# Exhibit 99.1

learningmovingdelivering


Financial
  Highlights(BAR CHART)(1)Cash, cash
  equivalents and short-term investments.2004
  
  2005(Expressed in thousands, except
  per share and percent data)Revenue
  
  $
  338,204
  
  $
  374,377Net income
  
  $
  28,983
  
  $
  37,058Earnings per share, diluted
  
  $
  1.35
  
  $
  1.81Cash provided by operating
  activities
  
  $
  43.7
  
  $
  58.8Return on sales
  
  
  8.6
  %
  
  9.9
  %Return on equity
  
  
  16.5
  %
  
  21.6
  %Dividends per share
  
  $
  0.26
  
  $
  0.34Weighted average shares
  outstanding, diluted
  
  
  21,464
  
  
  20,509Orders
  
  $
  387,307
  
  $
  404,377Backlog of orders at year-end
  
  $
  186,228
  
  $
  219,680(IMAGE)


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corporate
profile

test

MTS
provides integrated test equipment, software and services that allow customers
to optimize designs, improve productivity and speed development time by
determining the physical behavior of materials, components, subsystems and full
product prototypes. Our test offering covers the range of needsfrom standard
tools for the smallest suppliers to custom solutions for the largest
manufacturers.

(BAR CHART)

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    |                                                                                                                                                                       |                                                                                                                                                    |                                                                                                                                                                                                                                      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    | market advantages                                                                                                                                                    | customer benefits                                                                                                                                 | looking ahead                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    |                                                                                                                                                                       |                                                                                                                                                    |                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    |                                                                                                                                                                       |                                                                                                                                                    |                                                                                                                                                                                                                                      
|ground vehiclesApplicationsPhysical testing, analysis and integrated modeling solutions for the
  durability and performance of passenger cars, trucks, motorcycles, and
  recreational and commercial vehicles.                                                                                                                                                                                                                                                                                                                                               | Key Customers American Axle, Audi, BMW, Bridgestone/Firestone, Daimler Chrysler, Delphi,
  Ferrari, Ford, General Motors, Goodyear, Honda, Hyundai, Nissan, Renault,
  Toyota, TRW, Visteon, Volkswagen, Volvo                     |   Unmatched
  experience
  and expertise
  Advanced
  testing technology
  Global service and
support
  Breadth
  of offerings
  Standard
  and custom solutions |   Accelerate time-to-market
  Optimize lab efficiency
  Improve quality
  Reduce warranty
claims                                               |   Expand
  product lines with standard offerings
  Leverage global network to
focus on international
  markets                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    |                                                                                                                                                                       |                                                                                                                                                    |                                                                                                                                                                                                                                      
|aerospace ApplicationsIndustrys only full-service
  supplier of integrated hardware, software and services for testing durability
  and strength properties for commercial and military aircraft, helicopters and
  spacecraft.                                                                                                                                                                                                                                                                                                                               | Key Customers Airbus, Boeing, Cessna, Eclipse, Embraer, Japan Defense Agency, Lockheed
  Martin, ME Engines, Pratt & Whitney                                                                                                       |   Unmatched
  experience and expertise
  Advanced testing
technology
  Global service and
support
  Breadth of offerings
  Standard and custom
solutions         |   Maximize
  innovation
  Improve safety
  Speed development
time
  Improve quality                                                            |   Expand
  product lines with standard offerings
  Continue close collaboration
with industry leaders to
  anticipate and deliver on customer needs                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    |                                                                                                                                                                       |                                                                                                                                                    |                                                                                                                                                                                                                                      
|infrastructure
Applications

 
Integrated
  equipment, software and services for geomechanical, civil and seismic
  engineering applications thattest the effects of forces and motion on the durability,
  strength, flexibility andperformance of materials and structures.

 
Integrated
  testing solutions for material research, product development and
 manufacturing
  optimization.


