁ xed compensation includes not only
the agreed salaries, but also non-monetary compensa-
tion granted by KWS SAAT AG.

(27) Shareholdings of members of the Supervisory
Board and Executive Board (as of August 31, 2008)
Dr. Arend Oetker indirectly holds a total of 1,650,010 shares
and Dr. Dr. h. c. Andreas J. Büchting 100,020 shares in
KWS SAAT AG. All together, the members of the Super-
visory Board hold 1,750,030 shares in KWS SAAT AG.

(28) Audit of the annual ﬁ nancial statements
On December 13, 2007, the Annual Shareholders’ Meeting
of KWS SAAT AG elected the accounting ﬁ rm Deloitte &
Touche GmbH, Hanover, to be the group’s auditors for
ﬁ scal year 2007/08.

Fee paid to the external auditors under
section 314 sentence 1 no. 9 of the HGB

a) Audit of the consolidated

ﬁ nancial statements

b) Certiﬁ cation and valuation services

c) Tax consulting

d) Other services

Total fee paid

2007/08

572

701

For ﬁ scal year 2008/09, fees for consulting services
(excluding auditing) of € 100 thousand are expected.

Annual Financial Statements | Notes | Notes to the income statement I 75

(31) Supervisory and Executive Board of KWS SAAT AG

SUPERVISORY BOARD

Dr. Carl-Ernst Büchting
Einbeck
Honorary Chairman

Dr. Dr. h. c. Andreas J. Büchting
Einbeck
Agricultural Biologist
Chairman
since December 2007

Membership of other legally mandated
Supervisory Boards:

•

Conergy AG, Hamburg

Dr. Guenther H. W. Stratmann
Düsseldorf
Attorney-at-law
Chairman
until December 2007
Membership of other legally mandated

Supervisory Boards:

apetito AG, Rheine (Deputy Chairman)
AGCO GmbH, Marktoberdorf
IXOS SOFTWARE AG, Grasbrunn (Chairman)

•
•
•
Membership of comparable German and

foreign oversight boards:

•

apetito catering GmbH, Rheine (Deputy Chairman)

Dr. Arend Oetker
Berlin
Businessman
Deputy Chairman

Membership of other legally mandated
Supervisory Boards:
•

Schwartauer Werke GmbH & Co. KGaA,
Bad Schwartau (Chairman)

• Merck KGaA, Darmstadt
•

Cognos AG, Hamburg (Chairman)

Membership of comparable German and
foreign oversight boards:

•
•
•
•
•

Hero AG, Lenzburg (President)
Bâloise Holding AG, Basle, Schwitzerland
E. Gundlach GmbH & Co. KG, Bielefeld
Leipziger Messe GmbH, Leipzig
Berliner Philharmonie GmbH, Berlin (Chairman)

Hubertus von Baumbach
Ingelheim
Businessman
since December 2007

Jürgen Bolduan
Einbeck
Seed Breeding Employee
Chairman of the Central Works Committee of KWS SAAT AG
since December 2007

Cathrina Claas
Frankfurt/Main
Businesswoman
since December 2007

Membership of other legally mandated
Supervisory Boards:

•

CLAAS KGaA mbH, Harsewinkel

Membership of comparable German and
foreign oversight boards:

•

CLAAS KGaA mbH, Harsewinkel
(Deputy Chairwoman of the Shareholders’
Committee)

Goetz von Engelbrechten
Uelzen
Farmer
until December 2007

Membership of other legally mandated
Supervisory Boards:

•

Nordzucker AG, Braunschweig (until July 2007)

Philip von dem Bussche
Einbeck
Chairman (since December 2007)
Corporate Affairs, Sugarbeet, Human Resources

Membership of legally mandated
Supervisory Boards:

• Sisi Wasabi AG, Berlin (since December 2007)

Dr. Christoph Amberger
Northeim
Corn, Cereals, Marketing

Dr. Hagen Duenbostel
Einbeck
Finance, Controlling, Information Technology, Legal

Membership of legally mandated
Supervisory Boards:

• Sievert AG, Osnabrück (since July 2007)

