We can look back on a very successful business year in 2006: MTU Aero Engines Holding AG generated revenues of €2.4 billion, representing an increase of 10.7% compared to the previous year. There was an even more marked increase in our operating income (adjusted EBITDA), which rose by 33.3 % to €318.2 million. MTU has thus once more exceeded its revenue and earnings targets. You will be pleased to hear that this positive development enables us to offer a dividend payment of €0.82 per share to our shareholders.

Each MTU business unit has made its own contribution to these excellent results: both commercial MRO and the OEM business with associated spare part sales. And this is how it should stay: our medium-term goal is to achieve growth rates that are well above the general market level.

MTU registered its strongest growth in the commercial MRO segment, with an 24.5% increase in revenues to €954.7 million. The programs that generated the greatest revenues were the V2500 engine for the Airbus A320 family, and the CF6 program for commercial aircraft seating more than 200 passengers. The €240 million deal with U.S. carrier Air Wisconsin is the largest contract for the CF34 that we have ever fetched home to Ludwigsfelde. The experts at MTU Maintenance Berlin-Brandenburg can report yet another success: the Ludwigsfelde teams have been commissioned by Norwegian oil producers to maintain off- and onshore industrial gas turbines, a deal valued at a total of €42 million.

The OEM business and spare parts sales gained momentum, too, exhibiting above-average growth.

August 2006 marked a key date in a new area of our commercial business when the Airbus A380 made its first-ever flight under the power of GP7000 engines. One of our major programs for the future had thus reached an important milestone. Progress was made in the PW6000 program, too: we delivered the first production A318 engine to Pratt & Whitney in the fall of 2006.

In the military aero engine business, MTU’s participation in General Electric’s F414 engine program represents a major strategic success, enabling us to gain a foothold in the lucrative U.S. defense market. In Europe, the Eurofighter EJ200 engine continues to assure us of a full workload. All in all, we increased our revenues in the OEM business by 3.4% to €1.5 billion.

However, we have no intention of simply resting on our laurels. Over the past twelve months, MTU has proved how well it is able to handle changes in external factors such as the spiraling price of raw materials and the rising dollar exchange rate. Now it has to face up to a further set of demands: New aircraft are expected to be more fuel-efficient, significantly quieter and less polluting than current models. At the same time, the next generation of aero engines must be cheaper to manufacture and maintain. We are making our company ready for the future in order to meet these challenges successfully in terms of products and technologies.

Continuous improvement of our competitiveness is another issue of key importance. We will further optimize our internal processes and plan to implement a set of measures to improve efficiency in the current financial year. Our aim is to achieve annual savings of approximately €50 million, which we expect to economize primarily in the areas of purchasing and human resources. We are moreover studying the possibility of capitalizing on the advantages of sites in other countries, such as those of central and eastern Europe.

Turning to our products, we continue to adhere to our belief in a well-balanced portfolio, for today’s products are tomorrow’s maintenance contracts. We aim to safeguard and strengthen our position through participation in new engine programs. Over the coming years, we plan to build on MTU’s leading position in our core business field of maintenance by branching out into related niche markets. The main areas we have identified are engine leasing and the repair of parts and add-on equipment.

On the technology front, we are systematically preparing for the future by intensifying our research and development efforts on new aero engines. The main focus of these activities lies on the next-generation single-aisle (NGSA) market – that is, short- and medium-range aircraft, regional and business jets. One lasting factor in our success is our cooperation with Pratt & Whitney. We are close partners on both the PW6000 program and the successor to the V2500. A demonstrator of the latter engine is being built to test the reliability of the innovative technologies it will incorporate. In the military sphere, we have set our sights on the long-term markets for unmanned air vehicles (UAVs) and heavy transport helicopters. We also expect to see good growth rates for the F414, a program in which we would like to become more heavily involved.

Dear shareholders, as you can see, we are getting MTU “ready for the future”. The increase in value of the MTU share by 35% over the course of 2006 reflects the capital markets’ confidence in our present performance and our plans for future development. This rate of growth is higher than the market average.

So let me take this opportunity of thanking you on behalf of the whole Board of Management. Your trust in us and your investment in MTU Aero Engines are vital to our business success. You give us the moral and financial strength we need to reach the highest level of technological excellence and to further improve the company’s competitive status.

I would expressly like to thank all members of the MTU workforce for their highly dedicated work. Their sense of motivation and professional expertise are the crucial foundation of our success.

Sincerely yours

Udo Stark