KUKA AG — Annual Report 2011

Apr 16, 2012

SMART TOOLS MEET SMART PEOPLE

ANNUAL REPORT 2011

SUPERVISORY BOARD REPORT

D E A R S H A R E H O L D E R S ,

the Supervisory Board fulfilled its mandate during the company's very successful 2011 business year.

The Supervisory Board carried out its duties primarily at regular meetings of the plenum and its subcommittees during the reporting year, but teleconferencing was also required to reach some decisions. The key topics of the discussions were the Group's financing and corporate strategy. The Supervisory Board offered the Executive Board what it considered constructive criticism. It carried out its monitoring function by holding timely meetings with the Executive Board to discuss in detail the company's business and financial situations. During these meetings, the board reviewed the company's key indicators such as orders received, sales, EBIT and head count. The committee was updated weekly on deliveries from Japan following the tsunami and nuclear incident at the Fukushima nuclear power station. Members of the Supervisory Board, especially the chairman and the chairs of the committees, also held bilateral sessions with Executive Board members, during which they advised them on key issues.

Here we highlight the meetings and decisions made regarding the 2010 financial statements, the 2012 budget and the medium-range plan to 2014. The Executive Board explained to the Supervisory Board deviations in business performance from the 2011 corporate plan and budget. The Supervisory Board reviewed and understood these explanations.

Risk and compliance management were especially important to the Supervisory Board. The panel also had to deal with the businesses subject to reporting as per the rules of procedure. It reached decisions about all issues associated with Executive Board compensation in accordance with legislative requirements.

At all times while fulfilling its monitoring obligations as a controlling body, the Supervisory Board considered whether the Executive Board was fulfilling its duties as managers of the company properly, legally and efficiently.

BERND MINNING Chairman of the Supervisory Board

C H A N G E S TO T H E E X E C U T I V E B OA R D A N D S U P E R V I S O RY B OA R D

During the fiscal year just ended, there were no personnel changes at the Supervisory and Executive Board levels.

There were no conflicts of interest at either the Executive Board or Supervisory Board level during the reporting period (see also below).

M E E T I N G S O F T H E S U P E R V I S O RY B OA R D A N D I T S S U B C O M M I T T E E S

During 2011, the Supervisory Board held five ordinary plenary meetings. One decision was reached during a telephone conference and another by exchanging written correspondence.

During a telephone conference on February 9, 2011, the Supervisory Board approved the sale of 1,327,340 treasury shares of the company.

The financial statements meeting was held on March 14, 2011. The Supervisory Board approved KUKA Aktiengesellschaft's financial statements for the 2010 financial year as prepared by the Executive Board, and they were thus adopted. It further approved the consolidated statements for 2010. A special agenda item during this financial statements meeting was to recommend to the Annual General Meeting KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin, as the new auditor of the financial statements and consolidated financial statements for the 2011 financial year. The Supervisory Board dealt with the pending Annual General Meeting and approved the Executive Board's meeting agenda and resolutions.

As has been the tradition, the Supervisory Board met before and after the Annual General Meeting on May 26, 2011. Among other things, the Supervisory Board was presented with reports regarding variable compensation at the next management level, the status of implementing the four-pillar strategy, risk management and the standard rules of procedure / business activities subject to approval. The Supervisory Board subsequently revised its own rules of procedure. The strategic discussions provided an opportunity to intensively examine issues related to the manufacturing concept.

The meeting on September 29, 2011 was dominated by Group strategy discussions. The Board discussed Group strategy as well as the individual strategies of the Systems, Industrial Robotics and Advanced Robotics business units. The outlook for the lightweight robot dominated discussions dealing with Advanced Robotics. The Supervisory Board was also informed about the introduction of an upper management level reporting to the Executive Board. The board approved the introduction of a Phantom Share Program for managers at this level.

In its planning meeting on December 15, 2011, the Supervisory Board approved the budget for 2012 and the mid-range plan to 2014. During this meeting, the various committees tabled reports. A key agenda topic was also machine tool manufacturing at KUKA Systems GmbH in Schwarzenberg.

All members of the Supervisory Board participated in at least half the Supervisory Board meetings during 2011 (section 5.4.7 of the Corporate Governance Code). For further comments about corporate governance, please refer to the Corporate Governance section, which forms part of this annual report.

The Supervisory Board established the following committees: Personnel Committee (chaired by Mr. Minning), Audit Committee (chaired by Dr. Ganzer), Strategy and Development Committee (chaired by Mr. Minning), Technology and Production Committee (chaired by Prof. Dr. Loos) and Mediation Committee in accordance with article 27 section 3 of the German Codetermination Act (MitbestG) (chaired by Mr. Minning). A Nomination Committee was also formed in accordance with section 5.3.3 of the Corporate Governance Code (chaired by Mr. Minning).

The Personnel Committee convened twice in 2011. The topics on the agenda were mainly Executive Board compensation and the associated contractual policies.

The Audit Committee met five times. The main agenda topics were the financial statements; for example, KUKA Aktiengesellschaft's and the consolidated year-end results for 2010 on March 11, 2011, as well as risk and compliance management.

The Strategy and Development Committee had an especially heavy workload and met five times. For example, key engineering issues related to technology integration required it to regularly attend meetings about associated organizational changes within the Group. The committee was informed about current and planned projects and partnerships relating to medical systems and followed closely the progress being made on the lightweight robot and its application engineering. At a higher level, the committee discussed the general Group strategy and strategies of the individual divisions, as well as the research and development projects road map.

The Technology and Production Committee convened six times and worked diligently on cost-reduction measures and process issues.

Neither the Arbitration Committee nor the Nomination committee found it necessary to hold a meeting.

I N D E P E N D E N C E A N D D E C L A R AT I O N O F C O M P L I A N C E

The Supervisory Board members complied with and continue to comply with the arms-length provisions outlined in section 5.4.2 of the Corporate Governance Code. There were no conflicts of interest as defined in section 5.5 of the Corporate Governance Code. At the Supervisory Board meeting of December 15, 2011, CEO Dr. Reuter and Supervisory Board chairman Mr. Minning outlined the business relationships between KUKA Group's companies and Grenzebach Group.

The Supervisory Board and the Executive Board submitted identical declarations of compliance in accordance with article 161 of the German Stock Corporation Act. The annual declarations were made on February 16, 2011 by the Executive Board and on March 1, 2011 by the Supervisory Board. The declaration of compliance was made permanently available to shareholders at the company's web site.

WO R K W I T H T H E AU D I TO R S

The annual financial statements of KUKA Aktiengesellschaft and consolidated financial statements of KUKA Group as of December 31, 2011, as well as the consolidated management report of KUKA Aktiengesellschaft and KUKA Group, including the bookkeeping, were audited by auditors KPMG Aktiengesellschaft, Wirtschaftsprüfungsgesellschaft, Berlin, who issued an unqualified audit opinion on them on March 2, 2012. KUKA Group's risk management system was also audited, as required by law. KUKA Group's mid-year report dated June 30, 2011 was also reviewed by the auditors. KUKA Aktiengesellschaft's consolidated statements were prepared in accordance with article 315a of the German Commercial Code (HGB) based on the International Accounting Standards (IFRS) as adopted by the European Union.

The Audit Committee appointed the external auditors, KPMG, as per the resolution at the Annual General Meeting of May 26, 2011. Prior to appointing the auditors of the financial statements of the company and the Group, the chair of the Audit Committee and the chairman of the Supervisory Board conducted an in-depth review with the auditors regarding key audit issues, scope and fees. The auditors agreed to immediately inform the chairman of the Audit Committee about any disqualification or bias issues encountered during the audit, provided such disqualification or bias issues could not immediately be resolved. The auditor also agreed to report on an ongoing basis during the audit all material findings and developments arising during the audit that were within the scope of the Supervisory Board's responsibilities. Furthermore, the auditors were instructed to inform the Supervisory Board, or make a note in the audit report, if information was encountered during the audit that is contrary to the declarations released by the Executive and Supervisory Boards as per article 161, section 1, clause 1 of the German Stock Corporation Act (AktG).

Finally, the Audit Committee obtained the arm's-length declaration of the auditor in accordance with section 7.2.1 of the CGC and monitored the independence of the auditor. The committee also signed contracts with the auditor for services that did not relate to the audit itself.

As in previous years, each year with different topics, the company asked the auditor to focus especially on a number of items during the annual review of the 2011 financial year, such as valuation of financial obligations of Group companies toward KUKA Aktiengesellschaft, and the administration and valuation of the order backlog, the approach and valuation of deferred taxes and reporting of guarantee, warranty and service expenses in KUKA Group's income statement. The auditor found no major issues with regard to these items.

In December 2011, the auditor gave the Audit Committee chair a detailed explanation of the preliminary audit results.

Because they had been contracted to review the June 30, 2011 mid-year financial report, the auditors attended the August 2, 2011 Audit Committee meeting.

In a joint meeting with the auditor on March 13, 2012, the Audit Committee reviewed the two financial statements, taking into consideration the auditor's reports. The Executive Board and the auditor presented the highlights of the financial reports to the panel. The Audit Committee members reviewed, discussed and checked in detail the documentation relating to the financial statements and discussed the audit report in depth with the auditor. The auditor answered the questions posed by the Audit Committee members. The Audit Committee reported to the Supervisory Board on the results of its discussions during the board's meeting on March 27, 2012 and recommended that the board approve KUKA Aktiengesellschaft's annual financial statements and KUKA Group's consolidated annual financial statements.

The Supervisory Board reviewed the draft annual financial statements submitted by the Executive Board on March 27, 2012. Because KUKA Aktiengesellschaft's net profit was applied to the loss carryforward, there was no need to make a recommendation to shareholders at the Annual General Meeting regarding the distribution of net profit. The auditor, KPMG, attended the Supervisory Board meeting in order to report on material findings in the audit and to provide additional information. All members of the Supervisory Board were in possession of the audit reports provided by the auditor. KPMG explained in detail the asset, financial and earnings situation of the company and the Group. The auditor also reported that there are no major weaknesses in the internal controlling system and accounting-related risk management system. The board and the auditor jointly reviewed and discussed the financial statements and KPMG answered all questions posed by the Audit Committee.

2 0 1 1 F I N A N C I A L STAT E M E N T S A D O P T E D

After completing its own review, and with full knowledge and consideration of the Audit Committee report, the auditor's reports and the explanations provided in the meeting of March 27, 2012, the Supervisory Board raised no objections to the results and concurred with the auditor's findings. In the opinion of the Supervisory Board, the auditor's reports comply with the legal requirements stipulated in articles 317 and 321 of the German Commercial Code (HGB).

The Supervisory Board is satisfied that the management report compiled for KUKA Aktiengesellschaft and KUKA Group is complete. The assessments made by the Executive Board in the management report are in agreement with its reports to the Supervisory Board, and the statements made in the consolidated management report are also in agreement with the Supervisory Board's own evaluations. At the conclusion of its review, the Supervisory Board found no cause to raise objections to the consolidated management report.

At its financial statements meeting on March 27, 2012, the Supervisory Board approved KUKA Aktiengesellschaft's financial statements for the 2011 financial year as prepared by the Executive Board. The annual financial statements are thus adopted.

The Supervisory Board also approved KUKA Aktiengesellschaft's consolidated financial statements and the Corporate Governance report for the 2011 financial year as prepared by the Executive Board.

T H A N KS TO T H E STA F F

Given the company's recent past, the 2011 financial year was one during which the company's business progressed in an orderly manner. Even though the economic situation created a favorable climate, the company's employees faced considerable challenges. Once again, they worked exceptionally hard for the company and contributed substantially to the excellent results. The employees especially share the credit for the growth of the company's shareholder value.

The Supervisory Board thanks all KUKA Group employees, members of the Executive Board, managers of the Group's companies and elected employee representatives for their strong commitment. All have helped to advance KUKA's technology leadership and their performance has made an outstanding contribution to the financial health of the company, its customers and shareholders.

Augsburg, March 27, 2012

The Supervisory Board

Bernd Minning

Chairman

BUSINESS AND BUSINESS ENVIRONMENT	55
ECONOMIC ENVIRONMENT	58
BUSINESS PERFORMANCE	59
THE DIVISIONS	61
EARNINGS, FINANCIAL POSITIONS AND NET WORTH	64
NOTES TO THE ANNUAL FINANCIAL STATEMENTS OF KUKA AKTIENGESELLSCHAFT	71
EVENTS AFTER THE BALANCE SHEET DATE	73
RESEARCH AND DEVELOPMENT	73
PROCUREMENT	77
EMPLOYEES	77
SUSTAINABILITY	80
RISK AND OPPORTUNITY REPORT	82
INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM	88
DISCLOSURE ACCORDING TO ARTICLE 289 SECTION 4 AND ARTICLE 315 SECTION 4 OF THE GERMAN COMMERCIAL CODE,
INCLUDING ACCOMPANYING EXPLANATION	89
OUTLOOK	94

CONSOLIDATED MANAGEMENT REPORT*

BUSINESS AND BUSINESS ENVIRONMENT

B U S I N E S S AC T I V I T I E S A N D G R O U P ST R U C T U R E

KUKA AG is a stock corporation listed on the MDAX, the German index for medium-size companies.

The internationally active robot and plant engineering company helps its customers improve the efficiency and quality of their production processes. The business model of the company's Systems division encompasses planning and building automated assembly lines and systems. The Robotics division manufactures industrial robots, one of the key components required to automate manufacturing processes, and also has a mandate to provide associated services to its customers.

The divisions' management executives coordinate the divisional activities. The Robotics division develops, manufactures and sells industrial robots. The Systems division designs and builds automated manufacturing lines. KUKA AG is the Group holding company and is headquartered in Augsburg. The company has subsidiaries in its most important international markets, which help the divisions sell their products and provide assembly and field service locally. The company thus has a local presence in its global markets.

R O B OT I C S D I V I S I O N

The Robotics division supplies industrial robots, one of the core components of automated manufacturing systems. The division's product portfolio is modular. This enables the business unit to offer customized solutions based on a series of standard products with payloads ranging from 5 to 1,300 kg. The industrial robots are mainly developed and assembled in Augsburg. Control cabinet assembly, which is very labor-intensive, is carried out at two Hungarian factories. There is also an assembly facility in Shanghai, China, whose main purpose is to service the Asian market.

The division unveiled a new generation of industrial robots called QUANTEC, with fundamentally improved mechanics and controllers (KR C4). Among other things, QUANTEC robots weigh significantly less, which appreciably reduces cycle times while reach and payload stay the same. The new KR C4 controller also offers enhanced motion control and sequencing, as well as softwareintegrated safety processes. Overall, this generation of industrial robots offers customers significantly greater value added.

In 2010, KUKA established an Advanced Robotics section within the Robotics division to expand the development of new applications and accelerate the company's entry into new markets. This business entity has been operating as an independent company, KUKA Laboratories, since January 2011. In addition to research and development for the two divisions, this business unit is responsible for developing the lightweight robot (LWR) to the stage of market readiness and to expanding the share of sales from the health care systems market. The LWR's unique combination of sensors and safety features enables it to be used in applications for which robot-based solutions were unsuitable to date for various reasons, including safety.

SY ST E M S D I V I S I O N

The Systems division plans, designs and builds automated manufacturing systems. The range of products and services offered covers the entire value added chain of a plant – from systems components, tools and jigs to automated manufacturing cells, up to complete turnkey systems. The division's expertise is in automating individual production processes such as welding and soldering, processing a variety of materials (metals and nonmetals) and integrating various manufacturing steps in order to build a fully automated system.

^* As of the 2011 financial year, the management reports of KUKA Aktiengesellschaft and KUKA Group are consolidated. This does not impair comparability with the previous year.

The division mainly supplies automated systems to the automotive industry, including assembly lines for car bodies, engine and transmission assembly systems, as well as press tools for sheet metal processing. KUKA Systems also operates a Jeep Wrangler car body manufacturing line (KTPO), located at the Chrysler site in Toledo, Ohio.

The Systems division works with regional centers of expertise. Markets in Germany and Europe are serviced from Augsburg, North and South America from greater Detroit, Michigan, and Asia from Shanghai, China. Other business segments include press tool manufacturing and automated assembly lines and test stands for engines and transmissions. These entities are located in Schwarzenberg, Erz Mountains, and Slovakia, as well as Bremen and greater Detroit, Michigan.

M A R K E T S A N D C O M P E T I T I V E P O S I T I O N S

The automotive industry is KUKA Group's most important customer segment and generates almost two-thirds of total sales. KUKA has been developing and implementing robot-based automation solutions for this market segment for over 30 years. During this time, KUKA has become a recognized brand name for innovative technologies, because it has had to comply with the automotive industry's stringent productivity, quality and reliability specifications. KUKA is the market leader for industrial robots in Europe by its own estimates and is one of the world's three leading suppliers of the product. KUKA Systems is number two in both Europe and North America in the area of car body manufacturing for the automotive industry. Both divisions regard themselves as technology leaders.

To continuously expand its business, KUKA specifically targets sectors outside the automotive industry (general industry) in which it can take advantage of its leading automotive industry market position. KUKA Robotics has made the most progress in this regard. The division is a key global player in markets such as metal processing, mechanical engineering, plastics, food and health care. The robots for general industry are mainly sold and serviced by systems partners that target specific markets. KUKA Systems is also expanding into related segments, including vehicle manufacturing and the solar industry. It currently generates about 20 percent of its revenue in non-automotive areas.

C O R P O R AT E ST R AT E GY

KUKA's strategy to grow profitably based on identified strengths such as the market leadership of the divisions, the company's innovation strength and strong customer relationships rests on three pillars:

• 1. Expanding KUKA's innovation and technology leadership For over thirty years, the KUKA brand has been associated with innovations in the area of automotive plant construction and robot technologies. The automotive industry is generally playing a pioneering role in developing innovative manufacturing technologies. In order to maintain and expand its high level of innovation, the Robotics division employs about 10 percent of its workforce in research and development at its Augsburg headquarters and invests between 6 to 8 percent of its sales revenues in this activity annually. Normally, the Systems division's R & D is conducted in conjunction with customer orders. As a result, only a minor share of spending in this area is reported as R & D. In fact, the Advanced Robotics section plays a cross-functional role within the company by taking charge of technical developments for new applications and markets targeted by the two divisions.
• 1. Diversifying business activities into new markets and regions KUKA targets markets outside the automotive industry (general industry) based on its leading market position in the carmaking sector. KUKA Systems does this by drawing on its automation expertise and applying it to related markets such as the aircraft and rail vehicle manufacturing industries, as well as the solar industry. KUKA Robotics works with sector-specific systems partners and develops new applications for industrial robots in target markets such as metal processing, mechanical engineering, plastics, food and health care. General industry markets are especially important because their profit potential is greater than that of the automotive sector. In parallel, KUKA has established sales and service capabilities in the highgrowth emerging markets of Asia and South America, in order to reap sustainable profits from the increasing automation. Among others, they include the BRIC nations Brazil, Russia, India and China. The company often successfully penetrates new markets via automotive projects with existing customers. New opportunities to enter into discussions with local automobile manufacturers and general industry players arise once these footholds have been established.

• Optimized cost structure and continuous efficiency improvement As part of its 2009 / 10 cost-cutting program, KUKA reviewed all of its internal processes and reengineered a number of them, especially in the area of supplier management and procurement in low-cost countries. This has enabled the company to significantly reduce its breakeven point. The Robotics division's target EBIT margin is 10 percent, and the Systems division's is 5 percent. KUKA continuously works on improving its efficiency.

I N T E R N A L M A N AG E M E N T SY ST E M

The internal management system ensures that the Group's key indicators are transparent, which enables them to be systematically strengthened. KUKA Group's financial performance indicators measure factors that influence the company's enterprise value.

In order to determine return on sales, earnings before interest and taxes (EBIT) are compared to sales revenues. This gives the EBIT margin. EBIT is compared to the average amount of capital employed to determine the return on capital employed, or ROCE. EBIT and ROCE are determined for KUKA Group as well as the Robotics and Systems divisions. Free cash flow; that is, cash flow from operating and investment activities minus capital spending, shows whether the investments can be funded from cash flow, and how much cash is available to pay a dividend and service debt. The Group publishes this key indicator.

An important early indicator of business performance for mechanical and plant engineering companies is orders received. Order backlog is determined by subtracting sales revenues from orders received. This indicator is reported at the close of each period. Order backlog is an important indicator of the loading of the operational capacities in the coming months. Orders received and order backlog are determined for KUKA Group as well as the Robotics and Systems divisions.

All key indicators are continuously tracked and reviewed by KUKA Group's corporate accounting and controlling departments. Management analyzes any deviations from plan and initiates the necessary corrective actions required to reach the targets.

2 0 1 1 TA R G E T S AC H I E V E D

At its financial results press conference on March 16, 2011, the Executive Board presented its outlook for the 2011 financial year. In it, the Board stated that it expected the company to generate significantly rising sales revenues as the global economy continued to recover and that operating profit (EBIT) would rise disproportionately after completion of the cost-cutting program. The initial overall sales target was at least € 1.15 billion and EBIT margin was expected to be greater than 5 percent. The expected higher profits were to be driven by higher capacity utilization, the introduction of the new QUANTEC industrial robots and the lowering of the operational breakeven point. In addition, Group net earnings were projected to be positive again.

Because orders received over the course of the year came in higher than had been expected, the Executive Board was able to confirm KUKA Group's sales targets for 2011 when it presented the interim financial statements at the end of each quarter. The following were the forecasts:

First quarter 2011:	at least € 1.2 billion
Second quarter 2011:	at least € 1.2 billion;
	€ 1.3 billion expected
Third quarter 2011:	at least € 1.2 billion;
	€ 1.35 billion expected

Target for EBIT margin of greater than 5 percent remained unchanged.

The strong global demand for robot-based automation from the automotive sector and general industry ensured that KUKA Group was able to achieve its sales and profit targets for the financial year. Overall sales revenues for 2011 came in at € 1.44 billion. Earnings before interest and taxes (EBIT) also rose from quarter to quarter and at the end of 2011 reached 5.1 percent.

GUIDANCE 2011

	Plan	Actual
Sales revenues	€ 1.35 billion	€ 1.44 billion
EBIT margin	> 5.0%	5.1%

ECONOMIC ENVIRONMENT

In the first half of 2011, the general economic trend was influenced by strong growth in the leading national economies. However, as the year progressed, the debt crisis in Europe and in the United States, together with political upheavals in some North African countries, caused uncertainty in the capital markets and led to a slowdown in economic growth. Overall, the eurozone's GDP for 2011 overall is still expected to increase 1.6 percent year-on-year according to the Organization for Economic Cooperation and Development (OECD). According to preliminary numbers supplied by the German Federal Statistical Office (Statistisches Bundesamt), Germany was again very strong driving this trend, with 3.0 percent growth, thanks especially to its strength in exports to the emerging markets of Asia and South America.

AU TO M OT I V E I N D U ST RY P O ST S R E C O R D N U M B E R S F O R 2 0 1 1

The German automotive industry posted record numbers for exports and for car production during the past fiscal year according to information provided by its professional association, VDA. German premium manufacturers especially managed to grow twice as fast as the market in the largest markets, China and the United States. In total, exports and production of German vehicles were both up 7 percent year-on-year; in absolute numbers, this is about one-third higher than the 2009 results. This trend had a particularly positive effect on the capacity utilization of automotive plants, which rose 5 percentage points to approximately 90 percent.

The tendency of automotive manufacturers to expand capacities abroad and rapidly expand the number of vehicles produced there is proving to be a long-term trend. The demand for cars, especially in the emerging markets of Asia and South America, is once again growing at an above average rate. The foreign output of German automotive manufacturers thus increased 15 percent year-on-year, once again significantly exceeding domestic output. The world's largest markets, China and the United States, barely recorded double-digit growth at 10 percent each, while demand in Western Europe fell slightly. Here it shrank 2 percent, due to the expiry of government scrapping incentives that were available in previous years. Sales of cars and light commercial vehicles increased worldwide in 2011 by 6 percent to 65.4 million vehicles according to information provided by VDA.

CAR SALES 2011 BY REGION / COUNTRY

M E C H A N I C A L A N D P L A N T E N G I N E E R I N G S E C TO R G R OW T H E V E N ST R O N G E R

The German mechanical and plant engineering sector's growth was even stronger than the automotive industry's in fiscal 2011 according to information supplied by VDMA, the industry's professional association. The industry benefited from the high level of capital spending driven by economic fundamentals in the developed countries of Europe and the United States, but also in the fast-growing regions of Asia and South America. Orders received price adjusted rose in 2011 by 10 percent year-on-year. Due to longer order lead times, output growth was even higher at 12 percent. German mechanical and plant engineering companies were posted a high utilization rate at the end of 2011, with an average capacity utilization of 89 percent (long-term average: 86 percent). Order backlog provided coverage of just over six months.

Growth in the "Robotics and Automation" subsegment of the German mechanical and plant engineering sector was even stronger than in the industry as a whole. Orders received price adjusted in 2011 rose 23 percent year-on-year, twice as much as the overall German mechanical and plant engineering sector.

VDMA KUKA

ORDERS RECEIVED, MECHANICAL AND PLANT ENGINEERING SECTOR

VDMA Indexed numbers, base year 2005 = 100 Change year-on-year

G LO BA L R O B OT I C S M A R K E T G R OW T H ST R O N G

The international robotics industry continued on its strong growth path during the year under review. In its latest study for 2011, the International Federation of Robotics (IFR) estimates that worldwide industrial robot sales have grown 27 percent to approximately 150,000 units.

This growth is being driven mainly by the international automotive industry, which is investing in new manufacturing technologies, manufacturing capacities and modernizing its production facilities. But sectors outside the automotive industry are also increasingly relying on robot technology to increase the efficiency of their production plants and the quality of their products. According to IFR, the main markets for industrial robots last year were Japan (26,000), Korea (24,500), North America (21,000), China (19,500) and Germany (15,500). Growth in China (+30 percent) and North America (+28 percent) was especially strong.

WORLDWIDE SALES OF

BUSINESS PERFORMANCE

Driven by the strong global demand for robot-based automation, KUKA Group's results for the financial year just ended set new records. Orders received, sales and EBIT all hit new highs. We were thus clearly able to meet our target values from Guidance 2011 (approximately € 1.35 million in sales revenues and a consolidated EBIT margin of more than 5 percent).

O R D E R S R E C E I V E D H I T R E C O R D H I G H

Orders received reached € 1553.0 million for the year just ended, an increase of 36.0 percent compared to the € 1,142.3 posted in 2011. Robotics' orders rose 34.6 percent to € 654.4 million, which compares to € 486.2 million a year earlier. Similarly strong growth came from both the automotive and general industry sectors. Systems was able to win numerous major automotive industry orders, especially for car body and assembly systems, but also general industry orders. Year-over-year, orders received were up 27.9 percent. The division's orders received totaled € 916.6 million, compared with € 716.8 million in 2010.

S A L E S R E V E N U E S S I G N I F I C A N T LY H I G H E R

KUKA Group's sales revenues for the financial year also reached a new high of € 1,435.6 million, up 33.1 percent from the € 1,078.6 million achieved in 2010. KUKA was thus able to steadily grow sales in each quarter, and driven by multiple systems project orders, brought in € 403.2 million in Q4, the highest for the entire financial year. Robotics' sales revenues in 2011 reached € 616.3 million, up 41.5 percent from the prior year's € 435.7 million. Systems' sales revenues rose 22.4 percent, to € 850.7 million from € 695.3 million in 2010. The book-to-bill ratio was again at 1.08, clearly above 1, and also higher year-on-year than the 1.06 ratio in 2010.

KUKA GROUP SALES REVENUES in € millions

2007 2008 2010 2009 2011

KUKA SYSTEMS SALES REVENUES in € millions

O R D E R BAC K LO G R I S E S AG A I N

At the same time, KUKA Group's order backlog rose anew and reached € 724.0 million at the end of the 2011 financial year. This represents an increase of 14.8 percent from the € 630.5 million reported on the December 31, 2010 record date. Robotics' order backlog to the end of 2011 was € 184.4 million, up 23.8 percent year-over-year, while Systems had € 545.0 on hand, an increase of 9.0 percent over the year prior. The order backlog coverage for Systems is six to eight months, and for Robotics it is three to four months. KUKA Group thus has a high degree of visibility in the current financial year.

TA R G E T E D H I R I N G I N G R OW T H M A R K E T S

Driven by higher business volume, KUKA Group engaged in targeted hiring of new employees and used contract workers to cover temporary order peaks. Overall, the workforce expanded by 10 percent to 6,589, which compares to 5,990 on December 31, 2010. The number of contract workers increased during the same year-over-year period from 843 on December 31, 2010 to 1,078 on December 31, 2011. Of the 599 new full-time employees hired by KUKA Group, Robotics accounted for 406 and the System division 187. On a percentage basis, the increases were 17.3 percent and 5.4 percent respectively. Other companies accounted for an additional six persons. On a regional basis, most of the hiring was done by foreign subsidiaries in the growth markets of the United States, Brazil, China, Hungary and India. In Germany, new hires were attributable mainly to Robotics. The division added technical staff in research and development, as well as manufacturing in Augsburg.

E B I T A L M O ST T R I P L E D

KUKA Group's earnings before interest and taxes (EBIT) rose in each quarter of the year under review and almost tripled for the financial year overall, ending at € 72.6 million, a new record in KUKA's history. Last year the company reported a final EBIT of € 24.8 million. EBIT margin too was significantly better, going from 2.3 percent in 2010 to 5.1 percent in 2011. The margin improvement was driven by economies of scale due to higher volumes on the one hand, and the introduction of the new QUANTEC generation of robots by Robotics on the other. In addition, the savings from the cost reduction program from years 2009 and 2010 had a positive impact on the company's earnings for the whole financial year.

Both divisions contributed to this very satisfactory development. Robotics was able to more than double its contribution to Group EBIT, reporting € 51.0 million in 2011 versus € 20.8 million in 2010. At the same time, the division's EBIT margin rose during the same comparable period, to 8.3 percent from 4.8 percent. Better capacity utilization enabled Systems to improve its EBIT from € 20.0 million in 2010 to € 33.7 million in 2011. EBIT margin rose from 2.9 percent in 2010 to 4.0 percent in 2011. At the same time, the holding costs of KUKA Group after completing its restructuring went down from € 16.0 million in 2010 to € 11.6 million in 2011.

THE DIVISIONS

R O B OT I C S D I V I S I O N

Orders received at record high

During the 2011 financial year, capital spending by customers on efficiency improvements, raising production output and improving quality continued unabated. The Robotics division benefited accordingly and reported strong business growth rates, driven by both general industry and automotive. During the financial year, the division received several major blanket orders from European carmakers, which enabled it to report record orders received of € 183.1 million and € 183.2 million in the first and second quarters respectively. At the same time, demand from general industry continued to accelerate during the reporting period, and the growth rate of orders from this market segment slightly outpaced that of the automotive industry. The Robotics division reported record overall orders received for 2011. They rose 34.6 percent to € 654.4 million from 2010's € 486.2 million.

Robotics launches new QUANTEC generation of industrial robots

Robotics unveiled its new QUANTEC generation of robots including the new KR C4 controller at the Automatica trade show in May 2010. Following the introductory phase in the second half of fiscal 2010, the division initially began selling the new generation of robots to automotive customers. They were introduced to general industry during the current financial year. The QUANTEC / KR C4 has impressive features. It is compact, keeps energy consumption low, boasts improved performance and is based on a holistic design approach.

The Robotics division had already been able to nearly double its orders from the automotive industry the year prior – admittedly coming from a low level the year before – and this financial year orders received from this market segment again rose dramatically. For example, two of the major orders included 800 industrial robots for China and 500 units destined for Belgium and Spain. In addition, Robotics received a blanket order from a major German premium carmaker for the supply of 3,000 robots. Overall orders from the automotive industry in 2011 jumped 36.7 percent, to € 275.0 million from € 201.2 million in 2010.

General industry growth rates outpace automotive

The economic recovery in the capital goods industry spilled over into general industry. Regionally, demand was concentrated in Europe and especially Asia. The division also focused on expanding the range of applications for which KUKA robots could be used. For example, at the EMO 2011 trade show, new solutions were presented for automating machine tools, which improve customers' flexibility while meeting specified safety requirements. In the first quarter of 2011, the Advanced Robotics division received its largest order to date from the health care segment. Siemens Healthcare purchased a large number of medical robots for use in modern x-ray imaging systems. Overall, general industry orders were up 36.8 percent in 2011, rising to € 257.9 million from € 188.5 million in 2010. The service business also benefited from the strong demand in both market segments. Here orders received rose 25.9 percent to € 121.5 million from € 96.5 million the year prior.

KUKA lightweight robot wins euRobotics Award

In May 2011, KUKA's lightweight robot won the euRobotics Award. This prize is handed out annually for the most successful collaboration between science and industry. The euRobotics Award is the European robotics industry's most coveted prize. KUKA's lightweight robot is the first robot to allow close collaboration between humans and machines thanks to innovative sensors that enable it to be used without protective barriers. This represents a milestone in the ongoing development of modern robotics.

ORDERS RECEIVED BY MARKET SEGMENT

The strong orders received drove the Robotics division's sales revenues sharply higher. They jumped 41.5 percent in 2011 and ended at € 616.3 million, compared to € 435.7 million in 2010. The book-to-bill ratio continued to be greater than one, coming in at 1.06 versus 1.12 in 2010.

Order backlog higher at the start of the current financial year

Because orders received in financial 2011 were greater than sales revenues, the Robotics division's order backlog continued to rise and reached € 184.4 million as of the end of the 2011 financial year, up 23.8 percent from the € 149.0 million reported on December 31, 2010. This high order backlog along with the blanket orders from the automotive industry gives Robotics a relatively high capacity utilization factor for the 2012 financial year.

Profit contribution more than doubled

103.9

100.2 93.9

This very satisfactory business growth enabled Robotics to more than double its earnings before interest and taxes (EBIT) in 2011. Profits were up primarily thanks to better economies of scale resulting from the higher capacity utilization and cost advantages of the new QUANTEC generation of robots. EBIT rose from € 20.8 million in 2010 to € 51.0 million in 2011. The division's EBIT margin also rose, from 4.8 percent in 2010 to 8.3 percent in 2011. The Robotics division's strategic EBIT margin target is 10 percent.