 Integrated
  testing solutions to support the design and development of biomedical materials,
  components and devices for both internal and external use. | Key Customers Guidant, Japan National Research Institute, Lawrence Livermore National
  Laboratory, Medtronic, Sandia National Labs, State University of New York,
  Taiwan National Center of Research for Earthquake Engineering |   Unmatched
  experience and expertise
  Advanced
  testing technology
  Global
  service and support
  Breadth of offerings
  Standard and custom
solutions     |   Optimize
  civil structure safety and longevity
  Improve material and biomedical
device performance
  Reduce costs
  Speed development
time |   Expand
  product lines with standard offerings
  Continue to create new test
innovations that improve end
  users quality of life
  Grow material testing market
share with tools for all
  levels of the material supply chain
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                    |                                                                                                                                                                       |                                                                                                                                                    |                                                                                                                                                                                                                                      

industrial

MTS offers
precise, rugged position and velocity sensors that help automate machines by
making them faster, safer and more efficient. Our sensors leverage MTS
exclusive technologies in magnetostrictive sensing that yield the highest
accuracy, repeatability and reliability of any motion sensor in the field.

(BAR CHART)

|                                                                                                                                                                                                                                                   |                                                                                                                                                                                      |                                                                                                                    |                                                                                                                            |                                                                                                                              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                   |                                                                                                                                                                                      | market advantages                                                                                                 | customer benefits                                                                                                         | looking ahead                                                                                                               
|                                                                                                                                                                                                                                                   |                                                                                                                                                                                      |                                                                                                                    |                                                                                                                            |                                                                                                                              
|                                                                                                                                                                                                                                                   |                                                                                                                                                                                      |                                                                                                                    |                                                                                                                            |                                                                                                                              
|sensors
  Applications High-performance sensors for
  metal and plastics manufacturing machinery; equipment used in mobile
  construction and agriculture, wood processing, aircraft assembly
  and medical products; and fluid level measurement. | Key Customers Bosch Rexroth, Claas, CNA Manufacturing Systems, CNH, DeMag Plastics, Eaton,
  Heil, Husky Injection Molding, Negri Bossi, Nissei Plastics, Parker, Sinopec,
  Stryker |   Extensive
  application expertise
  Exclusive
  technologies in magnetostriction
  Global service and
support |   Speed
  development of new applications
  Enhance product
quality
  Increase productivity
  Reduce cost of
ownership |   Build
  mobile hydraulics business
  Aggressively explore new market
opportunities
  Expand lower cost product
offerings
|                                                                                                                                                                                                                                                   |                                                                                                                                                                                      |                                                                                                                    |                                                                                                                            |                                                                                                                              

(IMAGE)

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|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------
|MESSAGE                                                                                                                                                                                                                                                            |  | MTS is a market-driven
  technology company providing hardware, software and services to researchers,
  engineers and manufacturers worldwide. We help customers design, develop and
  produce higher-quality products with greater speed and lower cost.MTS emerged nearly 40 years ago as a creative problem-solver for complex
  engineering challenges. The company has since grown into a leading global
  provider of testing and sensing solutions. We are transforming the company
  and our offerings to meet the changing needs of our customers. By learning
  from and moving together with the markets we serve, MTS will continue to
  deliver the resources that engineers, researchers and manufacturers need to
  excel in their businesses. |  | MESSAGEMTS Systems Corporation Annual
  Report to Shareowners2005
|Helping
  customers be certain worldwide.MTS empowers its
  customers to validate designs with absolute certainty, in industries ranging
  from automotive to aerospace, geomechanical to biomedical, civil and seismic
  engineering to industrial manufacturing. |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|MESSAGE                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---



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| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
| | [PHOTO]

