Ladies and Gentlemen, On behalf of the entire Board of Management, I welcome you to the 84th Annual General Meeting of BMW AG. I also welcome all viewers now joining us on the Internet.

Where does the BMW Group stand today? I will answer this question with the following messages:

1. Despite significant up-front expenditure on our product and market initiative, your Company reached its operative targets in 2003.

2. We have made a good start into the 2004 year of business – and we remain optimistic for the ongoing course of the year.

3. Today your Company is stronger than ever before and will be one of the most profitable companies in the worldwide automotive industry also in the future.

Now, Ladies and Gentlemen, I will explain these core messages in greater detail. Let me start with the facts and figures for 2003:

We have sent you the figures for the year of business under report together with the invitation to this Annual General Meeting. So you already have this data. Further copies of our 2003 Annual Report are, of course, available to you here today. I will therefore be brief in my report on the year of business under review, focusing on the most significant highlights.

First, some remarks on the Automobiles Segment:

Customer deliveries of BMW Group cars were up by 4.5 per cent in 2003 to more than 1.1 million BMW, MINI and Rolls-Royce cars delivered to customers:

• The BMW brand was up 1.6 per cent to more than 928,000 units delivered.

• Growing by 22.4 per cent, the MINI brand showed an increase in customer deliveries to more than 176,000 units.

• Rolls-Royce, our third premium brand, entered the year 2003 with worldwide sales of 300 motor cars.

Allow me to highlight the 3, 5 and 7 Series as examples of how the BMW brand has developed:

• With customer deliveries of more than 528,000 units, the current BMW 3 Series remains on a very high level of sales even in its sixth year of production. Indeed, 2003 was the third best year for the 3 Series in the entire history of the Company. This once again proves our strength.

• Accounting for more than 185,000 units delivered to customers, the BMW 5 Series was up 7.6 per cent in 2003 compared to the previous year.

The main driving force for this growth was of course the new 5 Series Sedan launched in July 2003, with customer deliveries in the second half of 2003 – that is in the car’s first six months in the market – exceeding the 70,000-unit mark. This is over 20,000 cars more than delivered of the previous 5 Series in the first six months.

• With retail at almost 58,000 units, 2003 was the best year the BMW 7 Series ever had. Compared with the previous year, customer deliveries were up 8.2 per cent. The 7 Series is especially successful in the USA and Asia. In Germany the 7 Series is a powerful No. 2 in the market.

Now let us proceed to the MINI brand:

The success of the MINI brand continued once again last year, making a substantial contribution to our overall increase in customer deliveries. Delivering a total of more than 176,000 MINIs to customers, we exceeded the previous year's figure by almost one-quarter – to be precise, by 22.4 per cent.

Overall, we have sold more than 400,000 MINIs since re-launching the brand three years ago. The MINI brand, within just a short time, has become a significant player in the premium car business. MINI proves that premium does not depend on the size of a car, but rather on its concept – i.e. the product substance and the desirability of a brand.

This takes me on to our third brand, Rolls-Royce: In the course of 2003, we delivered 300 new Rolls-Royce Phantoms to their owners. Following the ramp-up phase in 2003, production in Goodwood has already reached target capacity according to plan. Currently we are building four to five motor cars a day.

The response to this new luxury motor car is very positive indeed – both traditional Rolls-Royce customers and completely new customers groups are thrilled by the Phantom. We are therefore very confident in our outlook at the year 2004, the centennial year in the history of this very special marque: We expect Rolls-Royce to grow significantly in the course of 2004.

Ladies and Gentlemen,

So far about our products. How did our most significant markets develop in 2003?

The US market made a particular contribution in the 2003 year of business, with customer deliveries amounting to more than 277,000 units. This is an increase by 8 per cent over the previous year. For the first time in the history of the Company, the USA was the BMW Group's biggest-selling single market, outselling our home market Germany, where we delivered almost 256,000 cars to customers last year.

But even though in the past year Germany was for the first time – in quotes – "only" our second-largest single market, our home country continues to play a fundamental role for the Company:

We will only be successful worldwide if we maintain our lasting success here in this country. Approximately 75 per cent of our workforce is employed here in Germany and this is where we make a major share of our investments. In addition, it is a benefit to our image worldwide to be a German car manufacturer with a great tradition and to be one of the most successful premium manufacturers in this fiercely contested market.

We remain very successful in the Asian markets, where in many countries we achieved double-digit growth rates last year: In all, we delivered more than 93,000 BMW, MINI, and Rolls-Royce cars to customers in Asia in 2003, an increase by 18.5 per cent.

Last year we were particularly successful in the Chinese markets of China, Hong Kong, and Taiwan: In these markets, which gain increasing significance for the automotive industry, we delivered a total of more than 27,000 cars to customers, 75 per cent more than in the previous year.

