Annual report 2008

Klaus Eberhardt Chairman of the Supervisory Board

During the financial year 2008, resolutions were adopted at five Supervisory Board meetings and on one occasion by written consent in lieu of a meeting. Each member of the Supervisory Board was present at more than half the number of meetings. Between official meetings, the chairman of the Supervisory Board was regularly briefed on the company’s current situation, significant business transactions and important pending decisions.

At these meetings, the Supervisory Board thoroughly discussed the business development of MTU and its associated companies with the Board of Management. One of the important subjects was the ongoing establishment of MTU Aero Engines Polska. The market situation and MTU’s position in relation to its competitors was analyzed in detail. The Supervisory Board was also extensively briefed on all aspects of the various engine and technology programs. Topics of special interest were the company’s participation in the PW810 engine program for the Cessna Citation Columbus, the PW1217G for the Mitsubishi Regional Jet, the PW1524G that powers the Bombardier CSeries, the GE38 powerplant for the Sikorsky CH-53K transport helicopter, and the GEnx program for the Boeing 787 and 747-8. Another of the topics discussed was the TP400-D6 engine for the A400M military transporter.

Other items on the agenda of Supervisory Board meetings included the company’s compliance system, the structure of management compensation, the evolution of the U.S. dollar exchange rate and related hedging measures. Topics discussed on a regular basis at meetings with the Board of Management included the concrete progress being achieved through improvement processes in the commercial maintenance segment, especially at the site in Hannover, and specific aspects of the new “Challenge 2010” efficiency improvement program.

The Supervisory Board maintains the firm belief that good corporate governance is of fundamental importance to the company’s business success. For this reason, the Supervisory Board has closely studied the recommendations of the relevant corporate governance standards and the way in which they are being implemented. In doing so, it has also reviewed the efficiency of its own activities. Cooperation between the Supervisory Board and the Board of Management, and among members of the Supervisory Board, was judged to be of very high quality. There were no conflicts of interest between MTU and any member of its Board of Management or Supervisory Board. The Supervisory Board has assured itself that the company has complied with the recommendations laid down in the German Corporate Governance Code throughout the past year, as stated in its declaration of conformity. In a joint declaration with the Board of Management dated December 17, 2008, pursuant to the requirements of Section 161 of the German Stock Corporation Act (AktG), the Supervisory Board states that MTU Aero Engines Holding AG fully complies with the recommendations of the German Corporate Governance Code, with two exceptions only. The company’s declaration of conformity is reproduced on page 299 of this Annual Report together with a more detailed description of the company’s corporate governance; the declaration has also been posted on the company’s website.

By convention, the Supervisory Board has three committees equally representing the workforce and management of the company: the Audit Committee, the Personnel Committee, and the Mediation Committee – the latter formed to comply with Section 27, paragraph 3, of the German Codetermination Act. Each committee reports regularly to the full Supervisory Board on its work.

Pursuant to the recommendations of the German Corporate Governance Code, a Nomination Committee was additionally created in 2007. It is the task of this committee, which meets on an ad hoc basis, to identify suitable candidates for election to the Supervisory Board, who will be recommended to the Annual General Meeting by the Supervisory Board. Its members are Klaus Eberhardt and Dr. Jürgen M. Geißinger. The Nomination Committee convened once during the financial year 2008. The Mediation Committee, which has the same composition as the Personnel Committee, was not convoked in 2008.

The Personnel Committee consists of Klaus Eberhardt, Dr. Jürgen M. Geißinger and the two workforce representatives Josef Hillreiner and Michael Leppek, the latter having replaced Harald Flassbeck as of April 30, 2008. The Personnel Committee met twice in 2008 to discuss matters including the renewal of the contract with Supervisory Board member Dr. Rainer Martens, management compensation, and the results of the Supervisory Board’s efficiency audit.

The members of the Audit Committee are Louis R. Hughes (until April 30, 2008), Prof. Dr. Walter Kröll (since April 30, 2008), Klaus Eberhardt, Babette Fröhlich, and Josef Hillreiner. The Audit Committee met four times in 2008, primarily to review the annual financial statements of MTU Aero Engines Holding AG, the MTU consolidated financial statements and group management report. To aid the committee members in this task, they and all other members of the Supervisory Board were supplied with copies of the reports prepared by Deloitte & Touche concerning the auditing of the annual and consolidated financial statements, the management report and the group management report. These documents were thoroughly reviewed in the presence of the auditor. In conclusion, the committee recommended that the Supervisory Board should adopt the financial statements, approve the management reports and consent to the Board of Management’s profit distribution proposal.