Dr. Léon Broers (Deputy)
Einbeck, D / Heythuysen, NL
Research and Breeding, Energy plants

Eckhard Halbfaß
Einbeck
Farmer
Member of the Works Committee of KWS SAAT AG,
until December 2007

Jürgen Kunze
Einbeck
Chairman of the Works Committee of KWS SAAT AG,
until December 2007

Dr. Dietmar Stahl
Einbeck
Biochemist
Employee Representative
since December 2007

Prof. Dr. Dr. h. c. Ernst-Ludwig Winnacker
Brussels
Belgium
European Research Council (ERC) – Secretary General
until December 2007

Membership of other legally mandated
Supervisory Boards:

•
Bayer AG, Leverkusen
• MediGene AG, Munich
• Wacker Chemie AG, Munich

EXECUTIVE BOARD

Dr. Dr. h. c. Andreas J. Büchting
Einbeck
Chairman
Corporate Affairs
until December 2007

Membership of legally mandated
Supervisory Boards:

•

Conergy AG, Hamburg

Annual Financial Statements | Notes | Notes to the income statement I 77

(32) Signiﬁ cant subsidiaries and afﬁ liated companies
A list of shareholdings of KWS SAAT AG is published in the Electronic Federal Gazette.

Subsidiaries and associated companies, which were included in the consolidated group 1)

Sugarbeet

Corn

Cereals

Breeding & Services

90 % KWS MAIS GMBH

81 % KWS LOCHOW GMBH

100 % PLANTA ANGEWANDTE

100 % BETASEED INC. 2)

Shakopee, MN/USA

Einbeck

100 % KWS FRANCE S. A. R. L.

100 % KWS BENELUX B. V.5)

Roye/France
100 % DELITZSCH

PFLANZENZUCHT GMBH 10)
Einbeck

100 % O. O. O. KWS RUS 12)

Moscow/Russian Federation

100 % KWS ITALIA S. P. A.
Forli/Italy

100 % KWS POLSKA SP. Z O. O.
Poznan/Poland

100 % KWS SCANDINAVIA A/S 10)

Guldborgsund/Denmark
100 % KWS SEMILLAS IBERICA S. L.10)

Zaratán/Spain

100 % SEMILLAS KWS CHILE LTDA.
Santiago de Chile/Chile
100 % KWS SEME YU D. O. O.
Belgrad/Serbia

100 % KWS SUISSE SA

Basle/Switzerland
100 % ACH SEEDS INC.4)

Amsterdam/Netherlands
100 % KWS SEMENA S. R. O.5)

Zahorska Ves/Slovakia
100 % KWS MAIS FRANCE S. A. R. L.5)
Sarreguemines/France
100 % KWS AUSTRIA SAAT GMBH 5)

Vienna/Austria
100 % KWS SEMINTE S. R. L.5)

Bukarest/Romania

100 % DUNASEM S. R. L.13)

Bukarest/Romania

100 % KWS SJEME D. O. O.5)
Pozega/Croatia

100 % KWS OSIVA S. R. O.5)

Velke Mezirici/Czech Republic

100 % KWS SEMENA BULGARIA

E. O. O. D.5) Soﬁ a/Bulgaria

100 % AGROMAIS GMBH5)
Everswinkel

100 % KWS MAGYARORSZÁG KFT.5)

Györ/Hungary

Eden Prairie, MN/USA
100 % BETASEED FRANCE S. A. R. L.4)
Sarreguemines/France
100 % KWS UKRAINE T.O.W.12)

95 % KWS ARGENTINA S. A.5)
Balcarce/Argentina

51 % RAZES HYBRIDES S. A. R. L.3)

Alzonne/France

Kiew/Ukraine

50 % AGRELIANT GENETICS LLC.6) *

100 % KWS TÜRK TARIM TICARET

Westﬁ eld, IND/USA

A. S. 10)
Eskisehir/Turkey

50 % AGRELIANT GENETICS INC.*

Chatham, Ontario/Canada

Bergen
100 % KWS UK LTD.7)

