Group Annual Report BSH BOSCH UND SIEMENS HAUSGERÄTE GMBH

Transcription

1 Group Annual Report 2007 BSH BOSCH UND SIEMENS HAUSGERÄTE GMBH

2 Something special The BSH brands, in all the company s product areas Cookers, Home Laundry, Dishwashers, Dryers, Refrigeration, Freezers, Floor Care or Consumer Products stand for innovative technology, outstanding design, best quality and excellent service. These are brands that people trust, because they offer something special: All over the world, BSH products are making people s lives better. Main Brands Special Brands Regional Brands

3 Group Annual Report 2007

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5 CONTENT 3 5 Foreword The big difference All over the world, from Hong Kong and Singapore to Munich BSH s reputation is assured through the quality of its products. The reasons for this are many. On the road to success Through systematic personnel development, BSH ensures that its employees can work in positions in which they are best able to develop their potential. A system that adds value With the introduction of the BSH production system a global standard has been created that will lead to optimal use of resources along the entire value chain. A matter of common sense With its cutting edge climate protection projects, BSH is setting standards and proving that ecology and economy need not be mutually exclusive Supervisory Board Report Board of Management, Supervisory Board Management Report Development of business Net assets, financial position, and results of operations Significant opportunities and risks for future development Anticipated Trend Group Financial Statements Consolidated Statement of Income Consolidated Balance Sheet Consolidated Statement of Cash Flow Statement of Recognized Income and Expense Consolidated Statement of Changes in Shareholders Equity Notes to the Consolidated Financial Statements Share owner BSH Bosch und Siemens Hausgeräte GmbH Independent Auditors Report Summary of Past Performance

6 4 The figures are conclusive proof of our success Dr. Kurt-Ludwig Gutberlet, President and CEO of BSH.

7 FOREWORD 5 Strong in competition The year 2007, to which this report relates, was an anniversary year for BSH. It is now four decades since Robert Bosch GmbH, Stuttgart, and Siemens AG, Munich merged their respective home appliance divisions and formed BSH Bosch und Siemens Hausgeräte GmbH. In the years since, BSH has systematically developed itself from mere exporter to Europe to one of the world s leading home appliance manufacturers. Growth against the trend In this our anniversary year it is once again apparent that BSH is one of the most competitive companies in the home appliance sector. We have again succeeded not only in winning new market shares in most markets but also in growing profitably, despite having to contend with a difficult operating climate. Rising oil and commodity prices, the rapid devaluation of the US dollar and the worsening of the crisis in real estate have dampened the mood among companies and consumers alike. The markets in Western Europe and North America were impacted in particular. Reduced construction activity in the US has caused the market for white goods there to collapse, but in spite of this, BSH still managed to achieve 18 percent growth. Even in Germany, which is one of our most important markets, the going was tough in 2007, with demand for large home appliances weaker than the economy overall. In spite of this, however, BSH posted higher growth than the competition. In China, where market growth was 14 percent last year, we increased our sales by 32 percent, and in Eastern Europe our growth rate of 22 percent was four times that of the market. Global sales for the group as a whole grew by 6 percent to 8.8 billion euros. In addition to this, earnings rose 18 percent year on year. Figures like these make it impossible to dispute our success. The factors that contributed to our success This success is no accident, of course: it is the result of targeted action on our part. One factor involved has definitely been our consistent policy of investment in our production facilities, and in innovative product lines. In Germany, we have invested heavily in our dishwasher and cookers production plants, and this year has also seen the successful ramp-up of a new generation of washing machines.

8 6 The Board of Management of BSH (from left to right): Prof. Werner Vogt, Dr. Kurt-Ludwig Gutberlet, Dr. Wolfgang Colberg, Jean Dufour

9 FOREWORD 7 In Nanjing, China, we are in the process of massively expanding our appliance park there. In St. Petersburg, Russia, we have opened a new refrigeration factory and have started building a new washing machine factory. In Çerkezköy, Turkey, we have expanded the dishwasher factory, and in the Polish city of Łódz we inaugurated a new development and testing center for dryers. This list is far from exhaustive, and merely offers a sample of our activities during Another important factor in the success of BSH can be described as process excellence. Universal processes allow us, as a global operator, to collaborate across functions, countries and departments efficiently and in a targeted way. In the last few years we have put a great deal of effort into continually optimizing these processes, and in doing so have developed the instruments both to measure the quality of these processes and to constantly improve them. This has created the kind of transparency needed for value-based management of the group. However, the most important success factor for BSH is the global workforce of almost 39,000 employees, who share our vision and give their all for the company on a daily basis. For this we would like to offer them our heartfelt thanks. Strong for the future The year 2007 will not only be remembered as the latest high point in the company s history, but also as the year in which the consequences of climate change, in all their drama, finally entered public consciousness. For years, BSH has been in the vanguard of the development and production of energy-efficient home appliances. There is therefore a strong case for our playing a leading role in promoting them, and we intend to step up our efforts in this area still further. BSH sees one of its future functions as being to make an important contribution to climate protection through appliances that conserve resources. And it has now been shown that commitment of this sort pays off. Even if the challenges BSH has to face in the future are no less daunting, it is in a strong position to stay on its current growth course. We have a strategy, and if we continue to pursue it systematically there is no reason why our success of recent years should not continue. Dr. Kurt-Ludwig Gutberlet Dr. Wolfgang Colberg Jean Dufour Prof. Werner Vogt

10 The big difference All over the world, from Hong Kong and Singapore to Munich BSH s reputation is assured through the quality of its products. The reasons for this are many.

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12 10 Products for a better life Paradise Island residential complex in Singapore was fitted exclusively with built-in appliances by Gaggenau, a BSH brand. As head of International Sales at BSH, Dirk Hoffmann travels a lot today in Munich, tomorrow in Hong Kong or Singapore and the day after, perhaps some place off the map in Saudi Arabia. And what Dirk Hoffmann and his colleagues sell in the process is traded in units of impressive magnitude. They call the type of business they do project business, and it represents the high-end segment of the international built-in appliance market not fitting single kitchens with a cooker, refrigerator and dishwasher; but fitting out entire upscale neighborhoods and enormous housing complexes. From the Verve Suites in Kuala Lumpur and the World Trade Center in Dubai to the amazing high-rise Arch in Hong Kong, an increasing number of luxury properties are being fitted entirely with appliances from Bosch, Siemens or Gaggenau. Thinking in terms of processes German engineering and perfect logistics are sought after the world over. However, there s plenty of work for Dirk Hoffmann to do before these factors come into play. For example, when it becomes public that a new site in, say, Malaysia, is to be developed, a certain amount of detective work is required, and all available information channels have to be tapped. Who is the developer? What exactly do they need? As Dirk Hoffmann explains, It s the first project that counts: once we ve shown what we can do, the rest practically takes care of itself. Once you represent a model for success for a developer, they ll usually continue to want to collaborate with you they see you as a reliable partner. BSH has found that the most effective recipe for success in such cases is to make sure that you supply more than just the bare product. Hoffmann sums this up as follows: We have the most success in those markets where we offer a full project management service. By this he means that if you supply the hardware, you get the opportunity to supply the software and then, as well as supplying top quality products, you can impress with your smooth handling of the order. Even the most luxurious kitchen is only as good as the equipment in it. The BSH appliances make the difference. Previous page: Dr. h.c. Dirk Hoffmann in front of the Hong Kong skyline.

13 CORE COMPETENCE 11 Time is money, especially in construction. On day Y, exactly at Z o clock, appliance X must be outside the door of the completed apartment on the 17th floor and ready to install. Dirk Hoffmann knows exactly what his contacts need: If we make sure that there are no delays even perhaps time to spare that s worth its weight in gold to developers. For them, each day saved could mean selling or letting the property a day earlier. So our process management can create considerable added value for them. How this works in practice is explained by the Head of Growth Markets Corporate Sales, Dr. Peter Böhm, using Hong Kong as an example: BSH s site manager is already on the spot eight weeks before completion, observing the progress of this 2000-apartment project. It would be absolutely fatal if we were to deliver the appliances before everything was ready for them to be installed. BSH generally uses certified service partners for installation work, and even trains their employees in advance. The acceptance inspection is then carried out using its own personnel. Nothing is left to chance from the planning through to coordinating the various works to be carried out by the electrical and gas engineers, plumbers and kitchen furniture manufacturers. We think in terms of processes, says Böhm, and it s not just a question of establishing the perfect workflow: it means once we have demonstrated perfect performance and quality, being able to deliver it over and over again in subsequent projects. And that s definitely where our strength lies. The idea is that, for the developer, the decision to use BSH should mean all-round peace-of-mind. Dr. Peter Böhm has global responsibility for growth markets.

14 12 Success breeds success Good performance is rewarded with more orders sometimes in other countries. As the big developers with annual sales figures in the billions tend to be global operators, the effects of a good reference can be felt in other countries, indeed other continents, as well. As Dirk Hoffmann says, If we have established a very good business relationship in a country like Malaysia, and the developer then does a similar project in, say, Dubai, then we can count ourselves in, right from the planning stage. For those responsible at BSH, this opens up broad prospects. According to Hoffmann, BSH has orders on its books for as far ahead as 2011, but he says they still have to plan way beyond that date. Hoffmann and Böhm are talking specifically about projects in the Near East here, but using their expectations of future business as a guide, the company is also keen to position itself elsewhere. And Hoffmann is not only talking about the growth potential of his own division: When we manage to establish awareness not just of the BSH brand but also of our solution competence, then we have a head start in any business we might do as a result in core business areas. The added value of BSH Kuala Lumpur, Dubai, Hong Kong but back in Munich, Rudolf Walfort explains what an ordinary customer, who isn t buying electrical appliances as part of a multimillion-euro luxury villa purchase, stands to gain from all this. For customers like these, what is it that tips the scales in favor of BSH over one of its competitors? What added value do they get when they opt for Bosch, Siemens, Gaggenau or one of the other BSH brands? Walfort, who is responsible for built-in cooking appliances at BSH, can immediately think of a whole series of things that are in fact unique in the market: Slide and Hide, for example, the oven door that is fully set into the appliance a concept that is

15 CORE COMPETENCE 13 not just practical, but also won the if product design award; or the liftmatic oven which, because it is wall-mounted, opens up a host of new layout options for the customer. Instead of having a drop-down oven door or pull-out rack, at the press of a button a lift lowers the entire oven floor, together with the suspended baking shelves. Then there are TwistPad controls, not to mention the whole area of sensor technology and automated programming That s just a small selection from my product area, says Walfort, all developed by the company and all product features with USP potential. But I don t really like talking about individual product features. The real added value delivered by BSH is its system competence, and it ll be quite a while before anyone catches up with us in that area. System competence? Rudolf Walfort gives us an example. Take food: more and more people are discovering steam cooking, a particularly vitamin-conserving method. Well, we ve had a series of products for steam cooking in our portfolio for a long time. On the other hand, vitamin-conserving cooking methods are of no use if the vitamins have already been destroyed beforehand! This is why we must concern ourselves with food being stored correctly either deep frozen or at around 0 C. So to us, system competence in this context means that we must look at the whole food chain, from purchase onwards, and bring solutions onto the market across all product areas that are coordinated down to the last detail. This also means constantly having to think about how people s circumstances and thus their needs change. Scenario analysis is what Rudolf Walfort calls this constant peering into the future, this development of visions aimed at offering people the products that can make their lives better, whether they live in Munich, Dubai or Hong Kong. Rudolf Walfort sees the added value of BSH as being primarily its system competence both in relation to the entire supply chain and in the way its various product lines are perfectly coordinated.