2007 2008 2010 2009 2011

184.4

149.0

SY ST E M S D I V I S I O N

Large orders from automotive

Rising capital spending by the automotive industry on manufacturing systems in Germany and abroad also drove the Systems division's business volume sharply higher. The division's orders received in fiscal 2010 were up 27.9 percent to € 916.6 million from € 716.8 million in 2010. This result was only slightly less than the previous record of € 937.7 million set in 2007. This very satisfactory growth was driven by numerous major orders the division received from automotive industry customers, especially in Europe, North America and China. The body-in-white and assembly systems business units were the primary benefactors. At the same time, Systems landed some orders for especially ambitious projects in the fields of specialty welding and lightweight manufacturing. The division was also successful outside the car industry and among others, received orders from solar industry customers in North America and China.

Substantially higher sales

In parallel with the growing orders received, Systems was able to generate significantly higher sales revenues. They were up 22.4 percent in total to € 850.7 million from € 695.3 million in 2010. The book-to-bill ratio thus continued to be greater than one, coming in at 1.08 versus 1.03 in 2010.

Excellent order backlog for the current financial year

Because orders received outpaced sales revenues, the Systems division's order backlog rose further and reached € 545.0 million at the end of the financial year, up 9.0 percent from the € 500.0 million reported on December 31, 2010. This means that the order pipeline is full for six to eight months, and the division's capacity is fully utilized until well into the current financial year.

Profit contribution sharply higher

In fiscal 2011, the Systems division's earnings before interest and taxes (EBIT) came in at € 33.7 million versus € 20.0 million in 2010. This increase was driven especially by improved capacity utilization. As a result, the division's EBIT margin rose from 2.9 percent in 2010 to 4.0 percent in 2011. The Systems division's strategic EBIT margin target is 5 percent.

EARNINGS, FINANCIAL POSITIONS AND NET WORTH

E A R N I N G S

Summary

2011 was a very successful year for KUKA. The Group increased both its orders received and its sales revenues by more than 30 percent year-on-year, and thus substantially beat its 2008 numbers. As a result of the expanded business volume and the resulting economies of scale, as well as on the basis of the permanent cost cuts from previous years, the Group achieved earnings before interest and taxes (EBIT) of € 72.6 million, up € 47.8 million from the previous year. This very satisfactory growth is also reflected in earnings before taxes, which is positive again for the first time since 2008 and totals € 29.9 million.

KEY FIGURES KUKA GROUP

in € millions	2007	2008	2009	2010	2011
Orders received	1,343.8	1,279.9	903.3	1,142.3	1,553.0
Sales revenues	1,286.4	1,266.1	902.1	1,078.6	1,435.6
EBIT	70.4	52.0	-52.6	24.8	72.6
in % from revenues	5.5	4.1	-5.8	2.3	5.1
% from capital employed (ROCE)	41.6	21.5	-16.6	7.9	21.8
Capital employed	169.4	242.3	317.5	312.5	332.9
Employees (Dec. 31)	5,732	6,171	5,744	5,990	6,589

The Robotics division's sales revenues had already risen sharply, by 31.8 percent to € 435.7 million, in 2010. Sales rose once again in 2011. They were up 41.5 percent to their current € 616.3 million, a high for the year for the segment. KUKA's Chinese robotics company, newly established during the financial year, also made a significant contribution. The company has already reported sales revenues in the mid-double-digit millions of euro. The division posted a total order backlog of € 184.4 million to the end of the year.

The Systems division also reported excellent sales growth. Sales rose from € 695.3 million in 2010 to € 850.7 million in 2011, an increase of 22.4 percent. The division's orders received were also up nicely; in 2011, they were over € 200 million in each quarter, and were thus also above the year-over-year period in each quarter. KUKA's order backlog at the end of the year was worth € 545.0 million, compared to € 500.0 million the previous year. The backlog will have an impact in 2012 and partly in 2013 due to the delayed sales in the project business.

KUKA Group's consolidated sales revenues for the financial year came in at € 1,435.6 million, up 33.1 percent from the € 1,078.6 million reported last year.

Earnings and costs continue to improve

KUKA Group's gross earnings from sales rose € 77.7 million, from € 204.0 million in 2010 to € 281.7 million in 2011. The main reason for the increase in absolute terms was the € 357.0 million increase in sales revenues. The positive gross margin trend is noteworthy in this regard (that is, the ratio of consolidated gross earnings to sales revenues). It went from 18.9 percent to 19.6 percent.

The Robotics division contributed € 60.3 million to the increase in gross earnings. At the same time, gross margin was back to 29.6 percent after a decline to 28.1 percent in 2010. This is all the more satisfactory because the share of sales from major automotive industry customers, where margins tend to be lower, increased year-over-year.

KEY FIGURES KUKA ROBOTICS

in € millions	2007	2008	2009	2010	2011
Orders received	434.9	464.4	324.3	486.2	654.4
Sales revenues	412.9	474.4	330.5	435.7	616.3
EBIT	33.6	42.0	-11.5	20.8	51.0
in % from revenues	8.1	8.9	-3.5	4.8	8.3
% from capital employed
(ROCE)	34.6	37.2	-9.5	16.1	38.3
Capital employed	97.1	112.9	120.5	129.1	133.2
Employees (Dec. 31)	2,023	2,261	2,009	2,347	2,753

The Systems division contributed € 14.9 million to the higher gross earnings, an increase of 20.2 percent year-on-year. At 10.4 percent, gross margin was just below the previous year's level of 10.6 percent, but considerably higher than 2009's 9.0 percent. Adjusted for the interest expenses included in manufacturing costs, the margin was 11.4 percent versus 11.6 percent the previous year. Thanks to the ongoing positive market situation and the associated better price realization on orders, project risks were also significantly lower.

KEY FIGURES KUKA SYSTEMS

in € millions	2007	2008	2009	2010	2011
Orders received	937.7	854.9	615.4	716.8	916.6
Sales revenues	900.0	837.5	605.5	695.3	850.7
EBIT	37.2	26.8	-28.8	20.0	33.7
in % from revenues	4.1	3.2	-4.8	2.9	4.0
% from capital employed
(ROCE)	51.0	20.2	-14.5	10.4	16.1
Capital employed	73.0	132.7	198.6	192.4	209.6
Employees (Dec. 31)	3,582	3,781	3,534	3,456	3,643

In view of the business expansion, operating costs; that is, KUKA Group's administration, sales and R & D costs, rose year-on-year from € 192.7 million in 2010 to € 216.1 million in 2011. However, percentage-wise, this increase is less than sales revenue growth. One place this can be seen is in operating expenses, which rose 14.5 percent, whereas sales revenues rose 33.1 percent. Spending on research and development rose sharply, going up by € 8.2 million to € 37.7 million. The increase in expenses reflects both the consistent engineering orientation of the Group with its associated higher investment in trendsetting technologies, and in the budgeted depreciation and amortization (which will now be recognized in full) for major projects completed in previous years for the new generation of robots. The Group's administrative expenses are just slightly higher than last year.

Other income and expenses relate mainly to expenses and income associated with currency transactions, which generated a negative balance of € 1.8 million. Last year's balance was positive at € 3.8 million.

Strong rise in earnings before interest and taxes

KUKA was able to turn around its earnings before interest and taxes (EBIT) in 2010. The situation continued to improve during the fiscal year. KUKA's higher gross earnings were the main reason EBIT went from € 47.8 million to € 72.6 million. KUKA Group's consolidated EBIT margin improved in each quarter of 2011 and now stands at 5.1 percent for the financial year versus 2.3 percent last year.

The increase in earnings before interest and taxes is attributable to both segments. The Robotics division generated an EBIT of € 51.0 million in 2011, an increase over the € 20.8 million generated in the previous year, bringing EBIT margin to 8.3 percent. In Q4 2011, EBIT margin was already 9.0 percent and is thus approaching the target margin of 10.0 percent. The Systems division's EBIT was also up in 2011 and came in at € 33.7 million, compared to € 20.0 million the year prior. The division's EBIT margin was 4.0 percent. The division thus also closed in on its target EBIT margin of 5.0 percent this fiscal year.

EBITDA (earnings before interest, taxes, depreciation and amortization) came in at € 98.7 million, more than twice the € 47.0 million achieved during the same period the year prior. Total depreciation and amortization during the reporting period was € 26.1 million versus € 22.2 million at the same time last year. Of this total, the Robotics division's share was € 13.5 million, which compares to € 9.6 million a year earlier. The Systems division accounted for € 9.3 million, versus € 9.5 million the year prior, and others' share was € 3.3 million, as opposed to € 3.1 million the year prior.

KUKA's earnings from financing activities improved € 3.9 million year-on-year to € -18.2 million. KUKA's refinancing, the most recent of which took place in November 2010, had an impact on earnings from financing activities. More favorable guarantee conditions resulted in a reduction of € 1.8 million in guarantee fees yearon-year, despite having made greater use of the credit lines (up € 41.8 million from December 31, 2010 to December 31, 2011) as a result of the booming business. Interest expenses include € 18.7 million for the interest on the corporate bond placed in November 2010, versus € 2.3 million the year prior, and € 4.7 million for the convertible bond redeemed in November 2011 compared to € 5.3 million the previous year. Interest income was up from € 9.1 million the year prior to € 9.9 million and includes primarily income from investments at banks, income related to the financing lease and income from pension funds. Accountingrelated reclassification of financing charges into operating profit had a positive impact on the net interest result, which came in at € 8.4 million compared to € 7.2 million the previous year. A write-down on a holding in the amount of € 0.8 million was also recognized in KUKA's earnings from financing activities during the financial year along with the net interest income of € -17.4 million.

KUKA Group's tax expense totaled € 16.1 million in 2011, compared to € 4.1 million the previous year. This increase was driven especially by current tax expenses in the United States and the budgeted reduction of tax loss carryforwards that were recognized as assets in previous years among the German consolidated companies. The tax rate is 35.0 percent.

Turnaround for earnings after taxes

In total, KUKA Group's earnings after taxes went from € -8.6 million last year to € 29.9 million in 2011. The Group was thus able to generate a positive net result for the year for the first time since 2008. Earnings per share improved accordingly, going from € -0.28 in 2010 to € +0.89 in 2011. Because of the capital increase in 2010 and the sale of treasury shares in 2011, the weighted average number of shares in circulation rose from 30.3 million in 2010 to 33.4 million in 2011.

CONSOLIDATED INCOME STATEMENT (CONDENSED)

in € millions	2007	2008	2009	2010	2011
Sales revenues	1,286.4	1,266.1	902.1	1,078.6	1,435.6
EBIT	70.4	52.0	-52.6	24.8	72.6
EBITDA	97.3	78.0	-29.5	47.0	98.7
Earnings from financing activities	-8.0	-5.0	-11.5	-22.1	-18.2
Taxes on income	-13.6	-16.4	-11.4	-4.1	-16.1
Net result for the year	117.9	30.6	-75.8	-8.6	29.9

F I N A N C I A L P O S I T I O N

Financial management goals and principles

KUKA Group's financial management is run centrally by KUKA AG. KUKA AG bundles most of its companies' financial requirements and manages them at KUKA AG. In performing these tasks, KUKA AG evaluates risks related to credit, liquidity, interest and exchange rates on the basis of a standard reporting system and secures them to the extent possible. Risks are hedged exclusively on a transaction by transaction basis or for anticipated orders using standard derivatives. KUKA has issued a standard set of guidelines to all Group companies for managing financial risks. These guidelines were also continually reviewed and optimized during the financial year to ensure they were current.

Group financing and working capital management

The aim of the financing policy is to secure sufficient liquidity and guaranteed credit lines at all times to satisfy the operating and strategic financial needs of the Group's companies. This policy is based on a multiyear financial budget and a rolling monthly liquidity plan, each of which encompasses all consolidated Group companies. Working capital guarantees play a significant part in financing for ordinary business operations in the course of project business, especially in the Systems division.

Revenue streams from the business operations of the Group's companies represent the Group's most important source of liquidity. Cash management systems are used to employ the excess cash generated by individual Group companies to cover the financial needs of others. The centralized revenue sharing within the Group reduces the amount of debt financing required, which has a positive impact on the interest result. Coverage of KUKA Group's financial needs is primarily secured through the existing Syndicated Senior Facilities Agreement, as well as the bond issued in November 2010 (further information can be found in the Group notes, section 26).

FINANCING STRUCTURE AS OF 2010

During the past fiscal year, KUKA worked diligently on restructuring the Group's finances. In March 2010, a Syndicated Senior Facilities Agreement worth € 336.0 million, which had existed since 2007 (€ 146.0 million bank line of credit and € 190 million working capital guarantee) was extended. In November 2010, the company realigned the way it was financed: KUKA signed a new Syndicated Senior Facilities Agreement worth € 200.0 million with a consortium of banks and successfully placed a corporate bond valued at € 202.0 million. € 69.0 million was set aside from the bond income and used to repay the convertible bond in November 2011.

In conjunction with the bond issue, KUKA AG received initial ratings in November 2010 from Standard & Poor's and Moody's. The former rated the company B (stable) and the latter B2 (stable). Standard & Poor's rated the bond itself B- and Moody's gave it B3. The rating has remained unchanged since November 2010.

The new Syndicated Senior Facilities Agreement is valued at € 200 million, of which € 50.0 million is a cash credit line and € 150.0 million a working capital guarantee, and runs until March 2014.

Existing working capital guarantees increased

To increase working capital beyond the guarantees in the Syndicated Senior Facilities Agreement so that it could support its operations during the financial year, the company secured additional working capital guarantees through bilateral agreements with various surety companies. As of December 31, 2011, working capital guarantees of € 52.0 million have been available from credit insurance companies, compared to € 10 million the previous year. € 36.3 million of the working capital guarantees were utilized versus € 5.6 million the year prior.

Due to the Group's improved financial position, KUKA AG's finance department was able to replace bank guarantees with group guarantees through intensive negotiations with customers, in addition to increasing external working capital guarantees. KUKA AG acts as guarantor for these guarantees.

In total, external working capital guarantees of € 202.0 million were available on December 31, 2011, compared to € 160 million the previous year, of which 81.7 percent were utilized. Last year the number was 77.0 percent.

Second ABS program completed

KUKA AG's finance department also helps other KUKA Group business units with their financing structure. For example, a second ABS program of about the same magnitude as the existing one was added in June 2011. The maximum volume is now € 50.0 million (for more details, see Appendix 26 / ABS Program).

KUKA Group's Executive Board considers the company's financing to be appropriate and secured for the long-term after having undertaken the restructuring.

CONSOLIDATED CASH FLOW (CONDENSED)

in € millions	2007	2008	2009	2010	2011
Cash Earnings	81.2	69.4	-43.7	23.4	65.9
Cash flow from operating acitivities	62.3	-61.2	4.8	-24.8	36.4
Cash flow from investment activities	161.3	-105.7	-27.0	-12.5	-29.9
Free cash flow	223.6	-166.9	-22.2	-37.3	6.5

Cash Earnings again up sharply

Cash earnings, consisting of earnings before taxes corrected for cash-neutral depreciation on property, plant and equipment and intangible assets and other non-cash income and expenses were again up sharply. In fiscal 2009, they were still at € -43.7 million, by 2010 they had already reached € 23.4 million, and are now at a very satisfactory € 65.9 million. This achievement is directly attributable to the continuous improvement in earnings before taxes, which went from € -75.8 million in 2009, to € -8.6 million in 2010 and to € 29.9 million in 2011.

The positive business trend is reflected in cash flow from operating activities. Trade working capital at the end of the reporting year was posted as follows:

TRADE WORKING CAPITAL

in € millions	2007	2008	2009	2010	2011
Inventories	150.0	151.5	103.8	158.0	195.4
Trade receivables and receivables from const ruction contracts	271.9	331.5	238.5	291.8	339.8
Trade payables and liabilities from construction contracts	221.3	203.7	127.9	188.2	260.6
Trade working capital	200.6	279.3	214.4	261.6	274.6

The increase in trade receivables, as well as receivables from manufacturing orders (€ +48.0 million) and inventories (€ +37.4 million), were largely offset by an increase in trade payables and liabilities from manufacturing orders (€ +72.4 million). In total, trade working capital increased year-on-year by € 13.0 million to € 274.6 million.

KUKA Group's cash flow from operating activities as of the balance sheet date increased from € -24.8 million in 2010 to € 36.4 million in 2011.

Positive free cash flow despite higher capital spending

KUKA invested € 30.3 million during the financial year. Last year, investments totaled € 15.4 million. This reflects the increased spending on research and development and the associated increase in the share of investments attributable to intangible assets. These are now at 41.9 percent compared to 31.2 percent the previous year. € 8.2 million was capitalized for proprietary development activities during the reporting year, most which was reported by the Robotics segment. Last year the number was € 2.0 million. Development was focused on the lightweight robot and rounding out the new QUANTEC robot generation (see the "Research and development" section).

KUKA GROUP CAPITAL EXPENDITURES in € millions

Investments in property, plant and equipment totaled € 17.6 million compared to € 10.6 million last year. Technical systems and machinery accounted for € 5.0 million, the major share of the investment, versus € 3.9 million the year prior. Spending on other systems / factory and office equipment totaled € 8.8 million compared to € 4.9 million the previous year.

Investments by division in 2011 were as follows: The Robotics divisions spent € 20.1 million versus € 6.7 million the year prior. Besides the capitalized development activities described above, investments were primarily made in technical systems and machinery, such as an assembly cell for the QUANTEC robot's central hand. The Systems division reported investments of € 8.2 million compared to € 7.5 million the year prior. The spending was mainly on technical systems, such as engraving machines, friction welding machines and CNC machines, as well as factory and office equipment. KUKA AG's investments categorized as "Other" totaled € 2.0 million, which compares to last year's € 1.2 million. Other investments went toward initiatives such as enhancing software and hardware components.

KUKA ROBOTICS CAPITAL EXPENDITURES in € millions

KUKA SYSTEMS CAPITAL EXPENDITURES in € millions

Due to the higher capital spending, cash flow from investment activities is now € -29.9 million, compared to € -12.5 million the previous year.

The cash flow from investment activities together with the cash flow from operating activities resulted in a free cash flow of € 6.5 million. Last year, KUKA's free cash flow totaled € -37.3 million. KUKA Group was thus able to generate a positive free cash flow again for the first time since 2007.

Unrestricted liquidity substantially higher

The cash flow from financing activities was driven mainly by two events in 2011: The first was an outflow of cash caused by the repayment of the convertible bond in the amount of € 69.0 million; the second was an inflow of cash to KUKA from the sale of treasury shares in May of € 23.7 million.

Inflows of cash in the previous year were the result of the capital increase in June 2010 of € 42.8 million and the € 198.2 million bond placed in November 2010. Among other things, these funds were used to repay bank liabilities in the amount of € 63.9 million. In addition, € 69.0 million in cash was deposited into a trust account to repay the convertible bond. It was thus not unrestricted for KUKA.

As of December 31, 2011, KUKA Group had unrestricted liquid assets totaling € 168.8 million. This represents an increase of € 34.4 million over the unrestricted liquid assets available on the previous year's balance sheet date.

KUKA Group's net debt; that is, liquid assets minus current and noncurrent financial liabilities was € -32.6 million as of December 31, 2011, up € 27.7 million from the € -60.3 million on the previous year's record date, December 31, 2010. The Group's financing structure has thus continued to improve. The share of short-term financial liabilities (€ 7.4 million) of total financial liabilities (€ 201.4 million) is now only 3.7 percent, versus 26.9 percent the year prior.

N E T WO R T H

Total assets higher driven by business situation

Long-term assets were virtually unchanged from the previous year's record date, coming in at € 297.0 million versus € 296.6 million in 2010. Due to the increased investment activities, KUKA's fixed assets rose € 3.3 million, while receivables from finance leasing from the earlier redemption of KTPO's financing and income tax receivables due to budgeted incoming payments were down € 2.1 million and € 1.4 million respectively. Deferred tax assets were used as loss carryforwards due to a positive tax balance, especially among the German consolidated companies. In contrast, deferred tax assets had to be formed out of valuation differences in KUKA Group so that the total for deferred tax assets of € 35.0 million would be closer to the previous year's € 34.5 million.

NET WORTH

in € millions	2007	2008	2009	2010	2011
Balance sheet total	888.2	865.5	726.2	984.7	1,078.0
Equity	233.5	213.5	160.8	198.1	252.4
in % of balance sheet
total	26.3	24.7	22.1	20.1	23.4
Net liquidity / debt	163.6	-53.6	-48.5	-60.3	-32.6

Current assets were up because of sharply higher receivables from contracts and inventories. Further details in this regard are provided in the financial position discussions. The increase in other assets and deferred charges was driven mainly by higher value added tax receivables and prepaid import taxes related to large international projects. Cash and cash equivalents totaled € 168.8 million as of the record date. In total, current assets as of the record date were € 781.0 million, € 92.9 million higher than reported at the close of last year.

The business growth is also reflected in KUKA Group's total balance sheet assets, which rose € 93.3 million, or 9.5 percent, from € 984.7 million on December 31, 2010 to € 1,078.0 million on December 31, 2011.

Equity substantially higher

Total equity was higher, driven especially by the positive net result for the year of € 29.9 million, versus € -8.6 million the year prior, and the cash inflow from the sale of treasury shares worth € 23.7 million. Exchange rate differences of € 2.8 million also contributed to the increase in equity. This was offset by the actuarial result related to pension accounting of € 1.5 million. Overall, equity was up € 54.3 million to € 252.4 million as of December 31, 2011. As a result, the equity ratio, the ratio of equity to total assets, was 3.3 percent higher as of the balance sheet date: 20.1 percent compared to 23.4 percent.

Non-current financial liabilities as of the balance sheet date were about the same as last year at € 194.0 million and comprise mainly the corporate bond. The convertible bond was included under short-term financial liabilities the previous year. The line item this reporting year relates primarily to the use of cash credit lines by two foreign subsidiaries.

In conjunction with the expansion of business activities and larger advance payments from customers, both advance payments received (up € 18.1 million to € 67.1 million) and liabilities from manufacturing orders (up € 53.8 million to € 93.4 million) were higher. The very satisfactory order situation is also reflected in other liabilities, especially personnel liabilities; for example, liabilities for flexible work time, vacation entitlements and variable remuneration components are up sharply year-on-year. At the end of 2011, current liabilities totaled € 527.9 million compared to € 491.7 million the year prior

Working Capital and Capital Employed

During the financial year, working capital rose € 14.2 million to € 98.9 million due to the expanding business volume.

One of KUKA Group's key indicators is return on capital employed, or ROCE. The average capital employed is measured at the beginning and at the end of the financial year. On average, KUKA Group's capital employed for 2010 and 2011 was € 312.5 million and € 332.9 million respectively, up slightly year-over-year. Return on capital employed was positive thanks to the EBIT of € 72.6 million and ended at 21.8 percent, versus 7.9 percent the year prior.

The Robotics division's average capital employed came in at € 133.2 million versus € 129.1 million the year prior. The division generated a return (ROCE) of 38.3 percent compared to 16.1 percent the year prior. The Systems division, with average capital employed of € 209.6 million, posted a return (ROCE) of 16.1 percent. In the previous year the numbers were € 192.4 million and 10.4 percent respectively.

NOTES TO THE

ANNUAL FINANCIAL STATEMENTS OF KUKA AKTIENGESELLSCHAFT

KUKA Aktiengesellschaft acts as a management holding company with central management responsibilities such as accounting and controlling, finance, HR, legal and financial communications. Its business performance is primarily determined by the activities of its subsidiaries. KUKA Roboter GmbH and KUKA Systems GmbH, the management companies of the Robotics and Systems divisions, report directly to KUKA AG.

KUKA AG prepares its annual financial reports in accordance with the standards of the German Commercial Code (Handelsgesetzbuch – HGB) and the German Stock Corporation Act (Aktiengesetzbuch- AktG). The standards of the German Accounting Law Modernization Act (Bilanzrechtsmodernisierungsgesetz – BilMoG) were applied for the first time last year.

The electronic version of KUKA AG's financial statements will be published in the Bundesanzeiger (German Federal Gazette) and will be available on our website at www.kuka.com.

KUKA AKTIENGESELLSCHAFT: INCOME STATEMENT (HGB)

in € millions	2010	2011
Other company-produced and capitalized assets	0.0	0.5
Other operating income	30.2	40.0
Personnel expense	-17.4	-18.5
Depreciation and amortization of tangible and intangible assets	-3.0	-3.2
Other operating expense	-47.7	-36.8
Income from participations	46.6	34.2
Other interest and similar income	16.3	23.4
Interest and similar expenses	-33.7	-26.2
Income from ordinary activities	-8.7	13.4
Extraordinary result	-1.0	0.0
Taxes on income	6.0	1.2
Net profit (previous year: net loss)	-3.7	14.6
Loss carryforward from previous year	-72.0	-75.7
Balance sheet loss	-75.7	-61.1

KUKA AKTIENGESELLSCHAFT: BALANCE SHEET (HGB)

A S S E T S

in € millions	2010	2011
Non-current assets
Intangible assets	2.6	2.3
Property, plant and equipment	15.8	15.5
Financial investments	174.3	174.3
	192.7	192.1
Current assets
Inventories	0.0	0.1
Receivables from affiliated companies	171.8	171.5
Other receivables and assets	11.3	13.1
	183.1	184.7
Cash and cash equivalents	163.2	130.1
	346.3	314.8
Prepaid expenses	1.5	1.7
	540.5	508.6
E Q U I T Y A N D L I A B I L I T I E S in € millions	2010	2011
Equity
Subscribed capital	88.2	88.2
Nominal value of treasury shares	-3.5	0.0
	84.7	88.2
Capital reserve	73.0	73.0
Other retained earnings	3.5	24.4
Balance sheet loss	-75.7	-61.1
	85.5	124.5
Provisions
Pension provisions	12.5	11.9
Provision for taxes	1.5	0.0
Other provisions	29.4	19.4
	43.4	31.3
Liabilities
Bond	202.0	202.0
Liabilities due to banks	2.2	2.4
Trade payables	6.1	2.5
Accounts payable to affiliated companies	194.8	137.6
Liabilities to provident funds	2.4	2.5
Other liabilities	4.1	5.8
	411.6	352.8
	540.5	508.6

KU K A A K T I E N G E S E L L S C H A F T: E A R N I N G S

KUKA Aktiengesellschaft's earnings are determined primarily by the results of its subsidiaries and its financing activities. KUKA AG's result from ordinary business activities rose € 22.1 million to € 13.4 million, from € -8.7 million the previous year.

KUKA Aktiengesellschaft took over the tasks of KUKA Dienstleistungs-GmbH, such as facility management, during the financial year. Other operating income, as well as the offsetting personnel expenses, thus rose. Other operating expenses fell € 10.9 million to € 36.8 million. Last year's expenses related mainly to the capital increase, the Syndicated Senior Facilities Agreement and other consultation costs, which all weighed on other operating expenses.

Net income from investments came in at € 34.2 million, below the previous year's € 46.6 million. Note that the previous year's number includes a distribution by KUKA AG's American subsidiary of € 30.2 million. The net result of income from profit transfers and the cost of loss absorption increased significantly, from € 16.4 million to € 34.2 million.

The restructuring of the Company's financing in November 2010, which resulted in lower interest expenses, helped improve net interest income by € 14.6 million to € -2.8 million, as did higher net interest income from affiliated companies.

KUKA Aktiengesellschaft's net result for the year, including tax income of € 1.2 million that was primarily the result of tax charges from consolidated companies, was € 14.6 million. It was € -3.7 million the year prior.

KUKA AKTIENGESELLSCHAFT: FINANCIAL POSITION

One of KUKA Aktiengesellschaft's most important tasks is to provide funds and guarantees for its subsidiaries' operations. In November 2010 KUKA Aktiengesellschaft obtained external financing by placing a corporate bond, which is shown in the balance sheet line item "Bond". KUKA AG placed a convertible bond with a face value of € 69 million in 2006 via its Netherlandsbased subsidiary KUKA Finance B.V. This was repaid as planned in November 2011. In addition, KUKA Aktiengesellschaft entered into a Syndicated Senior Facilities Agreement with a consortium of banks in November 2010 (for more details, see Financial Position KUKA Group and Appendix (26)).

KUKA AG's financing role is reflected in the receivables from and liabilities toward affiliated companies. These receivables and liabilities are primarily a result of the cash pooling accounts with subsidiaries and the loans provided. The current balance shows a receivable of € 33.9 million, compared to a liability of € 23.0 million the previous year. The turnaround in the subsidiaries' liquidity needs was driven by two factors: The subsidiaries that participate in cash pooling expanded their working capital and profits were transferred during the financial year. In total, KUKA AG's liquid assets thus declined from € 163.2 million to € 130.1 million.

KUKA AG's financial liabilities are thus € 204.4 million, which compares to € 204.2 million in 2010.

KUKA AKTIENGESELLSCHAFT: NET WORTH

KUKA AG's net worth is driven by its management of its holdings and its management of the Group companies. For information on receivables from and liabilities to affiliated companies, please refer to remarks in the section on the KUKA Aktiengesellschaft's financial position.

Investments in intangible fixed assets and property, plant and equipment, especially factory and office equipment, totaled € 2.2 million and were offset by depreciations, amortizations and write-downs of € 3.2 million. The direct holdings of KUKA AG in its subsidiaries are shown under the financial assets line item.

The change in equity reflects the sale of treasury shares in May 2011 and the financial year's net result (see also the remarks on the financial position of KUKA Group on Page 66). KUKA AG's equity ratio was 24.5 percent as of December 31, 2011, versus 15.8 percent the year prior.

The net result of these items on KUKA AG's total balance sheet assets was a reduction of € 31.9 million to € 508.6 million.

EVENTS AFTER THE BALANCE SHEET DATE

There were no material events between the beginning of the year and the date of this management report that impact the financial, asset or earnings position of the Group.

Please refer also to the ad hoc announcement dated January 31, 2012:

"Today, Mr. Stephan Schulak, member of the Executive Board of KUKA Aktiengesellschaft (CFO), informed the Chairman of KUKA Aktiengesellschaft's Supervisory Board, Mr. Bernd Minning, that he will not be available for another term of office beyond September 30, 2012. Mr. Schulak will continue his office until September 30, 2012.

KUKA Aktiengesellschaft will timely inform about the successor in office of Mr. Schulak."

RESEARCH AND DEVELOPMENT

R & D S P E N D I N G B O O ST E D AG A I N

To advance its technology leadership, KUKA Group, especially the Robotics division, continued to invest in research and development on new products and applications during the financial year. As a result, capital spending rose from € 29.5 million in 2010 to € 37.7 million in 2011. Still, at 2.6 percent, KUKA Group's research and development ratio; that is, R & D expenditures over sales revenues, remained close to the prior year's 2.7 percent due to the sharply higher business volume in the KUKA Group. The capitalization ratio; that is, the share of R & D costs capitalized was 20 percent in 2011 versus 6.6 percent the year prior.

The majority of KUKA Group's research and development is conducted by the Robotics division, which sells products. During the reporting period, the division accounted for € 35.4 million, or 93.9 percent of the total reported R & D expenditures. This compares to € 28.2 million or 95.6 percent the year prior. Here too, the R & D ratio declined due to the sharply higher sales volume, coming in at 6.2 percent in 2011 versus 6.8 percent in 2010. In addition, the division spent € 2.1 million on development services for the Systems division and other companies. The Systems division's development work relates almost exclusively to that required to complete customer-specific projects.

GROUP RESEARCH AND DEVELOPMENT COSTS

	2007	2008	2009	2010	2011
Total expenditure in € millions	30.8	33.7	35.6	29.5	37.7
of which KUKA Robotics in € millions	28.3	31.0	33.1	28.2	35.4
KUKA Robotics share in %	91.9	92.0	93.0	95.6	93.9
KUKA Robotics' R&D-ratio in % of sales	6.9	6.5	10.1	6.8	6.2

R O B OT I C S D I V I S I O N

At the end of fiscal 2011, the Robotics division's research and development department employed 258 persons, compared to 212 last year. This represents an increase of 46 persons or 22 percent over the course of the fiscal year, a considerably higher growth rate than the average at KUKA Group overall. Half of these employees work on software and hardware development and half work on mechanical design and mechatronics. The majority have a university degree. The Robotics division applied for 79 patents and received 90 patents during the fiscal year. Last year the numbers were 137 and 98 respectively.

New QUANTEC generation of robots now completed

KUKA's new QUANTEC generation of robots was first unveiled at the Automatica trade show in Munich in 2010. The new series is compact, has a low tare weight and dynamic performance is exceptional. It saves valuable manufacturing floor space, cuts energy consumption and shortens cycle times. The QUANTEC series was completed during the fiscal year with the release of the QUANTEC Foundry model at the international casting tradeshow GIFA 2011 in Düsseldorf and the QUANTEC palletizing robot at the IREX 2011 international robot exhibition in Tokyo.

The foundry models include a heat-resistant central hand that can be submerged and are designed to withstand the extremely harsh conditions in a foundry, such as heat, sand, high-pressure water sprays and continuous high humidity. For example, foundry robots can be used to transport heavy workpieces between machines and presses or for forging and deburring.

The QUANTEC palletizing robot is available in three payload classes ranging from 120 kg to 240 kg. It features a hollow-shaft design that houses and protects hose assemblies. This makes off-line programming easier and extends the service life of the hose assemblies. Their high dynamics make the new QUANTEC palletizing robots ideally suited to applications in the food and beverage industry and the logistics sector.

Industrial robots used as milling machines

Thanks to their extreme flexibility, not only can industrial robots be used for material handling and welding, but also to machine workpieces. Such machining equipment is usually programmed using CAD / CAM systems. To date, existing CNC programs could not be directly interpreted by robot controllers and had to be translated into the robot programming language. On the new KUKA.CNC product, which was presented at the EMO 2011 machine tool exhibition in Hanover, the CNC kernel is directly integrated into the robot controller, which enables the robot to directly interpret CNC programs, thus eliminating the need for translation, as well as the associated loss of information. As a result, the ancillary advantages of an industrial robot (large work envelope, six-axis machining, low capital cost) are combined with the advantages of a conventional CNC controller (CNC programming, workpiece radius compensation, intuitive machine tool management and CNC user interface). It also expands the application range of industrial robots; for example, for milling and polishing shaped components or coating, seaming and trimming or laser, plasma and water-jet cutting complex parts.

Easy to integrate: KUKA robots in the world of machine tools

A further example of integrating KUKA industrial robots into the machine tool world was presented together with Siemens Drive Technologies, also at the EMO 2011 machine tool exhibition. The mxAutomation product enables robots to be operated and configured via Siemens' Sinumerik machine tool control system. This gives machine operators a common interface to both the machine tool on the robot. No special robot programming language knowledge is required. This integration optimizes the interaction of the two machines: the robot handles loading and unloading tasks and positions the workpiece and the machine tool does the actual machining.