We have already announced our objective to increase sales throughout the entire Asian region to 150,000 cars by the year 2008. And last year we took a significant step towards this goal. This year we will take the next major step: Next week we will be officially opening our production plant in Shenyang, where since September 2003 we have been building the BMW 3 Series and since November 2003 the BMW 5 Series. So we are well prepared for the major future market China and we will significantly improve our position there this year.

Looking at the bottom line, let me emphasize that the BMW Group further strengthened its position in the international markets in 2003:

• We are growing on a high level in the USA.

• We are continuing to grow in Europe.

• In Asia we are experiencing above-average growth.

• And we are currently expanding our position in Central and Eastern Europe: At the beginning of last year, we established our subsidiary in Poland. And since the beginning of this month we have been operating our new subsidiary in Hungary.

Ladies and Gentlemen,

So much on the Automobiles Segment. Let me now move on to our two other segments: Motorcycles and Financial Services:

In the year under report the motorcycle business was affected very significantly by economic factors in the international motorcycle markets. Facing this difficult environment, BMW Motorrad has developed successfully: Delivering almost 93,000 units to customers, we exceeded the previous year's sales figure for the 11th time in a row. At the same time we incurred up-front expenditure in the 2003 year of business also in the Motorcycles Segment, working on new models now entering the market in 2004.

In the financial services business the BMW Group continued to grow also in 2003: The volume of our business in the Financial Services Segment, as shown in the accounts, increased last year by 8.1 per cent to more than 28.6 billion euro.

Geographical expansion of the Financial Services Segment also continued in 2003 at an even faster pace: In Europe, Asia, South America and in several Arab countries, we launched new joint ventures resuming their business activities. As a result, the Financial Services Segment is now present through its own financing companies or joint ventures in no less than 41 countries.

Ladies and Gentlemen,

These fundamental facts and figures in our three segments add up to the following revenue and earnings in the 2003 year of business:

The Group revenues in 2003 were more than 41.5 billion euro. The decrease in relative terms by 2.1 per cent was attributable to the weakness of the US dollar. Taking the currency effect into account, the Group showed an in¬crease in revenues by 4.2 per cent over the previous year. As you can see, the development of Group revenues in 2003 as shown in the accounts is attributable not to the volume of our business as such, but rather to currency effects.

The crucial factor in judging the quality of our business in 2003 is of course the result, the bottom line of our business: Here we have succeeded, despite ongoing, substantial up-front expenditure on our product and market initiative,
in maintaining the quality of the Group's earnings at a high level also in 2003: At 3.2 billion euro, the earnings of the Group's ordinary business activities were a mere 2.8 per cent below the previous year's figure.

Apart from ongoing, substantial expenditure on our product and market initiative, we also offered our associates more part-time old-age employment contracts in the wake of forthcoming statutory amendments in part-time old-age employment, thus giving many associates the opportunity to enter retirement in accordance with their personal life plans.

Over and above the funds and provisions already set aside by the Group, this led by the end of the year to the establishment of additional provisions of 110 million euro, with a corresponding impact of the same magnitude on our earnings.

At 1.9 billion euro, net profit in 2003 was just 3.6 per cent below the previous year's figure. We were affected in this case by a one-off, non-recurring additional tax payment of 50 million euro due to the introduction of a new act on the treatment of corporate tax credits. In addition, there was a one-off supplement on corporate tax of 1.5 percentage points on account of the Flood Victims Solidarity Act last year, which led to a higher rate of taxation.

Ladies and Gentlemen,

Our Company is now emerging from a period of above-average expenditure on the future with greater strength and power in every respect. This also applies to our equity ratio: Following our split from Rover, we saw a decrease in our equity ratio from 21 per cent in the 1998 year of business to 10.5 per cent in the 1999 business year. The reason was that at the time we settled our entire divestiture in the year 1999 alone, showing the full sum in our accounts in just one single year. So in the process we took all expenditure and potential risks into consideration at the time.

We promised at the time, through our focus on the premium business, to increase the BMW Group’s equity ratio in the medium term to the former level. And here again, we have kept our promise: By the end of 2003, our equity ratio was 26.3 per cent. This gives the Group a sound and secure foundation for the future.

Also with this in mind, I am happy to state that the Board of Management and the Supervisory Board now suggest an increase in the dividend to the Annual General Meeting: Taking the unappropriated profit available for distribution in BMW AG of 392 million euro, we propose a dividend up by 12 per cent per ordinary share to 58 euro cents and up accordingly to 60 euro cents per preferred share, in each case on a nominal share value of 1.- euro on the stock capital entitled to dividends.