16 On the road to success Through systematic personnel development, BSH ensures that its employees can work in positions in which they are best able to develop their potential.

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18 16 Challenges and opportunities The ability to integrate and cooperate is a key requirement of BSH employees. In a company that has always stood out from the competition as regards quality, innovation and cutting edge technology, high levels of technical competence, creativity and commitment in its employees are crucial. Dr. Wolfgang Colberg, Personnel Director at BSH Bosch und Siemens Hausgeräte GmbH, therefore has a clear strategy with regard to the company s employees: We want everyone, and by that I really do mean everyone from assembly line workers to management to make a measurable contribution to company profits, and thus take some responsibility for the company as a whole. It s a question of give and take, because it gives everyone the chance to be part of a successful company. Challenges and opportunities are thus the key words in the search for and development of potential in BSH s 39,000 employees worldwide, as for about a year now, the company s development promotion schemes have been coordinated at a global level on the basis of a universal new competence model. Managers from its own ranks BSH systematically pursues a long-term, value-based growth strategy the key phrase here being long-term, as Dr. Colberg explains: Long-term means that we think in terms of fifteen or twenty years or more. That sort of growth strategy creates quite different opportunities from most. Our employees have extremely attractive jobs with long-term prospects within the company. We re always offering new functions, including in the international domain. We make sure that our employees are successful Dr. Wolfgang Colberg, Personnel Director on the Board of Management of BSH.

19 EMPLOYEES 17 On this basis, Colberg can permit himself to make quite specific and challenging demands of employees. Obviously, we want top people in our company, he says, but it s not enough to just find the best people on the job market and then expect success to follow automatically. We also try to identify ways in which we can help individual employees to do their jobs even better, and to derive more satisfaction from them. This is partly because BSH tries to fill management positions from its own ranks, and these candidates need to be identified at an early stage. Take Monika Gruber, for example: she is currently global Head of Controlling for the Consumer Products Division. Thirteen years ago, after passing her school-leaving exams, she applied to study for a cooperative education degree at BSH. This is a dual course, in which theory phases at the university of cooperative education (BA) alternate with work experience phases at various BSH sites. I wanted financial independence from the start, and I wanted the opportunity of combining theory with practical work within a company, she explains. She was one of the first to spend part of her training abroad, actually writing her dissertation in Australia. In those days, it was still quite a struggle to get a placement abroad but, as she says, Now, all BA students go abroad for at least one semester and I believe this intercultural experience is really important. After completing her studies, she started work as a section head in Controlling, for Consumer Products. Seven years deployment in Spain and Scandinavia followed. In Scandinavia, she started as Head of Business Administration for Norway and later became Head of Controlling for the whole of northern Europe as well, finally returning to Munich in Monika Gruber is in no doubt that her successful career so far is in no small part due to the support she has received from BSH s Human Resources Division along the way: I was able to complete two training courses every year, and they were always practice-based and relevant to the work I was doing at BSH. They also gave me a cross-divisional perspective and broadened my horizons. In all the countries I worked in, I learned the language and got to know people, After seven years abroad, Monika Gruber is back at the Munich headquarters where she is Head of Controlling, Consumer Products.

20 18 Head of Personnel Development, Andrea Werner: Our universal competence model provides a common framework for personnel development at BSH. so I have built up my own, personal international network. This network that Monika Gruber has built up, the source of which is basically BSH s International Executive Pool, contains a member of junior management from no fewer than four countries China, the US, Turkey and Russia. They meet twice a year to discuss problems and hammer out issues. Gruber simply says: BSH was offering a great opportunity here, so I took it. People who really fit in Monika Gruber s career at BSH over the last 13 years has been due both to her own ability and to the company s targeted development promotion measures. That is not to say that fate, committed line managers and her own initiative didn t also have a lot to do with it. These days, in a company constantly facing the challenges of global competition, finelytuned instruments are needed for placing the right people in the right positions. As Dr. Colberg says: It is important to us to find people who really fit in here. For this we needed a universal competence model that defined exactly what we require of people at BSH. Having such a model creates clarity and consistency. Also, because it reflects our corporate culture, it helps employees identify with the company. At BSH, it is Personnel Development (PE) that is responsible for developing and implementing this universal competence model and the instruments it applies. Head of Personnel Development, Andrea Werner, adopted a practice-based approach. Within four or five months her team, working in conjunction with top managers from throughout BSH, had identified the necessary criteria and, from them, developed the universal 12-competence model. It was approved in July 2007, and has since been implemented in BSH s Orientation Centers (OCs), which are similar to its better-known Assessment Centers, which are used for personnel selection. However, unlike them, according to Andrea Werner the sole purpose of the OCs is to determine where in the company employees should

21 EMPLOYEES 19 The continuing professional development of its personnel is of central importance to BSH. work, and thus help them decide what direction they would like their development at BSH to take. The list of competences is divided into four main areas strategy and management skills, methods and problem-solving skills, leadership and social skills and personnelrelated skills. In each of the four groups there are also three subskills, all of which have been specifically derived from daily routine at BSH. For example, says Andrea Werner, it is essential that our people are capable of integrating and cooperating. We have so many interfaces that in the search for solutions we have to work with different people and functions everywhere. If you can t do that, then you ll find it hard to get on at BSH. Other key qualifications are, for example, performance motivation and commitment or and to Dr. Colberg this is particularly important process competence. Colberg: We ve been working for years on ensuring that our employees thinking is processoriented, and that they don t all isolate themselves in their own little ivory towers. Intercultural competence, too, is absolutely essential in a global enterprise like BSH. An upward spiral The next challenge will be to apply the various parts of the program they have worked out over the past year to actual personnel work in the field, and this will include integrating it into a suitable talent management IT system. If we want to promote global careers, we must make sure that all personnel development measures worldwide are linked, says Andrea Werner, and it s our new competence model that will provide the basis for this. Dr. Colberg is convinced they re on the right track with this initiative: We make sure that our employees are successful, and that they have fun being successful. In this way, we create an upward spiral in which success breeds success. So it s a case of onwards and upwards, both for the employees and for BSH.

22 A system that adds value The introduction of the BSH production system sets a global standard for the optimal use of resources along the entire value chain.

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24 22 Standards for greater efficiency Following a pilot phase in Traunreut, the BSH production system will be rolled out at all sites worldwide. The world of engineers is one of facts, figures, mathematical formulae and logical interrelationships engineers are only interested in what can be measured and calculated. You know, says mechanical engineer Simon Mayer, manager of BSH s factory in Traunreut, I m a numbers person. I look at the numbers, and then I make decisions. One decision was an easy one for Simon Mayer, as he explains: Here at Traunreut, we wanted to be one of the first to introduce BSH s new production system, as we see it as offering a fantastic opportunity, not only to deliver more quality, more flexibility and more value, but to be able to measure and quantify these factors as well. 100 percent in 2009 Great expectations. But what exactly is this production system? Put briefly, it is a holistic approach, the aim of which is only to produce what the customer wants, and to do so as quickly and cost-efficiently a possible. This is why it s becoming increasingly important to implement universal standards throughout the group. In a globalized market, the effects of factors such as shorter innovation cycles, a constantly increasing number of variants and ever more stringent quality requirements at the same time as falling market prices are being increasingly felt. Global operators such as BSH do not have time to rest on their laurels; they must rise to these challenges before it is too late, not just by applying best practice in production, but by being prepared to try out new concepts as well. Three years ago we started looking into the idea more closely, remembers Simon Mayer. There had already been forerunners in Nauen and Giengen. Then, in early 2006 the decision was finally taken to roll out a universal production system throughout the group worldwide, and we at the Traunreut factory asked to be used for the pilot. After that, everything happened very quickly, and the changeover process has been under way since mid Now, at the end of 2007, we have gone over to the new production system in about 30 to 40 percent Each individual step in the production process is examined down to the last detail and then optimized. Previous page: Katrin Fehr and Werner Schmid in the cooker plant at Traunreut.

25 PRODUCTION SYSTEM 23 of the factory i.e. the whole of our newly designed cooker assembly unit has gone over to it, and our cooktop assembly unit is due to be converted during This means we re right on schedule for Traunreut to be 100 percent based on the new system from By then, all other BSH factories will have started rolling out the new system. Taking people with you Simon Mayer may be a numbers person, but it was not long before he realized that most of the challenges he faced with the introduction of the BSH production system were not technical in nature, but psychological. As he reports, there was obviously a certain amount of prejudice to overcome, with people muttering things like: Now what have they thought up to make our lives more difficult? Although it was important to dispel these prejudices and fears right from the start, it was also important to take them seriously. We mustn t forget, Mayer says, that with the new system, the way people work together has completely changed. We have to make sure that each individual has a full understanding of the whole production process. But as a result, each individual must also be prepared to question whether their particular step in the work process is actually useful and that s not an easy thing to do. So for Simon Mayer it was particularly important to take his people with him. Every employee at the plant, from manager to assembly worker, had to be helped to come to the We saw the opportunities it offered, so we wanted to be in on it from the start Simon Mayer, manager of the cooker factory in Traunreut.

