Financial overview

(1) Major projects in the automotive industries
-The mainstays of the sales of wiring systems and cable harnesses in 2006 were for customers BMW, Daimler Chysler, General Motors and Ford.
-The Company recorded increased sales especially for the Opel Astra and Zafira models, Mercedes A-Class, BMW 3 Series and for Bentley.
-The UK facility in Newcastle-under Lyme was realigned as a Competence Center for these customers to provide all the British brands belonging to Ford-including, along with Land Rover, also Jaguar and Aston Martin.
-Expansion of production facility in Hermosillo, Mexico was decided in 2006 for series production of cable harnesses for BMW X5.
-Business with Porsche also continued to go well. and the Company remains exclusive supplier for Porsche's 911, Boxter and Cayman models.

(2) Commercial vehicle and component Business
-In 2006, the Company increased its US business with customers Caterpillar, Cummins, as well as International Truck and Engine Corporation, supplying mainly from its facility in Hermosillo, Mexico.

Strengthening presence in Asia
-From June 2006. LEON Electrical Systems (Shanghai) Co., Ltd., its subsidiary in China, has started supplying cable harnesses to various automotive manufactures in China.
-The Company received order from the Chinese carmaker ,Shanghai Automotive Industry Corporation, supplying the complete wiring system for the new Roewe 750 car, which is based on the former Rover 75 model.
-In southern China, the Company had previously operated via the LEON Wiring System (Luzhou) Co., Ltd., joint venture. To improve its position in this region, the Company acquired the outstanding 30% of the shares from previous owner THB in the third quarter of 2006. LEON Wiring Systems (Luzhou) has since then been a wholly owned LEON subsidiary.
-The Company, together with local partner Daekyung Machinery & Engineering Co., Ltd, in order to develop and produce engine cable harnesses, set up a development and sales office in Korea that began operation in early 2007.

Acquisitions outside automotive field
-In Jul. 2006:The Company acquired Studer Draht-und Kabelwerk AG, One of the biggest cable manufactures in Switzerland and leads Europe-wide in the field of halogen-free installation cables.
-In Oct. 2006,:The Company acquired NBG Fiber-Optic GmbH of Gmund, Austria in order to strengthen its  position in the market of high performance cables to transmit the growing volumes of data for TV, video, audio and voice over internet protocol to and from private households.
-In Nov.2006,: The Company acquired 51% of the shares in Jena-based j-fiber GmbH, which is one of Europe's leading suppliers of optical glass fibers, which are required particularly for cables used in corporate networks as well as in the telecommunications industry.

Outlook
-The Wire & Cable Solution division will continue to grow this year, and is likely to generate a high single digit percentage rate increase in sales. Particularly Studer Draht-und Kabelwerk AG, which will for the first time contribute to business volume over an entire year, but also the two new additions in the glass fiber cable segment and LEONI HighTemp Solution will exert a positive effect. In addition there are the major orders received in the past year, for instance from the automation, telecommunications and aviation industries. A Further sales increase is to be expected in 2008.

- Having made stronger than expected gains in 2006, the 2007 sales of the Wiring Systems division are likely to be down slightly from the previous year's level. The ongoing major projects continue to ensure good capacity utilization, though they have in some cases exceeded the peak output figures. There will be little impetus from the market given the easing of demand and only a few model changeovers. After this year of transition, this division's sales should increase considerable again in 2008 and approach the one-billion threshold. Contributing to this will be the extensive new and follow-on projects with the car and commercial vehicle industry that were already gained in 2006, but which for the most part will not boost sales until 2009.

R&D Expenditure

LEONI AG's Corporate Research & Development department (ZFE) in 2006 successfully completed one of its projects that had run over several years: In the context of its "ImPKW" feasibility study, the department achieved robot-supported, fully automated wiring of a passenger car door with a flat-conductor cable harness at marketable costs.

LEONI HighTemp Solution
-The Company set up its new facility, LEONI HighTemp Solutions GmbH in Haver/North-Rhine Westphalia, in the second half of 2006. It is a facility for producing high temperature cables, which will commence operating in early 2007. The exceptionally resilient cables of LEONI HighTemp Solutions are suited to conditions of between 150 degree C and more than 1,000 degree C and are used above all in the automotive industry as well as in industrial applications.

The Intedis GmbH & Co., joint venture , in which the Company and automotive component supplier Hela KGaA Hueck & Co. have equal 50% stakes and which specializes in development services, presented a range of innovative sensor applications for vehicle interiors in 2006. Apart from touch-free switches and other products, Intedis has designed a new kind of seat-occupation recognition system that is particularly reliable as well as a method for applying electronic components directly onto flat conductors, which is suited to the interior wiring of passenger cars, commercial vehicles as well as buses and coaches.

(1) The funds went into building and expanding wiring system facilities in Chine, North Africa and South America, into the new plant of LEONI HighTemp Solutions to produce high temperature cables as well as setting up a state-of-the-art plastics treatment line at the cable plant in Roth.
(2) This almost entirely involved the acquisition of new subsidiaries in the Wire & Cable division.