KU K A L A B O R ATO R I E S ( A DVA N C E D R O B OT I C S )

KUKA Laboratories' (Labs') core research and development project centers on sensitive robot assistants that can be used in the manufacturing and services sectors; for example, health care and medical systems.

Drive systems for service robotics

A new drive and sensor system based on the KR C4 control architecture has been developed for KUKA's next generation of service robots. KUKA is thus expanding its core competency to include developing its own drive and power electronics and is establishing the conditions that will enable it to offer new technologies in the field of highly integrated robotics based on its own expertise.

Autonomous navigation

The algorithms that enable mobile robots to navigate autonomously have been enhanced. Robots that use these algorithms can navigate independently in very large production plants without relying on floor or other markings. KUKA's navigation system independently recognizes changes in the surroundings, which are necessary in a flexible manufacturing environment, and processes them in its lifelong learning module. Autonomous route planning was also enhanced to enable energy-optimized navigation on virtual tracks.

The algorithms were validated at KUKA's manufacturing plant and on omniRob and omniMove platforms at automotive and aerospace industry production facilities.

Mobile manipulation

A prototype of a mobile KUKA omniRob equipped with a lightweight robotic system has been installed on pilot installations at customer sites in various industries. The aim is to test mobile manipulation on material handling, assembly, machining and automated testing applications. Feedback from these installations will flow into serially manufactured standard products.

KUKA youBot

During the fiscal year just ended, KUKA launched a productionready youBot, a mobile robot equipped with a gripper. The youBot chassis is equipped with four Mecanum wheels similar those used on KUKA's omniRob and omniMove products. That youBot was designed to be used as a research and learning platform and part of its development was funded by the EU BRICS project. An open source software application based on a real-time Linux system is also being used on the BRICS project. Sales, software distribution and communication with the youBot community are handled by a Web 2.0 platform at youbot-store.com. The youBot robot gives KUKA a product platform that enables it to address the research and education communities via Open Innovation and test new business models, as well as new sales and communications channels.

The youBot has already been tested and integrated into robotics lectures given by student interns at MIT in the United States and at the University of Hanover.

EU-funded SoftRobot project

Software engineering has advanced radically. The major paradigm shifts are the transition from procedural to object-oriented programming and the introduction of service-oriented architectures. During this process, tools were created to industrialize software design. As a result, complex applications can now be created at a fraction of the cost and effort.

The main objective of the SoftRobot project is to transition these two concepts to robotics. A new software architecture for controlling robots is thus being developed. New approaches to integrating robotics into the IT world can be developed by considering complex real-time requirements while using modern software engineering methods.

EU-funded ACTIVE project

A European consortium is examining the use of lightweight robots in the field of neurosurgery under the auspices of the ACTIVE project. KUKA Labs is preparing the specifications for critical medical applications for this project and conducting the necessary risk analyses from a robotics perspective.

SY ST E M S D I V I S I O N

During the financial year, KUKA Systems aligned its research and development structure with the new organizational configuration, which splits the systems and cell businesses. A product management unit was formed at the same time, which is responsible for speeding up the standardization of the components used in the systems business and developing new products for the cell business. Various products were developed or enhanced in 2011. The Systems division applied for 19 patents and received 21 patents during the fiscal year. Last year the numbers were 15 and 48 respectively.

FlexibleCube split into two series

FlexibleCube is a modular system for laser and inert gas welding applications, which the division unveiled for the first time at the Euroblech 2010 trade show in Hanover. During the financial reporting period, the modular system was split into two separate families. Three different compact cells plus a flexible configurable modular series will be available as of mid-2012. The compact cells are portable and are true "Plug & Produce" entities that can be started up at site with minimal effort. The modular system's modern design underscores FlexibleCube's high quality standards, while further reducing manufacturing costs.

Orbital turntable

The plant engineering and assembly business unit further enhanced the proven Turnflex concept and created a universal orbital turntable. The turntable is squared and measures 3.90 meters across the diagonal. A tool can be bolted to each of its four sides. One of its many benefits is that workpieces can be crimped on both the inside and the outside on a system that has a considerably smaller footprint. KUKA Systems already supplied two manufacturing cells in 2011 that use the new turntable.

New product family for automating bending machines

Belgian-based KUKA Automatisering + Robots has developed a modular concept for automating bending machines. The product family consists of standard components, which sharply reduces the cost of engineering such systems. The standardization especially impacts loading and unloading stations, turning stations, positioners and grippers. An off-line software application developed together with an external partner facilitates integrating new components into the system. The software enables process parameters and robots to be configured together.

High-speed milling machine developed

Together with the Fraunhofer Institute and a respected German manufacturer of cutting tools, KUKA Werkzeugbau developed a high-speed milling machine to machine long, vertical castings. This innovative milling machine is equipped with cutting tools made from cubic boron nitride and features a two-stage adjustment, which allows vertical surfaces over 600 mm long to be very finely sanded in a very short time. The feed capability of this tool is twice that of other milling machines available on the market, which cuts surface preprocessing to one operation. This eliminates the manual reworking that has typically been required up until now. The potential to enhance the basic concept of this high-speed milling machine and develop a universal tool system is considerable.

Adjustment station for axle drive

This station, available from KUKA Assembly & Test, can be used to adjust the circumferential backlash and bearing preload of the axle plug-in gear on truck rear axles. The difference in the angle between the drive pinion and bevel crown wheel in the forward and reverse direction is measured dynamically and adjustment rings used to set the circumferential backlash. The bearing preload adjustment is then set using a tactile measurement process to detect the deformation of the housing. This adjustment station can be used for many gear types and a variety of gear ratios and has already been successfully integrated into an assembly line.

PROCUREMENT

KUKA Group's divisions are each responsible for procuring the parts they need for manufacturing, but indirect materials and services are purchased on behalf of all Group entities according to the lead buyer principle. For example, KUKA Robotics' responsibility includes purchasing transportation services and energy and KUKA Systems is in charge of telecommunications, building management and the vehicle fleet.

P R O C U R E M E N T VO LU M E AG A I N U P S U B STA N T I A L LY

Due to the much higher business volume, the Robotics division's procurement volume was again sharply higher than the year prior. The division addressed this situation by adding second source suppliers (dual source strategy) and more rigorously planning the delivery of critical parts such as electronics components. It was able to avoid shortages of parts that would impact manufacturing schedules by cooperating more closely with suppliers or directly with manufacturers of individual components such as semiconductors or displays. This proved to be the right policy, especially in view of the nuclear incident in Japan in March 2011.

G LO BA L S O U R C I N G C U T S P R O C U R E M E N T C O ST S

In parallel, the Robotics division was able to further optimize its procurement channels and supplier base. As a result, Robotics has had an end-to-end supply chain extending from the supplier through its own manufacturing system to the shipment of robots since 2011. At the same time, procurement was further shifted to low-cost countries in conjunction with a global sourcing initiative. The volume of parts supplied from these countries has increased to about 20 percent. A major portion of this increase is due to expanded local buying in China, where purchased components include power supplies and castings. Volume in this growth market was twice what it was in 2010. As a result, the Robotics division was able to reduce its average procurement costs in 2011 by 5 percent, adjusted for currency and commodity price factors.

N E W P U R C H A S I N G O R G A N I Z AT I O N P R OV E S I T S WO R T H

The new purchasing organization introduced by KUKA Systems in Augsburg last year, which is grouped by merchandise category, proved its worth in view of the increasing volume of material to be procured. Because of closer cooperation with suppliers, buyers were able to anticipate bottlenecks in merchandise categories promptly and look for alternatives. Manufacturing progress was increasingly checked at the supplier's plant. This also expanded purchasing's expediting role in project schedule management. A task force of specialists also supports purchasing in difficult situations.

S U B S I D I A R I E S I N R O M A N I A A N D M E X I C O M O R E I N T E N S I V E LY U S E D

To better utilize the cost advantages of low-wage countries, KUKA Systems founded a new company in Romania in 2011. Its main task is to assemble jigs and fixtures. The company also helps KUKA Systems in Augsburg search for and develop new suppliers. In addition, the Mexican subsidiary is being utilized more frequently to manufacturer cold-assembled tools for projects in North America and Brazil.

EMPLOYEES

KUKA Group's human resource programs concentrated on two main items during the 2011 financial year just ended. First, the operating business units had to add sufficient personnel capacity to handle the sharply rising business volume. However, the aim was to add personnel in the markets where the orders are being processed and in markets where wages are low, such as the emerging regions of Asia, America and Eastern Europe. Secondly, the demographic population shift in the developed countries is making it necessary to make jobs more attractive. KUKA intensified its activities at schools and colleges in Germany, expanded its vocational training and substantially improved its policies related to creating a family-friendly workplace.

TA R G E T E D I N T E R N AT I O N A L P E R S O N N E L E X PA N S I O N

To address the sharply higher business volume, KUKA Group engaged in targeted hiring of new employees, primarily abroad. This expansion took place most of all in the growth markets of the United States, Brazil , China, Hungary and India. In Germany, new hires were attributable mainly to the Robotics division. The division added technical staff in research and development, as well as manufacturing in Augsburg. The Company's workforce thus expanded from 5,990 as of the end of 2010 to 6,589 at the end of 2011, an increase by 10.0 percent or 599 employees. The majority of the new people were added by the Robotics division, where the number of employees rose by 406 employees or +17.3 percent. The Systems division expanded its workforce by 187 or +5.4 percent. Finally, the number of persons employed by KUKA AG and other activities increased by six. To cover capacity utilization peaks, the number of contract workers increased from 843 on December 31, 2010 to 1,078 on December 31, 2011.

EMPLOYEES BY DIVISION (DEC. 31)

EMPLOYEES BY REGION (DEC. 31)

O N E - T H I R D W I T H U N I V E R S I T Y D E G R E E O R C O L L E G E D I P LO M A

The qualifications of KUKA's employees have continually improved in recent years. Around one-third of KUKA's employees now have a university degree or college diploma, and two-thirds have credentials in a technical or accounting field. The age distribution average of 41 years remained the same as last year during the reporting year. The average age in the Robotics division was below the Group's average at 38, versus 39 the year prior. In the Systems division the average age was slightly above the Group's average at 43 versus 42 the year prior.

An increasing number of employees were able to look back on a long period of employment during the reporting year: 72 employees were honored for their 25th year anniversary on the job, in comparison to 48 the previous year, and 19 employees were honored for their 40th year anniversary on the job, in comparison to 11 the previous year.

KU K A TO P E M P LOY E R 2 0 1 1 / 2 0 1 2

The CRF Institute presented the 2011 / 12 Top Employer in Automotive award to KUKA AG's CEO, Dr. Till Reuter, at the IAA international car show in Frankfurt in September 2011. The award distinguishes the best and most trendsetting employers in the German automotive industry, including subsuppliers. In total, twenty-three companies qualified this year through special achievements in career opportunities, primary and secondary benefits, work life balance policies, training and development as well as corporate culture.

KUKA maintained close contact with regional universities and colleges and significantly expanded training opportunities for graduates and interns during the reporting year. Addressing qualified applicants for junior specialist and management trainee positions is an important part of HR work. The company participated in eleven job fairs in 2011, including at the Technical University and University of Applied Sciences of Munich, as well as the universities of applied science in Augsburg, Aalen, Deggendorf, Kempten, Ingolstadt, Rosenheim and Ulm. Last year, the company attended twelve job fairs. At the same time, a total of 158 graduates and interns were given the opportunity to gain their first professional experience. Last year the number was 117. These activities also included participation in roundtable events such as "Engineer meets entrepreneur", "Engineers in practice" presentations and "Career days" at various colleges.

KUKA AG was also voted one of the 100 most popular employers in Germany by students in 2011 ("TOP 100 in the universe" as well as "TOP 100 in the field of Engineering" .See also the press release dated September 19, 2011 "KUKA is TOP Employer in Automotive for 2011 / 12".

A P P R E N T I C E S H I P S I N C R E A S I N G LY I M P O R TA N T

In light of demographic trends and fewer applicants, KUKA Group is intensifying its apprenticeship training and in recent years has continually offered more apprenticeship positions at its German plant locations. The number of apprentices thus rose from 193 at the end of 2009 to 210 at the end of 2010, and is 227 as of December 31, 2011. The apprenticeship ratio; that is, the proportion of young people working for the Group was thus 3.5 percent of the total workforce at the end of 2011, the same as last year.

KUKA offers a wide variety of technical and accounting apprenticeships at its German locations in Augsburg, Bremen and Schwarzenberg in the Erz Mountains: mechatronics engineers, industrial mechanics, machinists / lathe operators, IT specialists and automation system electronics technicians as well as industrial and logistics administrators. Tool and die makers are trained in Schwarzenberg exclusively. In addition, high-school graduates can enter a vocational degree program based on the German dual education system in mechatronics or electrical engineering at various cooperative education institutes or the Augsburg University of Applied Sciences, where they can earn a Bachelor of Engineering Degree (BA). All apprenticeship opportunities at KUKA are summarized in the brochure entitled "Technology. Teamwork. Dream job", which are available from the HR departments at each location.

To make students more interested in applying for apprenticeships at the company, KUKA is also offering high school students the opportunity to spend a week getting to know the world of work during a "taster" course; 140 school students made use of this opportunity during the reporting year (see more at www. kuka. jobs). In addition, about 20 school classes toured the company site. Some graduates received job application training. In addition, KUKA sponsors four schools at various levels and conducts joint school projects.

A relatively new target group for technical professions are young women, who are given insight into these professions once a year on a so called Girls Day. This target group is showing increasing interest in training in the industrial / technical area. The ratio of women is already at 20 percent here.

KU K A M A K E S J O B S M O R E FA M I LY F R I E N D LY

KUKA conducted a "career and family" audit last year at its Augsburg location to seeks ways to increase the attractiveness of its jobs. The existing policies for achieving a better work-life balance were evaluated from February to May 2010.

Afterwards, HR defined additional goals for a family-conscious HR policy. Detailed measures for achieving a work-life balance are part of this extensive program. In the 2011 reporting year, the following measures were implemented as planned:

• _ Meetings are being scheduled during more family-friendly hours to take the different working hours of employees into consideration.
• _ Video conferences and conference calls are being used increasingly to reduce travel times to other locations.
• _ Furthermore, health management is being expanded. Among other actions taken to this end, a health day event was held in Augsburg and Gersthofen on September 16, 2011, where around 500 employees were informed in detail, among other things, about healthy diets and the correct way to sit at work.

Berufundfamilie gemeinnützige GmbH will review the implementation of all measures once a year to ensure that re-auditing is successful after three years. Goals and measures for KUKA on the road to becoming a family-friendly company are also explained in the brochure "Career and family - We go all-out for both", which can be picked up at the HR departments in Augsburg. At the same time, we call on all employees to enter into an active dialogue on work-life balance (berufundfamilie@kuka.com).

9 . E M P LOY E E S H A R E P R O G R A M

Another attractive opportunity for retaining existing or potential employees in the company is employee shares. The KUKA employee share program was offered for the ninth time in 2011. A total of 320 employees participated in the program. The company again subsidized the purchase of two KUKA shares with an additional incentive share. A total of 101,820 shares thus went to KUKA employees in June 2011.

SUSTAINABILITY

KUKA has committed to the goal of conducting business sustainably. A company that is aware of its responsibility toward the environment, its employees and its shareholders must combine economy, ecology and social responsibility. We see sustainable business activity as an ongoing threelevel process:

• _ in the organization of the business operations,
• _ in the conduct of employees and
• _ in achieving environmental goals.

I N T E G R AT E D B U S I N E S S P R O C E S S E S I N T R O D U C E D

Holistic business processes are a prerequisite for successfully implementing all measures and achieving sustainable goals. It is therefore of key importance that KUKA Group's companies are certified to globally recognized ISO standards. All of the Group's major manufacturing companies and business units in Germany, Hungary and North America have been certified to ISO 9001 (management systems) and ISO 14001 (environmental management systems) for years. Plans call for other foreign subsidiaries to be certified to these standards in the near future. For example, efforts are being made to bring our Chinese companies into compliance in 2012.

C O D E O F C O N D U C T U P DAT E D

The second key initiative associated with achieving sustainable business activity is defining employee conduct – toward each other and toward their business partners outside the company. A prerequisite to excellent teamwork is loyalty, respect and fairness when dealing with other team members. These are some of the core values that characterize KUKA's corporate culture, and that have found their way into the new Corporate Compliance Handbook in addition to those associated with avoiding legal risks. The handbook was revised last year and has defined the standard of conduct of all company employees since April 1, 2011. In November 2011, employees were able to further expand their compliance knowledge using an online training program with case studies from practical business situations. An on line test was also available.

N E W G E N E R AT I O N O F R O B OT S : G R E E N AU TO M AT I O N

The launch of the new QUANTEC industrial robot together with the new KR C4 controller was a milestone on the road to improving the environmental balance sheet. This family of products is noticeably more compact and lighter than its predecessors; accordingly, it requires fewer components and consumes less energy when operating. In detail, the QUANTEC industrial robot features

• _ weight reduced 12 percent: because it weighs 160 kg less, this standard robot is considerably more efficient (input power / payload).
• _ power consumption reduced 30 percent: thanks to fewer modules and a more passive cooling system, the new QUANTEC Robot uses 30 percent less power for the same performance.
• _ 50 percent fewer cables and plugs, body made of spheroidal graphite cast iron (previously aluminum), as well as waterbased paints mean substantially reduced material consumption and greater environmental protection.
• _ 95 percent lower standby losses: the new KR C4 Robot Controller's virtual main breaker dramatically cuts power consumption when the robot is idling. Limiting hardware components were replaced by smart software functions; a basic precondition for integrating a complete safety controller into the robot and eliminate the need for conventional robot cells protected by barriers.

E N V I R O N M E N TA L LY S O U N D SY ST E M S P R O D U C T S

In addition, KUKA Systems has made additional criteria for material and energy conservation part of its development and manufacturing specifications for complete systems components. These criteria aim to encourage

• _ the use of lightweight construction processes
• _ the reduction of production components that need to be moved
• _ holding methods that do not consume energy
• _ minimum downtimes and less wear and tear.

N E W E N E R GY T R A N S PA R E N C Y I N AU G S B U R G

On the manufacturing side, the key initiative was the implementation of a web-based energy management system (ENerGO +) at Augsburg headquarters. Since June 2011, energy consumption readings have been sent four times a day via LONWorks (Local Operating Network.) from about 250 meters installed at the company's factories and buildings. The system then prepares this data visually and makes it available to personnel responsible for cost center management. Transparency and speed thus facilitate the search for opportunities to save energy . Appropriate measures were identified quickly during joint onsite inspections. This included measures such as dimming lights during breaks, turning down heat in unoccupied areas, and turning off unneeded machines during overload periods. The company is considering extending ENerGO + to its other locations.

KEY FIGURES ECOLOGY

	2010	2011
Number of locations worldwide	37	37
with ISO 9001 certification	14	14
of which ISO 14001 certified	10	10
Consumption (Augsburg only)
Electric power (MWh)	12,667	13,386
Gas (MWh)	17,182	14,605
Water (m3 )	18,018	19,972
Power consumption per robot manufactured
(kWh)	229.8	178.3
CO2 GHG emissions (t)	8,615.5	9,416.8

We have been participating in the Carbon Disclosure Project since 2008. This organization publishes information on the life-cycle assessments of listed companies annually and on business prospects for sustainable products. The Carbon Disclosure Project is supported by many investor groups (www.cdproject.net).

F O C U S O N H E A LT H C A R E M A N AG E M E N T

In 2011, the focus was also on health care management. Numerous courses and seminars were held during the course of the year on the subjects of nutrition, exercise, prevention and stress management. This series of campaigns culminated in a general health day on September 16. On this day, about 500 employees in Lechhausen and Gersthofen were coached in detail on topics such as a healthy diet and the correct sitting posture at the workplace.

Prior to that, KUKA's Family Day was held on July 22: 4,000 employees took part. Employees and their relatives had the opportunity to take a close look at the workplace and participate in one of the ten tours of other business units within the company that were offered. The event gives employees' families an opportunity to better understand each other and for all employees to develop a better understanding of one another.

WO R K S A F E T Y FA R B E T T E R T H A N I N D U ST RY AV E R AG E

Another of KUKA's targets that forms part of conducting business sustainably is to achieve a work accident rate that is 50 percent below the industry average. Workers in manufacturing and similar operations are exposed to increased health and safety risks. The company thus takes great care to systematically reduce these risks to the lowest possible level in its manufacturing operations. For years it has successfully achieved this goal. The average "1,000-man-ratio"; that is, the number of work-related accidents subject to reporting per 1,000 employees, was 12.7 over the past five years (2007 – 2011), while the industry average during this period was 41.4.

KEY SOCIAL FIGURES

	2010	2011
Number of employees (Dec. 31)	5,990	6,589
of which apprentices	210	227
Average length of service (years)	9.4	9.1
Sick leave ratio (in %)	2.9	2.9
Fluctuation (in %)	9.9	12.9
Accidents per 1,000 employees (Germany)	12.8	13.9

RISK AND OPPORTUNITY REPORT

P R I N C I P L E S

KUKA Group conducts business around the globe. Every entrepreneurial activity presents new business opportunities, but also many risks, especially technical ones. The goal of KUKA AG's Executive Board is to minimize these risks and take advantage of potential opportunities, in order to systematically and continuously improve the value of the company for all stakeholders and shareholders.

Risk management

To achieve this objective, the Executive Board implemented a comprehensive risk management system within the Group, which is used to continuously and systematically identify, evaluate, control, monitor and report internal and external risks to which its divisions and subsidiaries are exposed. Identified risks are evaluated throughout the Group for their potential impact on profits and the likelihood that they will occur. They are categorized according to worst, medium and best case scenarios, including the expected risk value. Accruals and write-downs associated with these risks are included in the financial statements in accordance with applicable accounting principles. The monthly risk report includes the top ten risks for the divisions and KUKA AG as holding company, as well as an overview of the entire Group's risk exposure. These top ten risks are a fixed part of the monthly reporting. The risk report is also reviewed during Executive and Supervisory Board meetings, especially when the audit committee convenes. The identified risks are presented and explained in more detail to the Executive Board quarterly by the risk management committee. The committee also determines whether or not initiatives to minimize the risk are adequate or whether further measures are required. This management committee also evaluates the plausibility of the reported risks and derives alternative ways to avoid similar risks in future.

The direct responsibility for early identification, control and communication of risks is defined and lies with the management of the divisions and subsidiaries. Risk managers in the central and decentralized business units ensure that the reporting process is uniform with clearly defined reporting channels and reporting thresholds that are in line with the size of the company. Whenever defined reporting thresholds are exceeded, the responsible parties are obliged to use internal ad hoc announcements. The head of the Group controlling department at KUKA AG is responsible for coordinating the risk management system. This central risk management position reports directly to KUKA AG's CFO. This ensures that risk management is an integral component of KUKA Group's overall planning, control and reporting process.

The Group's risk management system makes it possible for the Executive Board to identify material risks at an early stage and take appropriate steps to counter them as well as to monitor the mitigating measures. As part of its regular audits, the internal audit department monitors whether KUKA Group's risk management directives are being adhered to, and thus the effectiveness of the procedures and tools that have been implemented. If necessary, the internal audit involves the risk responsibles into audit scope. In addition, the internal audit department regularly audits the risk management process to ensure that it is efficient and continuously improved. Furthermore, the external auditors check that the early risk identification procedure is suitable for timely identification of risks that threaten the existence of the company.

KUKA Group's opportunities and risk-related controlling process ensures that opportunities and risks are taken into consideration by the management. Further details regarding associated opportunities are provided in the description of the various risk categories.

KUKA Group also has an internal controlling system (p. 89, Internal control an risk management system) above and beyond the risk management system, which is used to continuously monitor the Corporation's business and accounting processes and helps to ensure that they are properly adhered to.

M A R K E T A N D B U S I N E S S R I S KS A N D O P P O R T U N I T I E S

KUKA is exposed to the cyclic investment plans of its customers in the various market subsectors. The automotive sector, with its oligopolitical structures and constant price pressure, represents a major share of the Systems and Robotics divisions' business volumes. Variations in the industries' capital expenditure plans are also considered in the respective strategic and operative plans by analyzing public announcements and disclosures. Due to the cyclic nature of the business, the company continuously strives to be as flexible as possible with its own capacities and its cost structure.

It is further exposed to country risks, such as inadequate patent and brand protection in Asia, exchange rate fluctuations, financial and technical risks and the risk of substantial price increases of key raw materials. To the extent possible and economically viable, value added is increasingly being localized to reduce currency exchange risks. KUKA has developed an independent strategy to safeguard its intellectual property, which is primarily secured by patents and trademark rights. New competitors in the market, particularly from Asia, increase price pressure. We counter this by maintaining strong relationships with our customers, and especially by expanding our technological skills and protecting them.

KUKA benefited from sharply higher orders received than the year prior from both the automotive industry and the general machinery and plant engineering sector, especially in the first half of 2011. Additional opportunities also arose because KUKA Group's key automotive customers enjoy an excellent competitive position in their markets. Compared to its own competitors, KUKA Group sees business growth opportunities due to its customer portfolio, particularly with respect to the development of its customers' market shares. Further opportunities arise from the general trend toward greater automation in non-industrial sectors, such as the long-term prospects associated with assisting an aging society.

KUKA works with suppliers that focus on quality, innovation strength, continuous improvement and reliability so that it can supply its own customers with top quality products. Generally, KUKA sources product components from several suppliers, but due to a lack of alternatives is dependent on single source suppliers that dominate their markets in a few cases.

An additional risk that could also impact business performance after 2011 is the further development of national debts around the world, but particularly in the eurozone. Increasing currency fluctuations, particularly of the American dollar, the Hungarian forint, the Japanese yen and the Chinese yuan, pose an additional risk. How KUKA manages its currency exchange risks is described in detail in the section on financial risks.

P E R F O R M A N C E R I S KS A N D O P P O R T U N I T I E S

KUKA Robotics

The key challenges for this division's product portfolio are the continuing cost sensitivity of customers around the world and their demands for continuous product innovation. This applies especially to the automotive industry and its subsuppliers. The result is permanent price pressure and potentially longer life cycles for the robots.

KUKA Robotics counters such trends by continually developing new products and applications that offer customers in existing markets quantifiable financial advantages driven by very fast paybacks. In fiscal 2011, KUKA Group spent € 37.7 million on research and development. The Robotics accounted for 93,9 percent of the expense. Over the course of the financial year, the division rolled out a new generation of robots in stages to its traditional markets. Launching new products goes hand-in-hand with risks associated with product performance and warranties, which could generate reworking costs. KUKA employs a comprehensive quality management system that includes extensive validation and test processes to manage such risks or avoid them altogether.

KUKA sees an opportunity to continuously expand its customer base into general industry. One of the corporation's key strategic thrusts is to penetrate new, non-automotive markets. This includes the health care market and other consumer related sectors in which human-machine collaboration will in future be necessary. The systems used for human-machine collaboration can operate without protective barriers or similar safety measures. One of the division's subgroups, Advance Robotics, focuses on technical development of such innovative products and applications. In addition, the company is expediting sales in the American region and the BRIC nations. Increased distribution of our own value added across various local currencies will make the profitability of the company less dependent on exchange-rate fluctuations.

KUKA Systems

This division's sales and profits are subject to general business risks due to the length of time it takes to process project orders, the revisions to the specifications that are often necessary while already processing the orders, the infrequency of the orders received, as well as price and competitive pressures. Other risks associated with these projects include inaccurate prediction of the actual costs, as well as penalties for late deliveries. The division thus uses appropriate risk checklists for individual orders, which are used to assess the associated legal, business and technical risks prior to preparing a quotation or accepting an order. Insolvency risks especially are monitored, tracked and mitigated using a strict project and receivables management process in conjunction with this exposure reporting. Other risks are continuously monitored and if necessary accounted for by accruals or write-downs. In addition, the company is standardizing and optimizing the quotation and order acceptance processes used by its international subsidiaries. Opportunities associated with the project business arise mainly when parts can be purchased at a lower cost than originally estimated, and by invoicing the customer for any changes over the course of the project.

Major automakers throughout the world are currently rapidly expanding their global manufacturing capacities. KUKA is increasingly working jointly with internal partners, whereby several of the division's regional subsidiaries collaborate on a project, especially in South America and Asia. In such cases there are risks associated with information exchange, the value added process and the IT-based master project management system. There are also organizational risks associated with extraordinarily rapid and strong growth in business volume, particularly in emerging markets. KUKA mitigates these risks by harmonizing its global IT systems and deploying experienced internal and contract employees when establishing and expanding the local organizations.

The increasing variety of models offered by the automotive industry has a positive impact on the potential market volume, since it generates increasing demand for flexible manufacturing systems, which in turn spurs demand for new assembly lines or the revamp of existing ones. This creates new business opportunities for systems integrators and subsuppliers. Scarce resources are driving demand for smaller and more fuel-efficient vehicles, which will rely on alternative energy sources. Going forward, this will make it necessary for automakers, especially the American players, to invest in new assembly-lines or to upgrade their existing production systems.

Pay-on-production contracts such as the one entered into by KUKA Toledo Productions Operations (KTPO) offer additional opportunities, but also risks. The Jeep Wrangler brand continues to offer above average growth opportunities compared to other American car models. Again in 2011, KUKA participated in the growth. The risks herein are the strong dependence on the volume produced for the American car market.

Thorough market analyses have shown that KUKA Systems also has long-term business opportunities outside the automotive industry; namely, in general industry. Current examples are the aerospace and solar industry, from which new orders were again received in 2011. Although there is an opportunity to penetrate new markets, there are also associated risks, above all in relation to technical requirements, since customers in these sectors often have absolutely no experience with automated systems. Checking technical risks by using appropriate risk lists is therefore a major instrument in advance of applying new automation technologies.

ST R AT E G I C R I S KS A N D O P P O R T U N I T I E S

The goal of the business divisions is to be among the technology and market leaders in their target markets. Consistently enhancing their core technologies using coordinated innovation programs is thus of primary importance. A key task is to identify the opportunities and risks of technical innovations in a timely manner and evaluate their feasibility. The company mitigates the impact of faulty market assessment by conducting regular market and competitor analyses, some of which are decentralized. Application-oriented developments, partnerships with systems integrators and alliances and cooperative research projects; for example, the German Aerospace Center (DLR) in Wessling near Munich, RWTH Aachen and the university clinic in Aachen reduce the risk of developing non-marketable products and systems.

Using effective quality assurance systems in combination with regular certification programs helps convince purchasers that the company offers customer-oriented products and solutions and strengthens the positions of KUKA's companies in their target markets.

The corporate strategy is managed by a central KUKA AG department and is regularly reviewed and coordinated with the divisions. The joint Innovation Center develops crossover technologies and concepts. Uniform procedures and processes generate synergies that help the company meet market demands for innovative products and solutions.

PERSONNEL RISKS AND OPPORTUNITIES

The success of KUKA Group, a high-tech company, depends mainly on having qualified technical and management staff. Personnel risks arise mainly from employee turnover at key positions within the Group. Improved business and economic prospects enable the company to strengthen the loyalty of its core personnel, provide highly skilled employees with continuing education or entice new recruits to join the company. This applies to the traditional markets in Europe, but especially the United States, as well as the growth markets; e.g. the BRIC countries, in which the need for highly qualified employees is steadily growing. Last but not least, in-house continuing education programs such as those offered by KUKA Academy, or employee suggestion programs, generate opportunities resulting from the improved motivation and qualification of the workforce.

Furthermore, in Germany, there is evidence of an increasing shortage of qualified personnel, particularly in the technical area. This requires that the company have appropriate in-house training programs and permanently stay in tune with the job market and job seekers. KUKA works closely with local and national universities and research institutes, such as the University of Augsburg, RWTH Aachen and the German Aerospace Center (DLR).

Centralized and decentralized training and continuing education programs for employees at all levels ensure that the Group's people have the indispensable expert skills they require. The in-house and international trainee program offers recruits the opportunity to get to know various business areas and foreign companies. The 227 apprentices to be trained by the KUKA Group by year-end will be quickly integrated into the company and mostly offered a permanent position when they have completed their training. One of the key challenges in the coming years will be to prepare KUKA Group for the future in view of the demographic shift.

KUKA Group has an attractive performance and results-driven compensation system for managers to strengthen entrepreneurial thought processes and management styles and to encourage employees to remain with the company and participate in its growth over the long term. KUKA Group's employee share program is another initiative that serves this purpose.

I T R I S KS A N D O P P O R T U N I T I E S

The existing IT security and Business Continuity Management systems, as well as guidelines and organizational structures, are continuously optimized and reviewed in an effort to predict and minimize computer systems related risks such as failure of computer centers and other IT systems. This is done by continuously investing in updated hardware and software. A new storage system with the requisite processes and corresponding data and applications recovery systems was installed and started up to ensure business continuity in the event of failures. The company mitigates the risks associated with an increasing number of external threats, and dependence on ever-expanding digitization of business processes, by systematically monitoring the associated processes. Targeted investment and ongoing optimization of IT-supported processes generate long-term cost reduction opportunities and lead to continuous quality improvement.

IT security is also closely tied into KUKA Group's risk management process. External and internal auditors conduct an annual IT audit as well as spot checks to ensure that the respective processes adhere to legal requirements.

FINANCIAL RISKS

One of KUKA AG's primary tasks is to coordinate and control the Group's financing requirements and ensure that KUKA remains financially independent. With this goal in mind, a central department optimizes the Group's financing and limits its financial risks. The standard, group-wide treasury reporting system implemented in 2007 was further enhanced for this purpose. In addition, the Group's overall liquidity risk is reduced by closely monitoring the Group's companies and their control of payment flows.

Over the course of the past two-and-a-half years, KUKA Group's solvency was strengthened by way of several measures. One of these was to restructure the company's debt in terms of maturity and the type of financial instruments used. For 2009 and 2010, this included two capital increases, the issue of a corporate bond and conclusion of a new Syndicated Senior Facilities Agreement.

The rating agencies Standard and Poor's and Moody's gave KUKA AG a long-term Corporate Family Rating (CFR) of B and B2 respectively. Both ratings were assigned a stable outlook. KUKA AG's bond was given a rating of B- and B3 respectively.