26 24 For Stefan Lauwitz, one of the greatest advantages of the new system is its transparency. clear and logical conclusion that a production system of this sort brings benefits for everyone and, in the final analysis, is actually much better than all the other options. Stefan Lauwitz, Head of Corporate Production Technology at headquarters, who is coordinating the rollout of the system from the group s headquarters in Munich, adds that a production system of this sort is also a matter for the bosses, saying: The whole changeover, and the new thinking that goes with it, must be seen to be being experienced by everyone. First and foremost, it s essential that management takes the trouble to know and understand these processes, because only what I understand myself can I put into practice and communicate to others. Working in a value-creating way First of all, workshops for around one hundred managers were held at Traunreut. Over the course of a day-and-a-half, they learned what the changes to the production sequence mean, how they are to be implemented, what the production system is supposed to achieve and, not least, about the new philosophy behind it all. Cooker production was the first to be radically changed, with five principles, namely producing according to demand, solid product start and discontinuation, challenging and fostering employees, avoiding errors and avoiding waste being applied. Standing right where it s all happening, on the production line itself, Katrin Fehr, who is responsible for time management, explains what has changed: The work done at each workstation can be divided into two kinds valuecreating and non-value-creating. Our aim was to create conditions that ensured that the proportion of value-creating work was as large as possible. For example, two steps forward and two steps back, or turning round to pick up another screwdriver, are clearly not valuecreating. By analyzing problems such as these at every single workstation they were able to optimize workflows, which are now defined down to the last action and for each station. Katrin Fehr says that for the workers in assembly this was a really big change at first: People had the feeling they were losing some of their personal freedom at their workstations. However, they soon noticed that there were plenty of advantages to the new way of doing things. The new workflows

27 PRODUCTION SYSTEM 25 Gearing the production lines to the requirements of the people who work on them minimizes the proportion of non-valuecreating work. increase productivity and actually make work easier. But assembly is not the only factor in the equation. The BSH production system affects the whole value chain, from the purchase of raw materials and components, through storage and logistics and production in the factories to the actual delivery of appliances. When they analyzed this value chain, Simon Mayer and his co-workers noticed that, at 30 to 50 minutes, the processing times for materials in the factory accounted for a very small section of the chain in terms of time. However, it took ten days for the product made from these materials to be finished and to leave the factory. According to Mayer, this was attributable to the length of the storage phases between the individual production phases. We immediately changed the technical setup to make the various production areas more closely linked. By doing this we were able to make massive reductions in the size of the buffer stocks, and now it s more value that s created in the workstream, instead of more handling. We can do it Stefan Lauwitz distils the production system concept down to one essential point, saying: No matter what we do, the first thing is to create transparency. Then we can see where value is being created and where resources are still being wasted and that s something we can systematically improve. And by creating transparency and universal standards, we re also making it possible for the immense knowledge and experience that exist within our organization worldwide to be shared and made accessible to everyone. Transparency is all well and good, but what about the numbers, Simon Meyer do they add up? In response to this question, Simon Mayer leans back and looks relaxed: We ve made really good progress there already, he says. Our sales department is now able to influence production from the fifth working day. That s a considerable improvement. We re achieving enormous reductions in warehouse stocks as a result. And then there s the target we ve set ourselves, here in Traunreut, of saving several million euros through the production system and I think we can do it, too.

28 A matter of common sense With its cutting edge climate protection projects, BSH is setting standards and proving that ecology and economy need not be mutually exclusive.

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30 28 Pioneering work in climate protection Production of energyefficient refrigerators at BSH s plant at Hortolândia in Brazil. Few thought it would work putting brand new, energy efficient refrigerators into shacks in shanty towns but it is working, and achieving threefold benefit social, ecological and economic into the bargain. The idea is as simple as it is effective. At any rate, this BSH model is receiving the highest praise from non-governmental organizations because it combines in exemplary fashion the three pillars of sustainability. BSH s Refrigerator Exchange initiative, on which it has collaborated with local energy providers in the favelas in various Brazilian cities, is one of many projects that bear witness to the company s consistent commitment to climate protection. It is the result of many years research and experience, as it is not only since the recent debate on climate change that BSH has been one of the leading companies in the sector in developing energy-efficient and resource-sparing appliances. The year 2007 will thus go down in memory not least as the year in which the Nobel Peace Prize was awarded to Al Gore and the Intergovernmental Panel on Climate Change; but it was also the year in which mankind truly became aware, for the first time, of the dramatic global consequences of climate change. BSH has landmark years of its own to remember, however: back in the nineties, for example, Bosch unveiled one of the first fully CFC- and FC-free refrigerators a pioneering contribution toward combating climate change. We can justifiably say that since the seventies, we have shown a good deal of the pioneering and entrepreneurial spirit when it comes to energy efficiency and sparing resources, says Dr. Herbert Mrotzek, Head of the Corporate Environmental Protection and Health and Safety department, which BSH set up as early as Its stated mission is to continually improve climate protection through innovative solutions. Dr. Herbert Mrotzek, Head of Corporate Environmental Protection and Health and Safety. Previous page: Márcio Vazquez in front of old refrigerators awaiting recycling.

31 ENVIRONMENT AND SOCIETY 29 Saving energy in day-to-day operations As over 90 percent of the environmental damage caused by large home appliances occurs during normal use, this is where BSH can make the greatest contribution to ecological equilibrium, i.e. in the environmentally friendly design of its products. This includes reducing the amounts appliances consume because, as Dr. Mrotzek explains: Older appliances often consume more than twice as much electricity and water as new ones. It was this fact that provided the inspiration for the Refrigerator Exchange initiative in the favelas of Brazil: Brazil s economy is growing, and the resulting increased demand for energy is causing considerable problems. Energy providers there are therefore required by the state to invest 0.5 percent of their revenues in efficiency programs. According to Márcio Vazquez, who was responsible for getting the project off the ground, the favelas probably contain the oldest appliance stock in the world. In these deprived settlements, some of which have as many as 300,000 inhabitants, refrigerators that either totally lack insulation or are at best badly insulated, have been the norm. And because many favela residents are not officially registered as living there, they tap illegally into the grid, which is another problem Brazil s energy providers have to contend with. As Márcio Vazquez explains: The benefit is twofold: providing poor households with free refrigerators automatically increases the official percentage of people with electricity, and at the same time we are reducing energy consumption by installing more efficient appliances. An incredible 45,000 have been replaced in the course of one year, and BSH is organizing the whole process delivering, collecting and recycling. That way, we ensure that the old refrigerators don t continue to be used, says Vazquez. Following the success of this pilot project, BSH is engaged in intensive talks with the Brazilian government, which is currently working on a major program of investment aimed at building on the benefits described above. Energy champions in all BSH companies The network of international associations, universities, energy providers and industry partners that BSH has built up over the years is proof of the incalculable value of its many years experience working to protect the environment. We keep a close eye on technical and social developments in all areas and are constantly looking to see where we can forge useful collaborations, to make sure that new technologies are used for the benefit of all, is how development engineer Horst Werkmann from Electronics, Drives and Systems (EDS), one of BSH s innovation centers, describes his department s aims. Márcio Vazquez (photo, top of page): BSH coordinates the whole process of replacing old refrigerators in the favelas, including the recycling.

32 30 For example, it is one of the dreams of this BSH think tank to design a washing machine or dishwasher that only springs into life when a wind turbine is running, or there is sun to supply solar power collectors with energy an intelligent network, in fact. It is important not to rest on our laurels, and instead to keep looking far into the future, is the way Werkmann sees it. This is why, at BSH, they have actually started to bring together all the resource-conservation activities currently under way within the company into a single project. The importance being attached to this project is evidenced by the high caliber of the steering team that has been put together for it it includes two members of BSH s Board of Management, for example. The company s strengths are to be pooled in five modules, starting in Product Development, Marketing and Corporate Communications and continuing with work in groups and policy committees, so that the individual projects can be coordinated and their impact made even greater. Jean Dufour, Member of the Board of Management, says, quite simply, that Energy excellence must become a BSH-wide movement. An important step in the right direction is the appointment of socalled Energy Champions in all BSH subsidiaries, whose job, as local experts, will be to champion environmental concerns all over the world and link up the individual country-specific structures involved. According to Dr. Mrotzek: This will allow us to put the diverse experience and special expertise in the field of energy efficiency that exists in the various countries at the disposal of the whole company. We were always leaders in this field, he says, and in future we want to be the benchmark for the sector. Horst Werkmann (with Kira Marquardt) from the BSH think tank, EDS looking far into the future. Progress in quantum leaps While we must look to the future, it should be acknowledged that what has been achieved to date is still enormous the water consumption of washing machines reduced by up to 67 percent since 1990, and the electricity consumption of refrigerators cut up to 79 percent, to name just two statistics. What has been achieved is really impressive, but is there not still some real room for improvement? Dr. Christian Zimmermann from BSH s product area Cooling is optimistic.

33 ENVIRONMENT AND SOCIETY 31 Obviously, progress is not linear, he says, it comes in stages, and time and again, new technologies can result in quantum leaps. He also stresses how important it is to persevere, and continues: With every new product we develop, energy efficiency is always part of the specifications, and when we set up a new production platform, we anticipate a jump to the next energy efficiency class, or even to the one after that and worldwide, too, even if that new energy class is still nowhere to be seen in the existing standards. This produces a strong leverage effect, which is often also the result of collaborating with components suppliers. As Dr. Zimmermann says: We not only optimize internally, for example in the layout of our appliances, but also work very closely with our suppliers on the development of components. This considerably increases the effectiveness of our own efforts. The developers concern themselves with the whole life cycle of a new appliance, from its environmentally friendly production and energy-efficient use to the ecological requirements for its recycling. Only if you avoid using critical substances right from the start can you be sure of avoiding polluting the environment when you recycle a refrigerator, for example. As Dr. Zimmermann puts it: To produce appliances that are environmentally compatible throughout their life cycle is our clearly stated aim. Dr. Christian Zimmermann from the product area Cooling. An investment that pays for itself This philosophy obviously comes at a price. But even if it does result in slightly higher production costs, the investment is certainly worth it for the customer. Constantly making customers aware of this fact, however, is not the job of the developers, but of the experts in Marketing. Their advertising campaigns leave customers in no doubt as to the economic benefits of energy-saving technology, especially in times of rising energy prices. Customers are also reminded that they are making an important contribution to the ecological equilibrium of the planet without having to sacrifice the slightest bit of convenience or comfort. Energy efficiency is quite clearly a matter of common sense, and it is also becoming a worldwide trend. The last word goes to Dr. Zimmermann: Because of our cutting edge technology, it is with our name that this trend is largely associated, and of that we are very proud. Outstandig ecological and social engagement and performance: the Brazilian team lead by Ivana Ribeiro

34 32 Supervisory Board Report During the year under review, the Board of Management reported regularly to the Supervisory Board on the performance of the company and on its major decisions, both orally and in writing. The 2006 financial statement, the development of business during fiscal 2006 and in the year 2007, and the Business Plan 2008, including HR and financial planning, were explained to the Supervisory Board by the Board of Management at the two regular Supervisory Board meetings held during the year. The Board of Management reported to the Supervisory Board on the company s economic development and the competitive situation in the relevant markets, particularly in Europe, Turkey, Russia, the USA, South America, and China, as well as the progress in implementing the corporate growth program and its further development. The Supervisory Board provided comprehensive advice on these topics. Rudi Lamprecht, Chairman of the Supervisory Board. The Supervisory Board also discussed the Board of Management s report on the situation in the product areas, in particular the Refrigeration, Laundry and Dishwashers areas, and the investment projects in China and Russia. The Supervisory Board also addressed topics including the development of material and market prices, as well as personnel and selling costs, the internationalization of purchasing, asset management and business risks stemming from the situation in the financial markets, exchange rate developments and the rise in energy costs. The Supervisory Board sought details from the Board of Management about the Group s Risk Management System, and offered advice on the establishment of a Compliance Management System. The Supervisory Board s discussions also encompassed technical, sales-related and political issues around the energy efficiency of home appliances and further cuts in energy consumption, research and development topics, including the introduction of new ranges of appliances, projects associated with the Protos plant oil stove, competitor analysis and mergers and acquisitions in the home appliance sector. In addition to its official sessions during the course of the year, regular discussions also took place between the Board of Management and the Chairman of the Supervisory Board and his deputies. The financial statement of BSH Bosch und Siemens Hausgeräte GmbH and the consolidated financial statement as of December 31, 2007, and the management report for BSH Bosch und Siemens Hausgeräte GmbH and the Group management report have been audited by Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft, Munich, and have been given their unqualified approval. The reports prepared by the auditors were presented to all members of the Supervisory Board. The Supervisory Board thoroughly examined the documents concerned, which were also discussed in full at the Supervisory Board s meeting to approve the balance sheet, which was held in the presence of the auditors.