  Sidney W.
  Emery, Jr.
  Chairman and 
  Chief Executive Officer
  Objective:
  To be the
  leading worldwide
  provider of mechanical
  testing solutions and
  high-performance
  position sensors. |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| |                                                                                                                                                                                                                  | to our Shareowners                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 
| |                                                                                                                                                                                                                  | MTS continued to deliver in fiscal year 2005 by increasing financial returns for shareowners and meeting growing customer needs worldwide.
  Our ability to deliver results had tangible benefits for our customers, such
  as developing new products faster with more productive mechanical testing
  solutions and enhancing the safety and productivity of industrial machines
  with cost-effective, high-performance position sensors. We are learningto become more market-driven, more
  cost-competitive and stronger technologically, as demonstrated by our ongoing
  transformation within the Test segment and the market expansion in the
  Industrial segment. We aremovingahead by exiting non-strategic
  businesses and aggressively investing in growth opportunities in our core
  businesses. In fiscal year 2005, shareowners experienced a significant
  increase in share price, an increase in the dividend and a greater ownership
  stake via Company share repurchases, while our employees experienced new
  growth opportunities as we expanded our marketing, selling, development and
  manufacturing capabilities. We aredelivering.
  learning
  Building on our premier engineering heritage,
MTS is becoming
  increasingly market-driven to better leverage our technical strengths. As a
  result, we were able to offset continued weak demand from the North American
  ground vehicles OEMs. Today, approximately two-thirds of our business comes
  from Europe and Asia. Our global sales, service and manufacturing
  capabilities enabled us to quickly respond to customer needs, no matter where
  they were located. Whether our customers were in Beijing, Frankfurt, Detroit
  or Tokyo, we provided local support, which is a capability that continues to
  differentiate us in the marketplace. This was reflected in our increased
  ability to meet the aftermarket needs of our worldwide installed base in the
  Test segment.
  In the Industrial segment, our Sensors business continues to grow faster than
  its markets. Our study of the mobile hydraulics market validated the size and
  strength of future demand for these sensors, deepening our commitment to
  increase expenditures in this growing market. In both segments, we continue
  to learn new, innovative ways to lower our cost structure while expanding our
  product portfolio.
  From a process perspective, we invested significant time and money to fully
  comply with the requirements of the Sarbanes-Oxley Act, which governs
  internal | 
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| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 
| |                                                                                                                                                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 

---



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Partnering to solve real customer challenges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 
| | controls over financial reporting. A global team of business,
finance and information technology process owners worked diligently to ensure
  we were ready for our first year of internal controls audit. I am pleased to
  report we received an unqualified opinion from our external auditors
  regarding the adequacy of our internal controls over financial reporting.movingOur Test segment, created through organizational consolidation two
  years ago, continues to aggressively move forward. This consolidation has
  helped us better anticipate the changing needs of our customers and align
  product development to meet those needs. Despite the lack of capital
  investment by North American automotive manufacturers, this segment grew by
  10 percent, with growth in the ground vehicles, aerospace and infrastructure
  markets. Orders strengthened in both Europe and Asia, where our expertise in
  aircraft structural testing, advanced materials testing and high-performance
  passenger car and sports vehicle testing is highly valued. For the last two
  years, our worldwide orders footprint has shifted to approximately one-third
  from each major geography of North America, Europe and Asia. In fiscal year
  2005 the Test segments research and development and sales and marketing
  expenditures increased by 17 percent, an indication of our commitment to our
  core markets. We delivered our first high-speed dynamometer as well as
  numerous hardware enhancements and system upgrades. As a result, we are
  seeing a steady increase in opportunities for new products and services in
  our ground vehicles, aerospace and infrastructure test markets. These new
  products and services, combined with our initiative to become more
  cost-competitive in mid-market test products, position us to achieve
  above-market growth rates in the Test segment.In the Industrial segment, we completed the product migration to the
  new, higher performance G and R Series sensors, with strong market acceptance
  worldwide. We introduced a full line of ruggedized magnetostrictive position
  sensors for mobile hydraulics applications. Again this fiscal year, revenue
  from mobile hydraulics sensor applications roughly doubled, and the number
  and breadth of field trial activities increased in line with our expectations
  for significant future market growth. In October 2005, we opened an
  expanded sensors assembly facility in Japan to service anticipated growth in
  both Japan and China. Sensors orders grew by more than 14 percent for the
  third consecutive year. We also continued our initiatives focused on
  distribution and product expansion |  | Around the
world every day, our people work alongside organizations at the forefront of their
respective fields, innovating together to resolve real engineering challenges
and discover new capabilities.
Making ridecomfortmeasurablein the lab

(IMAGE)
Customer: Audi AG

Situation: Audi wanted to
better simulate rough road conditions in a laboratory environment so that it
would have more information to design quiet and smooth-riding vehicles.