The Syndicated Senior Facilities Agreement concluded in November 2010 runs until March 31, 2014. It includes the usual covenants specifying quarterly restrictions. A fundamental risk associated with this type of financing exists when business performance is significantly below plan and the resulting profit and financial situation precludes adherence to the covenants. In such cases, extension of the financing depends on the extent to which the banks involved agree to the necessary adjustments. KUKA monitors adherence to these covenants monthly. The company complied with all covenants during the course of the 2011 financial year.

In addition to the aforementioned steps, agreements on bilateral credit lines with banks and credit insurance companies supplement KUKA Group's financing portfolio. This includes, for example, the ABS program (regular sale of receivables) established in 2006 with Bayerische Landesbank in the amount of up to € 25 million, the term of which has been extended until March 31, 2013. An additional ABS program in the amount of over € 25 million has also been concluded with Landesbank Baden-Württemberg.

Transaction-related currency exchange risks are hedged using currency futures. The goal is to hedge the currency exchange risk on a rolling basis. Details of the central currency management process are provided under Financial Instruments on pages 111 f. of the notes to the financial report. As a basic principle, all KUKA Group companies must secure their foreign currency positions as soon as they arise. Translation risks; that is, valuation risks associated with balance sheet items whose value has been converted from a foreign currency, are not hedged, but are continuously monitored. The risk associated with the volatility of leading currencies and the resulting economic exchange risk (competitive risk) is mitigated by having production facilities in several countries (natural hedging). Internal guidelines are used to control the trading and use of derivatives. Associated risks are continuously monitored internally.

C O M P L I A N C E R I S KS

Compliance violations can lead to fines, sanctions, legal directives regarding future business conduct, forfeiture of profits, exclusion from certain businesses, loss of union concessions or other restrictions. Furthermore, involvement in potential corruption proceedings could harm the overall reputation of KUKA Group and could have a negative impact on efforts to compete for business in both the public and private sectors. Such proceedings could also have a negative impact on the relationship KUKA Group has with business partners upon which it depends, as well as its ability to find new business partners. It could also have a negative impact on the company's ability to pursue strategic projects and transactions that may be important for the business; e.g., joint ventures or other forms of cooperation. Ongoing or future proceedings could lead to the suspension of some existing contracts and third parties, including competitors, could initiate legal proceedings against KUKA Group for substantial amounts of money.

In order to make these risks transparent and controllable, a Corporate Compliance Program was introduced in early 2008. It applies to all German and international KUKA companies and all managers around the globe have been trained. A compliance committee meets at regular intervals and ad hoc and reports to KUKA AG's CEO, who in turn reports to the Supervisory Board's Audit Committee.

In spring 2011, KUKA Group's updated corporate compliance program manual, with supplementary rules regarding each employment contract, was distributed to all employees. As a logical extension to the steps taken to date, an e-learning program to educate employees at the German sites about the contents of the compliance guidelines was established in consultation with the Group's works council and has been in use since fall 2011. The next step, which is scheduled for February 2012, is to roll out the program to all the company's international locations and to include all employees who started with the company at the German sites since September 2011.

The CEO is ultimately responsible for the corporate compliance program. The program is regularly updated and subject to strict internal controls. The initiative did not uncover any substantial risks in 2011, since the company was able to actively implement countermeasures by mitigating risk at an early stage and striving to eliminate risk sources; e.g., by aligning its business processes.

OT H E R R I S KS

KUKA Group continuously monitors other risks and mitigates these to the extent possible. There is no evidence of environmental risks from operational activities, since the company does not use hazardous materials. The Group makes use of buildings and properties for its business operations, some of which it owns. As a result, the company is exposed to risks associated with any residual pollution, soil contamination or other damaging substances that may be discovered on its properties. There is currently no evidence that any situations exist which would have a negative impact on the valuation in the balance sheet. However, there is no guarantee that such situations, which could, for example, require costly cleanup operations to be undertaken, will not occur in the future.

The events in Japan on March 11, 2011 had no negative impact on KUKA Group's business results. Neither do we currently foresee any impact on the business operations going forward.

Where possible, legal risks are limited by using standard general contracts. The Group's legal department supports the business operations and thereby helps to limit risks. A Group-wide Directors' and Officers' (D&O) Liability Insurance Policy is in place that covers, among others, the business management bodies (Executive Board and managers) and supervisory bodies (Supervisory, administrative and advisory boards) of the German and foreign Group subsidiaries. Existing insurance policies are reviewed annually in order to weigh the relationship between the insurance protection and deductible amount versus the risk premium. KUKA's Executive Board subsequently decides on further steps.

The shareholder structure is periodically analyzed to assess a possible takeover of the company. Because it has operations around the world, KUKA Group is required to observe numerous international and country-specific regulations, mostly related to the laws of the particular country, as well as financial administration rules. There is a risk that countries could implement duties should the company fail to properly observe laws and other regulations. Tax audits in particular could have a negative impact on the Group. Should the auditors find compliance issues, the company could be liable for payment of interest charges, penalties and tax arrears. Appropriate precautions based on experience are taken for such tax risks.

S U M M A RY

From an overall perspective, KUKA Group is primarily exposed to business performance and financial risks. The Executive Board is not aware of any individual or combined risks that could threaten the company's existence. Strategically and also financially, the company is positioned to be capable of taking advantage of business opportunities that arise.

INTERNAL CONTROL AND RISK

MANAGEMENT SYSTEM

The risk management system comprises all organizational rules and measures related to recognizing risk and procedures for dealing with entrepreneurial risks.

The key risk associated with financial reporting is that the annual and interim reports could misrepresent the actual situation, which could substantially affect decisions made by the interested parties that read them. KUKA Group therefore uses an accounting-related internal controlling system that aims to provide early warning of possible sources of errors and limit the associated risks. This provides adequate assurance that the financial statements and consolidated year-end results are prepared in accordance with legal requirements.

ST R U C T U R E S A N D P R O C E S S E S

P R I N C I P L E S

As a capital market oriented parent company as per articles 289 section 5 and 315 section 2, item 5 of the German Commercial Code (HGB), KUKA Aktiengesellschaft is obliged to describe the key characteristics of its internal controlling and risk management system as they relate to the Group's accounting process, which includes the accounting processes of the companies discussed in the consolidated financial statements.

KUKA regards the internal controlling and risk management system as a comprehensive system and uses the definitions of accounting system related internal control systems (IDW PS 261 item 1g ff.) and risk management systems (IDW PS 340, item 4) provided by the Institut der Wirtschaftsprüfer in Deutschland e. V., Düsseldorf. An internal controlling system is thus the embodiment of the principles, processes and measures introduced by management, which are geared toward implementing management decisions throughout the organization:

• _ to ensure that the business activities are effective and efficient (including preservation of assets, and preventing and uncovering fraud)
• _ to ensure that the internal and external accounting systems are proper and reliable
• _ to ensure that the company complies with applicable laws.

The following structures and processes have been implemented by KUKA Group in regards to the accounting process:

KUKA AG's Executive Board bears full responsibility for the internal controlling and risk management system as it applies to the accounting process. All subsidiaries that are part of the consolidated financial statements are included via a clearly defined management and reporting organization. KUKA AG has Shared Service Centers with Accounting and Human Resources for its German companies. Other departments with Group-wide responsibilities, such as Treasury, Legal Services and Taxes also provide services centrally at KUKA AG using standard processes throughout the Group.

The principles, organizational structures and processes, and the (Group) accounting-related internal controlling and risk management system processes are defined in guidelines and organizational procedures, and adjusted to external and internal developments at regular intervals.

F E AT U R E S O F T H E I N T E R N A L C O N T R O L L I N G A N D R I S K M A N AG E M E N T SY ST E M

We regard characteristics of the internal controlling and risk management system related to the accounting process as material, if they can have a material influence on the balance sheet and overall conclusion of consolidated financial statements and yearend closing including the consolidated management report. At KUKA Group, this includes mainly:

• _ identifying the main areas of risk (see Risk report, page 82ff) and controlling areas that affect the Group accounting process
• _ quality controls to monitor the (Group) accounting process and the accounting results at the Group Executive Board and management company levels and at the level of the individual reporting units included in the consolidated financial statements
• _ preventive control measures for the Group's finance and accounting systems and for the companies included in the consolidated financial statements, as well as for operative business performance processes that generate key information for preparing consolidated financial statements and yearend closing including the consolidated management report, and including a separation of functions of predefined approval processes in relevant areas
• _ measures to ensure that Group accounting-related facts and data are administered via proper IT processes (for example, this includes centralized control of access rights to accounting systems and automated plausibility checks when entering data into the reporting and consolidation system)
• _ measures to ensure that the departments implement the accounting-related internal controlling and risk management systems and that the internal audit department monitors same by systematically verifying adherence to the internal control system

In addition, the CFOs of all subsidiaries must provide an internal balance sheet oath in conjunction with the external reports for June 30 and December 31. KUKA AG's board members take an external balance sheet oath at the midpoint and end of the fiscal year only after they have received the ones from the subsidiaries' CFOs, and only then sign the responsibility statement of the legal representatives. This confirms that KUKA Group has complied with the specified reporting and accounting standards and that the numbers contained in the reports reflect the actual financial, assets and profit situation of the corporation.

In its meetings, the Supervisory Board's audit committee regularly reviews the effectiveness of the accounting-related internal controlling system. KUKA AG's Executive Board presents the risks associated with the financial reporting system at least once a year and outlines the controlling measures that have been implemented and monitors that they have been correctly executed.

S U M M A RY

The company ensures that KUKA AG's and KUKA Group's accounting system is implemented in accordance with legal requirements, proper bookkeeping, international accounting standards and internal Group guidelines using the structures, processes and features of the internal controlling and risk management system presented here.

The company also ensures that business transactions are uniformly and appropriately recorded and evaluated and that relevant and reliable information is thereby made available to the internal and external accountants who process the information.

DISCLOSURE ACCORDING TO ARTICLE 289 SECTION 4 AND ARTICLE 315 SECTION 4 OF THE GERMAN COMMERCIAL CODE, INCLUDING ACCOMPANYING EXPLANATION

The information required by article 289 section 4 and article 315, section 4 of the German Commercial Code (HGB) is disclosed and explained in the following.

C O M P O S I T I O N O F S H A R E C A P I TA L

As of December 31, 2011, the total share capital of KUKA Aktiengesellschaft amounted to € 88,180,120.60 and consisted of 33,915,431 no-par-value bearer shares. Each bearer share represents a notional holding of € 2.60 of the share capital. The share capital is fully paid in. All shares have equal rights and each share guarantees its holder one vote at the Annual General Meeting. Shareholders do not have the right to demand issuance of share certificates for their shares (article 4, section 1 of the Articles of Association). When new shares are issued, the date fixed as the starting date for profit-sharing can deviate from that outlined in article 60, section 2 of the German Stock Corporation Act (article 4, section 3 of the Articles of Association).

R E ST R I C T I O N S A F F E C T I N G VOT I N G R I G H T S O R T R A N S F E R O F S H A R E S

KUKA Aktiengesellschaft regularly grants Executive Board members of the Company and other selected managers of Group companies the right to participate in so-called "phantom share programs"; that is, virtual share programs, as per the terms of their individual employee contracts. The phantom share programs are a component of the performance-based compensation system for managers and are aimed at continuously improving the company's value. The respective programs have a term of three years. At the end of the term, managers are paid an amount that depends on the share price at that time and on the development of shareholder value. At the end of the respective phantom shareholder program term, managers entitled to participating must apply 25 percent of the gross sum paid out toward the purchase of KUKA shares, until a fixed holding target is reached, the value of which for current programs is 50 percent of their respective total annual remuneration. Shares purchased outside the phantom share program also count toward the holding target. The holding obligation does not end until the participant leaves KUKA Group.

Again in 2011, KUKA Aktiengesellschaft implemented an employee share program (MAP 2011). Under the terms of MAP 2011, employees were entitled to buy KUKA shares and for each share purchased, received a certain number of bonus shares as defined by MAP 2011. Employees are restricted from selling the KUKA shares purchased or bonus shares received until December 31, 2012.

The Executive Board is not aware of any further restrictions that would affect voting rights or share transfers.

S H A R E H O L D I N G S T H AT E XC E E D 1 0 P E R C E N T O F T H E VOT I N G R I G H T S

According to the German Securities Trading Act (WpHG), any shareholder who by purchase or sale or by other means acquires a stake that reaches, exceeds or falls below the voting right thresholds as defined in article 21 of the German Securities Trading Act (WpHG) is obliged to report same to the Company and the German Federal Financial Supervisory Authority (BAFin).

On September 2, 2011 the following persons and companies advised KUKA Aktiengesellschaft of their shareholdings as follows. The shareholdings that exceeded 10 percent of the voting rights at that point in time were:

1. Grenzebach Maschinenbau GmbH, Asbach-Bäumen heim, Germany	24.41% held directly
2. Grenzebach GmbH & Co. KG, Asbach-Bäumenheim, Germany	24.41% allocated as per article 22 section 1 item 1 item 1 of the WpHG
3. Grenzebach Verwaltungs GmbH, Asbach-Bäumen heim, Germany	24.41% allocated as per article 22 section 1 item 1 item 1 of the WpHG
4. Rudolf Grenzebach, Deutschland	24.41% allocated as per article 22 section 1 item 1 item 1 of the WpHG

KUKA Aktiengesellschaft has no knowledge of persons and / or companies that own shares of the company and directly or indirectly control less than 10 percent of the voting rights, other than those named above.

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

Shares with special rights that would impart controlling authority do not exist.

M E T H O D O F VOT I N G R I G H T S C O N T R O L W H E N E M P LOY E E S OW N S H A R E S I N T H E C O M PA N Y A N D D O N OT D I R E C T LY E X E R C I S E T H E I R VOT I N G R I G H T S

There is no participation by employees in the sense of article 289, section 4, item 5 and article 315, section 4, item 5, of the German Commercial Code (HGB).

STAT U TO RY L AW S A N D P R OV I S I O N S O F T H E A R T I C L E S O F A S S O C I AT I O N R E G A R D I N G T H E A P P O I N TM E N T A N D D I S M I S S A L O F E X E C U T I V E B OA R D M E M B E R S A N D R E G A R D I N G A M E N D - M E N T S O F T H E A R T I C L E S O F A S S O C I AT I O N

The company's Executive Board consists of at least two persons as per article 6, section 1 of the Articles of Association. The Supervisory Board determines the number of Executive Board members as per article 6 section 2 of the Articles of Association. Executive Board members are appointed and dismissed as per the rules of articles 84 and 85 of the Stock Corporation Act (AktG), article 31 of the German Act on Company Codetermination (MitbestG) and article 6 of the Articles of Association.

Article 119, section 1, item 5 and article 179 section 1 of the Stock Corporation Act (AktG) stipulate that any changes to the Articles of Association require a resolution by the shareholders at the Annual General Meeting. Article 22, section 1 of the Articles of Association states that a simple majority of the shareholders attending the Annual General Meeting is sufficient, provided that a greater majority is not required by law. The latter is required especially for resolutions concerning changes to the Company's business purpose, reduction in capital stock and changes to the form of incorporation.

Article 11, section 3 of the Articles of Association states that the Supervisory Board is authorized to make changes to the Articles of Association that only affect the version. Furthermore, by resolution passed at the Annual General Meeting on May 26, 2011, the Supervisory Board is authorized to amend the wording of article 4, section 1, item 5 of the Articles of Association after exercising (also partially) its authority to increase the share capital upon utilizing Authorized Capital 2011 and, in the event the latter has not been (fully) utilized by May 25, 2016, after expiry of the authorization.

E X E C U T I V E B OA R D AU T H O R I Z AT I O N TO I S S U E A N D B U Y BAC K S H A R E S

As per the resolution passed at the Annual General Meeting dated May 26, 2011, and article 4, section 5 of the Articles of Association, which was inserted as a result of this resolution, the Executive Board, subject to approval by the Supervisory Board, is authorized to increase the Company's share capital until May 25, 2016 by up to € 44,090,059,00 by issuing new shares once or several times (authorized capital 2011). The shareholders shall be granted subscription rights. However, subject to approval by the Supervisory Board, the Executive Board is authorized to exclude fractional amounts from the shareholder's subscription rights and to exclude shareholder rights if the capital increase takes place in exchange for capital contributions in kind for the purpose of acquiring companies or parts of companies or shares in companies or other assets (including receivables of third parties vis-à-vis the Company). Subject to approval by the Supervisory Board, the Executive Board is further authorized to exclude shareholder subscription rights upon utilization of the authorized Capital 2011 to obtain cash contributions, once or several times, in an amount not to exceed 10 percent of existing share capital at the time of coming into force and at the time at which this authorization is exercised, so that the new shares can be issued at a price that is not significantly lower than the price of the Company's shares trading on the stock exchange at the time of finalizing the new share issue price. Shares sold as a result of the authorization by shareholders at the Annual General Meeting of April 29, 2009 pursuant to article 71, section 1, item 8, item 5 of the German Stock Corporation Act (AktG) in conjunction with article 186, section 3, item 4 of the AktG during the term of the aforementioned authorization or that are to be issued to service warrant bonds or convertible bonds or a combination of these instruments count towards the aforementioned 10 percent threshold, provided these instruments were issued as a result of an authorization by shareholders at the Annual General Meeting of April 29, 2010 pursuant to the appropriate application of article 186, section 3, item 4 of the AktG during the term of said authorization. The Executive Board, with authorization of the Supervisory Board, is only permitted to use the aforementioned authorization to exclude shareholder subscription rights to the extent that the prorated sum of shares issued under exclusion of subscription rights does not exceed 30 percent of total share capital, neither at the time the authorization becomes effective nor the existing share capital at the time this authorization is exercised, should this amount the less. The Executive Board is authorized, subject to approval by the Supervisory Board, to stipulate other details regarding the recapitalization and its execution, in particular with respect to share rights and the terms and conditions related to the share issue.

According to article 4, section 6 of the Articles of Association, the total share capital of the Company was conditionally increased by up to € 19,500,000 by issuing up to 7,500,000 new shares. The conditional capital increase will only be carried out to the extent that option and / or conversion rights are exercised by the holders of option and / or conversion rights issued by the Company or its directly or indirectly majority owned companies in Germany or abroad on or before July 4, 2008.

On May 9, 2006, KUKA Aktiengesellschaft partially exercised the respective authorization to issue options and or convertible bonds and the aforementioned required capital by privately placing a convertible bond issue guaranteed by KUKA Aktiengesellschaft with a nominal value of € 69,000,000 through its 100-percent-owned Dutch subsidiary KUKA Finance B.V.. The rights of the bondholders to convert convertible bonds with a face value of € 50,000 per bond into new shares of the company (conversion rights) expired as of October 18, 2011 (end of the exercise period). Since no bondholders exercised their right to conversion during the exercise period (July 8, 2006 to October 18, 2011) article 4, section 6 of the articles of incorporation becomes null and void as of the close of October 18, 2011. The convertible bond face value plus accrued interest was repaid to all of the convertible bondholders in November 2011.

According to article 4, section 7 of the Articles of Association, share capital is conditionally increased by up to € 18,200,000.00, divided into up to 7,000,000 new no-par-value bearer shares (conditional capital). The conditional capital increase will only be carried out to the extent that holders or creditors of option or conversion rights or conversion or option obligations exercise their option or conversion rights in exchange for cash for options and or convertible bonds, participation rights or income bonds (or a combination of these instruments), issued or guaranteed by KUKA Aktiengesellschaft or a dependent Group company of KUKA Aktiengesellschaft as a result of the authorization granted to the Executive Board by shareholders at the Annual General Meeting of April 29, 2010 until April 28, 2015, or, to the extent they were obliged to exercise their conversion or option rights, fulfill their conversion or option obligations, or to the extent that KUKA Aktiengesellschaft exercises its option to wholly or partially grant shares of KUKA Aktiengesellschaft instead of paying the monies due, provided no cash settlement or treasury shares or shares of another listed company are used to service the bonds. Furthermore, new shares will be issued according to the conditions of the aforementioned authorization resolution at the option or conversion price to be determined respectively. The new shares shall participate in the profits as of the beginning of the financial year in which they are issued. The Executive Board is authorized, subject to approval by the Supervisory Board, to define the further details of execution of the conditional capital increase.

As per the resolution passed at the Annual General Meeting of KUKA Aktiengesellschaft on April 29, 2010, the Company is authorized, up until April 28, 2015, to buy back its own shares up to a total of 10 percent of the total share capital at the time the resolution was passed through the stock market or in form of a public purchase offer by the Company to all shareholders. In doing so, the purchase price (excluding acquisition costs) cannot be more than 10 percent higher or lower than the market price defined in detail in the resolution.

As per this resolution, the Executive Board is also authorized, subject to approval by the Supervisory Board, to treat the treasury shares acquired with exclusion of shareholder subscription rights as a result of this and earlier authorizations as follows:

• (i) to dispose of the acquired treasury stock to third parties in connection with company mergers or the acquisition of companies, or parts of companies, or participations in companies, or other assets (including receivables of third parties vis-à-vis the Company);

• (ii) to dispose of the acquired treasury stock by means other than the open market or tender offer to all shareholders, if the shares are sold for cash at a price that is not substantially lower than the quoted stock market price of company shares at the time of the sale. However, this authorization shall only be effective subject to the proviso that the shares sold subject to the exclusion of the subscription rights according to article 186 section 3, item 4 of the German Stock Corporation Act (AktG) may not, in total, exceed 10 percent of the share capital, and in fact do not do so either on the date that this authorization becomes effective or on the date on which it is exercised. This limit of 10 percent of share capital is to include shares (i) that were issued in order to service warrant or convertible bonds, participation rights or income bonds or a combination of these instruments, provided that these instruments were issued on the basis of an authorization granted at the Annual General Meeting of April 29, 2010 according to the appropriate application of article186, section 4, item 4 of the German Stock Corporation Act (AktG) and (ii) that are issued by exercising an authorization to issue new shares under exclusion of subscription rights using authorized capital that is in effect at the date on which this authorization becomes effective or an authorization granted at the Annual General Meeting of April 29, 2010 pursuant to article 186 section 3 item 4 of the German Stock Corporation Act (AktG);

• (iii) to use the acquired treasury stock in order to introduce the Company's shares on foreign stock exchanges on which they were previously not approved for trading;

• (iv) to offer shares in lieu of paying variable compensation elements and / or the 13th monthly salary of KUKA Group employees in or for the 2010 financial year in 2010 and 2011. Included are the following groups of employees: (i) Executive Board members of the Company; (ii) management board members of companies associated with the Company; (iii) employees of the Company; (iv) employees of companies associated with the Company. When offering treasury stock in this connection, it shall be ensured that (i) shares are acquired at a price not substantially lower than the quoted stock market price of Company shares at the time of accepting the offer; (ii) the acceptance period, subject to regulations concerning collective agreements, is four weeks for the respective offer; and (iii) employees who have acquired shares must hold these for a period of four years.

To the extent that members of the Executive Board are to be offered treasury stock in lieu of payment of compensation elements, the Supervisory Board of the Company shall be authorized to use the treasury stock and determine the modalities of the offer of treasury stock according to the preceding stipulations.

On the basis of this authority granted by shareholders at the Annual General Meeting of April 29, 2010, the Executive Board of KUKA Aktiengesellschaft, with approval of the Supervisory Board, resolved on May 11, 2011 to sell the 1,327,340 treasury shares purchased in 2008 (on the basis of an earlier authorization). The shares were sold in May 2011 at a price of € 18.60 each.

Moreover, subject to approval by the Supervisory Board, the Executive Board is authorized to withdraw the treasury shares. The purchase and the disposal authorization can be executed once or several times as well as in parts.

M AT E R I A L AG R E E M E N T S BY T H E C O M PA N Y T H AT A R E C O N D I T I O N A L U P O N A C H A N G E O F C O N T R O L , A N D T H E I M PAC T O F T H E S E C O N D I T I O N S

KUKA Aktiengesellschaft and its material subsidiaries and affiliated companies signed a new syndicated loan agreement with a bank syndicate led by Deutsche Bank AG Filiale Deutschlandgeschäft Commerzbank AG, UniCredit Bank AG and Landesbank Baden-Württemberg on November 8, 2010 under the terms of which the lenders make an amount of up to € 200,000,000 million available. This covers the material debt requirements of KUKA Group (including filing of bank guarantees). The contract includes a market-standard change-of-control-item typical in the industry under the terms of which the syndicated banks can demand repayment of the loan in the event that a shareholder (or several shareholders working in concert) acquire(s) control of at least 30 percent of the voting rights of KUKA Aktiengesellschaft. The existence of KUKA Aktiengesellschaft's business could be threatened if KUKA Aktiengesellschaft were unable to immediately secure refinancing from the market in such a case.

In addition, KUKA Aktiengesellschaft, under the arrangement of Deutsche Bank AG (London Branch) and Goldman Sachs International, issued a corporate high-yield bond with a total face value of € 202 million on November 18, 2010. The corporate bond is traded on the Luxemburg exchange (Euro MTF). The bond terms and conditions include a change-of-control-item customary for high yield bonds. It states that a change-of-control has occurred when

(i) a person or several persons acting in concert acquire(s) control of more than 30 percent of the share capital or voting rights of KUKA Aktiengesellschaft,

• (ii) as a result of one or several transactions, all or nearly all assets of KUKA Aktiengesellschaft and its subsidiaries defined in the bond terms and conditions as a "Restricted Subsidiary" are sold or transferred by some other means to a person who is not a "Restricted Subsidiary",
• (iii) for two years in succession, the majority of shareholder representatives sitting on the Supervisory Board is not made up of Supervisory Board members who were either members of the Supervisory Board on the day the corporate bond was issued, or whose appointment to the Supervisory Board was not supported by or made upon recommendation by the Nomination Committee, or
• (iv) KUKA Aktiengesellschaft or a subsidiary qualified as a "Restricted Subsidiary" makes a transaction defined in section 3 of the bond terms and conditions as a "Permitted Investment". This covers material shareholdings in third parties (for example, joint ventures).

If an event occurs that qualifies as a change-of-control-item under the bond terms and conditions, every bondholder has the right to demand that KUKA Aktiengesellschaft buy back their bond notes at a price of 101 percent of face value plus interest.

If all or almost all bondholders were to exercise their right to resell their bond notes in the event of a-change-of-control, and if KUKA Aktiengesellschaft could not immediately secure alternative financing from the market, the existence of KUKA Aktiengesellschaft's business could be threatened.

No compensation agreements exist on the part of the Company for the scenario of a take-over bid with members of the Executive Board or employees.

The compensation report explains the basis for the establishment of the compensation for the Executive Board and Supervisory Board as well as its amount and structure. Additionally, it contains disclosures regarding the shares owned by the Executive Board and Supervisory Board and transactions with KUKA Aktiengesellschaft. The report follows the recommendations of the German Corporate Governance Code and contains disclosures that are necessary according to the regulations of the commercial code, including the disclosure of Executive Board compensation pursuant to articles 285, 289, 314 and 315 of the German Commercial Code (HGB). The audited compensation report forms part of the management report. It is included in the Corporate Governance Report.

OUTLOOK

OV E R A L L E C O N O M I C C L I M AT E

Growth in Asia and the United States

Driven by the expanding economies in Asia and the United States, the world economy should continue to grow in 2012, although at a slower rate than last year due to the fiscal and economic problems in Europe. At the start of the calendar year, the World Bank thus lowered its 2012 world economic growth forecast from 3.6 percent to 2.5 percent. Nevertheless, experts continue to forecast significant growth in emerging nations such as the BRIC nations of China, Brazil and India. Thanks to its strong export focus, Germany could also see slight growth in GDP in 2012.

C O N D I T I O N S BY S E C TO R

Automotive markets anticipating further growth

The German automotive industry association, VDA, expects the automotive industry to continue on its growth track during the current fiscal year. However, different markets will grow at different rates. The growth will be led and driven by the BRIC nations, especially China and India, where sales growth is forecast at 8 percent and 10 percent respectively. Experts are also forecasting notable growth in the United States (+5 percent) and Brazil (+3 percent). In contrast, growth in Western Europe will likely continue to be stagnant depending on economic developments. Overall, VDA expects sales of cars and light trucks to rise slightly in 2012, increasing by 4 percent to a total of 68 million units.

Carmakers increasing their capital spending budgets

Due to the steady growth in the BRIC nations and the United States, the European premium brands especially, including Daimler, BMW and VW, are continuing to expand their regional production capacities. Last year, they again boosted their capital spending budgets. Over the course of the next two years, Daimler will invest USD 2.4 billion in its American factory in Tuscaloosa, Alabama, among others. During the same period, BMW will spend USD 0.9 billion on expanding its facility in Spartanburg, South Carolina. Audi also announced the construction of its own manufacturing facility in the United States. Overall, Duisburg-Essen university's CAR Center Automotive Research is expecting German carmakers to expand their production capacities in the United States from the current 1.0 million vehicles per year to 1.6 million units by 2015. The share of the market held by German cars could thus rise from 7.6 percent in 2010 to 10 percent in 2015.

The second important target market for carmakers is China. In June 2011, Daimler signed a general agreement with its Chinese joint venture partner regarding the investment of € 2 billion to expand the facilities in China. A month prior, BMW and its local partner had raised the amount they would invest to build a secondproduction facility in China from € 0.6 billion to € 1 billion. According to newspaper reports, the company is also planning to build a new assembly facility in Brazil.

The major North American carmakers have similar plans. In June 2011, Ford doubled the amount it would invest annually, from USD 3 to USD 6 billion, to expand its range of vehicles and factories. In addition to modernizing its American factories, the company plans to build a second plant in India that will cost up to USD 1 billion.

KUKA has partnered with these carmakers for many years and expects the announced capital spending to generate additional, sharp increases in the business growth of its two divisions.

Increasing model variety

One of the ways carmakers are responding to the fierce competition in the automotive industry and the demand from car buyers for customized products, particularly in the industrialized nations, is to expand the number of different models they offer. According to a study by Duisburg-Essen university's CAR Centers Automotive Research group, this trend will continue going forward. According to the study, the number of different series and models of cars currently available in the market is 315, and could increase by about one-third to 415 by 2015 (in comparison: in 1995 it were only 227). However, expanding the model variety usually means installing new ultra-flexible production systems, which can be used to assemble two or more models or variants of a vehicle.

Using high-performance robotic systems to build new assembly lines and upgrade existing ones is one of KUKA's core competencies.

Trend toward automating manufacturing systems unabated

Generally, further automating production processes results in greater conservation of resources and improves performance, from both a quality and total output perspective. According to the latest study published by the International Federation of Robotics (IFR), "World Robotics 2011", the following development trends are evident in the markets for robot-assisted automation:

• _ In the automotive industry, the trend towards smaller, more environmentally sound vehicles and new materials such as carbon fiber composites (CFC) and alternative drive technologies such as hybrid or electric cars will hold steady. Changing the components produced usually goes hand-in-hand with changes to existing assembly lines and in many cases to a higher degree of automation.
• _ General industry (all non-automotive sectors) is considerably less automated than the automotive industry. For example, in Germany, the number of robots per 10,000 workers (called robot density) in general industry is 1 / 10 what it is in automotive. However, the demand for customized consumer goods especially is forcing manufacturers to make their production systems more flexible. Industrial robots are ideally suited for this task. But the pharmaceuticals and cosmetic industries, health care and the food and beverage industries are all under pressure to improve their efficiencies and are also continually automating their production systems;
• _ Advances in the precision, safety and ease of use of robotic systems are revealing completely new applications and markets for robots, particularly with respect to cooperation between humans and machines; for example, in the workshops of small and medium-size companies.
• _ Rising incomes in low-wage countries in Eastern Europe, Asia and South America are also causing manufacturing systems to be increasingly automated. For example, in China, wages are now rising about 20 percent per annum according to reports by German companies.
• _ And finally, the threat of a shortage of skilled tradespeople in the highly developed Central European countries over the next few years will trigger another push toward automation.

Robotics market growth remains steady

In its most recent study, the Federation of Robotics (IFR) thus forecasts that the robotics market will continue to grow steadily. It predicts that from 2012 to 2014, growth will be concentrated in the following regions and sectors:

• _ The Chinese robot market is currently growing at a rate of 30 percent per annum and could become the largest market with sales of over 30,000 units per year. China already holds the number one position for carmaking, with more and more vehicles being assembled locally.
• _ After the nuclear incident in March 2011, Japanese companies are aiming to diversify their manufacturing plants geographically and increasingly shift them to North America, Europe and Asian mainland regions. This too will drive new investment in highly automated manufacturing systems.
• _ Orders from Korea's electronics industry have risen sharply in the recent past, and the trend toward automating the country's manufacturing plants could hold steady at current levels going forward.
• _ North America's automotive industry is back to full strength. It is striving to catch up and the robotics business could benefit significantly in the next few years.

Overall, the IFR expects industrial robot sales to rise 6 percent annually to about 167,000 units between 2012 and 2014. Industrial robots sales growth in Asia is expected to be above average at 7 percent, average in the United States at 6 percent and below average in Europe at 4 percent.

Service robots sales also to rise

Service robots can be used not only by private individuals, but also in the defense and security sector and in agriculture. The number of service robots sold in the professional area in these specific segments grew only 4 percent to 13,700 units in 2010. However, the smaller market segment for medical robots, which KUKA serves, grew at an above-average rate of 14 percent. Overall, IFR expects sales of service robots for professional use to rise dramatically and to grow to 20,000 units annually from 2011 to 2014.

SALES OF INDUSTRIAL ROBOTS WORLDWIDE 2008 – 2014

C O M PA N Y- S P E C I F I C O P E R AT I N G E N V I R O N M E N T

KUKA Group's medium-term strategy for the next two years continues to be to grow profitably. The strategy rests on the leading market positions of the Robotics and Systems divisions in their respective markets and the company's strong innovation capacity and close customer relationships.

The Robotics division's targets are as follows:

• _ Product launches in general industry. Following the successful launch of the QUANTEC generation of robots with KR C4 controller in the automotive sector, this new industrial robot will be introduced to general industry over the course of the current year. Together with systems partners that focus on these sectors, Robotics has developed applications that will now be marketed and sold to the metal processing industry, mechanical OEMs, as well as the plastics and food and beverage industries, among others. The division plans to further expand its general industry market share.
• _ Expanded product portfolio. To round out its product range, Robotics plans to introduce its own robot for smaller payloads, designed especially for application in general industry segments. This is one step toward achieving the target of growing market share in this sector.
• _ Advanced Robotics. KUKA Laboratories was formed two years ago within the Robotics division. Its main mandate is to develop KUKA's lightweight robot (LWR) and press ahead with health care market penetration. A unique combination of sensors and safety features enables the LWR to be used in completely new applications in the area of human / machine cooperation that to date were off-limits for industrial robots. KUKA's lightweight robot is currently being tested in several industrial pilot installations.