35 SUPERVISORY BOARD REPORT 33 The Supervisory Board raises no objections and concurs with the findings of the audit. It approves the financial statement of BSH Bosch und Siemens Hausgeräte GmbH and the consolidated financial statement, and recommends that the shareholders adopt the financial statement and the consolidated financial statement and approve the Board of Management s proposal about the use of net income. Dr. Peter Moritz stepped down from the Supervisory Board with effect from May 8, 2007, followed by Mr. Volker Pruschke on August 31, We have thanked them both for their valuable contributions. They were succeeded as members of the Supervisory Board by Mr. Dominik Asam and Mr. Thomas Horst Bauer, on May 8, 2007 and October 8, 2007 respectively. Dr. Jürgen Radomski left the Supervisory Board at the conclusion of its meeting on December 7, Dr. Radomski had been a member of the Supervisory Board of BSH Bosch und Siemens Hausgeräte GmbH since 1995, serving as the body s Chairman or Vice-Chairman for over six years. During this period he played a key role in shaping the development of the company. The Supervisory Board has expressed its thanks to Dr. Radomski for his great contribution to the company s current position. Mr. Karl-Heinz Seibert was elected to succeed him on the Supervisory Board with effect from December 7, The Supervisory Board would like to thank the Board of Management and the company s employees for their successful endeavors over the past year. Munich, April 30, 2008 For the Supervisory Board Rudi Lamprecht Chairman of the Supervisory Board

36 34 Board of Management Dr. sc. pol. Kurt-Ludwig Gutberlet Chairman Chief Executive Officer, Corporate Strategy, Corporate Communications, Law and Industrial Policy, Internal Audit, Consumer Products, Customer Service Dr. sc. pol. Wolfgang Colberg Chief Financial Officer, Finance and M&A, Business Administration, Corporate Development and Controlling, Labour Relations Director, Human Resources, Information Technology, Purchasing, Tax, Customs, Insurance Jean Dufour Chief Sales and Marketing Officer, Corporate Sales, Brand Management, Logistics Prof. E. h. Werner Vogt Chief Operating Officer, Chief Technology Officer, Product Area Dishwashers, Product Area Cookers, Product Area Cooling, Product Area Laundry, Electronic Systems and Drives, Corporate Technology

37 Supervisory Board BOARDS 35 Rudi Lamprecht, Munich Chairman of the Supervisory Board Member of the Managing Board of Siemens AG (until Dec. 31, 2007) Advisor to the Managing Board of Siemens AG (since Jan. 1, 2008) Elmar Freund, Bad Neustadt Vice-Chairman Chairman of the Group Works Committee Wolfgang Chur, Stuttgart Vice-Chairman Member of the Board of Management of Robert Bosch GmbH Dominik Asam, Munich (since May 8, 2007) Head of the Board of Management of Siemens Financial Services GmbH Thomas Bauer, Stuttgart (since Oct. 8, 2007) Director, Sales and Marketing Coordination Consumer Goods and Industrial Technology; Marketing Communications and Brand Management of Robert Bosch GmbH Ellen Bonna-Knöpp, Giengen Chairperson of the Works Committee of the Giengen plant Artur Fischer, Rosenheim Senior Authorized Representative of the IG Metall trade union, Rosenheim Administrative Office Peter Kern, Frankfurt Union Secretary to the Executive Committee of the IG Metall trade union Gerhard Kümmel, Stuttgart Member of the Board of Management of Robert Bosch GmbH Volker Pruschke, Stuttgart (until Aug. 31, 2007) Director, Sales and Marketing Coordination Consumer Goods and Industrial Technology; Marketing Communications and Brand Management of Robert Bosch GmbH Dr. rer. pol. h.c., Dr. techn. h.c. Jürgen Radomski, Munich (until Dec. 7, 2007) Member of the Managing Board of Siemens AG Gotthard Romberg, Stuttgart Formerly Member of the Board of Management of Robert Bosch GmbH Wolfgang Rückert, Traunreut Vice-Chairman of the Works Committee Traunreut plant Dieter Schweisfurth, Hamburg Head of Sales, Bosch Northern Region BSH Bosch und Siemens Hausgeräte GmbH Karl-Heinz Seibert, Munich (since Dec. 7, 2007) Head of Mergers, Acquisitions and Postclosing Management, Siemens AG Franz Veh, Dillingen Chairman of the Works Committee, Dillingen plant Lothar Wiedeberg, Berlin Vice-Chairman of the Works Committee, Berlin plant Prof. Dr.-Ing., Dr.-Ing. E.h. Klaus Wucherer, Erlangen Member of the Managing Board of Siemens AG (until Dec. 31, 2007) Advisor to the Managing Board of Siemens AG (since Jan. 1, 2008) Dr. rer. pol. Peter Moritz, Munich (until May 8, 2007) Member of the Board of Management, Siemens Financial Services GmbH

38 36 Management Report A. Development of business Development of the sector and of the economy as a whole A host of factors acted as a drag on the global economy in Rising crude oil and commodity prices, the more rapid decline in the US dollar, and the worsening US property crisis all depressed business and consumer sentiment. Nevertheless, at 3.9 percent, economic growth in 2007 was only slightly less than the strong rate of expansion recorded in 2006 (4.1 percent). The main boost came once again from investment activity, although consumer spending also continued to make a noticeable contribution to growth. At regional level, economic trends again varied considerably. In the USA, the property crisis had a particularly noticeable impact. Growth in 2007 was therefore significantly lower than in previous years at 2.2 percent, with the main decline in construction activity. The American economy was buoyed only by the weakness of the US dollar, which resulted in an upturn in US exports. As in previous years, the emerging economies experienced an extremely favorable economic trend. Latin America continued to benefit from very high commodity prices, which boosted investment activity and to an increasing extent consumer spending as well. At 5.3 percent, economic growth was roughly on a par with the previous year (+5.1 percent). South America s most important economy, Brazil, saw growth accelerate to 5.4 percent despite the continued appreciation of its currency. Among the emerging economies, those in Asia continued to achieve the strongest rate of growth, expanding by 8.9 percent. The best performers in 2007 were once again China (+11.5 percent) and India (+9.2 percent). Europe picked up where it left off in 2006 by continuing to deliver a very encouraging performance. The continent as a whole achieved a growth of 3.4 percent in 2007 (2006: +3.5 percent) with Central and Eastern Europe an above-average rate of growth (6.5 percent). Thanks primarily to the strength of the global economy, the fast pace of expansion in Western Europe was largely unchanged at 2.8 percent (2006: +2.9 percent). Neither persistently high crude oil prices, the surge in the euro, nor the sharp increase in value-added tax in Germany had a significantly adverse effect on the economic environment. Alongside exports, investment activity proved to be a further factor underpinning Western Europe s economic upturn. At 2.5 percent, growth in Germany was slightly less than the strong rate of expansion recorded in 2006 (2.9 percent). This figure is better than originally expected given the 3.0 percentage point increase in value-added tax and the sharp rise in energy prices.

39 BUSINESS PERFORMANCE MANAGEMENT REPORT 37 Demand for large home appliances in Germany was weaker than the economy as a whole. In the absence of the purchases that had been brought forward to beat the upcoming increase in value-added tax, thereby boosting unit sales at the end of 2006, revenue declined by around 6,0 percent in At the end of the year, demand once again slowed more sharply than expected. Built-in appliances were slightly harder hit by this negative trend, as average prices in this segment, excluding the effect of value-added tax, also fell. In Germany, as in Europe, the shift toward energy efficient home appliances continued. As the largest European market for home appliances, Germany also influenced the trend across Western Europe as a whole in Alongside Germany, the markets in the United Kingdom, Spain, and Turkey recorded figures reflecting a negative trend. In the United Kingdom and Spain, demand for home appliances was negatively impacted mainly by the weak property market. Turkey recorded a surprisingly sharp decline compared with previous years. Here, consumers were unnerved by factors such as the political environment, which resulted in a negative trend in the demand for home appliances. Since the positive trend in the markets in Italy, the Netherlands, and Sweden barely made up for the decline in core markets, market revenue in Western Europe remained roughly on a par with Once again, there was an encouraging trend in the demand in Eastern Europe, primarily in Poland, Ukraine, and the Baltic states. In contrast to previous years, growth in Russia was moderate by Eastern European standards. The overall market growth rate for Europe, including Turkey and Russia, was around 1 percent. As in previous years, the emerging economies of Latin America saw a positive trend in the demand for large household appliances. Growth in Asia continued to be driven by China, which again expanded at a double-digit rate. In the USA, the property crisis and accompanying slowdown in residential construction activity had a significant impact on the demand for home appliances. After years of solid growth, the market saw a sharp decline in unit sales. Due to the weak dollar, the sector also recorded a fall in revenue in euro terms in Due mainly to the trend in the US market, but also to the subdued markets in Western Europe, the global market for large home appliances was roughly on a par with the previous year in euro terms. Revenue trends In the year under review, BSH Bosch und Siemens Hausgeräte GmbH (referred to in the text as the Group or BSH ) generated consolidated revenue of EUR billion, a year-on-year increase of 6.1 percent. After currency adjustments, the increase in revenue stood at 7.0 percent.

40 38 MANAGEMENT REPORT Consolidated revenue in Germany fell by 5.6 percent to EUR billion. Following a sharp rise of 9.4 percent, revenue outside Germany accounted for 80.5 percent of the total (2006: 78.1 percent). Sales by Region 1.4% Others 8.4% Asia 3.4% Latin America 6.2% North America 9.4% Eastern Europe 19.5 % Germany In Western Europe, including Turkey but excluding Germany, the Group increased revenue by 5.5 percent, outperforming the market in most Western European countries. Above all, the markets in France, Germany, and Italy enabled BSH to achieve above-average revenue growth. In Eastern Europe, BSH continued to deliver the revenue growth seen in previous years, increasing revenue by 24.4 percent and thus outstripping the strong comparative figure for BSH achieved exceptional revenue growth in almost all countries in Eastern Europe, where Poland and Russia in particular made a significant contribution to consolidated revenue. 51.7% Western Europa excluding Germany, includingturkey In the North American market, BSH was able to increase consolidated revenue by a further 7.8 percent year on year in euro terms despite the property market crisis and the weak dollar. The lines of dishwashers, cookers and laundry appliances produced by the Group in the USA once again helped it to outstrip prior-year growth. Stable demand for home appliances in Latin America also lifted consolidated revenue in the year under review. BSH continues to post sharp increases in revenue in Asia. The Group achieved significant revenue growth primarily in China with the help of its laundry and refrigeration appliances and also in Hong Kong and Singapore. The Group also achieved strong revenue growth in Australia/Oceania. Production BSH operates a development and production network comprising 44 production facilities at 31 sites worldwide, allowing it to compete at an international level in a globalized economy. By dovetailing development and manufacturing, the Group enhances its production flexibility. At the same time, BSH s direct proximity to customers in regional markets ensures that it is able to respond as quickly as possible to changes and requirements. In doing so, BSH competes successfully with globally active rivals and in a changing competitive environment where innovation cycles are becoming ever shorter and quality requirements ever more exacting.

