IV. Other Disclosures30. Contingent liabilities and other financial obligations30.1. Contingent liabilitiesThe company has contingent liabilities of €150.6 million (previous year: €138.4 million). The gross figure represents the total amount of liability, whereas the net amount is reduced by the provisions set aside to cover the liability.   30.2. Other financial obligations30.2.1. Obligations arising from operating lease arrangementsApart from liabilities, provisions and contingent liabilities, the company has additional other financial obligations, as a result of rental and lease contracts for buildings, machines, tools, office, and other equipment. The contracts have terms of one to18 years and in certain cases contain extension and purchase options as well as price adjustment clauses. Within the framework of rental and lease agreements, payments of €9.4 million (previous year: €6.3 million) were expensed. The sum of future minimum lease payments attributable to lease agreements which cannot be terminated and the operating lease arrangements are as follows (based on maturities):  Lower liabilities in comparison to the previous year are attributed to the divestment of ATENA Engineering GmbH. 30.2.2. Pledged securitiesFor lease obligations the company has pledged securities amounting to €2.5 million to Nord/LB Norddeutsche Landesbank, Hannover. 30.2.3. Transfer by way of security/ mortgageAs part of the acquisition and in connection with the purchase price financing, substantially all the Group’s assets are secured and all receivables were assigned. The real estate of the Group serves as security to the associated mortgages. The securities were released due to the repayment of this financing in March 2005. The cancellation of the land charge was entered in the land register in June 2005. 30.2.4. Order obligationsThe other financial obligations resulting from the order obligation for investments and for maintenance contracts and general operating expenses are within a normal level. 30.3. Default riskIrrespective of existing security, the amount stated for financial assets specifies the maximum default risk for the case in which a customer, risk- and revenue partner, syndicate, etc. are not able to meet their contractual payment obligations. For all service arrangements underlying the original financial instruments, securities are required, credit rating information are obtained or historical data from the existing business relationship, and in particular payment patterns, are used to avoid payment defaults in order to minimize the default risk depending on the nature and type of the particular service provided. If default risks are evident for the individual financial assets, these risks are recorded by way of impairments. In the case of derivative financial instruments, the Group is also exposed to a credit risk which arises as a result of contract partners not fulfilling contractual agreements. This credit risk is diminished by ensuring that business is conducted only with partners with a first-class rating. For this reason, the general credit risk resulting from the derivative financial instruments used is not considered to be significant. There are no indications of any concentration of default risks arising from business relations, individual debtors, or groups of debtors. 31. Notes to the consolidated Cashflow StatementThe statements detail how the liquid assets of the company have changed during the year under review. According to IAS 7 (Cashflow Statements), a distinction is made between cashflows from current operations, cashflows from investing, and cashflows from financing activities (see consolidated cashflow statement). The cash and cash equivalents in the cashflow statement comprise all liquid assets stated in the balance sheet, i.e. cash-in-hand, cheques, credit balances held at banks and securities, if they are available within three months. The cashflows from investing and financing activities are established directly on the basis of payment. Cashflow from operating activities is inferred indirectly on the basis of the consolidated net profit. As part of the indirect calculation process, the changes to balance sheet items taken into consideration in connection with the current business activities are adjusted by currency translation effects and changes in the group of consolidated companies. Accordingly, the changes in the corresponding balance sheet items cannot be reconciled with the corresponding figures of the published consolidated balance sheet. 32. Relationships with related companies and personsSpecial disclosures are to be provided with regard to relationships and transactions with related companies and persons. Related companies are shown in share ownership (text item 32.1.2.). The Board of Management, the Supervisory Board, as well as stockholders are considered under the provisions of IAS 24 (Related party disclosures). In addition, the disclosure requirement extends to transactions with associated companies and joint ventures as well as transactions with persons who exercise significant influence on the financial and business policies of the Group, including close family members or intermediate companies. A significant influence on the financial and business policy is based on a shareholding of 20 % or more, a seat on the managing board or Supervisory Board at a Group company or another key position in management. MTU Aero Engines Holding AG is impacted by the disclosure requirement of IAS 24 for the 2005 business year with regard to the business relationships of the subsidiaries, associated companies, joint ventures, and members of the Board of Management and Supervisory Board. 32.1. Related companiesBusiness transactions between companies within the Group were eliminated in the course of consolidation and are therefore no longer included in these appended disclosures. 32.1.1. Business with related companiesDuring the course of the business year, companies within the Group conducted business amongst themselves. The following business transactions were carried out with the non-consolidated related companies below:    32.2. Related personsNo Group company has conducted any business which is subject to disclosure requirements with members of the Managing Board or the Supervisory Board of the company or with other members of management in key positions or with companies in whose Managing Board or Supervisory Boards these persons are represented. This is also applicable for close family members of this group of persons. 32.2.1. Compensation paid to the Board of Management and Supervisory BoardThe Board of Management, which until the end of July consisted of three members, and the Supervisory Board received the following compensation, of which €2.8 million was performance-related:    33. Fees paid to the auditorFees paid during the business year were as follows:  The “Audit” item includes all expenses paid to auditing company Deloitte & Touche GmbH, Wirtschaftsprüfungsgesellschaft, for auditing of financial statements. Other certification and evaluation services concern services relating to the initial public offering (IPO) as well as review of interim financial statements. 34. Notes to the German Corporate Governance CodeThe Board of Management and the Supervisory Board of MTU Aero Engines Holding AG have issued the declaration prescribed by Section 161 of the German Stock Corporation Act (AktG) in the 2005 MTU Group Annual Report, and have also made it permanently available to shareholders on the web site at www.mtu.de. |