Other subjects discussed at length by the Audit Committee included the risk management system and the work of the internal auditing team. As well as reviewing the compliance system of the company, the Audit Committee was briefed by the Board of Management on possible ways of creating a centralized function to manage MTU’s industrial property rights. The committee also specified the key areas for audit in the 2008 financial statements, reviewed the proposed fees to be paid for the services of the accounting firm Deloitte & Touche, and recommended that the Supervisory Board should award the contract.

MTU Aero Engines Holding AG’s annual financial statements, consolidated financial statements, management report and group management report for the 2008 financial year were audited and fully certified by the accounting firm Deloitte & Touche, Munich, whose engagement had been confirmed at the Annual General Meeting. The audit reports and documents to be reviewed were submitted in a timely manner to all members of the Supervisory Board. The Supervisory Board thoroughly reviewed the annual financial statements, consolidated financial statements, management report and group management report of MTU Aero Engines Holding AG for 2008 and the Board of Management’s profit distribution proposal on the basis of the preliminary audit by the Audit Committee, on which the chair of the Audit Committee had presented a full report to the Supervisory Board. The auditor attended the Audit Committee meeting on March 10, 2009 and the Supervisory Board’s balance sheet meeting on March 19, 2009, and presented the main findings of the audit. The Supervisory Board reviewed the annual financial statements, consolidated financial statements, management report, group management report and the Board of Management’s profit distribution proposal, and raised no objections. The annual financial statements and consolidated financial statements for the 2008 financial year as submitted by the Board of Management were approved at the Supervisory Board meeting on March 19, 2009. The annual financial statements were thereby adopted. The Supervisory Board agreed to the Board of Management’s profit distribution proposal, after giving due consideration to the interests of the company and its shareholders. At its meeting on March 19, 2009, the Supervisory Board took note that MTU Aero Engines Holding AG had not entered into any change-of-control agreements. This excludes the indirect consequences of any agreements contracted by associated companies containing change-of-control clauses that might affect MTU Aero Engines Holding AG. More detailed notes on this subject can be found in the group management report on page 122 ff.

Among the shareholder representatives on the board, the following change took place in the early months of the financial year: Under a decision by the Munich district court on February 1, 2008, Udo Stark was appointed to the Supervisory Board as the successor to Johannes P. Huth, who retired from the Supervisory Board on January 31, 2008.

The existing Supervisory Board was dissolved with effect of April 30, 2008, making way for the election of new officers by the Annual General Meeting. In the voting that took place on April 10, 2008 in accordance with the rulings of the German Codetermination Act, the following persons were appointed to serve as members of the Supervisory Board: Josef Hillreiner, Michael Behé, Rudolf Domberger (employee representatives), Thomas Dautl (senior management representative), and Michael Leppek and Babette Fröhlich as union representatives. The departing officers were Harald Flassbeck, Michael Keller, Josef Mailer and Günter Sroka.

The Annual General Meeting of MTU Aero Engines Holding AG on April 30, 2008 elected the following persons to serve on the company’s Supervisory Board as shareholder representatives: Klaus Eberhardt, Prof. Dr. Wilhelm Bender, Dr. Jürgen M. Geißinger, Prof. Dr. Walter Kröll, Udo Stark, and Prof. Dr. Klaus Steffens. They include one new member, Prof. Dr. Wilhelm Bender, who is the Chairman of the Executive Board of Fraport AG. He takes the place of Louis R. Hughes, who took leave as a member of the Supervisory Board after the Annual General Meeting on April 30, 2008.

The Supervisory Board expresses its gratitude to Harald Flassbeck, Louis R. Hughes, Johannes P. Huth, Michael Keller, Josef Mailer and Günter Sroka for their dedicated, professional work.

The Supervisory Board wishes to thank the Board of Management and all MTU employees for their persevering efforts and the outstanding results they achieved in 2008. Thanks are also extended to the works council for its constructive cooperation and, last but not least, to all the shareholders who have placed their trust in MTU over the past business year.

Munich, March 19, 2009