41 BUSINESS PERFORMANCE MANAGEMENT REPORT 39 In the year under review, BSH started to reorganize its production processes, optimize procurement and production logistics, and standardize processes across the entire value chain by introducing a uniform production system. Transparent processes enable weaknesses to be identified and eliminated, thereby increasing productivity and cost efficiency. The growth in consolidated revenue in 2007 resulted in a further increase in the facilities output. Capacity in Germany and Europe underwent a double-digit increase. Overall, production capacity utilization was at almost equally high levels in Germany, Europe, and overseas. As well as being committed to delivering constant improvements in productivity, the Group continues to make no compromises in setting the highest standards of quality for its products, while at the same time accommodating requirements relating to function, equipment, and design. By increasing capacity in selected areas, BSH will continue to pave the way for profitable growth. Procurement The overall picture in 2007 was one of difficult procurement markets coupled with a continued upward trend in prices. The main influencing factors in this context were the surges in nickel and crude oil prices and substantial increases in the prices of copper and chrome. Due to increases in the cost of iron ore, coal, and scrap, steel prices almost remained at a high level. In addition, rising energy costs had a negative impact on producer prices. Although, in previous years, BSH s long-term supply agreements had lessened the impact of rises in commodity prices, these price rises increased costs to a greater extent in the year under review, particularly component costs. By carrying out numerous rationalization activities, the Group was nevertheless able to keep increases in the cost of materials to a reasonable level. This was also achieved with the help of copper and nickel hedges and by inviting selected suppliers to enter into BSH framework agreements where larger quantities of primary products are required. Procurement thus made a very positive contribution to the Group s competitiveness. Because of the continued strong demand for primary products, especially from China and India, BSH anticipates further increases in material prices in Due to the ongoing rise in global market prices, products such as plastics that depend on crude oil or oil derivatives are expected to see further severe price increases.

42 40 MANAGEMENT REPORT The process of consolidation under way among global suppliers will continue in Mirroring past events in the steel market, suppliers of plastic pellets are now making efforts to consolidate. BSH is responding to the trend toward greater consolidation among suppliers of primary products by making even greater use of the market opportunities available worldwide. To avoid economically unviable situations in which it is dependent on particular suppliers, BSH will redouble its efforts to place specifications for materials and their processing across as broad a supply market as possible. Qualitative requirements will in each case have to be aligned with technical standards. Against this background, it will be necessary to attach ever greater importance to supplier training and expanding the base of capable procurement sources offering a consistently high standard of quality. As part of an ongoing process, efforts continue to reduce the cost of materials through improved technical solutions. In the year under review, these activities to some extent checked the cost increases resulting from market prices. Going forward, rationalization activities will continue to be a key factor in BSH s success. Investment* in EUR million Investments Investment by the Group in intangible assets and property, plant, and equipment (excluding goodwill) increased by 5.8 percent to EUR 378 million, which equates to 4.3 percent of consolidated revenue. Germany accounted for EUR 140 million of the total invested in intangible assets and property, plant, and equipment and other countries for EUR 238 million, with Asia, North America, and then Eastern Europe the main focal points. Of the total amount invested, 34.5 percent was spent on new products, 24.2 percent on expansion and rationalization activities, and 29.8 percent on land, buildings, logistics, information technology, and other items. Investment in replacement assets accounted for 11.5 percent * Investments in intangible assets and property, plant, and equipment (excluding goodwill) Finances Current and noncurrent financial liabilities fell by a total of EUR 93 million in the year under review, partly as a result of the EUR 59 million repayment on a short-term loan made by BSH Finance Management GmbH, Vienna. The decline in current financial liabilities of EUR 3 million is due to the reduction of those liabilities and above all to the opposite effect of the reclassification of noncurrent financial liabilities in Germany in the amount of EUR 106 million.

43 BUSINESS PERFORMANCE MANAGEMENT REPORT 41 The Group has agreed on a long-term capital expenditure facility of EUR 50 million for its subsidiary in Turkey with the European Investment Bank in Luxembourg. The agreement is somewhat special in that it is the first to offer the choice between euros, Turkish lira, and other currencies when tranches of the loan facility are drawn down concurrently. Cash and cash equivalents increased by EUR 148 million to EUR 453 million in the year under review, mainly as a result of successful asset management. The cash changes in trade receivables and payables are particularly notable in this context. The Supplier Finance Program (SFP) implemented by BSH in Germany and Poland in 2006 was further developed in the year under review. In coordination with commercial banks, suppliers, and specialists, the Group started to prepare for this SFP in the USA and to roll it out in Turkey and Brazil bearing in mind the experiences to date. As in the previous year, currency risks from operating activities were continuously ascertained, evaluated, and hedged in accordance with the hedging policy defined in the Group s financial guidelines in a rolling process with a horizon of up to 12 months. Such risks are hedged primarily using forward exchange contracts and occasionally using option contracts. In the year under review, interest rate risks continued to be countered mainly by taking out fixed-rate loans. In 2007, BSH introduced cash flow hedge accounting as part of currency management at Group level. Extensive documentation had to be prepared, procedures defined, and detailed discussions held with experts before the Group could continue to roll out cash flow hedge accounting with selected subsidiaries abroad in fiscal As in previous years, the Group pursued those risk-adjusted investment strategies that have proven the most successful in practice in investing its funds. Despite the volatile market environment, its investment securities once again made substantial contributions to earnings in the year under review. To optimize liquidity in the Group, BSH continues to use the Groupwide, centrally controlled cash management system. A central Treasury Controlling unit provides continuous monitoring, identification, and evaluation of potential treasury risks in the Group. BSH retained its external long-term rating of A-/stable from international rating agency Standard & Poor s in 2007.

44 42 MANAGEMENT REPORT Workforce by Region 15% Asia 4% Latin America 5% North America 10% Eastern Europe 30% Western Europe exluding Germany, including Turkey 36% Germany At December 31, 2007 Human resources and social issues At December 31, 2007, BSH employed a total of 38,950 people worldwide, including apprentices/trainees. Of this total, 24,890 (2006: 23,731) were employed internationally and 14,060 (2006: 14,223) in Germany. At the end of the year, there were 682 employees in various stages of apprenticeship/traineeship, 447 of whom were located in Germany. Headcount was increased mainly at the companies in China, Turkey, and Russia. Personnel restructuring was carried out in Germany, Spain, and Latin America for local facility-related reasons. In fiscal 2007, human resources (HR) activities at international level focused on stepping up and systematically implementing a HR policy that also includes the subsidiaries. At national level, HR activities in Germany focused on introducing and implementing the framework agreement on pay (ERA) as of July 1, This agreement brought a complete change of wage scale for the German employees concerned. On the whole, the uniform approach to HR policy recently adopted by BSH was systematically pursued at Group level, resulting in turn in organizational improvements in daily workflows. A standardized and systematized method of international personnel development was introduced with a view to further optimizing appointments to key positions in the Group. To safeguard this HR strategy, BSH provides intensive personnel development through programs such as the Junior Executive Pool, the International Executive Pool, and the Senior Executive Program. A BSH competence model has been developed for application internationally to support the business model throughout the Group. This is used as the basis for personnel and management development. On the employer branding front, BSH competed for the Top Employer 2007 award run by crf and German magazine Karriere. Its fourth place position was an excellent achievement. This commendation is a clear indication that BSH is highly attractive to skilled workers and managerial staff. Among the companies voted Germany s top employers by manager magazin, BSH achieved excellent rankings among the 100 best employers in the economists and engineers categories. As part of its university marketing drive, BSH was represented at various recruitment fairs in Germany and agreed on a premium collaboration arrangement in the field of marketing with the Ludwig- Maximilians-Universität in Munich. This collaboration arrangement will increase knowledge transfer between academia and industry via case studies and presentations and through the company s direct contact with students.

45 BUSINESS PERFORMANCE MANAGEMENT REPORT 43 On March 5, 2007, the German federal government and the country s leading industry associations extended the National Pact for Training and Young Skilled Workers. This political initiative aside, BSH is making a valuable contribution by continuing to offer the same high number of training positions in Germany (447). Once again therefore, the Group went far beyond its actual requirements in providing training in On innovative, needs-based programs with an international thrust, highly capable and performance-driven recruits are prepared for business administration roles in the workplace. In the year under review, the BSH JuniorFirma program provided the first opportunity for trainees and students to develop an entrepreneurial mindset and take responsibility for tasks. With a view to providing further training for BSH employees, the Group currently has 72 authors in place worldwide, who are tasked with preparing information and education programs. Web-based training on the professional development portal is playing an increasingly important role and thus supporting continuing professional development in the workplace. The increasing number of employees on international delegation within the Group is of particular importance. The 201 expatriates in 30 countries, 50 inbounds at BSH sites in Germany, and 21 employees involved in cross-country transfers reflect the increasingly international profile of the Group s HR activities. Environmental protection BSH is aware of its responsibility toward the environment and society. The company has underlined its commitment to corporate social responsibility by declaring its support for the ten principles of the United Nations Global Compact and signing the CECED Code of Conduct, the code of conduct of the home appliance industry. Internally, these have been incorporated into the corporate principles and the Business Conduct Guidelines published in 2006, formalizing the obligation on all employees to implement them. A central concern of BSH is to develop and produce environmentally compatible, energy-efficient home appliances. Innovative technological and environmental standards are rigorously applied within the BSH Group to ensure that this objective is achieved. BSH thus increases its competitiveness, safeguards its employees jobs, and makes a major contribution toward resource conservation and climate protection. A centrally controlled environmental and quality management system in place throughout the Group ensures both compliance with, and further development of, the standards at all production sites. At the end of the year under review, a total of 39 of the Group s 44 production facilities were certified under ISO 14001, the international standard for environmental management systems. Environmental Figures for Production Energy per ton product (kwh/t product) Waste per ton product (kg/t product) Water per ton product (m 3 /t product) CO 2 emissions per ton product* (kg/t product) *Excluding proportion from electrical energy generation and transport