Ladies and Gentlemen,

The substance of the BMW Group – the particular fit of our high-performance team, our high-performance organization, and our high-performance products – paid off once again in 2003.

We successfully reached our operative goals in 2003 although general conditions last year were everything but favorable in a number of markets. Just by way of example, let me remind you of

• the Iraq war,

• SARS in Asia,

• and the strike in the new German Länder, the new states of Germany in the East.

Continuing to make significant investments, we established the foundation last year, despite the difficult overall situation, for further expansion of the Group's activities in the future: In 2003 the BMW Group invested approximately 3.2 billion euro in fixed and intangible assets. Added to this, we incurred development expenditure of 996 million euro capitalised in accordance with IAS regulations, accounting for an overall addition to the Group's assets of more than 4.2 billion euro. In relative terms, this means a growth rate of 5 per cent.

Apart from capital expenditure on new products and the enlargement of our worldwide sales and distribution network, somewhat more than half of our capital expenditure has gone into the expansion and enlargement of our production network. We believe it is crucial in this context to have both adequate and flexible production capacities. By the year 2005, we will have invested a total of approximately 1.3 billion euro in our Leipzig production plant, which will further enhance the flexibility of our production network in Germany. In addition, BMW's new Leipzig Plant is yet another commitment to Germany as our home country – not least because we have succeeded here once again, through "BMW's Formula for Work", in setting new standards in Germany in terms of flexible working times.

In the year 2003, we not only made investments in fixed and intangible assets. We also hired new associates, so the workforce of the BMW Group grew worldwide by 2.9 per cent to more than 104,000 in the course of last year. Taking transfers into account, the Company created more than 3,100 new jobs in 2003 alone. The number of apprentices, in turn, was up in 2003 by 2.5 per cent to more than 4,300. We will continue to create new jobs also in 2004.

Ladies and Gentlemen,

Our success in 2003 did not come by chance, but is rather the result of hard work by all of our associates. There have rarely been times in the history of this Company in which we have demanded so much of the people employed by the BMW Group. On the other side, I may also say that in my opinion there is no other company where employees do their job with such great passion leading to such a story of success.

Speaking also on behalf of the entire Board of Management, I therefore take this opportunity to sincerely thank the associates of our Company all over the world. The great success of our product and market initiative is quite simply attributable to the fact that our associates made this initiative possible in the first place through their hard work and commitment. And speaking on my own behalf, let me state that it is a great pleasure to work with these highly motivated people day-by-day.
In this context we also owe our gratitude to our dealers and importers within our worldwide dealer organisation, as well as our suppliers. It is also due to their great personal commitment and hard work that we were able to reach our goals last year. I therefore would like to extend my appreciation them, too, most sincerely.

I also wish to thank the Members of the Supervisory Board – both the representatives of our shareholders and the representatives of our associates. The very good and constructive cooperation of the Supervisory Board and the Board of Management gives our Company a strong foundation and is an essential guarantee for our success.

In this cooperation, all parties consistently observe their various tasks and responsibilities – and we have already done this, before the subject of corporate governance first hit the headlines.

Ladies and Gentlemen,

Since the year 2000, the BMW Group has been focusing consistently on the development, production and sale of premium vehicles. For we know that this is what we can do best.

The pivotal point is that we see premium not just as a brand and product strategy, but rather as the underlying philosophy characterizing all processes and decisions within the Company.

Our customers buy our products because they are looking for

• emotion,

• uncompromising engineering,

• innovative technology,

• and supreme quality.

And this is what we are ultimately able to offer them, because these benchmarks shape our entire Company as guiding principles through and through

Looking at our customers, for example, we see a desire for growing personalization and differentiation. Our customers do not want to have just "some" car, but rather a very special – personalized – car. And precisely this is what they get from all of our three brands.

Our Customer-Oriented Sales and Production Process, referred to as KOVP for short, enables us to offer our customers their very own personal car built-to-order. At BMW, mass production has for a long time been replaced by “mastermind production” tailoring each car to the individual purchaser. And this we do at competitive costs.

All processes within the Company are dedicated to customized, individual products. This is a consistent principle and attitude in everything we do throughout our entire chain of value creation – from development through production and sales all the way to logistics. We are highly flexible. We "live" premium every day and in every detail. Our customers feel and appreciate this. And this consistent approach and philosophy cannot simply be copied – even if the one or the other perhaps would like to do so.

Ladies and Gentlemen,

What have we achieved with our premium brand strategy so far?

• We have expanded our brand and product portfolio, establishing a broader range of models today than ever before.

• We have conquered new markets and are now more international than ever before.

• And today we are one of the most profitable companies in the world.

Within a surprisingly short period we have raised the Company to a new dimension. And to make it quite clear, we are no longer a small niche manufacturer operating in the shadow of the giants in our industry.

