Financial overview

(in million euros)	May 2006	May 2005	Rate of change	Factors
Sales	3,394.8	3,071.2	10.5%	(1)

(1)
Sales increased by10.5 percent to 3,394.8 million euros from 3,071.2 million euros in the previous year. The growth was due entirely to higher product sales and would have been much higher had it not been for the massive fall in selling prices.

Over half of the growth was generated in the NAFTA region. In the Asia-Pacific region, sales were up almost 20 percent.

While sales in Germany were increased slightly (+1.6 percent) from a high level, the growth of roughly 10 percent in the rest of Europe, mostly in Eastern Europe, led to further strong sales growth.

The stable sales increase were achieved across all the Company's business divisions, with the growth market Electronics standing out in particular.

Business overview by division
Lighting division: Global overcapacity and cutthroat competition
The Company has responded to the strong price pressure, especially in the lighting segment, and rising raw material prices for steel and plastics by continuing to concentrate its lighting production facilities and by transferring more production and development activities abroad. In less than two years, Plant 2 in Lippstadt has been transformed into a Hella pilot plant and technology center for headlamps. To strengthen its operational excellence, the Company launched the extensive Lion (Light On) initiative midway through FY2005/2006, with the aim of significantly optimizing all processes and cost structures, particularly in lighting division.

Electronics division:
International growth pushed ahead
In FY2005/2006. the Electronics sector's development network, for instance, was substantially strengthened by the creation of additional resources at the location in Detroit (USA), Shanghai (China) and Timisoara (Romania). In addition, with the full takeover of joint ventures in India (Padmini) and China (HSE) and the acquisition of a controlling interest in its Chinese relay joint venture in Xiamen, the Company has also established clear structures for further growth in Asia.

Driver assistance systems
These three series production in the driver assistance system technology were started in 2005/06
-Hella lane change assistant
-Newly developed rear view camera
-Adaptive cruise control system
And the Company also launched the electronic parking assistant, which helps drivers in parallel-parking situations through automatic steering.

In addition, the year saw the successful start of production of the new generation of Hella throttle-valve sensors and the new Hella generation of integrated circuits for CIPOS contractless sensor technology in the field of steering-torque sensors.

R&D expenditure & Structure

	FY2005/2006	FY2004/2005
Employees	2,886	2,923
R&D expenditure in million euros
Lighting technology	97.7	99.4
Electronics	166.6	149.0
Aftermarket products	21.3	15.7
Miscellaneous	-	-
Total	285.6	264.1
as a % of sales	8.4%	8.6%

Product development
<Automotive Lighting>
Stronger focus on lighting electronics
-The Company sees lighting electronics as a key innovation-driver for future headlamp systems. Examples are future LED headlamps with assisting light and, presently, the intelligent headlamp based on the VarioX module with new actuator technology: the series headlamp generates the functions country light, motorway light, extended fog light and high beam automatically, according to the specific driving situation.

LED technology for main lighting
-The Company presented a full LED headlamp system in fall 2005 at the IAA International Motor Show in Frankfurt, the Company has already received a first series-production order.

Innovations in light guides
-The Company has been able to use its 3D curved light-guide rods in a series application for the first time. With these, the Company can realize horizontal and vertical light distributions via prism rods providing versatile configuration possibilities for unique designs. The light-curtain technology is already in production for a series-production order.

<Automotive Electronics>
-With the acquisition of Aglaia GmbH, Berlin, in 2005/06, the Company has also substantially strengthened its competence in imaging technology, which in turn opens up promising potential for forthcoming camera-based applications such as traffic-sign, people and object recognition.

Capital expenditure: 278 million euros (FY2005-06)

The Company strengthened the competitiveness of its components business by stepping up it production activities in China with regard to air-conditioning actuators, body actuators and relays, and in India with regard to temperature sensors.