Solution: Combining two of
its proven ride and handling testing technologies, MTS helped Audi create a
dynamic roadway on which biaxial forces and vibrations can be applied to a
loaded drive-train with spinning wheels. A true industry first, this system
provides an accurate, repeatable means of simulating noise and force levels
experienced by passengers riding on rough roads.

Improving
manufacturing speed and efficiency
(IMAGE)

Customer: Ingersoll-Rand

Situation: This customer
needed a way to improve the control of an adhesive dispensing system used to
join automotive body panels.

Solution: Ingersoll-Rand chose
MTS R-Series sensors specifically because the highly accurate position and
velocity outputs enabled dramatic improvements in dispensed volume accuracy and
variability from part to part, resulting in improved manufacturing efficiencies and lowering
overall manufacturing costs for their customers. | 
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| | Delivering custom capabilities
in a standard offering

(IMAGE)

Customer:
Australian Defence Science and Technology Organisation (DSTO)

Situation:
The Australian DSTO wanted a full-scale fatigue test instrumentation and
control system capable of customizing advanced control laws.

Solution:
MTS partnered with the DSTO to create a calculations in the loop software
capability for testing its BAE SYSTEMS Hawk aircraft. This capability allows
users to manipulate signals, digital outputs and control laws during real-time
testing, significantly reducing test completion time. Calculations in the loop
is now a standard option of the MTS AeroPro software platform.

Helping Beijing
prove earthquake-readiness for the 2008 Olympics

(IMAGE)

Customer:China Academy of Building Research (CABR)

Situation:
In helping Beijing prepare to host the 2008 Olympics, the CABR wanted to
accurately test the ability of stadiums, dormitories, communication
infrastructure networks, highways and various other supporting venues to
withstand earthquake forces.

Solution:
MTS helped CABR create a seismic simulation table, 36 square meters in size,
capable of accurately replicating the motions and forces of the worlds most
violent earthquakes. Testing is now well underway with MTS consultants helping
the CABR make the most of its technology investment. |  | while advancing our technology leadership in magnetostriction. Combined,
  these actions will enable us to profitably grow faster than these markets.
  During the year, we exited the engine test, noise and vibration software and
  laser metal forming (AeroMet) businesses. Together, these non-strategic
  businesses represented approximately seven percent of revenue. In each case,
  we determined that we did not have a viable path to a market and financial
  leadership position.
  deliveringIn fiscal year 2005 we grew
  revenue by nearly 11 percent and finished the fiscal year with a strong
  backlog of $220 million. Earnings per share improved by 34 percent, to $1.81
  per share, on higher volume, improved gross margins and a favorable change in
  the fiscal year 2005 effective tax rate, reflecting steady progress in
  operating performance. We generated $59 million of cash from operations,
  ending the year with $160 million in cash and short-term investments. During
  the year, we offset share dilution from option exercises by repurchasing
  approximately one million shares of Company stock. Additionally, in the
  fourth quarter we raised the annual dividend by 25 percent to 40 cents per
  share. Combining this with our impressive stock price appreciation during the
  year, MTS delivered a 72 percent return to our shareowners on their
  investment.
  As we begin fiscal year 2006, we are using our financial strength to invest
  in new products and to expand our global network to capture and serve a
  greater share of our targeted markets worldwide. With a sharpened focus on
  our core Test and Industrial businesses, we plan to continue increasing
  investments to benefit both customers and shareowners. In addition to organic
  growth, we anticipate using cash to selectively acquire businesses or product
  lines that enhance our market position. However, we will prudently use this
  cash only for those opportunities that align with both our strategic and
  financial objectives.
  MTS continues to be financially strong, technologically excellent, and
  market-focused. We are learning, moving, and, most importantly, delivering 
  for customers, shareowners and employees alike.
  (IMAGE) | 
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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 