Considering the profitability we have achieved in the meantime and our stock capitalisation of currently more than 22 billion euro, we have no reason to hide behind anybody in the automotive industry. And likewise we have no reason to be pressured by others.

Focusing on premium products, we have caught up with the so-called big players in the industry – and to a certain extent we have even overtaken them. This clearly confirms the success of our strategy and it is a proof of the success of all our associates. The strength of our earnings and our high level of stock capitalisation provide the foundation for our ongoing independence in the future.

The crucial point is that even with the magnitude we have reached today we have by far not yet exhausted the potentials of our Company. Indeed, we will find new ways and means time and again of continuing to expand in the future:

• We definitely see new opportunities with new vehicle concepts.

• And we see a further potential for winning over young, emerging markets.

We will therefore continue to use these potentials in future, thus placing the BMW Group on a broader foundation.

The decisive point, however, is to consistently focus on the roots of the Company's success. We know what we are capable of. We know why our brands and products are successful. And we know how to create a desire for our products among our customers.

Precisely this knowledge is crucial to the ongoing expansion of this Company. As I already stated at last year's Annual General Meeting, we will continue to expand with a clear focus. But we will not be a company seeking to do everything. So we will also say "No" to one or the other concept. But we give ourselves the clear objective and commitment to do everything we do 100 per cent.

We are therefore able to distinguish very clearly between

• things we can and must do in order to be successful in the long term,

• and things we should not do, because they do not fit the Company and might possibly even harm us in the course of time.

In everything we do we will always find typical solutions appropriate for our brands.

The BMW X3 and X5 prove that expansion can only be successful if it is based on a clear brand strategy and consistent positioning of the brand. We will always offer products, which fulfil the wishes of a clearly defined group of customers 100 per cent. So looking at the future, this means that

• our products are always authentic,

• we will always focus on the sharp and unique profile of our brands,

• and we will never build boring cars.

Ladies and Gentlemen,

We are supported in this philosophy by a fundamental trend towards customization and differentiation. We also benefit in this context from the fact that market segments are permanently on the move. Our playing field is not limited, but is continuing to grow and expand. With this in mind we will take opportunities time and again to go on expanding and grow further.

In this situation the 2004 year of business is of particular significance to the Company: While the last few years were characterized by substantial up-front expenditure on our product and market initiative, we have now entered the payback period.

Looking at the Automobiles Segment, we have already launched the new 6 Series Coupé and the 6 Series Convertible this year. Another new vehicle we have in the market is the X3. And in the ongoing course of the year the MINI Convertible and the new BMW 1 Series will also be making their appearance.

Looking at BMW Motorrad, we will be introducing four new or updated motorcycles by the end of the year. The R 1200 GS long-distance enduro, the updated single-cylinder model series, and the K 1200 LT luxury tourer are already available. Introducing the new K 1200 S in autumn 2004, BMW Motorrad will be entering the upper range of sporting high-performance machines. This goes to show that our product initiative is not limited to cars alone, but also applies to our motorcycles.

The year 2004 offers particularly clear proof of the BMW Group’s performance. This is the year of expansion showing how our up-front expenditure for the Group's product and market initiative in recent years is now taking on material substance.

We have already made a very good start into the year 2004:

Delivering a total of more than 371,000 BMW, MINI and Rolls-Royce cars to customers in the first four months of 2004, we are already up over the same period last year by 5 per cent.

We also have the opportunity in the rest of the year to benefit from the general improvement of conditions: The car markets in various regions are currently pointing up, showing that the car business is improving in the international markets.

In the light of our positive development in the first four months of the year and the outlook for the economy, we are confident that we will reach our goals throughout the 2004 year of business as a whole:

• We will set up new records in customer deliveries of all three Group brands.

• Our earnings will also reach to a new record figure.

In conclusion, Ladies and Gentlemen, I wish to briefly sum up the essential highlights:

1. Your Company is well prepared for the future. This is confirmed by our success in the 2003 year of business. And it is confirmed by our forecasts for the current 2004 business year. We are optimistic.

2. Particularly in the last few years, your Company has grown into a new dimension and is now stronger than ever before in every respect.

3. The strength of your Company rests on a healthy foundation. The BMW Group is everything but a company at the end of its possibilities – on the contrary, it offers you an ongoing, positive perspective.

Ladies and Gentlemen,

We know what we stand for and we know what we are doing. We are shaping our future ourselves and we are shaping our future with and through our own strength!

Thank you very much for your attention.

BMW Group
Corporate Communications
Statement by Dr. Helmut Panke, Chairman of the Board of Management of BMW AG
84th Annual General Meeting of BMW AG
Munich, 13 May 2004