46 44 MANAGEMENT REPORT There have been continuous improvements in the environmental indicators in recent years, demonstrating that the internal objectives have been very well implemented. For the period to 2010, new BSH targets provide for an annual reduction in specific energy consumption of three percent, an annual reduction in specific water consumption of five percent, and an annual reduction in specific waste volumes of two percent. BSH s capital investment and operating expenses for productionrelated environmental protection worldwide amounted to EUR 20 million in the year under review. Climate change is seen as a global social and economic challenge of our time. Its main triggers include the high carbon dioxide emissions (CO 2 ) that result from the use of fossil fuels. Reducing energy consumption is therefore a key lever in checking CO 2 emissions. The CO 2 emitted during production at BSH sites results from the use of gas and heating oil. In 2008, BSH will for the first time publish its carbon footprint, showing the CO 2 emissions from all BSH activities in fiscal 2007 and including the CO 2 emissions resulting from energy and electricity consumption at production and sales sites and Group headquarters, travel and customer service activities, and the transportation of goods from the production facilities to customers. Over 90 percent of all environmental impacts occurring in the course of a product s life result from the consumption of electricity, water, and cleaning agents during the product s use. BSH developers therefore pay special attention to the appliances usage phase. Since 1990, the amount of electricity consumed by refrigeration appliances in Germany has been reduced by almost 80 percent on average. In the same period, the amount of electricity and water consumed by cookers, washing machines, and dishwashers has fallen by 30 to 40 percent, depending on the appliance and usage. There are currently around 188 million large appliances more than ten 10 years old still being used in homes throughout the 25 member states of the European Union. BSH is actively working in its own product marketing and within the European Committee of Domestic Equipment Manufacturers (CECED) to accelerate the replacement of the high number of inefficient old appliances still in use throughout Europe. Around 44 terawatt hours of electricity and 22 million tons of CO 2 could be saved each year if old home appliances were replaced with new, highly efficient products at an earlier stage. As part of its responsibility to take back products and dispose of old appliances in an environmentally sound way, BSH is working hard toward uniform quality standards in recycling. Together with the WEEE Forum, which represents European waste electrical and electronic equipment management schemes, the CECED, and the European Electronics Recyclers Association (EERA), a voluntary standard has been

47 BUSINESS PERFORMANCE MANAGEMENT REPORT 45 drawn up for the recycling of household cooling and freezing appliances, thereby providing the first pan-european requirements with respect to the recycling of end-of-life cooling appliances containing environmentally hazardous CFC and HCFC and environmentally compatible hydrocarbon. BSH published its 15th Environmental and Corporate Responsibility Report in Additional information about environmental protection within the Group and at our international production facilities is available on the Internet at Research and development In the year under review, the Group invested EUR 259 million in research and development, which equates to 2.9 percent of revenue (2006: 2.8 percent). Its investment in research and development, which helps pave the way for numerous patent applications and grants and BSH property rights, makes BSH one of the most innovative companies in the industry. At December 31, 2007, BSH had over 2,100 research and development staff, some 1,150 of them in Germany. This headcount highlights the importance of R&D to the Group. In a globalized environment, BSH has organized its worldwide development network into centers of excellence. By strategically combining and localizing the individual skills, the Group fosters the efficiency and overall success of the development network, thereby enabling BSH to improve its innovativeness and strong competitiveness. Measures taken to increase the energy efficiency of BSH s home appliances provide an excellent example of its innovations in Further enhancing its considerable development capabilities and ensuring that it remains ahead in terms of innovation are among BSH s strategic objectives. The Group realizes that only by continuing to innovate can it gain further significant competitive advantages. Against this background, BSH applies a successful intellectual property strategy centered on maintaining and bolstering the Group s own portfolio of industrial property rights worldwide. Its innovative, high-quality products enabled BSH to be successful in the marketplace in the period under review. This is reflected more specifically in the awards it received in product tests carried out by German and international consumer organizations. In 66 of the 94 tests involving BSH products in 2007, the Group emerged as Overall winner or Best Buy. Research and Development Costs in EUR million as a percentage of sales Brand design is regarded as playing a key role in communicating the innovativeness of BSH products to consumers. The 112 national and international design prizes awarded in 2007 highlight BSH s outstanding expertise in combining both development and design

48 46 MANAGEMENT REPORT Significant developments in fiscal 2007 Due to the excellent trend in revenues in the growth markets of China and Russia, BSH continued to step up its business activities during the period under review. These investments aim to extend its market position in China and Russia and increase the proportion of exports. The production line for side-by-side refrigerators at the Chuzhou production site in the Chinese province of Anhui was successfully brought on stream in fiscal The foundations were also laid for the production line at the new facility for fridge freezers, which will become operational in At the Appliance Park operated by BSH Electrical Appliances Co., Ltd., Nanjing in the province of Jiangsu, construction work began on the new production facility for washing machines. The building used for the production of small home appliances was also extended. Production of BSH refrigeration appliances for the Russian market started on schedule and using modern manufacturing equipment following the completion of the logistics and production facilities in St. Petersburg. The aim here is to meet market requirements by promptly supplying Russian customers with the latest generation of refrigeration appliances. Product advice and marketing are provided by the Group s own Moscow-based sales company, OOO BSH Bytowaja Technika. As well as investing heavily in the growth markets of Asia, BSH also continues to expand its capacity in European markets. Due to the increase in unit sales, Turkish company BSH Ev Aletleri Sanayi ve Ticaret A.Ş. is now also manufacturing dishwashers on the new production line at the Çerkezköy site and delivering them to local and European markets. Within the Group, the Dillingen site in Germany continues to produce the majority of the dishwashers sold. Aided by the Group s closely interlinked development and production activities, the site is producing all the latest dishwasher ranges for the global market. The production facility at the Nazarje site in Slovenia was extended for the purposes of manufacturing new ranges of small home appliances. New and innovative products receive the attention of the sites in the development and production network through to market launch and beyond. At the Lipsheim site in France, for example, a center of excellence has been set up for the new steam ovens and steam and convection ovens that were launched in At the Łódz site in Poland, a new development and test center for tumble dryers has been opened to further develop appliance series after their market launch.

49 BUSINESS PERFORMANCE MANAGEMENT REPORT 47 The foundations were laid for a new cooker production facility in Hortolandia, Brazil with a view to supplying the Latin American market was a year of anniversaries, first and foremost the 40th anniversary of BSH Bosch und Siemens Hausgeräte GmbH. BSH can look back on a long history of appliance production in Germany spanning many years. Owned by BSH since 1982, Neff GmbH has been producing home appliances at the site in Bretten for 130 years. Around 1,300 employees plan, develop, and produce electric ovens and cookers, switching elements, and ventilation hoods for BSH customers in over 20 countries. The BSH company produces 1.6 million appliances a year. The Giengen site has been producing modern refrigeration appliances for the Group since The total number of units produced now stands at 60 million. Giengen is home to the BSH Group s center of excellence for refrigeration appliances. The Dillingen site celebrated 30 years of dishwasher production. A total of 40 million units have been produced in Dillingen and sold all over the world during that time. At its Fürth site, BSH celebrated the 40th anniversary of the Group s spare parts logistics center. Established by Siemens AG as a warehouse for white and brown goods, Fürth is now home to the Group s central spare parts logistics center and central receivables processing for Germany. The relocation of payables processing for Germany to a central Shared Service Center in Fürth, a process initiated in September 2006, was completed for the time being on December 31, 2007, when the accounts were transferred. As planned, the project will move immediately on to the next phases, in which existing processes will be optimized and further developed. The process of centralizing the accounting activities of all German companies at the Munich site had been successfully completed by the end of the year. In the year under review, Group parent BSH GmbH brought another of its investments under the umbrella of BSH Home Appliances Holding GmbH, Vienna, in this case an equity interest in the company in Slovakia by way of a non-cash capital increase. Dutch company BSH Huishoud-elektro B.V., Amsterdam transferred two of its investments in France and Italy to BSH Home Appliances Holding GmbH, Vienna in the form of a non-cash dividend.

50 48 MANAGEMENT REPORT By acquiring minority interests in BSH subsidiaries and through capital increases at Group companies, BSH GmbH increased its noncurrent financial assets by EUR 51 million. In 2007, the sales companies in Canada, Malaysia, and Ukraine were consolidated, or included in the consolidated financial statements, for the first time. Effective January 1, 2008, BSH signed an agreement to acquire the sales company Willem van Rijn Huishoud-elektro B.V., thereby taking over direct marketing of the Bosch and Neff brands in the Netherlands.

51 NET ASSETS, FINANCIAL POSITION, AND RESULTS OF OPERATIONS MANAGEMENT REPORT 49 B. Net assets, financial position, and results of operations In fiscal 2007, the Group s total assets increased by 5.5 percent year on year to EUR 6,276 million. This increase is primarily attributable to the rise in current assets, which at EUR 3,699 million now account for 58.9 percent of total assets. While inventories changed only slightly as a proportion of total assets, trade accounts receivable fell by 1.4 percentage points. Despite a EUR 510 million increase in revenue, this became possible as a result of the Group carrying out targeted receivables management, while applying the same measurement criteria as in the previous year. Cash and cash equivalents increased substantially to EUR 453 million and as a result rose by 2.1 percentage points year on year as a proportion of total assets. The EUR 148 million improvement in cash and cash equivalents at the end of the year is attributable to net cash from operating activities in the amount of EUR 754 million, net cash used in investing activities of EUR 341 million, and net cash used in financing activities of EUR 261 million. Net cash from operating activities was impacted in particular by the increase in trade accounts payable, the fall in depreciation and amortization of noncurrent assets, and profit after income taxes. The net cash outflow in investing activities is due mainly to investments in intangible assets and property, plant, and equipment amounting to EUR 388 million. The net cash outflow in financing activities was caused by the change in financial liabilities and the dividend payments to parent companies. Exchange rate fluctuations and changes in the consolidated group, on the other hand, had a minor impact on cash and cash equivalents. The reclassification of noncurrent financial assets accounted for EUR 53 million of the increase in current securities to EUR 90 million. Noncurrent financial assets amounted to EUR 719 million, a slight decline of EUR 27 million compared with This item includes investment securities of EUR 542 million, financial investments, and other receivables and assets. Balance Sheet Structure % 36% 18% 38% 6,276 5,950 Total assets (in mill. of EUR) % 12 % 27% 12 % 38% 6% 39% 17 % 38% 10 % 14 % 29% 12 % 35 % Cash, cash equivalents, andsecurities Receivables and other assets Inventories Noncurrent assets Trade accounts payable Financial liabilities Provisions Other liabilities Shareholders equity Property, plant, and equipment and intangible assets increased by 9.4 percent as a result of investments and including depreciation and amortization expense. Deferred tax assets at the reporting date fell to EUR 203 million (2006: EUR 293 million), due primarily to the change in the discount rate used to calculate pension provisions to 5.40/5.25 percent (2006: 4.50/4.25 percent). 6,276 5,950 Total liabilities and shareholders equity (in EUR million)