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Corporate
Information

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Board of
Directors
Sidney W. Emery, Jr.
Chairman and
Chief Executive Officer
MTS Systems Corporation
Dugald K. Campbell
Retired President and CEO,
Tower Automotive, Inc.
Jean-Lou Chameau
Provost, Vice President
Georgia Institute of Technology
Merlin E. Dewing
Chairman and Founder
Dewing Financial Services, Inc.
Brendan C. Hegarty
Consultant
Former Chief Executive Officer
NanoMagnetics
Barb J. Samardzich
Vice President
Ford Motor Company
Linda Hall Whitman
Consultant
MinuteClinic, Inc.Notice of Annual Meeting
The annual meeting of shareowners will be held at 5:00 p.m.
(Central Standard Time) on Tuesday, January 31, 2006, at the Companys
headquarters in Eden Prairie,
Minnesota. Shareowners who cannot
attend the meeting are urged to exercise their right to vote by proxy via the mail, phone or internet.Common Stock
MTS Systems Corporations common stock publicly trades on The
Nasdaq Stock Markets National
Market under the symbol MTSC. |  | Executive
Management
Sidney W. Emery, Jr.
Chairman and
Chief Executive Officer
Laura B. Hamilton
Senior Vice President
Test
Joachim Hellwig
Vice President
Sensors
Susan E. Knight
Vice President
Chief Financial Officer
Douglas E. Marinaro
Vice President
Software and Consulting Services
Kathleen M. Staby
Vice President
Human ResourcesCorporate Officers
John R. Houston
Corporate Secretary
Partner, Robins, Kaplan,
Miller & Ciresi LLP
Paul T. Runice
Treasurer
Barbara J. Carpenter
Assistant Corporate Secretary |  | Investor
RelationsPaul T. Runice
Treasurer
MTS Systems Corporation
14000 Technology Drive
Eden Prairie, Minnesota
55344-2290
Telephone: 952-937-4003
Email: paul.runice@mts.comDividend Reinvestment Plan
Shareowners may invest MTS Systems dividends and purchase additional shares of MTS stock. Shareowners may obtain further details
by calling Wells Fargo Shareowner Services at 800-468-9716.Trademarks
MTS is a registered trademark and
AeroPro is a trademark of MTS Systems Corporation. |  | Corporate
Headquarters
MTS Systems Corporation
14000 Technology Drive
Eden Prairie, Minnesota
55344-2290
Telephone: 952-937-4000
info@mts.com
www.mts.comNorth American Subsidiaries
MTS Testing Systems (Canada)  Ltd.European Subsidiaries
MTS Automotive Sensors GmbH
MTS Holdings France, SARL
MTS International Ltd.
MTS Sensor Technologie und   Verwaltungs-GmbH
MTS Sensor Technologie
  GmbH and Co. KG
MTS Systems SAS
MTS Systems GmbH
MTS Systems Ltd.
MTS Systems Norden AB
MTS Systems srlAsian Subsidiaries
MTS (Japan) Ltd.
MTS Korea, Inc.
MTS Sensors Technology K.K.
MTS Systems (China), Inc.
MTS Systems (Hong Kong), Inc.

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|(MTS LOGO) |  |  |                                      | 
|           |  |  |                                      |  | 
|           |  |  | MTS Systems
  Corporation           
|           |  |  | 14000 Technology Drive              
|           |  |  | Eden Prairie, Minnesota
  55344-2290
|           |  |  | Telephone: 952-937-4000             
|           |  |  | info@mts.com                        
|           |  |  | www.mts.com                          |  | 

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| |  |  | 100-157-974PRINTED IN U.S.A. 1205
| |  |  | ©2005 MTS SYSTEMS CORPORATION    
| |  |  |                                   |  |