Thriplow/Great Britain

PFLANZENGENETIK UND
BIOTECHNOLOGIE GMBH**
Einbeck

100 % KWS LOCHOW

100 % KWS INTERSAAT GMBH

POLSKA SP.Z O.O.7)
Kondratowice/Poland

49 % SOCIETE DE MARTINVAL S. A.8) *
Mons-en-Pévèle/France

Einbeck
100 % KWS SEEDS INC.9)

Shakopee, MN/USA

100 % GLH SEEDS, INC.2)

Shakopee, MN/USA
100 % KWS SAATFINANZ GMBH

Einbeck

100 % KWS KLOSTERGUT

WIEBRECHTS HAUSEN GMBH
Northeim-Wiebrechtshausen

100 % EURO HYBRID GESELLSCHAFT
FÜR GETREIDEZÜCHTUNG MBH
Einbeck

100 % KWS R & D RUS LTD. 11)

Lipezk/Russian Federation
100 % RAGIS KARTOFFELZUCHT- UND
HANDELSGESELLSCHAFT MBH
Klein Wanzleben

* Proportionate consolidation
** Proﬁ t transfer agreement

1) The percentages stated relate to the interest held by the parent
2) Subsidiary of KWS SEEDS INC.
3) Subsidiary of KWS FRANCE S. A. R. L.
4) Subsidiary of BETASEED INC.
5) Subsidiary of KWS MAIS GMBH
6) Investee of GLH SEEDS, INC.

7) Subsidiary of KWS LOCHOW GMBH
8) Investee of KWS LOCHOW GMBH
9) Subsidiary of KWS INTERSAAT GMBH und KWS SAAT AG
10) Subsidiary of KWS INTERSAAT GMBH
11) Subsidiary of O. O. O. KWS RUS
12) Subsidiary of EURO HYBRID GMBH und KWS SAATFINANZ GMBH
13) Subsidiary of KWS MAIS GMBH und KWS SAATFINANZ GMBH

June 30, 2008

(33) Proposal for the appropriation of net retained proﬁ ts
A proposal will be made to the Annual Shareholders’ Meet-
ing that an amount of € 11,220,000.00 of KWS SAAT AG’s
net retained proﬁ t of € 12,080,000.00 should be distributed
as a dividend of € 1.70 (€ 1.40) for each of the 6,600,000
shares. The balance of € 860,000.00 is to be carried for-
ward to the new account.

Declaration by legal representatives
We declare to the best of our knowledge, and in accordance
with the applicable reporting principles for ﬁ nancial report-
ing, the consolidated ﬁ nancial statements give a true and fair
view of the assets, liabilities, ﬁ nancial position and proﬁ t or
loss of the group, and the management report of the group
includes a fair review of the development and performance
of the business and the position of the group, together with
a description of the principal opportunities and risks associ-
ated with the expected development of the group.

Einbeck, October 6, 2008
KWS SAAT AG
THE EXECUTIVE BOARD

On the basis of our audit, we have no reservations to note.

In our opinion pursuant to the ﬁ ndings gained during the
audit, the consolidated ﬁ nancial statements of KWS SAAT
AG, Einbeck, comply with the IFRS as applicable in the EU,
and in addition with the commercial law regulations to be
applied pursuant to section 315a (1) of the HGB (German
Commercial Code) and give a true and fair view of the as-
sets, ﬁ nancial position and earnings of the group, taking
into account these regulations. The group management
report accords with the consolidated ﬁ nancial statements,
conveys overall an accurate view of the group’s position
and accurately presents the opportunities and risks of fu-
ture development.

Hanover, October 10, 2008

Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft

(Dr. F. Beine)
Auditor

(T. Römgens)
Auditor

Auditor’s Report

We have audited the annual ﬁ nancial statements of the
KWS Group – consisting of the balance sheet, the Income
Statement, the Notes, the Cash Flow Statement, Segment
reporting and the Statement of Changes in Equity – and
the group management report for the ﬁ scal year from July
1, 2007, to June 30, 2008, all of which were prepared by
KWS SAAT AG, Einbeck. The preparation of the consoli-
dated ﬁ nancial statements and group management report
according to the International Financial Reporting Stand-
ards (IFRS) as applicable in the EU, and in addition accord-
ing to the commercial law regulations to be applied pursu-
ant to section 315a (1) of the HGB (German Commercial
Code), is the responsibility of the Executive Board of the
company. Our task, on the basis of the audit we have con-
ducted, is to give an opinion on the consolidated ﬁ nancial
statements and the group management report.