_ Health care systems. The Advanced Robotics group's second core objective is to drive the company's expansion into health care. The business unit was able to land a large order from Siemens Healthcare at the start of 2011 and again at the beginning of 2012. Siemens will use the robots for x-ray imaging systems. KUKA's robotic systems are increasingly being used for health care applications, for both diagnostics and therapy, because robots have the advantage of being able to deliver precise, tremor-free, safe and repeatable motion for long periods without tiring. KUKA is pressing ahead with this lucrative business, and is collaborating more and more with specialized research institutes.

The Systems division will continue to focus on enhancing its organizational structure as a result of the growing internationalization of the systems business over the course of the period of this forecast. The aim is to improve efficiencies in the manufacturing and order processing departments and look for cost savings in the procurement area.

_ Internationalization of the value added chain. The division started to establish regional centers for its systems business a few years ago. For example, the Augsburg location serves the markets in Germany and Europe, the office in the greater Detroit region the markets in North and South America and the location in Shanghai, China is responsible for Asia. All three centers will soon become hubs; that is, they will have their own sales and other organizational departments. The centers will thus be capable of independently and efficiently looking after sales, engineering and project management for larger systems orders.

_ Procurement from low-cost countries. The Romanian subsidiary will become a center of expertise for standard components and suppliers for the regional center in Europe. The same will be done for the subsidiaries in Mexico for North and South America and in China for Asia. These three companies will be responsible for purchasing, as well as manufacturing and assembling components. The relative procurement advantages in low-cost countries will thus benefit the entire Group. Furthermore, the Indian subsidiary will operate as a center of expertise for engineering services.

E X P E C T E D B U S I N E S S O U T LO O K

Summary

KUKA Group expects further growth, although at a slower pace, in the global economy and in its key automotive and general industry markets over the period covered by this forecast, 2012 to 2013. The problems in Europe may especially dampen demand in southern Europe. Overall the company expects further sales growth and improved earnings.

Sales and EBIT margin

Based on the high order backlog and clear signs of business growth, KUKA Group expects sales during the current 2012 fiscal year to match last year's level of € 1.44 billion. EBIT margin is expected to be greater than 5.5 percent. In 2011 it was 5.1 percent.

This improvement in earnings is expected to be driven by a greater share of general industry business in the Robotics division and a greater share of sales of the new generation of QUANTEC / KR C4 robots. In addition, KUKA Group expects a further expansion of R & D activities by the Robotics division in 2012. In the Systems division, the higher price realization of the orders in the backlog are expected to improve margins in 2012. The benefits of further internationalization and efficiency improvements in the value added chain should also lead to a further improvement in profit contributions, especially in 2013.

Provided the economy continues to grow and the market situation remains positive, KUKA Group expects sales revenues and EBIT margin to continue to grow in fiscal 2013.

Net income for the year

In fiscal 2011, KUKA Group generated a net income of € 29.9 million. Based on a steady increase in operating profitability (EBIT) in 2012 and 2013, net income should rise by a similar amount.

Research and development and capital expenditures

KUKA's product strengths are founded on innovation and quality. To safeguard these competitive advantages, KUKA Group plans to slightly increase spending on research and development over the period covered by this forecast. The Robotics division will direct the spending towards enhancing its applications and software and developing new products. The Systems division's spending on R & D usually takes place almost exclusively in conjunction with in-house orders. Overall, KUKA Group plans to spend € 40 to 50 million in each of fiscal 2012 and 2013 on research and development.

Capital spending: KUKA Group expects capital spending to rise as a result of the expansion of the assembly capacity in China, implementation of the hub concept and higher spending on research and development. Accordingly, the capital expenditure to sales ratio over the course of the period covered by this forecast is expected to be 2.5 to 3.5 percent.

Free cash flow

KUKA Group's free cash flow is primarily generated from operating earnings and the development of its working capital in the Robotics and Systems divisions. Provided general conditions remain stable and sales also remain stable or grow slightly, KUKA Group expects its free cash flow to be positive and rising in 2012, despite a slight increase in working capital. In 2013, sales growth should also result in an increase in working capital. Still, cash flow in 2013 is also expected to be well in the black, and significantly higher than the € 6.5 million reported for the 2011 fiscal year.

GROUP INCOME STATEMENT	100
STATEMENT OF COMPREHENSIVE INCOME	100
CASH FLOW STATEMENT	101
GROUP BALANCE SHEET	102
DEVELOPMENT OF GROUP EQUITY	104
GROUP NOTES	106
Group segment reporting	106
General comments	108
Notes to the Group income statement and to the Group balance sheet	118
Notes to the Group cash flow statement	149
Notes to the Group segment reporting	150
Other notes	151
Corporate bodies	154
Schedule of shareholdings of KUKA Aktiengesellschaft 156
RESPONSIBILITY STATEMENT	158
AUDIT OPINION	159
GLOSSARY	160

FINANCIAL STATEMENTS

G R O U P I N C O M E STAT E M E N T

o f K U K A A k t i en g e s el l s c h a f t f o r t h e p er i o d J anu ar y 1 – D e c em b er 31, 2 01 1

in € millions	Notes	2010	2011
Sales revenue	(1)	1,078.6	1,435.6
Cost of sales	(2)	-874.6	-1,153.9
Gross income		204.0	281.7
Selling expenses	(2)	-86.9	-99.5
Research and development costs	(2)	-29.5	-37.7
Gerneral and administrative expenses	(2)	-76.3	-78.9
Other operating income	(3)	30.2	43.0
Other operating expenses	(3)	-23.9	-44.4
Earnings from operating activities		17.6	64.2
Reconciliation to earnings before interest and taxes (EBIT)
Financing costs included in operating results		7.2	8.4
Earnings before interest and taxes (EBIT)		24.8	72.6
Write-off of financial assets	(4)	–	-0.8
Interest income	(4)	9.0	9.9
Interest expense	(4)	-31.1	-27.3
Financial results		-22.1	-18.2
Earnings before tax		-4.5	46.0
Taxes on income	(5)	-4.1	-16.1
Earning after taxes		-8.6	29.9
of which: attributable to minority interests		0.0	0.1
of which: attributable to shareholders of KUKA AG		-8.6	29.8
Earnings per share (diluted / undiluted) in €	(6)	-0.28	0.89

STAT E M E N T O F C O M P R E H E N S I V E I N C O M E

o f K U K A A k t i en g e s el l s c h a f t f o r t h e p er i o d J anu ar y 1 – D e c em b er 31, 2 01 1

in € millions	Notes	2010	2011
Earning after taxes		-8.6	29.9
Translation adjustments		6.9	2.8
Changes of actuarial gains and losses	(23)	-1.8	-2.1
Deferred taxes on changes of acturial gains and losses		0.3	0.6
Other comprehensive income		5.4	1.3
Comprehensive income		-3.2	31.2
of which: attributable to minority interests		0.1	0.1
of which: attributable to shareholders of KUKA AG		-3.3	31.1

C A S H F LOW STAT E M E N T *

o f K U K A A k t i en g e s el l s c h a f t f o r t h e f in an c i al y e ar 2 01 1

in € millions	2010	2011
Net income after taxes	-8.6	29.9
Depreciation of intangible assets	7.1	10.4
Depreciation of tangible assets	15.2	15.7
Depreciation of financial assets	–	0.8
Other non-payment related income	-14.0	-4.0
Other non-payment related expenses	23.7	13.1
Cash earnings	23.4	65.9
Result on the disposal of assets	-0.6	-0.1
Changes in provisions	-28.2	-22.8
Changes in current assets and liabilities
Changes in inventories	-52.0	-36.0
Changes in receivables and deferred charges	-45.3	-83.9
Changes in liabilities and deferred income (excl. financial debt)	77.9	113.3
Cash flow from operating activities	-24.8	36.4
Payments from disposals of fixed assets	2.9	0.4
Payments for capital expenditures on intangible assets	-4.8	-12.7
Payments for capital expenditures on tangible assets	-10.6	-17.6
Cashflow from investing activities	-12.5	-29.9
Free cashflow	-37.3	6.5
Proceeds from capital increases	42.8	–
Proceeds / payments from the sale / acquisition of treasury shares	–	23.7
Dividend payments	–	- 0.1
Proceeds / payments from the issuance / repayment of bonds and liabilities similar to bonds	198.2	-69.0
Proceeds from / payments for the acceptance / repayment of bank loans	-63.9	3.6
Cash flow from financing activities	177.1	-41.8
Payment-related changes in cash and cash equivalents	139.8	-35.3
Exchange rate-related and other changes in cash and cash equivalents	2.4	0.7
Changes in cash and cash equivalents	142.2	-34.6
(of which net increase / decrease in restricted cash)	(69.0)	(-69.0)
Cash and cash equivalents at the beginning of the period	61.2	134.4
Cash and cash equivalents at the end of the period	134.4	168.8
Restricted cash	69.0	–
Cash and cash equivalents acc. to balance sheet	203.4	168.8

* See notes page 149 for further disclosures on the cash flow statement

G R O U P BA L A N C E S H E E T

o f K U K A A k t i en g e s el l s c h a f t a s a t D e c em b er 31, 2 01 1

Notes	Dec. 31, 2010	Dec. 31, 2011
		78.8
		87.6
(10)	1.0	0.2
	163.3	166.6
(11)	77.8	75.7
	9.0	7.6
	12.0	12.1
(5)	34.5	35.0
	296.6	297.0
(12)	158.0	195.4
(13)	125.7	145.5
(13)	166.1	194.3
(11)	4.1	4.6
	3.6	6.0
(14)	27.2	66.4
	326.7	416.8
(15)	203.4	168.8
	688.1	781.0
		1,078.0
	(7) (8) (9)	76.5 85.8 984.7

E Q U I T Y A N D L I A B I L I T I E S

in € millions	Notes	Dec. 31, 2010	Dec. 31, 2011
EQUITY	(16)
Subscribed capital	(17)	88.2	88.2
Capital reserve	(18)	75.4	67.5
Treasury shares	(19)	-27.9	–
Revenue reserves	(20)	60.9	95.2
Minority interests	(21)	1.5	1.5
		198.1	252.4
NON-CURRENT LIABILITIES, PROVISIONS AND ACCRUALS	(25)
Financial liabilities	(26)	192.8	194.0
Other liabilities	(27)	13.6	13.3
Pensions and similar obligations	(23)	70.2	70.4
Deferred taxes	(5)	18.3	20.0
		294.9	297.7
CURRENT LIABILITIES	(25)
Financial liabilities	(26)	70.9	7.4
Trade payables		148.6	167.2
Advances received		49.0	67.1
Liabilities from construction contracts	(13)	39.6	93.4
Accounts payable to affiliated companies		0.1	0.1
Income tax liabilities		14.3	6.1
Other liabilities and deferred income	(27)	80.3	109.6
Other provisions	(24)	88.9	77.0
		491.7	527.9
		984.7	1,078.0

D E V E LO P M E N T O F G R O U P E Q U I T Y

o f K U K A A k t i en g e s el l s c h a f t f o r t h e f in an c i al y e ar 2 01 1

Notes		(17)	(18)	(19)
	Number of shares outstanding	Subscribed capital in € millions	Capital reserve in € millions	Share buy-back in € millions
Jan. 1, 2010	27,932,650	76.1	47.0	-27.9
Comprehensive income		–	–	–
Capital increase	4,655,441	12.1	28.4	–
Employee share program		–	–	–
Other changes		–	–	–
Jan. 1, 2011	32,588,091	88.2	75.4	-27.9
Comprehensive income		–	–	–
Sale of treasury shares	1,327,340	–	-	27.9
Other changes		–	-7.9	–
Dec. 31, 2011	33,915,431	88.2	67.5	–

Actuarial gains and losses in € millions Annual net profit and other revenue reserves in € millions Equity to shareholders in € millions Minority interests in € millions Revenue reserves

(20) (21)

Total in € millions	Minority interests in € millions	Equity to shareholders in € millions	Annual net profit and other revenue reserves in € millions	Actuarial gains and losses in € millions	Translation gains / losses in € millions
160.8	1.4	159.4	72.0	2.1	-9.9
-3.2	0.1	-3.3	-8.6	-1.6	6.9
40.5	–	40.5	–	–	–
0.1	–	0.1	0.1	–	–
-0.1	–	-0.1	-1.3	1.2	–
198.1	1.5	196.6	62.2	1.7	-3.0
31.2	0.1	31.1	29.8	-1.5	2.8
23.7	–	23.7	-4.2	–	–
-0.6	-0.1	-0.5	7.4	–	–
252.4	1.5	250.9	95.2	0.2	-0.2

G R O U P N OT E S

o f K U K A A k t i en g e s el l s c h a f t f o r t h e f in an c i al y e ar 2 01 1

G R O U P S E G M E N T R E P O R T I N G*

Robotics		Systems
2010	2011	2010	2011
385.5	585.9	692.2	849.2
35.7%	40.8%	64.2%	59.2%
50.2	30.4	3.1	1.5
435.7	616.3	695.3	850.7
20.8	50.7	12.8	25.6
0.0	0.3	7.2	8.1
20.8	51.0	20.0	33.7
4.8%	8.3%	2.9%	4.0%
5.4%	8.7%	2.9%	4.0%
16.1%	38.3%	10.4%	16.1%
30.4	64.5	29.5	43.0
7.0%	10.5%	4.2%	5.1%
7.9%	11.0%	4.3%	5.1%
23.5%	48.4%	15.3%	20.5%
129.1	133.2	192.4	209.6
139.3	127.2	201.2	217.9
249.2	284.8	504.8	581.6
117.4	165.2	303.6	363.3
6.7	20.1	7.5	8.2
9.6	13.2	9.5	9.3
–	0.3	–	–
2,347	2,753	3,456	3,643

* See notes page 150 for more information on Group segment reporting

	KUKA Aktiengesellschaft and other Companies Reconciliation and Consolidation			Group
2010	2011	2010	2011	2010	2011
0.9	0.5	–	–	1,078.6	1,435.6
0.1%	0.0%	–	–	100.0%	100.0%
9.4	10.1	-62.7	-42.0	–	–
10.3	10.6	-62.7	-42.0	1,078.6	1,435.6
-22.9	-16.7	6.9	4.6	17.6	64.2
–	–	-	–	7.2	8.4
-22.9	-16.7	6.9	4.6	24.8	72.6
–	–	–	–	2.3%	5.1%
–	–	–	–	2.3%	5.1%
–	–	–	–	7.9%	21.8%
-19.7	-13.5	6.8	4.7	47.0	98.7
–	–	–	–	4.4%	6.9%
–	–	–	–	4.4%	6.9%
–	–	–	–	15.0%	29.6%
-6.7	-7.8	-2.3	-2.1	312.5	332.9
-12.2	-3.4	-3.5	-0.7	324.8	341.0
175.8	174.5	-192.1	-174.4	737.7	866.5
91.1	76.4	-22.9	-7.8	489.2	597.1
1.2	2.2	–	-0.2	15.4	30.3
3.2	3.3	–	0.0	22.3	25.8
–	–	–	–	–	0.3
187	193	–	–	5,990	6,589

GENERAL COMMENTS

AC C O U N T I N G P R I N C I P L E S

KUKA Aktiengesellschaft, Zugspitzstraße 140, 86165 Augsburg, has prepared its Group consolidated financial statements for the period ending December 31, 2011, according to the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB), the interpretations of the Standing Interpretation Committee (SIC) as well as the International Financial Reporting Interpretation Committee (IFRIC). The applied accountingprinciples were applicable and approved by the European Union as of the balance sheet date and were supplemented by the guidelines stipulated in Article 315a, section 1 of the German Commercial Code (HGB). The statements comply with all standards (IFRS / IAS) and interpretations (IFRIC) for which application is mandatory for the 2011 financial year. As a general rule, the accounting policies used conform to the methods applied in the prior year except for the standards and interpretations for which application is mandatory for the first time in the 2011 financial year. The newly applied standards and interpretations are listed under "Changes in accounting policies".

The Group consolidated financial statements are in compliance with German law. The numbers for the prior year were prepared according to these same standards. With the exception of specific financial instruments reported in fair values, the Group consolidated financial statements are prepared based on historical acquisition or production costs.

The Group consolidated financial statements have been prepared in euros. Unless otherwise noted, all amounts are stated in millions of euros (in € millions).

The Executive Board prepared the consolidated financial statements on March 2, 2012.

C O N S O L I DAT I O N P R I N C I P L E S

Subsidiaries directly or indirectly controlled by KUKA Aktiengesellschaft according to IAS 27 or SIC 12 ("Control Concept") are consolidated in the Group financial statements according to the rules of full consolidation.

The consolidated financial statements are based on the financial statements of KUKA Aktiengesellschaft and those of the consolidated subsidiaries and were prepared according to the uniform accounting policies for the Group. Capital consolidation takes place by offsetting carrying amounts of investments against the proportionate newly measured equity of the subsidiaries at the time of their acquisition. In line with IFRS 3, any positive differences are capitalized as goodwill under intangible assets. Any negative differences must be recognized in the income statement.

Intra-Group sales, expenses, earnings and receivables and payables are netted, and inter-company profits and losses are eliminated. The deferred tax entries required in connection with the consolidation processes have been recorded.

Guarantees and warranties that KUKA Aktiengesellschaft issues on behalf of consolidated subsidiaries are eliminated provided they do not have an external effect.

S C O P E O F C O N S O L I DAT I O N

A total of 48 companies are included in the Group consolidated financial statements. This is three companies more than in 2010. In addition to KUKA Aktiengesellschaft, six companies registered inside Germany and 41 firms domiciled outside Germany are included for which KUKA Aktiengesellschaft either directly or indirectly holds majority voting rights.

In comparison to December 31, 2010, the scope of consolidation has only changed to the extent that following newly founded companies were added:

• _ KUKA Robotics (China) Co. Ltd., Shanghai, China
• _ KUKA Robotics UK LTD, London, Great Britain
• _ KUKA Systems SRL, Sibiu, Romania.

The first two companies above belong to the Robotics division; the last company belongs to the Systems division. The change in the scope of consolidation does not impair comparability with the previous year.

C U R R E N C Y T R A N S L AT I O N

Receivables and payables denominated in foreign currency are translated at the balance sheet date using an average rate. Any associated translation gains or losses are recorded as gains or losses under other operating income or expenses.

The annual financial statements of the consolidated foreign subsidiaries are translated from their functional currency (IAS 21) into euros. For almost all foreign companies this is the respective local currency, since they operate predominantly within their currency area. The sole exception is KUKA Robotics Hungária Ipari Kft., Taksony, Hungary, which converted to the euro as its functional currency in 2007, since it conducts business predominantly in euros.

Accordingly, all assets and liabilities are translated at the rate effective on the balance sheet date. Existing goodwill and equity are translated using historical rates. Income and expenses are translated using average rates for the year. The translation of annual profits or losses on the income statement is also done at average rates for the year. Differences arising from the translation of assets and liabilities denominated in foreign currencies compared to their translation in the prior year as well as translation differences between the income statement and the balance sheet are recognized in the revenue reserves. In the event of the departure of Group entities, existing exchange differences are then recognized in profit or loss. The following table shows the currency values compared to the previous year:

		Balance sheet date		Average rate
Country	Currency	Dec. 31, 2010	Dec. 31, 2011	2010	2011
Brazil	BRL	2.2177	2.4159	2.3344	2.3259
Canada	CAD	1.3322	1.3215	1.3665	1.3756
China	CNY	8.8220	8.1588	8.9805	8.9961
India	INR	59.7580	68.7130	60.6318	64.8669
Japan	JPY	108.6500	100.2000	116.4567	111.0217
Korea	KRW	1,499.0600	1,498.6900	1,532.5125	1,541.0467
Malaysia	MYR	4.0950	4.1055	4.2733	4.2553
Mexico	MXN	16.5475	18.0512	16.7532	17.2791
Romania	RON	–	4.3233	–	4.2386
Russia	RUB	40.8200	41.7650	40.2780	40.8797
Sweden	SEK	8.9655	8.9120	9.5469	9.0276
Switzerland	CHF	1.2504	1.2156	1.3823	1.2340
Taiwan	TWD	38.9163	39.1724	41.9341	41.0302
Thailand	THB	40.1700	40.9910	42.0825	42.4248
Czech Republic	CZK	25.0610	25.7870	25.2939	24.5892
Hungary	HUF	277.9500	314.5800	275.3567	279.3100
USA	USD	1.3362	1.2939	1.3268	1.3917
United Kingdom	GBP	0.8608	0.8353	0.8582	0.8678
Vietnam	VND	25,895.1540	27,347.0000	25,379.1572	28,897.6695

AC C O U N T I N G A N D VA LUAT I O N

Goodwill

Within the framework of the rules under IFRS 3, goodwill is recognized using the "impairment only" approach and is tested for impairment at least annually.

The impairment test is performed for the defined cash generating units as per IAS 36 rules using the discounted cash flow method based on use values. The data from the detail planning phase from the business plan for the next three years was used as the underlying data for this purpose, assuming in subsequent years that the annual cash flows will generally equal those in year three. For the sake of simplification, the perpetuity calculation further assumes that investments equal depreciation / amortization expense and the working capital remains unchanged.

With respect to the segment-specific discount rates as well as the further parameters and their derivation, and also for the identification of the principal items of goodwill, please refer to the discussions under item 8.

Self-developed software and other development costs

Development costs for newly developed products or internally generated intangible assets (e.g. software) are capitalized provided that the technical feasibility and commercialization of the newly developed products are assured, that this will result in an inflow of economic benefits to the KUKA Group, and that the further requirements of IAS 38.57 have been met. In this context, the costs of production encompass the costs directly and indirectly attributable to the process of development. According to IAS 38, expenditures on research are recognized as expenses when they are incurred. Provided they are material, borrowing costs are capitalized for qualifying assets. Those assets are defined as qualifying assets within the KUKA Group for which a period longer than 12 months is required to get them ready for their intended use or sale. Examples here within the KUKA Group in particular are manufacturing plants, internally-generated intangible assets and long-term construction contracts.

Scheduled depreciation commences when the asset is put into use and is recognized over the expected useful life of, as a rule, one to three years, using the straight-line method. Moreover, the value recognized for capitalized costs of development projects not yet completed is subject to annual impairment tests.

Other intangible assets

Purchased intangible assets, predominantly software, are recognized at their acquisition cost and are amortized as scheduled over their expected useful life of three to five years using the straight-line method.

The KUKA Group does not carry any assets with an undefined useful life with the exception of goodwill.

Property, plant and equipment

Property, plant and equipment are recognized at acquisition or production costs less scheduled depreciation, which is generally applied using the straight-line method. If the depreciation according to the declining balance method better reflects the wear and tear of movable tangible assets, this method is applied. The selected depreciation method is continuously reviewed.

In addition to directly attributable costs, the costs of production for internally generated assets also include a proportionate share of overhead costs in accordance with IFRS. Borrowing costs are capitalized for qualifying assets.

Scheduled depreciation is based predominantly on the following periods of useful life:

	Years
Buildings	25 – 50
Property facilities	2 – 15
Technical plant and equipment	2 – 15
Other equipment	2 – 15
Factory and office equipment	2 – 15

Impairment charges of intangible and tangible assets are recorded in accordance with IAS 36 if the recoverable amount of the asset is less than its carrying amount. In this context, the recoverable amount is the higher of the net realizable value and the value in use of the asset in question. If the reasons for an impairment recorded in prior years no longer apply, the impairment is reversed.

Government grants

In accordance with IAS 20, government grants are recognized only if there is reasonable assurance that the conditions attaching to them will be complied with and that the grants will be received.

Government grants related to assets (e.g. investment subsidies and allowances) are deducted from the acquisition or production costs of the relevant asset. Grants related to income are recognized in the income statement.

Finance and operating lease

In connection with finance leases, ownership is attributed to the lessee in cases in which the latter assumes substantially all the risks and rewards incidental to ownership (IAS 17). Provided that the ownership is attributable to the KUKA Group, such leases are capitalized as at the date of the lease agreement at their fair value or at the lower present value of the minimum lease payments. Depreciation is recognized by the straight-line method over the useful life or over the lease term if it is shorter. The discounted value of payment commitments in connection with the lease payments is recognized as a liability and disclosed under other liabilities.

Finance lease agreements, for which the KUKA Group is the lessor and all substantial risks and rewards associated with the ownership are transferred to the lessee, are recognized as a sales and financing transaction for the lessor. A receivable is valued at the amount of the net investment in the lease and the interest income is recognized in the income statement.

To the extent that the KUKA Group has entered into operating leases according to IAS 17, lease or rent payments are directly recognized as an expense in the income statement and distributed using the straight-line method over the term of the leasing agreement, unless a different systematic basis more closely corresponds with the utilization period. Relevant total future costs are reported in item 9.

Financial instruments

Financial instruments are contracts that simultaneously give rise to a financial asset of one entity and a financial liability of another entity. These include both primary financial instruments (e.g. trade receivables or trade payables) and derivative financial instruments (e.g. transactions to hedge the risks of changes in fair value).

Derivative financial instruments are financial contracts whose value is derived from the price of an underlying asset (e.g. stocks, bonds, money market instruments or commodities) or a reference rate (such as currencies, indices or interest rates). They require little or no initial investment and are settled at a future date. Examples of derivative financial instruments include options, forward contracts and interest rate swap transactions. The KUKA Group only uses derivative financial instruments to hedge foreign currency risks.

IAS 39 differentiates between the following categories of financial instruments that are relevant for KUKA:

• _ Loans and receivables
• _ Financial assets and financial liabilities held for trading
• _ Available-for-sale financial assets
• _ Financial liabilities measured at amortized cost

Unless otherwise noted, financial instruments are recognized at fair value. The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.

As a general rule, financial instruments are initially recognized or derecognized when the asset is delivered to or by KUKA (settlement date accounting).

Participations in non-consolidated companies and financial investments

In the KUKA Group, participations in continuing business units that are not material to the financial position and performance of the Group are reported under available-for-sale financial assets. They are recognized at costs of purchase. Current market values are not available, since no shares are traded in an active market.

Receivables and other assets

Receivables and other assets are recognized at cost of purchase with appropriate discounts applied for all identified individual risks. General credit risk, to the extent that it can be documented, is also accounted for by appropriate valuation allowances. For this purpose, these financial assets are grouped in accordance with similar default risk characteristics and are collectively tested for impairment, and written down if necessary. When calculating any such impairment losses, the empirical default history is taken into account in addition to contractually stipulated payment flows.

The carrying amount of the assets is lowered using separate accounts for allowances for impairment losses. Actual defaults result in a write-off of the receivables in question. The maximum theoretically possible default risk corresponds with the carrying amounts. The carrying amounts largely correspond with the market values.

Derivatives with a positive fair value are recognized under other assets.

Cash and cash equivalents

Cash and cash equivalents include all cash funds recognized on the balance sheet; that is cash on hand, checks and cash balances with financial institutions, together with short-term investement with a residual term of less than three months from the date of puchase and the price of which flucutates only minimally.

Liabilities

Liabilities are recognized on the balance sheet at their depreciated / amortized cost of purchase. Payables arising from finance leases are recognized at the present value of future lease payments.

Long-term liabilities with a term of more than one year are discounted to the balance sheet date on the basis of appropriate interest rates where the interest effect is material.

On initial recognition, financial liabilities are carried at fair value less transaction costs. They are measured at amortized cost in subsequent periods; any difference between the amount paid out (less transaction costs) and the redemption amount is recognized in the interest result for the term of the loan using the effective interest method. Fees incurred when setting up credit lines are capitalized as credit transaction costs and are amortized over the term of the corresponding loan commitment.

Trade payables also include payments due on outstanding supplier invoices.

If the fair value of derivatives is negative, this results in recognition under other liabilities.

Derivatives

In accordance with IAS 39, the KUKA Group recognizes all derivatives at fair value as of the settlement date. The fair value is determined with the aid of standard financial mathematical techniques, using current market parameters such as exchange rates and counterparty credit ratings (mark-to-market method) or quoted prices. Average prices are used for this calculation.

Derivatives are used to hedge currency fluctuations. Accounting for hedging instruments within the restrictive framework of the hedge accounting rules is not undertaken.

Inventories

According to IAS 2, inventories are valued at average cost of acquisition or production. In addition to the direct unit costs, production costs also include appropriate costs for indirect materials and production overheads according to IAS 2. Write-downs to lower net realizable value have been taken to the extent required. In addition to valuation allowing disposal at no net loss, these write-downs also cover all other inventory risk. If the reasons that led to a devaluation of inventories in the past no longer exist, impairment losses are reversed.

Construction contracts

Construction contracts that meet the criteria of IAS 11 are recognized according to the percentage of completion method (POC method). As a rule, the percentage of completion to be recognized by contract is determined by the cost of work to date as a percentage of the estimated total costs (cost-to-cost method). The corresponding earnings from the contract are recognized on the basis of the percentage of completion thus determined. These contracts are presented as receivables or liabilities from contracts. To the extent that services performed to date exceed advances received, the contracts are recorded on the balance sheet as receivables arising from construction contracts. If there is a negative balance after deduction of advances, this is recognized as liabilities from construction contracts. In accordance with IAS 23, borrowing costs are considered for construction contracts started in 2009. If necessary, provisions are recognized for impending losses.

Current and deferred taxes

Tax receivables and liabilities are assessed using the expected amount of the reimbursement from or payment to the tax authorities.

According to IAS 12, deferred tax assets and liabilities have been recorded for all temporary differences between the carrying amounts of assets and liabilities on the Group balance sheet and their recognized value for tax purposes (liability method) as well as for tax loss carry-forwards. Deferred tax assets for accounting and valuation differences as well as for tax loss carry-forwards are only recognized to the extent that there is a sufficiently probable expectation that the corresponding benefit will be realized in the future. Deferred tax assets and liabilities are not discounted. Deferred tax assets are netted against deferred tax liabilities if the tax creditor is the same.

Pension provisions and similar obligations

The measurement of pension liabilities and similar obligations is performed according to IAS 19. Pensions and similar obligations comprise obligations of the KUKA Group to pay benefits under defined benefit plans. The pension obligations are determined according to the "projected unit credit method". In addition to known pensions and vested benefits as at the balance sheet date, this method also takes expected future increases in salaries and pensions into account. The calculations are based on actuarial reports that must be prepared annually and must be based on biometric data. Service costs are recognized as personnel expense; the interest portion of the addition to provisions as well as the return on the fund assets are disclosed in the financial results. Actuarial gains and losses are recognized directly in equity ("Option 3").

Other provisions

Other provisions are recognized in the event that there is a current obligation to third parties arising from a past event. It must be possible to estimate the amount reliably and it must, more likely than not, lead to an outflow of future resources. Provisions are only recognized for legal and constructive obligations to third parties.

Provisions are recognized for costs of restructuring to the extent that a detailed, formal restructuring plan has been created and communicated to the parties affected by it and it is highly probable that the company can no longer withdraw from these obligations.

No provisions are recognized for future expenses, since these do not represent an external obligation.

Liabilities in the personnel area such as vacation pay, flex-time credits and the statutory German early retirement scheme (Altersteilzeit) are recognized under other liabilities.

Liabilities for outstanding vendor invoices are recognized under trade payables.

Long-term provisions with a term of more than one year are discounted to the balance sheet date on the basis of appropriate interest rates where the interest effect is material.

Share-based compensation

As part of an employee stock ownership program it was possible for KUKA employees of German companies to purchase KUKA shares. Arranged according to a holding period of one, three and five years, employees receive an additional share as a bonus for every ten KUKA shares acquired. A 50 percent incentive was granted in addition to the subscribed shares. The number of incentive shares was limited to 75,000 for all employees. KUKA employees acquired a total of 101,820 shares.

Revenue recognition

Construction contracts (IAS 11) are accounted for by the percentage of completion method. Other revenues are recognized in accordance with IAS 18. Sales revenues are booked in the period in which the products or goods were delivered or the services were rendered. Any reductions to the proceeds, contract penalties and cash discounts are deducted from this. At this time, the amount of revenues can be reliably measured and the inflow of economic benefits from the transaction is sufficiently probable.

Cost of sales

The cost of sales comprises the cost of production of the goods sold as well as the acquisition cost of any merchandise sold. In addition to the cost of attributable direct materials and labor, this also comprises indirect costs, including the depreciation and amortization of production plants and intangible assets, writedowns of inventories and the recognized borrowing costs. KUKA accounts for provisions for product warranties as part of the cost of sales at the time of revenue recognition. Impending losses from contracts are recognized in the reporting period in which the current estimate for total costs arising from the respective contract exceeds the expected contract revenue.

Research and development costs

Research and development costs that are not eligible for recognition as an asset are recognized as expenses when they are incurred.

Financing costs included in operating results

The provisions of IAS 23R require financing expenses to be accrued for qualifying assets. Due to the way the corporation is internally managed and to increase transparency, financing expenses included in operating results are eliminated in the reconciliation for the earnings before interest and taxes (EBIT).

A S S U M P T I O N S A N D E ST I M AT E S

KUKA prepares its consolidated financial statements in compliance with the IFRS mandatory in the EU. In certain cases it is necessary for management to make assumptions and estimates that affect the recognition and amount of assets and liabilities on the balance sheet, income and expenses, as well as the disclosure of contingent liabilities. This is essential in the preparation of the Group consolidated financial statements. These assumptions and estimates may change over time and differ from the actual amounts determined at a later time. In addition, management could have made different assumptions and estimates in the same reporting period for similarly justifiable reasons. In the application of accounting policies, the company has made the following important discretionary decisions, which have an effect on the amounts in the annual financial statements. These do not include those decisions that represent estimates.

Development costs

Development costs are recognized as assets in accordance with the methods described under accounting policies. For the purpose of testing the impairment of the amounts recognized as assets, management must make assumptions concerning the expected future cash flows from assets, the applicable discount rates and the timing of the inflow of expected future cash flows that the assets will generate. Moreover, assumptions must be made regarding cost yet to be incurred and the period until completion for projects that have not yet entered the development stage.

Goodwill impairments

The KUKA Group tests assets recognized as goodwill at least once a year for impairment. This requires an estimate to be made of the value in use less costs of disposal of the respective cash-generating units to which the goodwill has been allocated. To determine the value in use, management must estimate the future cash flows of the respective cash-generating units and select an appropriate discount rate for calculating the present value of these cash flows. The selected discount rate, for example, is influenced by volatility in capital markets and interest rate trends. The expected cash flows are also influenced by fluctuations in exchange rates and the expected economic developments. For details about the carrying amounts of the assets recognized as goodwill and the performance of the impairment tests please refer to the discussion under item 8.