52 50 MANAGEMENT REPORT Sales Trend in bill. of EUR The use of loss carryforwards also led to a reduction in deferred tax assets. The measurement of deferred taxes was additionally affected by the reduction in the German rate of income tax from percent to percent and the slight change in temporary differences in noncurrent assets and provisions Current and noncurrent liabilities increased by EUR 11 million year on year to a total of EUR 3,904 million, while falling as a proportion of total equity and liabilities by 3.2 percentage points. There was a correspondingly positive change in equity, which rose by EUR 315 million to EUR 2,372 million, thus accounting for 37.8 percent of total equity and liabilities Total current liabilities increased only slightly in fiscal 2007, by 2.8 percent to EUR 2,074 million. While current financial liabilities, after repayments and the reclassification of items from noncurrent financial liabilities, remained almost unchanged year on year, trade accounts payable rose sharply in the period under review, by EUR 117 million or 19.2 percent. Other current liabilities amounted to EUR 723 million at the balance sheet date compared with EUR 705 million a year earlier. However, current provisions fell sharply, by EUR 75 million to EUR 363 million, which equates to 5.8 percent of total equity and liabilities. This fall was due to the use of provisions and reclassifications to noncurrent provisions. Profitability Trend* in EUR million * Profit before income taxes Noncurrent liabilities declined by EUR 46 million to EUR 1,830 million and as a proportion of total equity and liabilities by 2.4 percentage points, due primarily to the reclassification of items from noncurrent to current financial liabilities and the reduction in provisions for pension obligations. Conversely, noncurrent provisions rose sharply, by EUR 100 million to EUR 515 million at the balance sheet date. The additions relate to provisions for sales expenses, personnel obligations, and taxes and to other provisions. Pension obligations fell in fiscal 2007 due to the change in the discount rate from 4.50/4.25 percent to 5.40/5.25 percent. The decline in deferred tax liabilities is attributable to the increase/reduction in temporary differences in other provisions and noncurrent financial assets respectively. The Group s equity increased by 15.3 percent in the period under review to EUR 2,372 million, due primarily to the changes in retained earnings including dividend payments, consolidated net profit for the period, and items recognized directly in equity.

53 NET ASSETS, FINANCIAL POSITION, AND RESULTS OF OPERATIONS MANAGEMENT REPORT 51 In 2007, the Group increased revenue by half a billion euros to EUR 8,818 million, thereby fully achieving its ambitious targets in Western and Eastern Europe, North and South America, and Asia. The ratio of cost of sales to revenue changed by 5.3 percent year on year and therefore by less than the 6.1 percent increase in revenue. Gross profit was therefore slightly higher year on year, reflecting the result of a range of activities aimed at putting in place efficient production and procurement processes. The revenue growth in the year under review was achieved on the back of higher selling expenses. In the same period, administrative expenses fell both in absolute terms and as a percentage of revenue. Selling and administrative expenses amounted to EUR 2,263 million in total and as a percentage of revenue increased by 0.9 percentage points. BSH s research and development expenditure amounted to EUR 259 million. Accounting for a steadily rising percentage of revenue (currently 2.9 percent), it illustrates the importance attached to innovating and further developing our high-quality products. Net other operating income and expenses changed by a total of EUR 89 million year on year. Other operating income exceeded other operating expenses by EUR 47 million in the year under review (2006: expenses exceeded income by EUR 42 million). The sharp rise in other operating income compared with 2006 is attributable to exchange rate gains on foreign-currency receivables and liabilities and income from the reversal of write-downs of receivables. Other operating expenses fell due to the reduction in additions to provisions that are not function-related. Miscellaneous other operating expenses charged in 2006 were not recognized in fiscal Compared with 2006, there was only a minor improvement of EUR 3 million in total in net interest income/expense and other net financial income/finance costs, the total of which declined to EUR 23 million. At EUR 637 million, profit before income taxes substantially exceeded the prior-year figure. As a percentage of revenue, it stood at 7.2 percent in the year under review. In line with the increase in profit, income tax expense rose to EUR 226 million. The change of EUR 56 million includes an increase in deferred tax expense of EUR 65 million. The Group tax rate at the reporting date was 35.5 percent. BSH s consolidated net profit for 2007 rose by EUR 40 million to EUR 404 million, with minority interest falling only slightly.

54 52 MANAGEMENT REPORT Key factors affecting profits In addition to safeguarding its competitiveness over the medium to long term, one of the Group s main objectives is to ensure continuity and further improvements in its consolidated net profit. The Group s cost and operating structures are continuously being improved through rolling benchmark projects in all business units and through the worldwide exchange of best practice. The strong growth in revenue, by EUR 510 million to EUR billion, also enabled the Group to achieve a substantial increase in consolidated net profit. As in previous years, the major contributors to the Group s performance included the companies in Poland, the United Kingdom, Turkey, and Spain together with the German production companies. On the positive side, the smaller national companies without exception posted year-on-year increases in profit. While the large production companies in Poland and Turkey were not quite able to match prior-year profits, the Spanish subsidiary in particular suffered a sharp fall in profits compared with 2006 due to the downturn in the Spanish market. The Chinese companies continued their run of success by recording sharp increases in revenue and profits. Despite the fall in the value of sterling, sharp increases in revenue, improved margins, and lower costs resulted in an excellent showing at the UK company, which therefore made a substantial contribution to consolidated net profit. Consolidated net profit was depressed by the overall difficult situation in Brazil and the USA with regard to costs and exchange rates. Stagnating revenues, exchange rate-related increases in the cost of exports, and non-operating expenses prevented the Brazilian company from posting a profit despite its improved cost structure. Due to sharp increases in the cost of purchasing volumes caused by the fall in the US dollar and rising commodity prices, operating profit at the American company was on a par with the previous year despite strong revenue growth in local currency. The company s profit was also impacted by higher selling expenses and warranty expenses. As in the previous year, appropriate provisions were recognized at all Group companies for known and other risks at the balance sheet date. In the year under review, provisions for warranties and special risks were adjusted in line with the changes in revenue and actual costs.

55 SIGNIFICANT OPPORTUNITIES AND RISKS FOR FUTURE DEVELOPMENT MANAGEMENT REPORT 53 C. Significant opportunities and risks for future development In the year under review, a compliance working group was set up to structure a system of compliance management for the BSH Group. Since January 1, 2008, a Corporate Compliance Committee (CCC) has been responsible at Group level for the design and management of the BSH Compliance Organization and for the development and implementation of specific training programs (roll-out from the first quarter of 2008 onwards). In the first quarter, a Compliance Committee Office was set up at Group level to support the CCC. An external ombud has also been put in place, and regional Compliance Officers are appointed internationally at regional, national, or company level. BSH Compliance Management assists the operating units in complying with all legislation, BSH guidelines, and the Business Conduct Guidelines. Concurrently, the Business Continuity Management Program was stepped up at selected business units and national companies. Risk reporting continues as part of the risk management process. All existing insurance agreements were reviewed with regard to their content and the level of cover and adapted in line with current requirements and terms. In addition, an international transport insurance program providing an adequate level of risk cover was designed for BSH and appropriate agreements were concluded for subsequent years. The Group continues to rely on the proven treasury controlling and value contribution monitor systems used in the finance unit to control interest rate and currency management activities. BSH uses these information systems to identify, weight, and assess interest rate and currency risks throughout the Group and thus manage its hedging transactions as well. Due to exceptional price increases in the procurement market for nonferrous metals, crude oil derivatives, and logistics services, framework supply agreements for future procurement volumes were in some cases concluded at higher price levels than in the past. BSH aims to counteract the expected rise in costs by carrying out numerous rationalization and other activities. More specifically, this includes targeted activities aimed at increasing commodity hedging. It also includes inviting suppliers to enter into BSH framework agreements for large quantities of components, particularly suppliers of primary products such as steel and plastic pellets, in which case quantity and price structures are mutually agreed.

56 54 MANAGEMENT REPORT BSH will respond to the process of consolidation under way among global suppliers by making greater use of the market opportunities available worldwide. In addition, the Group will organize procurement opportunities by placing specifications for materials and their processing across an even broader supply market. In each case, the qualitative requirements on purchased materials will have to be in line with the applicable technical standards. In future, the Group will attach greater importance to supplier training and expanding its base of capable procurement sources offering a consistently high standard of quality. A general aim of the Group is to reduce material costs through improved technical solutions. As regards the markets, the US property crisis in particular poses risks to the performance of the economy as a whole, which may also affect the growth of the home appliances market. Due to the increasing number of global competitors, some of them aggressive, the pressure on the revenue and market share of established providers is growing. The relocation of production from highcost to low-cost locations, overcapacity, and consolidation among retailers are also pushing down manufacturers revenues and margins. At the same time, countertrends are emerging, such as the switch to more energy efficient appliances and the growth in the market for built-in appliances, where BSH operates as a premium provider with an above-average share. In addition, the Group faces currency risks as a result of exchange rate movements, primarily affecting the US dollar and the pound sterling, prices risks in the commodity market, and increases in energy costs. It successfully hedges currency and commodity risks using suitable derivatives and procurement contracts. As in the past, BSH remains focused on strong growth in the markets of Eastern Europe and China and expansion at low-cost locations. At the same time, the Group continues to invest in innovations and new products at the BSH sites, particularly in Germany, and in its highly qualified and motivated employees. This strategy has so far proven successful, enabling BSH to make a very positive contribution to job security in Germany and Western Europe. In conclusion, BSH is able to state that it knows of no risk at this time that jeopardizes the continued existence of the Group as a going concern.

57 ANTICIPATED TREND MANAGEMENT REPORT 55 D. Anticipated Trend BSH expects global economic growth in 2008 to be weaker than over the last three years and roughly in line with its long-term trend of 3.0 percent. Economic conditions will continue to be negatively impacted primarily by the worsening US property crisis and the resulting turmoil in the financial sector of industrialized nations. These events are not expected to severely depress global growth, however, as economic growth in emerging economies is underpinned increasingly by domestic demand and has therefore become less dependent on trends in industrialized nations. At regional level, BSH is cautious on the economic outlook for the USA, where growth is expected to be just 1.25 percent. The adjustments in the property market are not yet at an end. The weaker trend in the USA will also have an adverse impact on prospects in Latin America, as a result of which growth is likely to be slower than in 2006 and For the emerging economies of Asia, the forecast is for continued strong growth, particularly in China where economic growth is likely to be spurred not only by continued heavy investment in the expansion and modernization of infrastructure and production capacity, but also by this summer s Olympic Games. At the same time however, the Chinese government has redoubled efforts to avert the threat of an overheating economy. GDP growth is expected to weaken slightly to around 10 percent. Economic growth in Europe is likely to be comparatively robust again in Despite the risks created by Europe s heavy dependence on exports and the strong impact of the global economy on the situation in Europe, a further upturn is expected in domestic business. Above all, the extremely stable trend seen in the labor market through to the end of 2007, the prospect of further relatively sharp pay increases in 2008, and the likelihood that energy prices will stabilize point to stronger growth in consumer spending. Overall, therefore, BSH expects economic growth in Europe to slow only slightly in 2008 to 2.5 percent (2007: 3.4 percent); in Germany, it anticipates a change of 2.0 percent (2007: 2.5 percent). However, growth is expected to slow more sharply in the United Kingdom, Spain, and Ireland, where in previous years the property market has been a key driver of growth. In the absence of the effects of the 2007 increase in value-added tax, Germany is again expected to see a slightly positive trend in demand for large home appliances in It is presumed that this trend will also impact positively on the Western European market as a whole, even if market growth in the United Kingdom and Spain continues to be weak.