We conducted our audit of the annual ﬁ nancial statements
in accordance with section 317 HGB and the generally
accepted standards for the audit of ﬁ nancial statements
promulgated by the Institut der Wirtschaftsprüfer (German
Institute of Certiﬁ ed Public Accountants). According to
these standards, the audit must be planned and executed
in such a way that misstatements and violations materially
affecting the presentation of the view of the assets, ﬁ nan-
cial position and earnings conveyed by the consolidated
ﬁ nancial statements, taking into account the applicable
regulations on orderly accounting, and by the group man-
agement report are detected with reasonable certainty.
Knowledge of the business activities and the economic
and legal operating environment of the group and evalua-
tions of possible errors are taken into account. The effec-
tiveness of the internal accounting control system and the
evidence supporting the disclosures in the consolidated
ﬁ nancial statements and the group management report are
evaluated mainly on the basis of test samples within the
framework of the audit. The audit includes the assessment
of the annual ﬁ nancial statements of the companies included
in the consolidated ﬁ nancial statements, the deﬁ nition of
the companies consolidated, the accounting and consoli-
dation principles used and any signiﬁ cant estimates made
by the Executive Board, as well as the evaluation of the
overall presentation of the consolidated ﬁ nancial statements
and the group management report. We believe that our
audit provides a reasonable basis for our opinion.

P. von dem Bussche

Ch. Amberger

H. Duenbostel

L. Broers

Annual Financial Statements | Notes | Notes to the income statement | Auditors’ Report I 79

Agenda of the Annual Shareholders’ Meeting
on December 16, 2008

The Company’s Executive Board hereby invites you to the

Annual Shareholders’ Meeting
on Tuesday, December 16, 2008, at 11 a.m.,

at the Company’s premises in 37574 Einbeck, Grimsehlstrasse 31, Germany.

AGENDA

1. Presentation of the approved Financial Statements of KWS SAAT AG, the Financial Statements of the KWS Group
(consolidated Financial Statements) approved by the Supervisory Board, the management reports for KWS SAAT AG
and the KWS Group for the ﬁ scal year from July 1, 2007, to June 30, 2008, the Report of the Supervisory Board and
the explanatory report by the Executive Board on the disclosures in accordance with section 289 (4) and section 315 (4)
HGB (German Commercial Code)

2. Resolution on the appropriation of the net retained proﬁ t

3. Resolution on the ratiﬁ cation of the acts of the Executive Board

4. Resolution on the ratiﬁ cation of the acts of the Supervisory Board

5. Appointment of the independent auditor for ﬁ scal year 2008/2009

Financial calendar

November 28, 2008
December 16, 2008
February 26, 2009
May 28, 2009
October 29, 2009

Key data of KWS SAAT AG

Securities identiﬁ cation number
ISIN
Stock exchange identiﬁ er
Transparency level
Index
Share class
Number of shares
Capital stock at June 30, 2008
Share price high June 12, 2008 (Xetra)
Share price low August 10, 2007 (Xetra)
Average number of shares traded
– in Xetra
– in ﬂ oor trading in Frankfurt
Designated sponsor

Report on the 1st quarter of 2008/2009
Annual Shareholders’ Meeting in Einbeck
Report on the 2nd quarter of 2008/2009
Report on the 3rd quarter of 2008/2009
Annual press conference in Hanover;
Analyst conference in Frankfurt

707400
DE0007074007
KWS
Prime Standard
SDAX, GEX
Individual share certiﬁ cates
6,600,000
€ 19,800,000
€ 174.72
€ 103.10

8,602
930
Sal. Oppenheim jr. & Cie. KGaA