Deferred tax assets

Deferred tax assets are recognized to the extent that it is probable that taxable income will be available such that the loss carry-forwards can actually be used. The determination of the amount of deferred tax assets requires an estimate on the part of management of the expected timing and amount of anticipated future taxable earnings as well as future tax planning strategies. For details please refer to the discussion under item 5.

Receivables and liabilities from construction contracts

A number of companies, particularly in the Systems segment, conduct a portion of their business in the form of long-term construction contracts, which are recognized using the percentage of completion method. Sales are reported based on the percentage of completion. A careful estimate of the progress toward completion is essential here. Depending on the method used to determine the percentage of completion, the most important estimates include the total order costs, the costs yet to be incurred until completion, the total project revenues and risks as well as other assessments. The management team responsible for the respective project continuously monitors all estimates on a monthly basis and adapts these as needed.

Pensions and other post-employment benefits

Expenditures under defined-benefit plans and other post-employment benefits are determined on the basis of actuarial calculations. The actuarial calculations are prepared on the basis of assumptions with respect to discount rates, expected returns on plan assets, future increases in wages and salaries, mortality rates and future pension increases. In line with the long-term orientation of these plans, such estimates are subject to significant uncertainties. For examples of how changes to the discount factor affect the defined benefit obligation as well as for other details see note 23.

Provisions

To a great degree the designation and measurement of provisions for impending losses from contracts, of provisions for warranty obligations and of litigation provisions involve making estimates.

Long-term construction contracts in particular are awarded based on invitations to tender. KUKA recognizes a provision for impending losses when the current estimated total costs arising from the respective contract exceed the expected total revenue. These estimates may change due to new knowledge as the project progresses. Deficit orders are identified based on continuous project costing. This requires an assessment of the performance standards and warranty costs.

KUKA is confronted with different types of litigation. These proceedings can lead to criminal or civil sanctions or fines. A provision is always recognized when it is likely an obligation will result that will lead to future cash outflows and the amount of which can be reliably assessed. The underlying issues are often complex and associated with great uncertainties. Judgment whether a present obligation arising from a past event is to be recognized on the balance sheet date, whether future cash outflows are probable and the obligation can be reliably assessed is therefore largely at the discretion of management. The company, under the inclusion of external legal professionals, regularly assesses the respective stage of the proceeding. New findings can change the assessment and it may be necessary to adjust the provision accordingly. Please see item 24 for further details on provisions.

CHANGES IN ACCOUNTING POLICIES

Changes in accounting policies did not significantly affect the Group consolidated financial statements compared to 2010.

The following revised standards were applied for the first time in the 2011 financial year:

IAS 24 (rev. 2009) – Related Party Disclosures

The amendment to IAS 24 led to a fundamental revision of the definition of related parties in particular, and adjustments regarding the definition of transactions (with a disclosure requirement). The application of the new requirements took place retrospectively. The group of related parties did not change in the KUKA Group and the company was thus not affected by the new standard.

In addition, the following standards and interpretations likewise already adopted into EU law were applied for the first time in the 2011 financial year:

• _ IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
• _ Amendment to IAS 32 Classification of Rights Issues _ Improvements to IFRSs (2010)*
• _ IFRIC 14 Prepayments of a Minimum Funding Requirement
• _ IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
• * This affects the following standards: IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 21, IAS 28, IAS 31, IAS 34 and IFRIC 13.

IFRS standards and interpretations that are not yet mandatory

The following new and amended standards and interpretations had been adopted by the preparation date of the Group consolidated financial statements. However, these will become effective at a later date. The initial application always occurs in the year in which first-time adoption is required. Their impact on the consolidated financial statements of KUKA Aktiengesellschaft has not yet been completely analyzed. Consequently, the anticipated effects only represent a first estimate.

Amendment to IAS 19 – Employee Benefits

The revision of IAS 19 eliminated the elections for the treatment of actuarial gains and losses. In the future only Option 3 (applied by KUKA) will be available, i.e. actuarial gains and losses are to be recognized in the period in which they arise in other comprehensive income. Moreover, returns on plan assets will then be recognized in profit or loss based on the returns from corporate bonds – independent of the actual portfolio structure. Past service cost due to changes to the plan will in future be recognized directly in the period in which the change occurs. In certain cases the amendment to IAS 19 may influence other long-term personnel-related provisions. Adoption of the revised standard is mandatory for financial years starting on or after January 1, 2013.

Amendment to IAS 1 – Presentation of Other Comprehensive Income

The amendments to IAS 1 lead to a new grouping of the items presented in other comprehensive income. Items that can later be "recycled" to profit or loss for the period, e.g. at derecognition or offset, are to be presented separately from items that are not recycled. This change is mandatory for financial years starting on or after July 1, 2012; it is merely a new method of presentation and therefore has no impact on the financial position or performance.

IFRS 10 – Consolidated Financial Statements

IFRS 10 replaces the guidance on control and consolidation provided by IAS 27 "Consolidated and Separate Financial Statements" and SIC 12 "Consolidation – Special Purpose Entities". The new standard changes the definition of "control" so that the same criteria are used to determine control over all companies. Discretionary power and variable reflux are prerequisites for control. We do not expect this new standard to affect the consolidated financial statements of the KUKA Group. This standard is mandatory for financial years starting on or after January 1, 2013.

IFRS 11 – Joint Arrangements

This new standard introduces two types of joint arrangements: joint operations and joint ventures. The prior election of proportionate consolidation for jointly controlled entities has been eliminated. The equity method of accounting is now mandatory for partners in a joint venture. Currently there are no joint arrangements in the KUKA Group, so it is not expected that the standard will have any impact on the company. Initial application will take place in the 2013 financial year.

IFRS 12 – Disclosure of Interests in Other Entities

This new standard supersedes the current disclosures included in IAS 28 and determines the required disclosures for entities that report in accordance with the two new standards IFRS 10 – Consolidated Financial Statements and IFRS 11 – Joint Arrangements. The new standard is expected to increase the scope of disclosure for notes. Impacts on net income will not result. This standard is mandatory for financial years starting on or after January 1, 2013.

IFRS 13 – Fair Value Measurement

IFRS 13 describes how to determine fair value and expands the disclosures on fair value; the standard does not include any requirements in which cases fair value is to be used. Here, fair value is defined as the price that would be paid by independent market participants in an arm's length transaction on the measurement date if an asset were sold or a liability transferred. This standard is mandatory for financial years starting on or after January 1, 2013.

Altogether, the following standards and interpretations have already been approved and in part already adopted into EU law. In addition to the aforementioned standards, we expect the further standards and interpretations to have little or no material impact on KUKA Aktiengesellschaft's consolidated financial statements:

Standard / Interpretation	Effective date	Planned application by KUKA AG
Amendments to IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets	July 1, 2011	financial 2012
Amendments to IFRS 1, Severe Hyper inflation and Removal of Fixed Dates for First-time Adopters	July 1, 2011	financial 2012*
Amendment to IAS 1, Presentation of Items of Other Comprehensive Income	July 1, 2012	financial 2013*
Amendment to IAS 12, Deferred Tax: Recovery of Underlying Assets	July 1, 2012	financial 2012*
Amendments to IAS 19, Employee Benefits	January 1, 2013	financial 2013*
IFRS 10, Consolidated Financial Statements	January 1, 2013	financial 2013*
IFRS 11, Joint Arrangements IFRS 12, Disclosure of Interests in Other	January 1, 2013	financial 2013*
Entities	January 1, 2013	financial 2013*
IFRS 13, Fair Value Measurement	January 1, 2013	financial 2013*
Revision of IAS 27, Consolidated and Separate Financial Statements	January 1, 2013	financial 2013*
Revision of IAS 28, Investments in Associ ates and Joint Ventures	January 1, 2013	financial 2013*
IFRS 9, Financial Instruments Amendments to IFRS 7 Financial	January 1, 2013	financial 2013*
Instruments: Disclosures – Offsetting of Financial Assets and Financial Liabilities	January 1, 2013	financial 2013*
Amendments to IAS 32 – Adjustment for Offsetting Financial Assets and Financial Liabilities	January 1, 2014	financial 2014*
Amendments to IFRS 9 and IFRS 7: Mandatory Effective Date and Transition
Disclosures	January 1, 2015	financial 2015*
IFRIC 20: Stripping Costs in the Produc tion Phase of a Surface Mine	January 1, 2013	financial 2013*

Pending adoption (endorsement) by the European Union.

*

NOTES TO THE GROUP INCOME STATEMENT AND TO THE GROUP BALANCE SHEET

1 S A L E S R E V E N U E S

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

The breakdown of sales revenues by business division and region is shown in segment reporting (cf. page 106 and 107). Services account for approximately 18.6 percent of sales revenues in the Robotics division as compared to 20.8 percent last year. Services play a less significant role in the Systems division.

In connection with construction contracts, sales revenues in the amount of € 690.9 million were recognized in the reporting year (compared to € 541.6 million in the prior year) according to the percentage of completion method.

2 C O ST O F S A L E S , S E L L I N G E X P E N S E S , R E S E A R C H & D E V E LO P M E N T E X P E N S E S A N D G E N E R A L A N D A D M I N I ST R AT I V E E X P E N S E S

The following is a breakdown of the cost of sales, selling expenses, research and development expenses and general and administrative expenses:

The cost of sales include under other expenditures comprises financing costs for internally-generated intangible assets and receivables related to manufacturing orders totaling € 8.4 million, which compares to € 7.2 million the year prior. These were determined on the basis of the corporate financing rate of 7.5 percent, which last year was 13.0 percent.

Personnel costs are directly allocated to the functional areas based on the cost centers. The overall distribution is thus as follows:

in € millions	2010	2011
Wages and salaries	284.8	316.5
Social security payments and contri butions for
retirement benefits and provident funds	54.7	59.2
(of that for retirement benefits)	(3.4)	(3.5)
Total	339.5	375.7

In 2010, KUKA Group's German companies were subsidized by the German Federal Labor Office in the amount of € 1.0 million under the terms of the reduced working hours program. The grants were deducted directly from personnel expenses. Due to the very satisfactory business performance, there was no need for reduced working hours during the 2011 financial year.

	Cost of sales		Selling expenses		Research and development expenses		General and administrative expenses		Total
in € millions	2010	2011	2010	2011	2010	2011	2010	2011	2010	2011
Cost of materials	592.7	867.4	1.0	1.8	4.1	4.0	0.4	1.8	598.2	875.0
Personnel expense	234.6	265.6	46.0	49.1	18.7	18.3	40.2	42.7	339.5	375.7
Amortization	13.0	12.4	1.0	1.1	3.4	7.3	4.9	5.3	22.3	26.1
Other expenses and income	34.3	8.5	38.9	47.5	3.3	8.1	30.8	29.1	107.3	93.2
Total	874.6	1,153.9	86.9	99.5	29.5	37.7	76.3	78.9	1,067.3	1,370.0

Annual average employed and employed at the balance sheet date by the KUKA Group:

	Annual average		Balance sheet date
Employees by functional categories	Total 2010	Total 2011	Total 2010	Total 2011	of that, Germany	of that, abroad
Manufacturing	4,358	4,793	4,498	4,958	2,330	2,628
Sales	528	546	532	568	287	281
Administration	503	523	508	543	265	278
Research and development	240	255	242	273	268	5
Trainees*	–	23	–	20	11	9
	5,629	6,140	5,780	6,362	3,161	3,201
Apprentices	185	202	210	227	199	28
Total	5,814	6,342	5,990	6,589	3,360	3,229

* Last year interns were directly allocated to the respective functional category. Starting this reporting year they are counted independently.

3 OT H E R O P E R AT I N G I N C O M E A N D E X P E N S E S

These line items capture income and expenses that are not allocated to the functional categories cost of sales, selling expenses, research and development expenses, general and administrative expenses or otherwise reported separately.

Other operating income and expenses	6.3	-1.4
Other operating expense	23.9	44.4
Other expenses	0.8	2.4
Other taxes	2.8	3.7
Donations	0.1	0.1
Expenses for foreign currency trans actions	20.2	38.2
Other operating income	30.2	43.0
Other income	6.1	4.9
Reimbursements from damages claims	0.1	1.7
Income from foreign currency trans actions	24.0	36.4
in € millions	2010	2011

4 F I N A N C I A L R E S U LT

in € millions	2010	2011
Depreciation of financial assets	0.0	0.8
Interest income from finance lease	7.5	6.9
Returns on pension plan assets	0.3	0.3
Remaining interest and similar income	1.2	2.7
Other interest and similar income	9.0	9.9
Interest component for allocations to pension provisions Guarantee commission	3.8 5.6	3.5 3.8
Interest expense for the convertible
bond Interest expense for the corporate bond	5.3 2.3	4.7 18.7
Transaction costs of Syndicated Senior Facilities Agreement	15.2	1.4
Financing costs reclassified to operating results	-7.2	-8.4
Remaining interest and similar expenses	6.1	3.6
Other interest and similar expenses	31.1	27.3
Financial result	-22.1	-18.2

The depreciation of financial assets concerns a minority interest in North America acquired in 2009.

Interest income from finance lease concerns the financing of a factory building for the production of bodies for the Jeep Wrangler in Toledo, USA (cf. note 11). Remaining interest and similar income comes from short-term deposits of cash and cash equivalents at banks.

Transaction costs of the Syndicated Senior Facilities Agreement last year included one-time charges in connection with the former Syndicated Senior Facilities Agreement totaling € 5.3 million (see note 26 – Syndicated loan).

Financing costs reclassified to operating results concern financing costs to be accrued according to IAS 23R. Remaining interest and expenses primarily include ongoing expenses for keeping cash lines open from the Syndicated Senior Facilities Agreement.

5 TA X E S O N I N C O M E / D E F E R R E D TA X E S

Tax expense

Income tax expense breaks down by origin as follows:

in € millions	2010	2011
Current taxes	12.1	14.8
(of that relating to other periods)	(1.1)	(-0.2)
Deferred taxes	-8.0	1.3
from temporary differences	0.4	-5.5
from loss carry-forwards	-8.4	6.8
Total	4.1	16.1

Of the current expenses for tax on earnings, € 3.1 million is attributable to domestic expenditure compared to € 1.6 million in the previous year, whereas € 11.7 million is attributable to foreign expenditure compared to € 10.5 million last year.

Deferred tax expenses of € -0.6 million are attributable to domestic operations and € 1.9 million to foreign. This compares with the figures from the previous year of € -7.5 million and € -0.5 million (tax income), respectively.

The expected tax expense based on earnings before taxes and the applicable tax rate for the KUKA companies in Germany of 30.0 percent (prior year: unchanged) leads to the following actual tax expense:

in € millions	2010	2011
Earnings before tax expense	-4.5	46.0
Expected tax expense	-1.4	13.8
Tax rate-related differences	3.1	1.7
Tax reductions due to tax-exempt income	-0.5	-1.3
Tax increases due to non-deductible expenses	4.2	4.3
Tax arrears (+) / Tax credits received (–) for prior years	1.1	-6.5
Changes to allowance on deferred taxes	-2.8	5.7
First-time recognition of previously unrecognized deferred tax assets on tax loss carryforward	0.0	-1.5
Other differences	0.4	-0.1
Taxes on income (actual tax expense)	4.1	16.1

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

In principle, deferred taxes were recognized on the basis of the applicable tax rate for each company in question.

In addition to an existing corporate income tax credit, an amount equal to € 7.6 million (prior year: € 9.0 million) results after discounting as a non-current tax receivable effective December 31, 2011, and an amount of € 1.8 million (prior year: unchanged) as a current tax receivable.

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

Current tax income in other accounting periods totaling € 0.2 million (prior year: € -1.1 million) are primarily the result of corrections in foreign operations.

The final tax assessment based on the last domestic tax audits for the years 2002 to 2004 was carried out in the reporting year without tax effects in other accounting periods.

There are currently still no material conclusions for the new domestic audit period 2005 to 2008.

Deferred tax assets and liabilities

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

	Deferred tax assets		Deferred tax liabilities
in € millions	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011
Non-current assets	15.3	12.5	43.4	43.9
Current assets	40.6	48.2	49.1	55.9
Provisions	15.9	16.4	1.7	3.6
Liabilities	13.1	23.9	3.5	4.5
Subtotal	84.9	101.0	97.7	107.9
Balancing item	-79.4	-87.9	-79.4	-87.9
Valuation allowance	-2.8	-3.2	0.0	0.0
Subtotal	2.7	9.9	18.3	20.0
Deferred taxes on tem porary differences	2.7	9.9	18.3	20.0
Deferred taxes on tax loss carry-forwards	31.8	25.1	0.0	0.0
Total	34.5	35.0	18.3	20.0
thereof: from items recognized in equity			2.6	-1.4

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

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

From the loss carry-forward and carried interest of € 233.8 million (prior year: € 265.1 million), amounts totaling € 146.8 million (prior year: € 159.6 million) are not considered in the accounting of deferred taxes.

Deferred tax income in the amount of € 1.5 million results from the recognition of deferred tax receivables on loss carry-forwards from earlier periods which until now had not been included in or written down from the tax accrual / deferral.

In accordance with IAS 12, deferred tax items must be recognized for the difference between the proportionate equity of a subsidiary recognized on the Group balance sheet and the investment carrying amount of this subsidiary on the tax balance sheet of the parent company (so-called outside basis differences) if it is likely that this difference will be realized. Since both KUKA Aktiengesellschaft as well as the subsidiaries in question are corporations, these differences are predominantly tax exempt under Article 8b KStG upon realization and thus permanent in nature. According to IAS 12.39, no deferred tax liability should be recognized even for temporary differences (e.g. those resulting from the 5 percent flat-rate allocation under Article 8b KStG) if it is not likely, given control by the parent company, that these differences will reverse in the foreseeable future. Since no such reversal is expected, no deferred tax items had to be recognized on the balance sheet for this purpose. There are outside basis differences in the amount of € 1.7 million (prior year: € 4.0 million).

Overall, the change to deferred tax assets and liabilities of € 2.6 million (prior year: € 9.4 million) came from amounts affecting net income totaling € 1.3 million (prior year: € -8.0 million) as well as amounts not affecting net income resulting from changes to pension obligations, a convertible bond and currency exchange factors.

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

6 E A R N I N G S P E R S H A R E

Undiluted / diluted earnings per share break down as follows:

Earnings per share (in €)	-0.28	0.89
Weighted average number of shares outstanding	30,325,029	33,428,740
Net income / loss for the year after minority interests (in € millon)	-8.6	29.8
	2010	2011

Undiluted earnings per share due to shareholders of KUKA Aktiengesellschaft were calculated as per IAS 33 on the basis of Group consolidated earnings after taxes and the weighted average number of shares outstanding for the year.

On December 31, 2009 there were 27.9 million shares outstanding. 4.7 million shares were issued as part of the capital increase in June 2010, raising the average number of shares outstanding at the end of the preceding year to 30.3 million. On December 31, 2010 there were 32.6 million shares outstanding.

The sale of 1,327,340 treasury shares in May 2011 further increased the weighted average number of shares outstanding to 33,428,740. On December 31, 2011 there were thus 33,915,431 shares outstanding.

No dilution results in both the reporting and the previous year from the convertible bond issued in May 2006 and repaid in November 2011.

7 F I X E D A S S E T S

SCHEDULE OF CHANGES IN FIXED ASSETS 2011

	Acquisition / Manufacturing Costs
in € millions	Status as at Jan. 1, 2011	Exchange rate differences	Additions	Disposals	Reclassifications	Status as at Dec. 31, 2011
I. Intangible assets
1. Rights and similar assets	43.6	0.1	4.3	0.3	0.2	47.9
2. Self-developed software and other development costs	18.5	–	8.2	3.0	–	23.7
3. Goodwill	56.6	–	–	–	–	56.6
4. Advances paid	1.2	–	0.2	–	-0.2	1.2
	119.9	0.1	12.7	3.3	0.0	129.4
II. Tangible assets
1. Land, similar rights and buildings including buildings on land owned by third parties	114.8	0.5	1.0	0.8	0.2	115.7
2. Technical plant and equipment	92.7	0.3	5.0	2.5	1.2	96.7
3. Other equipment, factory and office equipment	68.6	0.0	8.8	4.3	0.2	73.3
4. Advances paid and construction in progress	0.5	0.0	2.8	–	-1.6	1.7
	276.6	0.8	17.6	7.6	0.0	287.4
III. Financial investments
1. Participations in affiliated companies	4.6	–	–	–	–	4.6
2. Other participations	0.9	–	0.0	0.0	–	0.9
3. Other loans	0.0	–	–	0.0	–	0.0
	5.5	–	–	–	–	5.5
	402.0	0.9	30.3	10.9	–	422.3

The following amounts have been capitalized under technical plant and equipment due to finance leases in which the KUKA Group acts as the lessee:

Technical plant and equipment	4.5	–	–	–	–	4.5
-------------------------------	-----	---	---	---	---	-----

Net carrying

Accumulated Depreciation
Status as at Jan. 1, 2011	Exchange rate differences	Additions	Disposals	Status as at Dec. 31, 2011	Status as at Dec. 31, 2011
33.0	0.1	5.4	0.3	38.2	9.7
3.4	–	5.0	3.0	5.4	18.3
7.0	–	–	–	7.0	49.6
–	–	–	–	–	1.2
43.4	0.1	10.4	3.3	50.6	78.8
66.1	0.2	3.1	0.8	68.6	47.1
71.6	0.2	5.5	2.3	75.0	21.7
53.1	0.2	7.1	4.2	56.2	17.1
–	–	–	–	0.0	1.7
190.8	0.6	15.7	7.3	199.8	87.6
4.5	–	–	–	4.5	0.1
–	–	0.8	–	0.8	0.1
0.0	–	-	–	0.0	0.0
4.5	–	0.8	–	5.3	0.2
238.7	0.7	26.9	10.6	255.7	166.6

3.3	0.0	0.3	–	3.6	0.9

SCHEDULE OF CHANGES IN FIXED ASSETS 2010

	Acquisition / Manufacturing Costs
in € millions	Status as at Jan. 1, 2010	Exchange rate differences	Additions	Disposals	Reclassifications	Status as at Dec. 31, 2010
I. Intangible assets
1. Rights and similar assets	42.1	0.6	2.8	1.9	0.0	43.6
2. Self-developed software and other development costs	18.0	0.0	2.0	1.5	–	18.5
3. Goodwill	56.6	0.0	–	–	–	56.6
4. Advances paid	1.7	0.0	–	0.5	0.0	1.2
	118.4	0.6	4.8	3.9	0.0	119.9
II. Tangible assets
1. Land, similar rights and buildings including buildings on land owned by third parties	113.8	1.2	0.9	1.1	0.0	114.8
2. Technical plant and equipment	89.5	0.8	3.9	3.5	2.0	92.7
3. Other equipment, factory and office equipment	71.7	1.4	4.9	9.6	0.2	68.6
4. Advances paid and construction in progress	1.8	0.0	0.9	0.0	–2.2	0.5
	276.8	3.4	10.6	14.2	0.0	276.6
III. Financial investments
1. Participations in affiliated companies	4.6	–	–	–	–	4.6
2. Other participations	0.9	–	–	–	–	0.9
3. Other loans	0.0	–	–	–	–	0.0
	5.5	–	–	–	–	5.5
	400.7	4.0	15.4	18.1	0.0	402.0

The following amounts have been capitalized under technical plant and equipment due to finance leases in which the KUKA Group acts as the lessee:

Technical plant and equipment	4.5	–	–	–	–	4.5

Accumulated Depreciation
Status as at Jan. 1, 2010	Exchange rate differences	Additions	Disposals	Status as at Dec. 31, 2010	Status as at Dec. 31, 2010
29.3	0.3	5.2	1.8	33.0	10.6
2.9	0.1	1.9	1.5	3.4	15.1
7.0	–	–	–	7.0	49.6
–	–	–	–	–	1.2
39.2	0.4	7.1	3.3	43.4	76.5
62.7	0.2	3.2	0.0	66.1	48.7
68.9	0.4	5.3	3.0	71.6	21.1
54.9	0.9	6.7	9.4	53.1	15.5
–	–	–	–	–	0.5
186.5	1.5	15.2	12.4	190.8	85.8
4.5	–	–	–	4.5	0.1
–	–	–	–	–	0.9
0.0	–	–	–	0.0	0.0
4.5	–	–	–	4.5	1.0
230.2	1.9	22.3	15.7	238.7	163.3

3.1	–	0.2	–	3.3	1.2

8 I N TA N G I B L E A S S E T S

Changes to the individual items under intangible assets are disclosed in the schedule of changes in fixed assets. No impairment losses were made in the financial year under review or in the previous year.

Goodwill

Recognized goodwill in the amount of € 49.6 million (prior year: unchanged) breaks down as follows:

Profit Center in € millions	Dec. 31, 2010	Dec. 31, 2011
Body-Structure and Engineering	40.7	40.7
Assembly & Test	4.7	4.7
Robotics Automotive	3.8	3.8
Others / less than € 1 million	0.4	0.4
Total	49.6	49.6

Individual profit centers represent the smallest cash-generating unit, making them the basis for the impairment test of goodwill. The customer service business in the Robotics division is proportionately allocated to the profit centers "Automotive" and "General Industry". The segment management reporting structures were minimally adjusted in the Systems division in the financial year 2011. This led to the renaming of the "Body-in-White" cash-generating unit to "Body Structure and Engineering". The Brazilian Systems company was added to this cash-generating unit due to its change of focus activities. From now on the Chinese Systems companies and KUKA Systems Corporation North America will be proportionately allocated to the reporting segments "Body Structure and Engineering" and "Technology Solutions". These adjustments to segment management reporting do not impair the overall comparability with the previous year. Likewise, this does not lead to different results for the goodwill impairment test.

The impairment test is based on a three-year detailed planning period and increased steadiness in the last year of the detailed planning. As in the previous year, a perpetual growth rate of 0.5 percent is considered. The following discount rates for WACC before taxes were used in the financial year:

in %	2010	2011
Planning period	2011 – 2013	2012 – 2014
Systems	9.6	13.0
Robotics	9.3	12.7

The cost of equity capital was determined on the basis of segment-specific peer groups. The cost of borrowed capital was derived from the refinancing costs of KUKA Aktiengesellschaft.

Material components used in determining WACC are the market risk premium of 5.0 percent (prior year: unchanged) and the risk-free interest rate of 4.0 percent (prior year: 3.1 percent). The beta factor was determined as a three-year average of the respective peer group; for the Systems segment it was 1.136 (prior year: 1.288) and for the Robotics segment it was 1.269 (prior year: 1.223).

The ratios for the cost of equity capital and the cost of borrowed capital were determined by segment based on the average debtto-equity ratios of the respective peer group for the last three years. The tax rate used was 29.37 percent (prior year: 30 percent).

A 1 percent higher WACC would only marginally influence the impairment of goodwill – as marginally as a reduction in sales revenues over the entire planning period by ten percent with a correspondingly lower cash flow.

Self-developed software and other product development costs

According to IAS 38, self-developed software and other development costs must also be capitalized. For the purpose of such capitalization, KUKA uses a definition of the costs of production which, in accordance with IAS, includes attributable direct costs as well as an appropriate allocation for overheads and depreciation. Borrowing costs are included in the production costs based on the Group capitalization rate of 7.5 percent (prior year: 13.0 percent) for qualifying assets whose development began after December 31, 2008.

Development costs are only recognized as assets in the KUKA Group at KUKA Roboter GmbH and its subsidiary KUKA Laboratories GmbH. The companies are working on several projects involving performance and guidance software for robots as well as new applications in the area of medical technology. Borrowing costs of € 0.2 million (prior year: € 0.1 million) were accounted for. Total expenditures for research and development for the reporting period were € 37.7 million compared to € 29.5 million in 2010.

Development costs with a carrying amount of € 18.3 million (prior year: € 15.1 million) from the years 2008 to 2011 have been capitalized according to IAS 38. Additions for 2011 totaled € 8.2 million (prior year: € 2.0 million). Amortization is applied using a straight-line method over the respective expected useful life of three years or less. The depreciation related to capitalized borrowing costs is recognized in the income statement initially under research and development expenses and eliminated in the reconciliation of the operating results to EBIT. An amount less than € 0.1 million was reclassified in this area in the financial year under review.

9 TA N G I B L E A S S E T S

The breakdown of the assets aggregated in the balance sheet items of the tangible assets, as well as changes over the reporting year and in 2010, are shown in note 7 of the annual report. The major focus of capital expenditures in the financial year is described in the management report.

Subsidies in the amount of € 0.3 million (prior year: unchanged) were deducted from the cost of purchase or cost of production for tangible assets. Government grants were received, principally for research and development projects, totaling € 2.0 million (prior year: € 2.3 million) and recognized as directly income-relevant. There were no contingently repayable grants as of the balance sheet date.

The depreciable amounts are as follows:

Total	15.2	15.7
non-scheduled	–	0.3
scheduled	15.2	15.4
Depreciation of tangible assets
in € millions	2010	2011

The finance leases for technical plant and equipment have interest rates of 2.25 percent p.a. The following table shows the breakdown of future payments due for finance lease agreements as well as the present values for future leasing payments (the corresponding amounts are recognized under other liabilities):

in € millions	Dec. 31, 2010 Total	Dec. 31, 2011 Total	Up to one year	between one and five years
Minimum lease payments	0.6	0.2	0.2	–
Present value	0.5	0.2	0.2	–

Commitments from leases and rental agreements

Total	26.4	36.8
more than five years	7.7	13.9
between one and five years	13.0	15.0
up to one year	5.7	7.9
in € millions	Dec. 31, 2010	Dec. 31, 2011

Commitments in connection with leases for passenger cars, office and factory buildings primarily include liabilities from leases and rental agreements in connection with operating leases.

Total rental expenses for the fiscal year were € 14.9 million compared to € 13.5 million in the prior year; rental income totaled € 0.3 million and was slightly less than the € 0.4 million in 2010.

1 0 F I N A N C I A L I N V E STM E N T S

Financial investments primarily resulted from loans and other investments with less than ten percent ownership. The write-off in the financial year concerns a minority interest in North America acquired in 2009.

1 1 F I N A N C E L E A S E

KUKA Toledo Production Operations LLC., Toledo, Ohio, USA manufactures Jeep Wrangler bodies under the terms of a payon-production contract with Chrysler. The first unpainted car bodies associated with the project were delivered to Chrysler in July 2006. The project was initially financed through an operating lease agreement with a local corporation and a consortium of financing banks. In 2008 KUKA Aktiengesellschaft reached an agreement with Chrysler LLC and the financing banks regarding the settlement of the € 77.1 million financing, which resulted in the legal ownership of the buildings and production systems.

Because of the existing agreement to supply car bodies to Chrysler, the acquisition of the production system assets was not included on the balance sheet as an asset acquisition, but instead categorized as a finance lease in accordance with IFRIC 4 / IAS 17 guidelines and booked as a receivable from finance leases. A non-current lease receivable of € 75.7 million (prior year: € 77.8 million) and a current lease receivable of € 4.6 million (prior year: € 4.1 million) exist as of the balance sheet date. Sales revenues shown on KTPO's balance sheet will thus be reduced by the fictitious leasing rate. The interest component included in the fictitious leasing rate is booked under interestresult, while the repayment component of this repayment reduces the receivables as per schedule.

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

in € millions	2010	2011
Future minimum lease payments / Finance lease gross investments	130.7	123.4
of that not later than one year	11.3	11.7
of that later than one year and not later than five years	45.1	46.6
of that later than five years	74.3	65.1
Unrealized financial income	-48.8	-43.1
Present value of outstanding minimum lease payments	81.9	80.3
of that not later than one year	4.1	4.6
of that later than one year and not later than five years	20.5	23.2
of that later than five years	57.3	52.5

1 2 I N V E N TO R I E S

Total	158.0	195.4
Advances paid	10.2	18.6
Finished goods	18.7	25.4
Work in process	84.4	107.8
Raw materials and supplies	44.7	43.6
in € millions	Dec. 31, 2010	Dec. 31, 2011

The carrying amount of inventory with adjusted valuation in the amount of € 123.5 million compares with € 94.9 million in 2010 and has been recognized at net realizable value. Writedowns, relative to gross value, amounted to € 26.2 million versus € 27.6 million the year prior.

1 3 R E C E I VA B L E S

Total	291.8	0.3	292.1	339.8	–	339.8
Receivables from contruction contracts	166.1	–	166.1	194.3	–	194.3
Trade receivables	125.7	0.3	126.0	145.5	–	145.5
in € millions	of that up to one year	of that more than one year	Dec. 31, 2010 Total	of that up to one year	of that more than one year	Dec. 31, 2011 Total

The following table breaks down receivables by age and recoverability.

	not impaired as of the balance sheet date but in arrears by					impaired trade			neither
in € millions	less than 30 days	30 to 60 days	61 to 90 days	91 to 180 days	more than 180 days	Total of past due, unim paired receiva bles	receivab les before recording of im pairment losses	impair ment loss	net carrying amount of impaired trade re ceivables	impaired nor past due as at the balan ce sheet date	Net carrying amount
as of Dec. 31, 2010	13.4	5.3	3.6	3.6	2.8	28.7	7.4	-6.8	0.6	96.7	126.0
as of Dec. 31, 2011	21.6	6.8	3.6	4.4	1.5	37.9	6.7	-6.3	0.4	107.2	145.5

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

Receivables of KUKA Roboter GmbH are regularly sold as part of two ABS programs. See note 26 / Asset-backed securities program for more details.

Trade receivables

Bad debt allowances on trade receivables developed as follows:

in € millions	2010	2011
Impairment losses / Status as at Jan. 1	6.2	6.8
Additions
(Expenses related to impairment losses)	3.2	2.8
Use	-1.2	-0.1
Reversals	-1.4	-3.2
Impairment losses / Status as at Dec. 31	6.8	6.3

The total amount of additions of € 2.8 million (prior year: € 3.2 million) breaks down into additions for specific bad debt allowances of € 2.6 million (prior year: € 2.7 million) and lump-sum bad debt allowances in the amount of € 0.2 million (prior year: € 0.5 million).

Receivables from construction contracts

For receivables from construction contracts, advances received have been offset against costs incurred in connection with the contract, including contributions to earnings on a per contract basis. As at the balance sheet date, costs incurred and earnings recognized in connection with long-term contracts in the amount of € 852.5 million were offset against advances received in the amount of € 658.2 million. In 2010 these figures were € 643.4 million and € 477.3 million, respectively. This resulted in receivables of € 194.3 million compared to € 166.1 million the year prior and liabilities of € 93.4 million versus € 39.6 million a year earlier. Advances received in connection with long-term contracts exceed the costs incurred and the earnings portion.

