Financial overview

( in millions of EUR )	FY2006	FY2005	Increase (Decrease)	Factors
Pierburg	923	903	2.2	(1)
KS Pistons	707	638	10.8	(2)
KS Plain Bearings	196	171	14.6	(3)
KS AluminumTechnology	224	210	6.7	(4)
Motor Service	158	160	(1.3)	-
Group	2,181	2,050	6.4	-
EBIT (Group)	113	146	(22.6)	(5)

< Factors >
(1)
Sales of the Pierburg Division increased 2.2 percent to 923 million euros compared with the previous year. While the air management and actuator businesses stayed slow due to a decrease in demand for intake pipes or throttle housings, the expansion in pump and emission control businesses compensated for negative factors.
In the emission control business, sales of the EGR valve products group increased due to successful entry into the U.S. market and growing attention to a diesel engine as the European regulations are becoming increasingly stringent. Contributing to the pump business were increased sales of oil and mechanical type water pumps.

(2)
Sales of the Piston Division (KS Kolben) increased 10.8 percent to 707 million euros, particularly due to the volume increase in the large piston category and transfer of higher material costs to sales prices.

(3)
Sales of the Plain Bearings Division increased 14.6 percent to 196 million euros over the previous year. Despite a dismal growth of the metal bearing business affected by price reductions to customers, high growth of die-casting and Permaglide products more than compensated for negative factors. The growth of die-casting products group is attributed to successful transfer of higher costs of materials to price hikes to customers, in addition to an increase in sales.

(4)
The Aluminum Technology Division has been on track to continued growth for the past few years. The sales increased 6.7 percent to 224 million euros over the previous year, primarily due to increased sales generated by low-pressure and high-pressure casting operations, as well as successful transfer of higher material costs to sales prices,

(5)
EBIT of the group as a whole registered a 22.6 percent decline to 113 million euros in comparison with the previous year. This is attributable to factors, including soaring prices of materials and energy, an increase in restructuring expenses, currency loss and falling sales as a result of sale during the previous year of the air mass sensor product group of the Pierburg Division.

New Company
Pierburg GmbH has set up its own subsidiary in the growth market of India. The new Indian company, Pierburg India Private Limited, will be headquartered at Pune, one of India's most important automotive centers. Pierburg also intends to set up at Pune its own production facility for exhaust gas recirculating valves, oil, water, and vacuum pumps. By the end of 2008 it is planned to increase the workforce in Pune to around 100. (From a press release by the company on Oct. 30, 2006)

Acquisition
The Company announced that KS Kolben, the Pistons division, has acquired effective February 2, 2006, from the DESC Automotive the complete OEM unit of Pistones Moresa.(From a press release by the company on Feb. 02, 2006)

R&D Expenditure

( in millions of EUR )	FY2006	FY2005	FY2004	FY2003
Pierburg	55	54	55	51
KS Pistons	37	37	32	25
KS Plain Bearings	8	7	4	3
KS Aluminum Technology	9	6	6	2
Group Total	109	104	97	81
% of Sales	5.0%	5.1%	5.0%	4.3%

R&D Organization

-	FY2006	FY2005	FY2004	FY2003
Ratio of employees engaged in R%D	7.2%	6.2%	6.2%	6.0%

Product Development
New "cooled EGR module"
The Company has booked its first orders for the newly developed cooled exhaust gas recirculation module. Presently, it has orders on hand from three renowned European carmakers, representing a total contract volume of around 300 million euros.This exhaust gas recirculation module comprises a newly developed cooler made from die-cast aluminum, a low-cost and weight-saving alternative to today's commonly used stainless steel coolers, an option which, moreover, utilizes the better heat conductivity of aluminum. (From a press release by the company on Nov. 27, 2006)

Capital Investment

( in millions of EUR )	FY2006	FY2005	FY2004	FY2003	FY2002
Pierburg	50	68	54	50	56
KS Pistons	58	58	47	43	47
KS Plain Bearings	12	17	12	6	14
KS Aluminum Technology	20	16	13	14	21
Motor Engineering	1	1	7	1	1
Others	8	2	0	3	5
Group	149	162	133	117	144

As in the previous year, capital investment was focused on the Pierburg and KS Kolben Divisions in 2006 primarily for refurbishing equipment, rationalization and new projects.

Pierburg
- In the domestic facilities, investment was mainly in new product launches and boosting production capacity in response to demands from customers.
- Investment was also earmarked for an increase in production capacity of intake pipes and electric water pumps, as well as equipment in the area of R&D and construction of a customer center in Neuss.
- In overseas faciliteis, investments were made in Spain and the U.S., particularly to increase assembly capacity of EGR valves and to produce water pumps, and in Italy and France to expand production capacity of oil pumps and water pumps. In Czech investments were made in construction of production lines for secondary air pumps, exhaust gas flaps and electric drive modules. In Brazil investments were made in construction of a plant and an office, equipment for die cast and finishing processes, as well as expansion of assembly capacity.

KS Kolben
-Investments in domestic facilities were mostly supplementary. In the area of large-size pistons and steel pistons, production capacity was expanded for a new project.
- Investments were focused on Czech and Japan for an expansion of production capacity. Also, in the spring the Division purchased and expanded a plant in Mexico.

Additionally, the Pierburg and KS Kolben Divisions announced in 2006 expansion of facilities in Fountain Inn where their headquarters are located.

Plain Bearing (KS Gleitlager)
Investments were made mainly in expansion of production capacity of semi-finished products in St. Leon-Rot and manufacturing capacity of the Papenburg Plant. Construction of a new logistics center also started.

- Overseas investments were for improvement of production capacities in the U.S.

Aluminum Technology
- With the aim of exploring a new business of high profitability, the Division made investment focused on construction of a building in preparation for expanding the product processing facility. It continued to introduce equipment for launching a new product in the area of low-pressure die casting. In Neckarsulm construction of a new customer center started scheduled to be completed in March 2007