1 4 OT H E R A S S E T S , P R E PA I D E X P E N S E S A N D D E F E R R E D C H A R G E S

in € millions	of that up to	of that more	Dec. 31, 2010	of that up to	of that more	Dec. 31, 2011
	one year	than one year	Total	one year	than one year	Total
Other assets, prepaid expenses and deferred charges	27.2	12.0	39.2	66.4	12.1	78.5

The increase in other assets, prepaid expenses and deferred charges was largely due to greater sales tax demands.

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

in € millions	Impaired receivables before recording of impairment loss	Impairment loss	Carrying amount of impaired receivables	Neither impaired nor past due as at the balance sheet date	Carrying amount
as of Dec. 31, 2010	2.7	-2.7	0.0	15.5	15.5
as of Dec. 31, 2011	2.7	-2.7	0.0	18.9	18.9

There are no other assets that are impaired or past due as of December 31, 2011 or December 31, 2010.

Impairment losses on other assets developed as follows:

in € millions	2010	2011
Impairment losses / Status as at Jan. 1	3.7	2.7
Additions
(Expenses related to impairment losses)	0.5	0.2
Use	-0.1	0.0
Reversals	-1.4	-0.2
Impairment losses / Status as at Dec. 31	2.7	2.7

1 5 C A S H A N D C A S H E Q U I VA L E N T S

Cash and cash equivalents include all cash funds recognized on the balance sheet; that is cash on hand, checks and cash balances with financial institutions, together with short-term investement with a residual term of less than three months from the date of puchase and the price of which flucutates only minimally.

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

Last year amounts totaling € 69.0 million were held in a fiduciary account and were accessed to meet obligations arising from the convertible bond ("restricted cash").

Total	203.4	168.8
Restricted cash	69.0	0.0
Cash and bank balances	134.3	168.7
Cash-on-hand	0.1	0.1
in € millions	Dec. 31, 2010	Dec. 31, 2011

1 6 E Q U I T Y

Changes in equity, including changes without effect on profit or loss are disclosed in the Development of Group Equity on page 104 f. and in the Statement of Comprehensive Income on page 100.

For more information on equity see the notes in the management report under "Disclosure as per article 315 section 4 of the German Commercial Code, including accompanying explanation".

1 7 S U B S C R I B E D C A P I TA L

Capital increase June 2010

In June 2010, a rights issue consisting of 4,655,441 shares was placed. The capital increase was implemented by issuing rights with a ratio of 6:1. At an issue price of € 2.60 per share, the subscription price was € 9.75. The difference between offer price and issue price is reported in the capital reserve, taking into account commissions and taxes. After deducting direct transaction costs the company took in € 42.8 million.

Following the capital increase the total share capital of KUKA Aktiengesellschaft amounts to € 88,180,120.60 and is subclassified into 33,915,431 no-par value bearer shares. Each share is equal to one vote.

1 8 C A P I TA L R E S E R V E

The capital reserve applies to KUKA Aktiengesellschaft. The change compared to last year results from the scheduled repayment of the convertible bond.

The change last year resulted from the capital increase in June 2010. The resulting transaction costs of € 4.9 million were deducted from the capital reserve without effect on profit or loss.

1 9 T R E A S U RY S H A R E S

In 2008, the company bought 1,327,340 of its own shares at a cost of € 27,898,339.58. On the basis of the authority granted by shareholders at the Annual General Meeting of KUKA Aktiengesellschaft on April 29, 2010, KUKA Aktiengesellschaft's Executive Board, with the approval of the Supervisory Board, decided to sell these treasury shares on May 11, 2011. UniCredit Bank AG and Joh. Berenberg, Gossler & Co. KG each purchased 50 percent of the shares as joint book runners, and then immediately offered them to institutional investors. The shares were sold for € 18.60 each. After deducting the usual commissions, the company received € 23,698,328.36.

Following the sale of the treasury shares, the total number of shares in circulation as of December 31, 2011 is 33,915,431.

2 0 R E V E N U E R E S E R V E S

The revenue reserves include:

• _ The accumulated retained earnings of KUKA Aktiengesellschaft and its consolidated subsidiaries
• _ Consolidation and currency translation effects
• _ Actuarial gains and losses included in provisions for pensions and the associated deferred taxes.
• _ Obligations as part of an employee stock ownership program for KUKA employees

Deferred taxes totaling € -1.4 million (prior year: € 2.6 million) from transactions not recognized in profit or loss are included in equity. These are exclusively attributable to actuarial gains and losses from pensions (prior year: € -0.8 million). The prior year amount also still included deferred taxes from the convertible bond amounting to € 3.4 million.

2 1 M I N O R I T Y I N T E R E ST S

This note primarily concerns the minority stake held by third parties in KUKA Enco Werkzeugbau spol. s. r. o., Dubnica, Slovakia and in Hung Viet International Company Limited, Ho Chi Minh City, Vietnam. The changes to this item are detailed in the development of Group equity.

2 2 M A N AG E M E N T O F C A P I TA L

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

This requires sufficient shareholders' equity (leverage ratio as a key indicator), liquidity (net liquidity as a key indicator), and a sufficient return on capital employed (ROCE as a key indicator). Management and controlling of the business divisions therefore also takes place based on these key indicators.

Net debt	€ millions	-60.3	-32.6
Current finance liabilities	€ millions	-70.9	-7.4
Non-current finance liabilities	€ millions	-192.8	-194.0
Cash and cash equivalents	€ millions	203.4	168.8
ROCE	%	7.9	21.8
/ Capital Employed (annual average)	€ millions	312.5	332.9
EBIT	€ millions	24.8	72.6
Equity ratio	%	20.1	23.4
/ Total equity	€ millions	984.7	1,078.0
Equity	€ millions	198.1	252.4
		2010	2011

2 3 P E N S I O N P R OV I S I O N S A N D S I M I L A R O B L I G AT I O N S

KUKA recognizes actuarial gains and losses directly in equity at the time in which they occur (Option 3 in accordance with IAS 19.93A).

Provisions for pensions developed as follows in the financial year 2011:

Since they are in the nature of a retirement benefit, liabilities of the US Group company KUKA Assembly and Test Corp. for post-employment medical benefits are also disclosed under pension provisions according to IAS 19. Of the total provisions and accruals, these obligations similar to pensions, calculated according to the rules of IAS 19, represent € 0.7 million (prior year: unchanged). The possible effects of an increase / reduction of one percent of the expected cost development in the field of medicine are under € 50,000.

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

For the defined contribution plans, the company pays contributions to a public or private pension insurance carrier. Upon payment of the contributions, the company has no further obligations. Total payments for pensions under defined contribution plans in the amount of € 19.3 million compared to € 17.7 million in 2010 are disclosed as expenses in the year in question.

Under defined benefit plans, the company incurs an obligation to provide the benefits promised by the plan to current and former employees.

in € millions	Status as at Jan. 1	Exchange differences	Consumption	Additions	Actuarial gains (–) and losses (+) (directly in equity)	Status as at Dec. 31
2010	70.0	0.1	5.8	4.1	1.8	70.2
2011	70.2	–	5.6	3.7	2.1	70.4

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

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

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

		Germany		USA		Other
Dec. 31	2010	2011	2010	2011	2010	2011
Demographic assumptions	RT 2005 G	RT 2005 G	RP 2000	RP 2000	IPS55 (I); TV88 / 90 (F)	IPS55 (I); TV88 / 90 (F)
Discount factor	4.95%	4.70%	5.40%	4.40%	4.95%	4.70%
Expected rate of return on assets	–	–	8.00%	8.00%	–	–
Wage dynamics	0.00 – 2.50%	0.00 – 2.50%	–	–	0.00 – 2.00%	0.00 – 2.00%
Pension dynamics	1.75 – 2.50%	1.75 – 2.50%	–	–	0.00 – 2.00%	0.00 – 2.00%
Changes in cost of medical services	–	–	5.00 – 8.00%	5.00 – 7.50%	–	–

The discounting factor is determined based on the returns from high-quality, fixed-rate corporate bonds.

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

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

For funded plans, the pension obligations calculated according to the Projected Unit Credit Method are reduced by an amount equal to the fund assets. If the fund assets exceed the defined benefit obligations, an asset is recognized according to IAS 19 and disclosed under other assets. If the fund assets do not cover the commitment, the net obligation is recognized as a liability under pension provisions.

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

Funding status of defined benefit pension obligations

	Germany		USA		Other		Total
in € millions	2010	2011	2010	2011	2010	2011	2010	2011
Present value of pension benefits covered by provisions	67.9	67.1	0.7	0.8	0.6	0.6	69.2	68.5
Present value of funded pension benefits	–	–	4.8	5.8	–	–	4.8	5.8
Defined benefit obligation zusagen (Defined Benefit Obligation)	67.9	67.1	5.5	6.6	0.6	0.6	74.0	74.3
Fair value of plan assets	–	–	3.8	3.9	–	–	3.8	3.9
Net obligation as of Dec. 31*	67.9	67.1	1.7	2.7	0.6	0.6	70.2	70.4

* Is the same as the pension provision because in both the reporting year as well as in the previous year there was no overfunding of plan assets and no unrecognized past service cost.

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

Current service costs and interest expenses totaling € 3.9 million (prior year: € 4.4 million) compare to benefit payments of € 5.6 million during the financial year (prior year: € 5.8 million). The increase of the defined benefit obligation results mainly from actuarial losses of € 2.1 million accrued during the financial year, compared to losses of € 2.0 million in 2010.

Changes in defined benefit obligations

Germany		USA		Other		Total
2010	2011	2010	2011	2010	2011	2010	2011
67.9	67.9	4.7	5.5	0.5	0.6	73.1	74.0
–	–	(4.1)	(4.8)	–	–	(-4.1)	(-4.8)
(67.9)	(67.9)	(0.6)	(0.7)	(0.5)	(0.6)	(-69.0)	(-69.2)
0.4	0.4	0.1	0.1	0.1	0.0	0.6	0.5
3.5	3.2	0.3	0.3	0.0	0.0	3.8	3.5
-5.6	-5.4	-0.2	-0.2	0.0	0.0	-5.8	-5.6
1.7	1.0	0.3	0.7	0.0	0.0	2.0	1.7
–	–	0.3	0.2	0.0	0.0	0.3	0.2
67.9	67.1	5.5	6.6	0.6	0.6	74.0	74.3
(–)	(–)	(4.8)	(5.8)	(–)	(–)	(4.8)	(5.8)
(67.9)	(67.1)	(0.7)	(0.8)	(0.6)	(0.6)	(69.2)	(68.5)

The defined benefit obligation increased in the reporting year owing to a decrease in the discounting factor for domestic and foreign pension plans. The influence of the remaining valuation parameters was minimal. A change to the discounting factor of + / - 0.25 percent would lead to a lower / higher defined benefit obligation of - / + € 1.8 million (prior year: € 2.0 million) .

Pension expense for defined benefit plans

		Germany		USA		Other		Total
in € millions	2010	2011	2010	2011	2010	2011	2010	2011
Current service costs	0.4	0.3	0.1	0.1	0.1	0.1	0.6	0.5
Interest expense	3.5	3.2	0.3	0.3	0.0	0.0	3.8	3.5
Expected return on plan assets	–	–	-0.3	-0.3	–	–	-0.3	-0.3
Pension expenses from defined benefit commitments	3.9	3.5	0.1	0.1	0.1	0.1	4.1	3.7

Pension expenses for defined benefit plans fell by € 0.4 million to € 3.7 million from the previous year's € 4.1 million.

The actuarial gains and losses recognized in Group equity include the following amounts:

in € millions	2007	2008	2009	2010	2011
Cumulative gains (+) and losses (–) recognized directly in equity as at
Jan. 1	-6.3	3.5	6.9	2.7	0.9
Actuarial gains (+) and losses (–) of the financial year	9.8	3.4	-4.2	-1.8	-2.1
Cumulative gains (+) and losses (–) recognized directly in equity as at
Dec. 31	3.5	6.9	2.7	0.9	-1.2

Employer payments into the fund assets of € 0.3 million are expected in the 2012 financial year.

The amounts for the current year and the four previous years of the defined benefit obligation, the plan assets and the funded status are represented as follows:

Funded Status	73.9	68.5	70.0	70.2	70.4
Plan Assets	3.1	2.4	3.1	3.8	3.9
Defined Benefit Obligation	77.0	70.9	73.1	74.0	74.3
in € millions	2007	2008	2009	2010	2011

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

Development of plan assets in the financial year

in € millions	2010	2011
Fair value as at Jan. 1	3.1	3.8
Expected returns on plan assets	0.3	0.3
Acturial gains / losses	0.2	-0.4
Currency translation	0.2	0.2
Employer contributions	0.2	0.2
Payments	-0.2	-0.2
Fair value as at Dec. 31	3.8	3.9

The actual losses from external pension funds were € 0.1 million compared to prior year gains of € 0.5 million. As of December 31, 2011 the plan assets of € 3.9 million (prior year: € 3.8 million) broke down into 73.7 percent shares in stock funds (prior year: 79.1 percent), with the remaining 26.3 percent (prior year: 20.9 percent) comprising fixed-interest securities and cash funds.

in € millions 2007 2008 2009 2010 2011 Experience-based increase(+) / decrease (–) of pension obligations -3.0% 0.8% 1.0% 0.5% 1.4% Experience-based increase(+) / decrease (–) of plan assets 0.0% -53.1% 15.6% 5.9% -9.2%

2 4 OT H E R P R OV I S I O N S A N D AC C R UA L S

in € millions	Status as at Jan. 1, 2011	Exchange rate differences	Comsumption	Reversals	Additions	Status as at Dec. 31, 2011
Warranty commitments and risks from pending
transactions	35.8	0.1	13.0	2.0	12.8	33.7
Liabilities arising from restructurings	4.7	0.1	3.1	0.4	0.1	1.4
Other provisions	48.4	1.4	32.1	2.4	26.6	41.9
Total	88.9	1.6	48.2	4.8	39.5	77.0

Other provisions and accruals for warranty commitments and risks from pending transactions include provisions for impending losses from pending transactions of € 13.2 million (prior year: € 20.6 million) and warranty risk of € 20.5 million (prior year: € 15.2 million). Of the reversals, € 1.1 million is attributable to provisions for impending losses and € 0.9 to warranty risk.

In 2009 the company put together and implemented a restructuring plan that affects the entire Group. The restructuring plan involved both personnel and material measures. Provisions totaling roughly € 3.1 million were used in the financial year for expected restructuring measures; € 0.4 million was reversed. At year end restructuring obligations totaled € 1.4 million; € 0.8 million for the Systems division, and € 0.6 million for the Robotics division. A provision of € 0.8 million (prior year: € 1.8 million) as of the balance sheet date was related to the restructuring in France.

Of the other provisions, € 17.2 million (prior year: € 21.0 million) relates among other items to costs still to be incurred for orders already invoiced and litigation risk of € 2.7 million (prior year: unchanged).

The expected remaining term of the other provisions is up to one year.

2 5 L I A B I L I T I E S

	Remaining maturity
2 0 1 1 in € millions	up to one year	between one and five years	of more than five years	Dec. 31, 2011 total
Liabilities due to banks	5.0	0.2	0.0	5.2
Bond	2.4	0.0	193.8	196.2
Convertible bond	–	–	–	–
Financial liabilities	7.4	0.2	193.8	201.4
Trade payables	167.2	–	–	167.2
Advances received	67.1	–	–	67.1
Liabilities from construction contracts	93.4	–	–	93.4
Accounts payable to affiliated companies	0.1	–	–	0.1
Income tax payables	6.1	–	–	6.1
Other liabilities and deferred income	109.6	11.3	2.0	122.9
(of that for other taxes)	(24.8)	–	–	(24.8)
(of that for social security payments)	(1.7)	–	–	(1.7)
(of that liabilities relating to personnel)	(52.9)	(6.5)	(1.0)	(60.4)
(of that for leases)	(0.3)	–	–	(0.3)
(of that derivates)	(4.2)	(0.3)	–	(4.5)
	450.9	11.5	195.8	658.2

	Remaining maturity
2 0 1 0 in € millions	up to one year	between one and five years	of more than five years	Dec. 31, 2010 total
Liabilities due to banks	1.8	0.0	0.0	1.8
Bond	2.2	0.0	192.8	195.0
Convertible bond	66.9	–	–	66.9
Financial liabilities	70.9	0.0	192.8	263.7
Trade payables	148.6	–	–	148.6
Advances received	49.0	–	–	49.0
Liabilities from construction contracts	39.6	–	–	39.6
Accounts payable to affiliated companies	0.1	–	–	0.1
Income tax payables	14.3	–	–	14.3
Other liabilities and deferred income	80.3	11.5	2.1	93.9
(of that for other taxes)	(10.9)	–	–	(10.9)
(of that for social security payments)	(1.4)	–	–	(1.4)
(of that, liabilities relating to personnel)	(37.6)	(5.8)	(1.2)	(44.6)
(of that for leases)	(0.3)	(0.3)	–	(0.6)
(of that derivates)	(6.4)	–	–	(6.4)
	402.8	11.5	194.9	609.2

2 6 F I N A N C I A L L I A B I L I T I E S / F I N A N C I N G

The existing financial liabilities mainly represent the bond issued in November 2010. The prior year amount also includes the convertible bond settled in November 2011.

Fixed interest rate agreements

Variable interest rate liabilities to banks as of Dec. 31, 2011

Financial instrument / in millions	Net carrying amount		Avg. Notional interest rate	Year of latest maturity
Liabilities due to banks	8.0 CNY	1.0 €	8.17% p. a.	2012
Liabilities due to banks	262.5 INR	3.8 €	12.00% p. a.	2012

Variable interest rate liabilities to banks as of Dec. 31, 2010

Financial instrument / in millions	Net carrying amount		Avg. Notional interest rate	latest maturity
Liabilities due to banks	0.5 €	0.5 €	4.20% p. a.	2011

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

Bond

In November 2010, KUKA Aktiensgesellschaft placed a bond with a face value of € 202.0 million. The issue price was 99.3605 percent, which corresponds to a cash inflow of € 200.7 million. The bond was issued in denominations of € 50,000.00 and carries an interest coupon of 8.75 percent p.a. Interest payments are made on May 15 and November 15 every year.

The bond matures at the latest on November 15, 2017 and will be redeemed by payment equal to the face value plus interest accrued up until that time. The issuer has the right to cancel the bond before maturity. The first cancellation date is November 15, 2014.

	Net carrying amount		Fair value
in € millions	2010	2011	2010	2011	Original maturity	Notional interest rate
Bond	195.0	196.2	210.1	202.8	2010 – 2017	8.75% p. a.
Convertible bond	66.9	–	68.7	–	2006 – 2011	3.75% p. a.

The market value of the bond was determined using the Xetra closing price of the Frankfurter stock exchange on the last trading day of the respective year.

The bond is listed on the Luxembourg exchange (ISIN DE000A1E8X87 / WKN A1E8X8). The last price quoted for the bond on the Frankfurt stock exchange in 2011 was 100.40 percent versus 104.00 as at December 31, 2010.

On initial recognition the bond was carried at fair value less transaction costs totaling € 8.0 million. The difference between the amount paid out (less transaction costs) and the redemption amount is recognized in the interest result for the term of the loan using the effective interest method. The interest rate rises to 9.66 percent (effective) when the issuing costs are included.

The proceeds from the bond were used to refinance the convertible bond, for redemption of cash usage under the syndicated loan and to invest in business operations.

Convertible bond

In May 2006, KUKA placed a convertible bond with a face value of € 69 million collateralized by KUKA Aktiengesellschaft via its subsidiary KUKA Finance B.V., Amsterdam, Netherlands. The bond matured on November 9, 2011. It was issued in denominations of € 50,000.00 each and granted rights for conversion in consideration of the 2007 dividend and the capital increase in 2010 into up to 2,718,322 no-par value shares of KUKA Aktiengesellschaft. The conversion price was thus € 25,1034 per share; the conversion rate was 1,991.7638 shares per unit of denomination.

By the maturity date KUKA Aktiengesellschaft had bought back shares of the convertible bond amounting to € 15.1 million (nominal) on the open market. The associated expense (€ 0.3 million) was recognized in the interest result.

KUKA's quoted share price on the Frankfurt Stock Exchange on November 9, 2011 was € 13.36. Conversion rights expired at the end of October 18, 2011. No bondholders exercised their conversion rights during the exercise period (July 8, 2006 to October 18, 2011), therefore the bond was redeemed by paying the face value of the bond plus interest accrued up until that time. The interest coupon was 3.75 percent p. a. Funds held in a fiduciary account ("restricted cash") were accessed to meet obligations arising from the convertible bond.

On the balance sheet, the convertible bond is broken down into an equity and a debt component The market value of the debt component (€ 55.7 million) was determined on the basis of the market interest rate for a corresponding fixed-interest bond without conversion feature (7.63 percent). The interest rate rose to 8.25 percent (effective) when the issuing costs allocated proportionately to the equity and debt components are included. The resulting value of the equity component (€ 11.3 million) was recognized as part of the capital reserve and was posted to the revenue reserves upon maturity. In the 2011 financial year, interest expense of € 4.7 million (prior year: € 5.3 million) was booked in connection with the bond account.

Syndicated loan

SYNDICATED LOAN FROM MARCH 2010 UNTIL NOVEMBER 2010 In March 2010, KUKA Aktiengesellschaft successfully concluded an agreement on amending the original 2006 Syndicated Senior Facilities Agreement (see the 2010 Annual Report for details on the 2006 Syndicated Senior Facilities Agreement) totaling € 336.0 million € (€ 146.0 million as a cash credit line and € 190.0 million as a guarantee line) and thus secured the financing of the KUKA Group. The term of the agreement was until March 2012.

The agreement included various covenants and conditions such as successfully implementing the KUKA Group's restructuring plan. Other stipulations were increasing capital via shares or by way of mezzanine financing, refinancing the existing convertible bond and honoring various financial and non-financial covenants.

Key covenants related to earnings before interest, taxes, depreciation and amortization (EBITDA), the debt-to-equity ratio and equity. As part of this agreement with the consortium banks KUKA Aktiengesellschaft agreed to accept additional equity capital or additional mezzanine funds by the end of June 2010. This obligation was met with the successful capital increase in June.

SYNDICATED LOAN FROM NOVEMBER 2010

In November 2010 the financial restructuring of KUKA Aktiengesellschaft was completed with the conclusion of a new Syndicated Senior Facilities Agreement and the issue of a bond.

The Syndicated Senior Facilities Agreement comprises € 200.0 million (€ 50.0 million as a cash credit line and € 150.0 million as a guarantee line) and has a term until the end of March 2014. The lead banks of the syndicate are Deutsche Bank, Commerzbank, Landesbank Baden-Württemberg and UniCredit Bank. Other consortium banks are Postbank, Bayerische Landesbank and Berenberg Bank.

The Syndicated Senior Facilities Agreement includes financial and non-financial covenants. The key financial covenants relate to minimums for the interest coverage ratio (ratio of earnings before interest, taxes, depreciation and amortization [EBITDA] to defined net interest expense), leverage (ratio of net debt to EBITDA) and gearing (ratio of defined net debt to equity without minority interests). The financial covenants must be met at the end of each quarter.

The utilization of the guarantee line as of the key date totaled € 128.7 million (prior year: € 117.6 million); the existing working capital line was utilized in the amount of € 3.8 million (as of prior year balance date December 31, 2010: not utilized).

The receivables of the syndicate of banks from the financing agreement are collateralized by KUKA companies. The collateral package includes a registered land charge on the industrial site in Augsburg totaling € 70.0 million as well as land charges on other domestic properties, charges on business interests, patent and trademark rights and other assets including blanket assignments and transfers by way of securities. These securities also subordinately serve bondholders.

Credit lines from surety companies

The guarantee lines committed by surety companies were raised from € 10.0 million (as at December 31, 2010) to the current € 52.0 million. At the end of the reporting year, the company had utilized € 36.3 million versus € 5.6 million on December 31, 2010.

Asset-backed securities program

KUKA issued an asset-backed securities (ABS) program in December 2006 and again in June 2011. Under this program, trade receivables of KUKA Roboter GmbH can be sold in regular tranches to a special purpose vehicle (SPV) of Bayerische Landesbank or Landesbank Baden-Württemberg. The SPV finances the purchase of the receivables by issuing securities on the capital market or through utilization of a special credit line provided by the respective bank. Covenants analogous to those of the Syndicated Senior Facilities Agreement are also in place for this financing program.

The key components of the ABS program are included in the following table:

		ABS Program 2006		ABS Program 2011		Total
in € millions	2010	2011	2010	2011	2010	2011
Volume	25.0	25.0	–	25.0	25.0	50.0
Utilization	10.3	9.0	–	13.5	10.3	22.5
		March 31,		June 30,
Expires		2013		2018
Retained credit risk (in %)	1.15	1.15	–	1.15	1.15	1.15
Continuing involvement	0.3	0.2	–	0.2	0.3	0.4
Value adjustment of continuing involvement	0.3	0.2	–	0.2	0.3	0.4

Default guarantees from credit insurers ensure adequate credit worthiness of the receivables sold. KUKA Roboter GmbH assumes the first 1.15 percent of credit risk from the sale of receivables and as a further security provides a cash deposit each time reported under other assets. KUKA Roboter GmbH manages and processes the receivables that are sold. Claims totaling € 0.2 million (prior year: € 0.1 million) resulting from this are recognized in the income statement.

2 7 OT H E R N O N- C U R R E N T / C U R R E N T L I A B I L I-T I E S A N D D E F E R R E D I N C O M E

The other liabilities for other taxes are primarily from sales, wage and church tax.

Other liabilities in the personnel area are mostly related to obligations from vacation entitlements (2011: € 5.7 million; prior year: € 5.2 million), flex-time credits (2011: € 12.8 million; prior year: € 10.1 million), variable compensation elements (2011: € 25.8 million; prior year: € 16.2 million) and early retirement (2011: € 6.7 million; prior year: € 6.1 million). Early retirement obligations have been reduced by the fair value of the corresponding fund assets (2011: € 8.0 million; prior year: 6.8 million). The present value of entitlements from early retirement obligations (DBO) before offsetting was € 14.7 million (prior year: € 12.9 million).

Also reported under this item are, among other things, special payments, inventor's compensation, long-service awards and trade association fees.

Liabilities arising from finance leases are recognized at the present value of future lease payments and disclosed as other liabilities.

2 8 F I N A N C I A L R I S K M A N AG E M E N T A N D F I N A N C I A L D E R I VAT I V E S

a) Principles of risk management

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

The fundamentals of the Group's financial policy are established by the Executive Board. The Group Treasury is responsible for implementing the finance policy and for ongoing risk management. Certain transactions require the prior approval of the CFO, who is also regularly briefed on the current risk exposure.

Effective management of the market risk is one of the Treasury's main tasks. To ensure this the department performs simulation calculations using different most-likely and worst-case scenarios.

b) Currency risks

KUKA is exposed to currency risks from its investing, financing, and operating activities. These are hedged at the time of their occurrence to the extent that they influence the Group's cash flows through the conclusion of derivative financial instruments with banks or by offsetting opposing payment flows. Hedging may also cover future planned transactions where hedging instruments with appropriate terms are used to cover currency risks. Foreign-currency risks that do not influence the Group's cash flows, e.g. risks resulting from translation of assets and liabilities of foreign KUKA companies into the Group's reporting currency, are generally not hedged. In certain cases these risks can also be hedged after approval by the CFO. In the area of investments, there were no major risks from foreign currency transactions on the KUKA reporting date.

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

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

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

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

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

The currency sensitivity analysis is based on the following assumptions:

• _ Major non-derivative monetary financial instruments (liquid assets, receivables, liabilities) are either directly denominated in the functional currency or are transferred to the functional currency through the use of derivatives. Exchange rate fluctuations therefore have no material effect on profit or loss, or shareholders' equity.
• _ Interest income and interest expense from financial instruments are also either recorded directly in the functional currency or transferred to the functional currency by using derivatives. For this reason, there can be no material effect on the variables considered in this connection.

Owing to the KUKA Group's delivery and service structure and the relationships with suppliers, the following currency scenarios arise at the balance sheet date for the main foreign currencies used by the KUKA Group:

A ten percent gain of the € against the USD would have a positive effect on Group profits of plus € 0.5 million (prior year: plus € 1.3 million). A ten percent decline of the € against the USD would have a negative effect on Group profits of minus € 0.6 million (prior year: minus € 1.6 million).

A ten percent gain of the € against the JPY would have a negative effect on Group profits of minus € 3.8 million (prior year: minus € 2.6 million). A ten percent decline of the € against the JPY would have a positive effect on Group profits of plus € 4.7 million (prior year: plus € 3.2 million).

A ten percent gain of the € against the CNY would have a positive effect on Group profits of plus € 0.2 million (prior year: € 0.0 million). A ten percent decline of the € against the CNY would have a negative effect on Group profits of minus € 0.2 million (prior year: € 0.0 million).

A ten percent gain of the € against the HUF would have a negative effect on Group profits of minus € 0.8 million (prior year: minus € 0.4 million). A ten percent decline of the € against the HUF would have a positive effect on Group profits of plus € 0.9 million (prior year: plus € 0.5 million).

A ten percent gain of the € against the BRL would have a negative effect on Group profits of minus € 0.1 million (prior year: plus € 0.8 million). A ten percent decline of the € against the BRL would have a positive effect on Group profits of plus € 0.2 million (prior year: minus € 0.9 million). A ten percent gain of the BRL against the USD would have a negative effect on Group profits of minus € 1.5 million (prior year: minus € 1.0 million). A ten percent decline of the BRL against the USD would have a positive effect on Group profits of plus € 1.8 million (prior year: plus € 1.2 million).

Assumptions concerning the future cannot be derived from this presentation of currency effects.

c) Interest rate risks

Risks from interest rate changes at KUKA are essentially the result of short-term investments / borrowings in EUR. These are not hedged at the reporting date.

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

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

An increase in market interest rates by 100 basis points at December 31, 2012 would have a positive effect on results of plus € 1.6 million (prior year: plus € 2.0 million). A decrease in market interest rates by 100 basis points would have a negative effect on results of minus € 1.6 million (prior year: minus € 1.3 million). This hypothetical effect results solely from the financial investments (borrowings) with variable interest rates totaling € 168.8 million (€ 4.8 million) at the balance sheet date.

d) Credit risks

The KUKA Group is exposed to credit risk from its operating activities and certain financing activities. A default can occur if individual business partners do not meet their contractual obligations and the KUKA Group thus suffers a financial loss. With regard to financing activities, important transactions are only concluded with counterparties that have a credit rating of at least A- / A1.

At the level of operations, the outstanding debts are continuously monitored in each area locally. There are regular business relations with major customers at several KUKA Group companies. The associated credit risks are subject to separate quarterly credit rating monitoring as part of the risk management system at the Group's Executive Board level for early detection of an aggregation of individual risks. Added to these measures are comprehensive routine checks implemented at the segment level as early as the order initiation process (submission of offers and the acceptance of orders). Credit risks are taken into account as necessary through individual impairments.

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

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

e) Liquidity risks

One of KUKA AG's primary tasks is to coordinate and control the Group's financing requirements as well as ensure the financial independence of KUKA and its ability to pay on time. With this goal in mind, the KUKA Group optimizes the Group's financing and limits its financial risks. The standardized, Group-wide treasury reporting system implemented in 2007 was further enhanced for this purpose. In addition, the Group's overall liquidity risk is reduced by closely monitoring the Group's companies and their control of payment flows.

As a first step to ensure the payment capability at all times and the financial flexibility of the KUKA Group, a liquidity reserve is kept by KUKA Aktiengesellschaft in the form of credit lines and cash funds. Moreover, KUKA has issued a bond, signed a Syndicated Senior Facilities Agreement with a consortium of banks and arranged for surety companies to commit guarantee lines. The funding and guarantee requirements for business operations are ensured to a large extent internally by transferring cash funds (intercompany loans) and guarantees. This ensures that Group-wide liquidity management takes place at the individual company level, thereby further optimizing the Group's financing on the whole.

The following figures show the commitments for undiscounted interest and redemption repayments for the financial instruments existing as of December 31 subsumed under IFRS 7 (expected interest payments in subsequent years are also considered even if these are not reported as of December 31, 2011):

D   . 3 1 , 2 0 1 1 in € millions	Cash flows 2012	Cashflows 2013	Cash flows 2014 – 2016	Cash flows 2017 ff.
Non-current financial liabilities	17.7	17.7	53.0	219.7
Current financial liabilities	5.0	–	–	–
Trade payables	167.2	–	–	–
Liabilities from construction contracts	93.4	–	–	–
Accounts payable to affiliated companies	0.1	–	–	–
Other non-current lliabilities and provisions	–	0.5	0.0	0.0
(of that for leases)	–	–	–	–
Other current liabilities and provisions	53.8	–	–	–
(of that for leases)	(0.3)	–	–	–

D   . 3 1 , 2 0 1 0 in € millions	Cash flows 2011	Cash flows 2012	Cash flows 2013 – 2015	Cash flows 2016 ff.
Non-current financial liabilities	17.7	17.7	53.0	237.4
Current financial liabilities	75.2	–	–	–
Trade payables	148.6	0.3	–	–
Liabilities from construction contracts	39.6	–	–	–
Accounts payable to affiliated companies	0.1	–	–	–
Other non-current lliabilities and provisions	–	1.2	0.9	0.0
(of that for leases)	–	(0.3)	–	–
Other current liabilities and provisions	43.5	–	–	–
(of that for leases)	(0.3)	–	–	–

All financial instruments are included which were held at the balance sheet dates and for which payments have already been contractually agreed. Foreign currency amounts are expressed at the spot rate on the key date. The variable interest payments from the financial instruments were determined on the basis of the interest rates last fixed prior to December 31, 2011, i.e. 2010. Financial liabilities repayable at any time are always allocated to the earliest time period. The payment flows from derivatives (forward exchange transactions) are net, i.e. they are represented by balancing the inflow and outflow of funds.

f) Hedges

Hedges are used by the KUKA Group exclusively in the form of forward exchange transactions to secure fair values and existing balance sheet items as well as to hedge future payment flows. These are exclusively for the purpose of hedging exchange risks.

The KUKA Group has not used hedge accounting since 2009.

The following shows the carrying amounts of the financial instruments according to the valuation categories of IAS 39:

in € millions	Abbr.	2010	2011
Availabe-for-Sale Financial Assets	AfS	1.0	0.2
Loans and Receivables	LaR	508.4	527.4
Financial Assets Held for Trading	FAHfT	2.9	4.0
Financial Liabilities Measured at
Amortized Cost	FLAC	451.5	418.9
Financial Liabilities Held for Trading	FLHfT	6.4	4.5

The carrying amounts and the fair values are derived from the following table:

Net carrying amount and fair values of IAS by measurement categories for 2011

in € millions	IAS 39 – measurement categories	Net carrying amount / Status as at Dec. 31, 2011	of that: other assets and liabilities not covered by IFRS 7	of that: other assets and lia bilities covered by IAS 17	Net carrying amount of the financial instruments / Status as at Dec. 31, 2011	Fair value / Status as at Dec. 31, 2011
Assets
Financial investments		0.2	–	–	0.2	0.2
(of that participations)	AfS	(0.2)	–	–	(0.2)	(0.2)
Long-term finance lease receivables	n. a.	75.7	–	75.7	–	75.7
Other long-term receivables and other assets		12.1	3.0	–	9.1	12.1
(of that trade receivables)	LaR	(0.0)	–	–	(0.0)	(0.0)
(of that from the category LaR)	LaR	(9.1)	–	–	(9.1)	(9.1)
(of that Other)	n. a.	(3.0)	(3.0)	–	–	(3.0)
Trade receivables	LaR	145.5	–	–	145.5	145.5
Receivables from construction contracts	LaR	194.3	–	–	194.3	194.3
Current finance lease receivables	n. a.	4.6	–	4.6	–	4.6
Other assets, prepaid expenses and deferred charges		66.4	52.7	–	13.7	66.4
(of that derivatives without a hedging relationship)	FAHfT	(4.0)	–	–	(4.0)	(4.0)
(of that Other from the category LaR)	LaR	(9.7)	–	–	(9.7)	(9.7)
(of that Other)	n. a.	(52.7)	(52.7)	–	–	(52.7)
Cash and cash equivalents	LaR	168.8	–	–	168.8	168.8

in € millions	IAS 39 – measurement categories	Net carrying amount / Status as at Dec. 31, 2011	of that: other assets and liabilities not covered by IFRS 7	of that: other assets and lia bilities covered by IAS 17	Net carrying amount of the financial instruments / Status as at Dec. 31, 2011	Fair value / Status as at Dec. 31, 2011
Liabilities
Non-current financial liabilities	FLAC	194.0	–	–	194.0	202.8
Other non-current lliabilities and provisions		13.3	12.1	0.0	1.2	13.3
(of that for leases)	n. a.	(0.0)	–	(0.0)	–	(0.0)
(of that Derivatives without a hedging relationship (held for sale))	FLHfT	(0.3)	–	–	(0.3)	(0.3)
(of that Other from the category FLAC)	FLAC	(0.9)	–	–	(0.9)	(0.9)
(of that Other)	n. a.	(12.1)	(12.1)	(0.0)	–	(12.1)
Current financial liabilities	FLAC	7.4	–	–	7.4	7.4
Trade payables	FLAC	167.2	–	–	167.2	167.2
Liabilities from construction contracts	n. a.	93.4	93.4	–	–	93.4
Accounts payable to affiliated companies	FLAC	0.1	0.1	–	–	0.1
Other current liabilities, prepaid expenses and deferred charges		109.6	55.8	0.3	53.5	109.6
(of that for leases)	n. a.	(0.3)	–	(0.3)	–	(0.3)
(of that Derivatives without a hedging relationship (held for sale))	FLHfT	(4.2)	–	–	(4.2)	(4.2)
(of that Other from the category FLAC)	FLAC	(49.3)	–	–	(49.3)	(49.3)
(of that Other)	n. a.	(55.8)	(55.8)	(0.0)	(0.0)	(55.8)

Net carrying amount and fair values of IAS by measurement categories for 2010

in € millions	IAS 39 – measurement categories	Net carrying amount / Status as at Dec. 31, 2010	of that: other assets and liabilities not covered by IFRS 7	of that: assets and liabilities covered by IAS 17	Net carrying amount of the financial instruments / Status as at Dec. 31, 2010	Fair value Status as at Dec. 31, 2010
Assets
Financial investments		1.0	–	–	1.0	1.0
(of that participations)	AfS	(1.0)	–	–	(1.0)	(1.0)
Long-term finance lease receivables	n. a.	77.8	–	77.8	–	77.8
Other non-current lliabilities and other assets		12.0	4.0	–	8.0	12.0
(of that trade receivables)	LaR	(0.3)	–	–	(0.3)	(0.3)
(of that from the category LaR)	LaR	(7.7)	–	–	(7.7)	(7.7)
(of that Other)	n. a.	(4.0)	(4.0)	–	–	(4.0)
Trade receivables	LaR	125.7	–	–	125.7	125.7
Receivables from construction contracts	LaR	166.1	–	–	166.1	166.1
Current receivables from finance leasing	n. a.	4.1	–	4.1	–	4.1
Other assets, prepaid expenses and deferred charges		27.2	19.1	–	8.1	27.2
(of that Derivatives without a hedging relationship (held for sale))	FAHfT	(2.9)	–	–	(2.9)	(2.9)
(of that Other from the category LaR)	LaR	(5.2)	–	–	(5.2)	(5.2)
(of that Other)	n. a.	(19.1)	(19.1)	–	–	(19.1)
Cash and cash equivalents	LaR	203.4	–	–	203.4	203.4

in € millions	IAS 39 – measurement categories	Net carrying amount / Status as at Dec. 31, 2010	of that: other assets and liabilities not covered by IFRS 7	of that: assets and liabilities covered by IAS 17	Net carrying amount of the financial instruments / Status as at Dec. 31, 2010	Fair value Status as at Dec. 31, 2010
Liabilities
Non-current financial liabilities	FLAC	192.8	–	–	192.8	210.1
Other non-current lliabilities		13.6	11.2	0.3	2.1	13.6
(of that for leases)	n. a.	(0.3)	–	(0.3)	–	(0.3)
(of that Derivatives without a hedging relationship (held for sale))	FLHfT	(0.0)	–	–	(0.0)	(0.0)
(of that Other from the category FLAC)	FLAC	(2.1)	–	–	(2.1)	(2.1)
(of that Other)	n. a.	(11.2)	(11.2)	(0.0)	–	(11.2)
Current financial liabilities	FLAC	70.9	–	–	70.9	73.0
Trade payables	FLAC	148.9	–	–	148.9	148.9
Liabilities from construction contracts	n. a.	39.6	39.6	–	–	39.6
Accounts payable to affiliated companies	FLAC	0.1	–	–	0.1	0.1
Other current liabilities, prepaid expenses and deferred charges		80.3	39.6	0.3	43.1	80.3
(of that for leases)	n. a.	(0.3)	–	(0.3)	–	(0.3)
(of that Derivatives without a hedging relationship (held for sale))	FLHfT	(6.4)	–	–	(6.4)	(6.4)
(of that Other from the category FLAC)	FLAC	(36.7)	–	–	(36.7)	(36.7)
(of that Other)	n. a.	(36.9)	(36.9)	(0.0)	(0.0)	(36.9)

With the exception of financial investments and leasing claims, most assets have short terms to maturity. Their carrying amounts as of the financial reporting date therefore correspond approximately to the fair value. Long-term interest-bearing receivables including finance lease receivables are measured and, if necessary, impaired based on different parameters such as interest rates and customer-specific credit ratings. Thus, these carrying amounts largely reflect the market values.

Liabilities – with the exception of long-term financial liabilities and the other non-current liabilities – have regular, short terms to maturity. The values shown on the balance sheet approximately represent the fair values. The market value of the bond is based on the quoted prices as of the balance sheet date.

The derivative financial instruments recognized at the balance sheet date have to do with forward exchange transactions to hedge exchange exposure. Recognition in the balance sheet occurs at the market value determined using standardized financial mathematical methods, among other things, in relation to the foreign exchange rates.

In accordance with IFRS 7.27A, financial assets and financial liabilities measured at market values are to be attributed to the three levels of the fair value hierarchy. The three levels of the fair value hierarchy are defined as follows:

• LEVEL 1: Quoted price in active markets for identical assets or liabilities
• LEVEL 2: Inputs other than quoted prices that are observable either directly or indirectly
• LEVEL 3: Inputs for assets and liabilities that are not based on observable market data.

Affected by this in the KUKA Group are primarily forward exchange transactions carried as an asset (€ 4.0 million; prior year: € 2.9 million) and those carried as a liability (€ 4.5 million; prior year: € 6.4 million). These are measured according to level 2.

Net results listed according to valuation categories are represented as follows:

Net profit / loss by IAS 39 measurement categories for 2011

in € millions	Net gains / losses	Total interest income / expenses	Com mission income / expenses
Loans and Receivables (LaR)	-1.2	2.7	0.0
Available-for-Sale Financial Assets (AfS)	-0.8	0.0	–
Financial Instruments Held for Trading (FAHfT und FLHfT)	3.1	–	–
Financial Liabilities Measured at Amortised Cost (FLAC)	-2.8	-28.4	-3.8
Total	-1.7	-25.7	-3.8

Net profit / loss by IAS 39 measurement categories for 2010

in € millions	Net gains / losses	Total interest income / expenses	Com mission income / expenses
Loans and Receivables (LaR)	1.1	1.2	0.0
Available-for-Sale Financial Assets (AfS)	0.0	0.0	–
Financial Instruments Held for Trading (FAHfT und FLHfT)	0.1	–	–
Financial Liabilities Measured at Amortised Cost (FLAC)	4.5	-29.0	-5.5
Total	5.7	-27.8	-5.5

Net losses (net profits in the previous year) from the category Loans and Receivables include for the most part exchange rate effects as well as results from additions and reversals of provisions for receivables and other assets. In addition to foreign currency effects, the net profits from Financial Liabilities Measured at Amortized Cost also include income from writing off liabilities. Interest income for financial instruments from the category Loans and Receivables comes from the investment of cash and cash equivalents. The interest result from financial liabilities from the category Financial Liabilities Measured at Amortized Cost largely reflects interest expenses from the convertible bond, the bond and from financial liabilities due to banks.

Commission expenses are recorded as the transaction costs for financial liabilities due to banks and fees for the provision of guarantees.

2 9 C O N T I N G E N T L I A B I L I T I E S A N D OT H E R F I N A N C I A L C O M M I TM E N T S

The following contingent liabilities and other financial commitments existed as of the balance sheet date:

Total	100.9	81.4
of that, other financial commitments	(4.4)	(5.7)
(of that, rent / lease liabilities)	(26.4)	(36.8)
of that, discounted notes	(0.5)	(1.1)
Other commitments	31.3	43.6
Liabilities from warranty agreements	68.1	36.3
Liabilities from guarantees	1.5	1.5
in € millions	2010	2011

NOTES TO THE GROUP CASH FLOW STATEMENT

The cash flow statement reports cash flows separately for incoming and outgoing funds from operating, investing and financing activities in accordance with IAS 7. The calculation of cash flows is derived from the Group consolidated financial statements of KUKA Aktiengesellschaft by the indirect method.

Cash and cash equivalents in the cash flow statement comprise all cash and cash equivalents disclosed on the balance sheet, i.e. cash in hand, checks and cash with banks provided they are available within three months. Last year cash inflows from the bond issue totaling € 69.0 million were placed in a fiduciary account. As agreed, these funds were accessed to buy back shares and / or to meet obligations arising from the convertible bond ("restricted cash"). Other cash and cash equivalents are not subject to restrictions.

Cash flow from operating activities is derived indirectly from the earnings after taxes on income.

Under the indirect method, the relevant changes to the balance sheet items associated with operating activities are adjusted for currency translation effects and changes to the scope of consolidation.

There were no payments received or made for the sale or acquisition of consolidated companies and other business units in the previous year and the year under review.

Cash inflows / outflows from operating activities also include the following items:

in € millions	2010	2011
Interest paid	-37.6	-29.1
Interest received	8.3	8.9
Income taxes paid	-6.8	-19.7

NOTES TO THE GROUP SEGMENT REPORTING

The data for the individual annual financial statements have been segmented by business field and region. The structure follows internal reporting (management approach). The segmentation is intended to create transparency with regard to the earning power and the prospects, as well as the risks and rewards for the various business fields within the Group.

Segment reporting is designed to accommodate the structure of the KUKA Group. The KUKA Group was engaged in the reporting year and 2010 in two major business fields:

KU K A R O B OT I C S

This segment offers customers from the automotive sector and general industry – as well as those supported by comprehensive customer services – industrial robots, from small models to the Titan robot now weighing in at 1,300 kg. The Advanced Robotics activities are also bundled in this segment.

KU K A SY ST E M S

This segment provides customers in the fields of automotive, aerospace, solar and general industry with innovative solutions and services for automated production. Applications range from welding, bonding, sealing, assembling and testing, to forming solutions tailored to meet the specific customer needs.

The integrated robotics business split off from Thompson Friction Welding Ltd., Halesowen, Great Britain in the financial year and became a part of KUKA Robotics UK LTD, London, Great Britain. This does not impair comparability with the previous year.

KUKA Aktiengesellschaft and additional participations that are supplementary to the operating activities of the KUKA Group are aggregated in a separate division. Cross-divisional consolidation and reconciliation items are shown in a separate column. The allocation of the Group companies to the individual business segments is shown in the schedule of shareholdings.

The breakdown of sales revenue by region is based on customer's registered office / delivery location. Non-current assets (property, plant and equipment and intangible assets) are calculated by company location.

	Revenues acc. to customer location		Non-current assets acc. to registered office of the company
in € millions	2010	2011	2010	2011
Germany	443.8	503.6	84.9	85.9
Europe (excluding Germany)	217.8	328.8	19.3	19.8
North America	268.1	274.2	53.3	54.5
Asia / other regions	148.9	329.0	4.8	6.2
Total	1,078.6	1,435.6	162.3	166.4

Overall, the KUKA Group achieved more than ten percent of total sales from three customers, respectively. These sales are attributable to both the Robotics segment and the Systems segment.

		Total 2011
in € millions	in %	in € millions	in %
144.0	13.4	268.8	18.7
144.3	13.4	222.4	15.5
154.0	14.3	149.2	10.4
636.3	58.9	795.2	55.4
1,078.6	100.0	1,435.6	100.0
		Total 2010

The calculations for segment reporting rely on the following principles:

• _ Group external sales revenues show the divisions' respective percentage of consolidated sales for the Group as presented in the Group income statement.
• _ Intra-Group sales revenues are related sales transacted between segments. In principle, transfer prices for intra-Group sales are determined at the market level.
• _ Sales revenues for the segments include revenues from sales to third parties as well as sales to other Group segments.
• _ EBIT reflects operating earnings, i.e. the earnings from ordinary activities – including goodwill impairment charges, if any – before financial results; EBIT is adjusted for borrowing costs to be capitalized.
• _ ROCE (return on capital employed) is the ratio of EBIT to capital employed, which is largely non-interest bearing. To calculate ROCE the capital employed is based on an average value.

The reconciliation of capital employed to segment assets and segment liabilities is shown in the following table:

in € millions	2010	2011
Capital Employed
Intangible assets	76.5	78.8
+ Tangible assets	85.8	87.6
+ Non-current lease receivables	77.8	75.7
+ Asset-side working capital	496.6	624.2
Inventories	158.0	195.4
Receivables from construction contracts	166.1	194.3
Trade receivables	126.0	145.5
Other receivables and assets	46.5	88.9
Net difference in receivables and payables from / to affiliated com panies if not classified as financial transactions	0.0	0.1
= Asset items of capital employed	736.7	866.3
. / . Other provisions, excluding major provisions for restructuring	81.7	75.7
. / . Liabilities from construction contracts	39.6	93.4
. / . Advances received	49.0	67.1
. / . Trade payables	148.9	167.2
. / . Other liabilities except for liabilities similar to bonds (incl. deferred income)	92.7	121.9
= Liabilities items of capital employed (= liability-side working capital)	411.9	525.3
= Capital employed	324.8	341.0
Average capital employed	312.5	332.9
Segment assets
Asset items of capital employed	736.7	866.3
+ Participations	1.0	0.2
= Segment assets	737.7	866.5
Segment liabilities
Liability items of capital employed (= liability-side working capital)	411.9	525.3
+ Pension provisions and similar obligations	70.2	70.4
+ Major provisions for restructuring	7.1	1.4
= Segment liabilities	489.2	597.1
Asset-side working capital	496.6	624.2
Liability-side working capital	411.9	525.3
Working capital	84.7	98.9

OTHER NOTES

RELATED PARTY DISCLOSURES

Persons or companies that may be influenced by or have influence on the reporting company must be disclosed in accordance with IAS 24, provided they have not already been included as consolidated companies in the financial statements.

Parties related to the KUKA Group include mainly members of the Executive and Supervisory Boards as well as non-consolidated and associated KUKA Group companies in which KUKA Aktiengesellschaft directly or indirectly holds more than 20 percent of the voting rights or companies that hold more than 20 percent of the share of voting rights in KUKA Aktiengesellschaft.

Grenzebach Maschinenbau GmbH, Asbach-Bäumenheim, Bavaria currently holds a 24.4 percent share in KUKA Aktiengesellschaft and therefore represents a related party for the purpose of IAS 24.

The following table summarizes the product and services-related business activities transacted between companies included in the KUKA Group consolidation and related companies:

Additional elements of the segment reports are contained in the management report on the operating business divisions Robotics and Systems, as well as in the tables at the beginning of the Group notes

		Products and services provided by the KUKA Group to related companies		Products and services provided by related companies to the KUKA Group
in € millions	Interest in %	2010	2011	2010	2011
Grenzebach-Group	24.4	10.2	23.8	18.5	31.7

Intra-Group purchases and sales are transacted under the "dealing at arm's length" principle at transfer prices that correspond to market conditions.

Services provided to related companies mainly comprise sales, primarily for products from the Robotics segment. Services provided to the Group by non-consolidated related and associated companies consist primarily of preparatory work that is subject to subsequent processing by the KUKA Group's consolidated companies and job order production.

The following table lists the material amounts owed by related parties to fully consolidated KUKA Group companies and vice versa.

		Receivables of the KUKA Group to related companies		Liabilities of the KUKA Group to related companies
in € millions	Interest in %	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011
Grenzebach Group	24.4	3.9	7.0	0.7	1.9
Other less than € 1 million	–	0.0	–	0.1	0.1
Total	–	3.9	7.0	0.8	2.0

No business subject to reporting rules was conducted between any KUKA Group companies and members of KUKA Aktiengesellschaft's Executive or Supervisory Boards with the exception of the legal transactions outlined in the compensation report.

TOTAL EMOLUMENTS OF EXECUTIVE BOARD AND SUPERVISORY BOARD MEMBERS

The total compensation paid to the Executive Board was € 3.2 million (prior year: € 2.6 million). Altogether in the financial year 2011, the Executive Board received a fixed salary including payments in kind of € 0.9 million (prior year: € 1.4 million). Target achievement and performance-based compensation amounted to € 1.3 million (prior year: € 0.7 million). € 1.0 million (prior year: € 0.5 million) was deferred for compensation in accordance with the phantom share program.

With a few exceptions, former Executive Board members have been granted benefits from the company pension scheme, which include old-age, vocational and employment disability, widow's and orphan's pensions. The amount of accruals included for this group of persons in 2011 for current pensions and vested pension benefits totals € 9.8 million (HGB) compared to € 10.1 million in 2010.

KUKA Aktiengesellschaft has no compensation agreements with the members of the Executive Board or the employees that would come into effect in the event of a take-over bid.

Total compensation of the Supervisory Board in fiscal 2011 was € 0.9 million (prior year: € 0.7 million).

Please refer to the notes in the audited compensation report for further information and details about the compensation of individual Executive Board and Supervisory Board members. The report on compensation forms part of the corporate governance report and summarizes the basic principles used to establish the compensation of the Executive and Supervisory Boards of KUKA Aktiengesellschaft. The executive compensation report is an integral part of the management report.

The members of the Executive and Supervisory Boards are presented on page 154 f.

AUDIT FEES

The fee for the auditor KPMG AG, Wirtschaftsprüfungsgesellschaft, Munich, recognized as an expense in 2011 totals € 1.4 million. € 0.9 million was recognized for financial statement auditing services. The auditor performed other assurance services totaling € 0.1 million. € 0.4 million was recognized as an expense for tax advisory services performed by the auditor.

D E C L A R AT I O N R E G A R D I N G T H E C O R P O R AT E G OV E R N A N C E C O D E

The identically worded declarations in accordance with Article 161 German Corporation Act (AktG) that have been issued by the Executive Board (February 15, 2012) and of the Supervisory Board (February 17, 2012) are available for inspection by any interested party on the company's website (www.kuka.com).

EVENTS AFTER THE BALANCE SHEET DATE

There were no material events between the beginning of the year and the date of this management report that impact the financial, asset or earnings position of the Group.

Please refer also to the ad hoc announcement dated January 31, 2012:

"Today, Mr. Stephan Schulak, member of the Executive Board of KUKA Aktiengesellschaft (CFO), informed the Chairman of KUKA Aktiengesellschaft's Supervisory Board, Mr. Bernd Minning, that he will not be available for another term of office beyond September 30, 2012. Mr. Schulak will continue his office until September 30, 2012.

KUKA Aktiengesellschaft will timely inform about the successor in office of Mr. Schulak."

Augsburg, March 2, 2012

KUKA Aktiengesellschaft

The Executive Board

Dr. Till Reuter Stephan Schulak

CORPORATE BODIES

E X E C U T I V E B OA R D

Dr. Till Reuter

Pfäffikon, Switzerland, Chief Executive Officer _ Rinvest AG, Pfäffikon/Switzerland *

_ Dr. Steiner Holding AG *

Stephan Schulak

Rohrbach, Chief Financial Officer

S U P E R V I S O R Y B OA R D

Bernd Minning

Kaisheim Chairman of the Supervisory Board Managing Director of Grenzebach Maschinenbau GmbH, Asbach-Bäumenheim and other Grenzebach companies

Jürgen Kerner***

Königsbrunn Deputy Chairman of the Supervisory Board Managing Member of the Board of Directors of IG Metall traded union, Frankfurt

• _ MAN SE, Munich*
• _ MAN Diesel&Turbo SE, Augsburg* (until February 23, 2012)
• _ manroland AG, Offenbach*
• _ Eurocopter Deutschland GmbH, Donauwörth*
• (until March 23, 2012)
• _ Premium Aerotec GmbH, Augsburg*
• _ Siemens AG, Munich (from January 24, 2012)

Prof. Dr. Dirk Abel

Aachen University Professor

Director of the Institute of Automatic Control at RWTH Aachen Member of the Supervisory Board of ATC GmbH (Aldenhoven Testing Center of RWTH Aachen University), Aachen

Wilfried Eberhardt***

Aichach Executive Vice President Marketing & Association KUKA Roboter GmbH, Augsburg Authorized signatory of KUKA Roboter GmbH, Augsburg

• _ KUKA Automatisme + Robotique S.A.S., France** (until January 31, 2012)
• _ KUKA Roboter Italia S.P.A., Italy** (until January 31, 2012)
• _ KUKA Roboter Schweiz AG, Switzerland**
• _ KUKA Automatisering + Robots N.V., Belgium**

* Membership in other legally stipulated supervisory boards

bodies of commercial enterprises *** Employee representative

^** Membership in comparable German and foreign controlling

Dr. Uwe Ganzer

Bochum Merchant _ expert AG, Langenhagen*

_ Curanum AG, Munich*

Siegfried Greulich***

Augsburg Chairman of the Works Council of KUKA Systems GmbH, Augsburg

Thomas Knabel***

Zwickau 2nd Secretary of IG Metall trade union, Zwickau branch

Carola Leitmeir***

Großaitingen Chairman of the Works Council of KUKA Laboratories GmbH, Augsburg

Prof. Dr. Uwe Loos

Stuttgart

• Industrial Consultant
• _ Dorma Holding GmbH +Co.KGaA, Ennepetal*
• _ Bharat Forge LTD, Pune, India**
• _ CDP Bharat Forge GmbH, Ennepetal**
• _ Kenersys GmbH, Münster**
• _ Fritz GmbH, Bietingheim Bissingen**
• _ Bharat Forge Aluminiumtechnik, Brand-Erbisdorf**

Dr. Michael Proeller

Augsburg Business Administrator Managing Partner of Erhardt + Leimer GmbH, Augsburg Managing Director of Erhardt + Leimer Elektroanlagen GmbH, Augsburg Managing Director of Erhardt + Leimer Elektrotechnik Chemnitz GmbH _ Erhardt + Leimer Inc., Spartanburg, USA**

• _ Erhardt + Leimer, India Pvt. Ltd., India**
• _ Erhardt + Leimer, Italia Srl., Italy**
• _ Erhardt + Leimer do Brasil Ltda., Brazil**
• _ Erhardt + Leimer Canada Ltd., Canada**
• _ Erhardt + Leimer Japan Ltd., Japan**
• _ Erhardt + Leimer France Sarl., France**

Fritz Seifert***

Schwarzenberg Chairman of the Works Council of KUKA Systems GmbH, Augsburg Toolmaking Division, Schwarzenberg Deputy Chairman of the Group Works Council

Guy Wyser-Pratte

Bedford, New York, USA President of Wyser-Pratte &Co., Inc. Director, Electricité et Eaux de Madagascar, S. A.

• * Membership in other legally stipulated supervisory boards
• ** Membership in comparable German and foreign controlling
• bodies of commercial enterprises *** Employee representative

S C H E D U L E O F S H A R E H O L D I N G S O F KU K A A K T I E N G E S E L L S C H A F T

A s o f D e c em b er 31, 2 01 1

Name and registered office of the company	Currency	Share of Equity in%	Equity in tsd. in local currency	Net profit for the year in tsd. in local currency	Method of Consolidation	Segment
Germany
1 KUKA Roboter GmbH, Augsburg*	EUR	100.00	50,614	01)	c	ROB
2 KUKA Systems GmbH, Augsburg*	EUR	100.00	30,076	01)	c	SYS
3 KUKA Laboratories GmbH, Augsburg*	EUR	100.00	27,493	01)	c	ROB
4 HLS Ingenieurbüro GmbH, Augsburg	EUR	100.00	1,170	583	c	SYS
5 KUKA Dienstleistungs-GmbH , Augsburg*	EUR	100.00	2,173	01)	c	OTH
6 Bopp & Reuther Anlagen-Verwaltungsgesellschaft mbH, Mannheim	EUR	100.00	26,743	-5873)	c	OTH
7 Freadix FryTec GmbH, Augsburg	EUR	100.00	39	-33)	nc	OTH
8 IWK Unterstützungseinrichtung GmbH, Karlsruhe	EUR	100.00	26	0	nc	OTH
9 KUKA Unterstützungskasse GmbH, Augsburg	EUR	100.00	25	0	nc	SYS
10 Schmidt Maschinentechnik GmbH, Niederstotzingen	EUR	100.00	0	6,388	nc	SYS
Other Europe
11 HLS Czech s.r.o., Mlada Boleslav / Czech republic	CZK	100.00	7,547	2,108	c	SYS
12 KUKA S-BASE s.r.o., Roznov p.R. / Czech republic	CZK	100.00	-90,567	-82,886	c	SYS
13 KUKA Automatisering + Robots N.V., Houthalen / Belgium	EUR	100.00	1,962	616	c	SYS
14 KUKA Automatisme + Robotique S.A.S., Villebon-sur Yvette / France	EUR	100.00	3,808	-242	c	ROB
15 KUKA Automotive N.V., Houthalen / Belgium	EUR	100.00	516	-69	c	SYS
16 KUKA Enco Werkzeugbau spol. s.r.o., Dubnica nad Váhom / Slowakia	EUR	65.00	3,454	446	c	SYS
17 KUKA Finance B.V., Rotterdam / Netherlands	EUR	100.00	904	22	c	OTH
18 KUKA Nordic AB, Västra Frölunda / Sweden	SEK	100.00	3,968	-2,546	c	ROB
19 KUKA Roboter Austria GmbH, Linz / Austria	EUR	100.00	1,291	691	c	ROB
20 KUKA Roboter Italia S.P.A., Rivoli / Italy	EUR	100.00	5,665	1,243	c	ROB
21 KUKA Roboter Schweiz AG, Dietikon / Switzerland	CHF	100.00	1,518	298	c	ROB
22 KUKA Robotics Hungária Ipari Kft., Taksony / Hungary	EUR	100.00	9,303	3,256	c	ROB
23 KUKA Robotics OOO, Moskau / Russia	RUB	100.00	3,946	-4,498	c	ROB
24 KUKA Robotics UK LTD, London / Great Britain	GBP	100.00	276	16	c	ROB
25 KUKA Robots IBÉRICA, S.A., Vilanova i la Geltrú / Spain	EUR	100.00	1,227	-492	c	ROB
26 KUKA Sistemy OOO, Togliatti / Russia	RUB	100.00	11,481	-1,247	c	SYS
27 KUKA Systems France S.A., Montigny / France	EUR	100.00	-17,725	-2,137	c	SYS
28 KUKA Systems SRL , Sibiu / Romania	RON	100.00	-192	-486	c	SYS
29 Metaalwarenfabriek 's-Hertogenbosch B.V., 's Hertogenbosch / Netherlands	EUR	100.00	-988	-113) 4)	nc	OTH
30 Thompson Friction Welding Ltd., Halesowen / Great Britain	GBP	100.00	5,941	-294	c	SYS

	Name and registered office of the company	Currency	Share of Equity in%	Equity in tsd. in local currency	Net profit for the year in tsd. in local currency	Method of Consolidation	Segment
	North America
	31 KUKA Systems Corporation North America, Sterling Heights / USA	USD	100.00	106,227	26,1632)	c	SYS
	incl.
32	KUKA Assembly and Test Corp. , Saginaw / USA	USD	100.00	–	–	c	SYS
33	KUKA Robotics Corp., Sterling Heights / USA	USD	100.00	–	–	c	ROB
34	KUKA Toledo Production Operations, LLC., Clinton Township, Michigan / USA	USD	100.00	–	–	c	SYS
35	KUKA Systems de Mexico, S. de R.L. de C.V. , Mexico City / Mexico	MXN	100.00	–	–	c	SYS
36	KUKA Recursos, S. de R.L. de C.V., Mexico City / Mexico	MXN	100.00	–	–	c	SYS
	37 KUKA Robotics Canada Ltd., Saint John NB / Canada	CAD	100.00	48	-425	c	ROB
	38 KUKA de Mexico S.de R.L.de C.V., Mexico City / Mexico	MXN	100.00	37,911	10,622	c	ROB
	Latin America
	39 KUKA Roboter do Brasil Ltda., Sao Paulo / Brazil	BRL	100.00	-140	-320	c	ROB
	40 KUKA Systems do Brasil Ltda., Sao Bernardo do Campo SP / Brazil	BRL	100.00	-6,277	-9,779	c	SYS
Asia
	41 HLS Autotechnik (India) Pvt. Ltd., Pune / India	INR	100.00	6,656	-968	c	SYS
	42 Hung Viet International Company Limited, Ho Chi Minh City / Vietnam	VND	75.10	4,000,456	1,549,133	c	SYS
	43 KUKA Automation Equipment (Shanghai) Co., Ltd., Shanghai / China	CNY	100.00	23,776	27,427	c	SYS
	44 KUKA Flexible Manufacturing Systems (Shanghai) Co., Ltd., Shanghai / China	CNY	100.00	-15,767	-38,948	c	SYS
	45 KUKA Robot Automation Malaysia Sdn BhD, Kuala Lumpur / Malaysia	MYR	99.99	6,973	823	c	ROB
	46 KUKA Robot Automation Taiwan Co. Ltd., Chung-Li City / Taiwan	TWD	99.90	38,055	7,417	c	ROB
	47 KUKA Robotics (China) Co. Ltd., Shanghai / China	CNY	100.00	12,779	3,779	c	ROB
	48 KUKA Robotics (India) Pvt. Ltd, Haryana / India	INR	100.00	32,904	2,167	c	ROB
	49 KUKA Robotics Japan K.K., Tokio / Japan	JPY	100.00	-24,888	-192,153	c	ROB
	50 KUKA Robotics Korea Co., Ltd., Kyunggi-Do / Südkorea	KRW	100.00	1,798,371	563,903	c	ROB
	51 KUKA Systems (India) Pvt.Ltd, Pune / India	INR	100.00	42,761	-5,626	c	SYS
	52 KUKA Systems (Thailand) Co., Ltd., Bangkok / Thailand	THB	100.00	-7,131	-11,125	c	SYS

* Companies that have made use of the exemption persuant to sec. 264 par. 3 or sec. 264 b of the German Commercial Code

1) after profit/loss transfer

2) according to Group Balance Sheet and Group Income Statement

3) Shell company

4) fical year ending June 30, 2011

Type of consolidation

c fully consolidated companies as at Dec. 31, 2011 nc non-consolidated companies as at Dec. 31, 2011

Division

ROB: ROBOTICS SYS: SYSTEMS OTH: OTHERS

RESPONSIBILITY STATEMENT

"To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit 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 associated with the expected development of the Group."

Augsburg, March 2, 2012

KUKA Aktiengesellschaft The Executive Board

Dr. Till Reuter Stephan Schulak

AUDIT OPINION

We have audited the consolidated financial statements prepared by KUKA Aktiengesellschaft, Augsburg, comprising the income statement, statement of comprehensive income, cash flow statement, balance sheet, statement of changes in equity, and the notes to the consolidated financial statements, together with the Group management report for the business year from January 1, to December 31, 2011. The preparation of the consolidated financial statements and the Group management report in accordance with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to Article 315a para. 1 HGB are the responsibility of the parent company's Executive Board. Our responsibility is to express an opinion on the consolidated financial statements and on the Group management report based on our audit.

We conducted our audit of the consolidated financial statements in accordance with Article 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW – "Institute of Public Auditors in Germany"). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the Group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the Group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the company's Executive Board, as well as evaluating the overall presentation of the consolidated financial statements and the Group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRSs as adopted by the EU, the additional requirements of German commercial law pursuant to Article 315a para. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The Group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.

Munich, March 2, 2012

KPMG Aktiengesellschaft Wirtschaftsprüfungsgesellschaft

Karl Braun Rainer Rupprecht (German public auditor) (German public auditor)

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