58 56 MANAGEMENT REPORT BSH estimates that sector revenue will be slightly more modest in Eastern Europe where, as unit sales continue to rise, prices are likely to come under pressure due to increasingly fierce competition and the expansion of local production capacity among other things. BSH therefore expects growth in Eastern Europe to be slightly lower than in In Latin America, demand for large home appliances will continue to grow, although not at the fast pace recorded in The countries of Asia will continue to act as a stabilizing force in the global home appliances market and grow at a slightly faster pace overall than in 2007, especially China. The property crisis will continue to have a noticeable effect on the US home appliances market in On the whole, BSH expects growth in the global market for large home appliances to be restrained yet slightly higher than in the previous year, as the large Western markets will likely fail to provide any significant impetus. The Group will continue to exploit its regional growth potential outside Western Europe, focusing firmly on the growth markets of China, Eastern Europe, and North America. However, it also intends to leverage additional revenue potential in Western Europe. Alongside the regional opportunities for growth, the expansion of the global segment for built-in appliances and BSH s new premium segments comprising side-by-side refrigerators and steam ovens present further opportunities. The Group will also fully dedicate its energy and resources to technologies that enable further improvements in the energy efficiency and environmental compatibility of home appliances. Assisted by its outstanding expertise in the segment for built-in appliances, its major international brands Bosch and Siemens, and its worldwide, high-quality, and efficient customer service organization, BSH will continue to cement and extend its leading market position in Germany and Europe. In doing so, it will also aim to increase its global market share by further improving the functionality, quality, and design of BSH appliances and marketing itself internationally.

59 ANTICIPATED TREND MANAGEMENT REPORT 57 Despite the major challenges it faces in procurement and sales markets, the Group s budget sets ambitious revenue and profit targets. Rolling benchmarking in all business units and a systematic focus on value across all Group activities will contribute toward achieving these targets. January 2008 saw revenue and profit meet the planning targets. This positive start to the fiscal year, the Group s clear organizational and strategic alignment, and its implementation in day-to-day operations indicate that BSH will once again achieve its ambitious corporate targets in Munich, February 26, 2008 BSH Bosch und Siemens Hausgeräte GmbH The Board of Management

60 58 Group Financial Statements Consolidated Statement of Income January 1 to December 31, 2007 (in EUR million) Note Revenue 4 8,818 8,308 Cost of sales 5 5,683 5,399 Gross profit 3,135 2,909 Selling and administrative expenses 6 2,263 2,063 Research and development expenses Other operating income Other operating expenses Goodwill impairment 0 1 Income from investments Interest result Other financial result Profit before income taxes Income taxes Profit after income taxes Minority interest Consolidated net profit

61 CONSOLIDATED BALANCE SHEET GROUP FINANCIAL STATEMENTS 59 Consolidated Balance Sheet Note 12/31/ /31/2006 ASSETS Current assets Cash and cash equivalents Securities Trade accounts receivable 17 1,819 1,809 Other current assets Inventories 19 1,103 1,019 Total current assets 3,699 3,398 as at December 31, 2007 (in EUR million) Non-current assets Non-current financial assets Property, plant, and equipment 21 1,403 1,284 Intangible assets Deferred tax assets Total non-current assets 2,577 2,552 Total assets 6,276 5,950 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Financial liabilities Trade accounts payable Other current liabilities Current provisions Total current liabilities 2,074 2,017 Non-current liabilities Financial liabilities Other non-current liabilities Non-current provisions Provisions for pensions and similar obligations Deferred taxes Total non-current liabilities 1,830 1,876 Shareholders equity Subscribed capital Retained earnings and other reserves 28 1,816 1,539 Consolidated net income Minority interest Total shareholders equity 2,372 2,057 Total shareholders equity and liabilities 6,276 5,950

62 60 GROUP FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOW Consolidated Statement of Cash Flow (in EUR million) Note Earnings after tax Income taxes Profit before tax Minority interest Depreciation and amortization of tangible and intangible assets Gains and losses on disposals of assets 0 3 Net interest expense Interest paid Interest received Income tax paid Other noncash income and expenses Changes in assets and liabilities Change in inventories Change in trade accounts receivable and other accounts receivable Change in securities (held for trading) 11 5 Change in trade accounts payable and other liabilities Change in provisions Change in deferred taxes 33 7 Cash inflow from operating activities Payments for financial investments 0 3 Payments for investments in intangible assets and property, plant, and equipment Proceeds from the disposal of assets 15 8 Increase in financial receivables Decrease in financial receivables 63 7 Investments in securities (available for sale) Sales of securities (available for sale) Cash outflow from investing activities Dividends Minority interest 4 1 Proceeds from the issue of financial liabilities Repayment of financial liabilities Net cash inflow/outflow from financing activities Net change in cash and cash equivalents Opening balance, cash and cash equivalents Exchange rate-related change in cash and cash equivalents 4 3 Consolidated group-related change in cash and cash equivalents 0 0 Closing balance, cash and cash equivalents

63 STATEMENT OF RECOGNIZED INCOME AND EXPENSE GROUP FINANCIAL STATEMENTS 61 Statement of Recognized Income and Expense (in EUR million) Net loss ( )/gain (+) from financial instruments available for sale 13 8 Net gain on fair value of financial instruments used for hedging purposes (CFH) 2 0 Actuarial gains (+)/losses ( ) from defined benefit pension commitments and similar obligations Exchange differences on translating foreign subsidiaries Deferred tax relating to components of income and expense recognized directly in equity 33 9 Income and expense recognized directly in equity Net profit after tax Total recognized income and expense for the year

64 62 GROUP FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Consolidated Statement of Changes in Shareholders Equity (in EUR million) Note 28 Subscribed capital Retained earnings Accumulated other comprehensive income Currency translation adjustment Fair-value measurement of securities Derivative financial instruments (CFH) Actuarial gains/losses on pension provisions Total shareholders equity At December 31, , , ,859 Profit after income taxes Dividend payments Foreign currency translation differences Financial instruments Pensions: Net actuarial gains/losses Other changes 3 3 Equity holders of the parent Minority interest At December 31, , , ,057 Profit after income taxes Dividend payments Foreign currency translation differences Financial instruments Pensions: Net actuarial gains/losses Other changes At December 31, , , ,372

65 Notes to the Consolidated Financial Statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 63 1 General BSH Bosch und Siemens Hausgeräte GmbH was formed in 1967 as a joint venture of Robert Bosch GmbH, Stuttgart, and Siemens AG, Berlin and Munich. The activities of the BSH Group (hereafter referred to as Group or BSH ) comprise: the manufacture or procurement and marketing, as well as research and development, of industrial products in the area of electrical engineering, precision mechanics, and related technology, especially in the area of home appliances; the manufacture or procurement and marketing of goods for use as accessories, auxiliary materials, or tools with the manufactured or marketed products. The address of the Group s registered office is Carl-Wery-Strasse 34, Munich, Germany. The Supervisory Board will approve the consolidated financial statements for publication on April 30, Presentation of accounting policies The following accounting policies were used in the preparation of the consolidated financial statements of BSH. 2.1 Statement of compliance The consolidated financial statements of BSH for the year ended December 31, 2007, have been prepared in accordance with the mandatory International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), London, applicable at the balance sheet date. 2.2 Basis of presentation The Group currency of BSH is the euro; unless stated otherwise, all amounts are reported in millions of euros (EUR million). The income statement is presented using the cost of sales method. To enhance the clarity of presentation, various items have been aggregated on the face of the balance sheet and income statement. These items are disclosed and explained separately in the notes to the financial statements. The consolidated financial statements have been prepared on the basis of historical cost, with the following exceptions: Financial assets held for trading and Available-for-sale financial assets are recognized at fair value. The accounting policies described below have been consistently applied over the reporting periods covered by these consolidated financial statements. The companies in the Group have consistently applied the accounting policies. 2.3 Newly issued accounting standards All International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and interpretations of the International Financial Reporting Interpretations Committee/ Standing Interpretations Committee (IFRIC/SIC) mandatory for fiscal year 2007 have been applied. The following standards/interpretations have not been applied in advance of their mandatory implementation date: IFRS 8, IAS 23 (rev. 2007), IAS 1 (rev. 2007), IFRIC 11, IFRIC 12, IFRIC 13 and IFRIC 14. The effects are not expected to be material. 2.4 Foreign currency translation Foreign currency transactions included in the single-entity financial statements of BSH GmbH and the subsidiaries are translated at the exchange rate prevailing at the transaction date. At the balance sheet date, monetary items denominated in foreign currency are recognized using the closing rate. Any translation differences are recognized in the income statement. The financial statements of consolidated subsidiaries prepared in foreign currency are translated on the basis of the functional currency concept (IAS 21 The Effects of Changes in Foreign Exchange Rates ) using the modified closing rate method. The foreign subsidiaries that are part of the BSH Group carry out their activities independently from a

66 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS financial, economic, and organizational point of view, and for this reason, the functional currency is always the same as the company s local currency. With effect from January 1, 2007, the Turkish regional company switched its functional currency from the euro to the Turkish lira. The change is attributable to the fact that the economic environment within which our Turkish company conducts its activities is shaped by the lira. All assets and liabilities (but not shareholders equity) are translated at the closing rate. Items included in the income statement are translated at the annual average rate. All resulting exchange rate differences are taken directly to a currency translation reserve in equity. In the single-entity financial statements of BSH Bosch und Siemens Hausgeräte GmbH and the subsidiaries, foreign currency receivables and payables are measured on initial recognition at the exchange rate on the date of the transaction. Any exchange rate gains and losses at the balance sheet date are recognized in income. Changes in exchange rates against one euro for the most important currencies used in currency translation are as follows: Closing rate Average rate 12/31/ /31/ US dollar Sterling Turkish lira Brazilian real Chinese yuan renminbi Basis of consolidation and consolidation principles The consolidated financial statements include BSH GmbH and all companies under its control. This control usually exists if BSH GmbH, directly or indirectly, holds over 50% of the voting rights of the subscribed capital of an entity or has the power to govern the financial and operating policies of the entity. The interests of minority shareholders in the Group s equity are reported separately on the face of the balance sheet and income statement. Companies are consolidated from the time the BSH Group obtains the option of control and deconsolidated when the option of control ceases. The financial statements of BSH GmbH and its consolidated subsidiaries have been prepared, audited, and consolidated in accordance with IAS 27, applying accounting policies that are uniform throughout the BSH Group. Germany Other Total Countries Consolidated as of Dec.31, First consolidated Deconsolidated in Consolidated as of Dec.31, See section 3 of the notes for more information on changes to the basis of consolidation. The entities included in the consolidation also include a special fund. As of December 31, 2007, four (2006: eight) companies were not consolidated because they have no operating activities or the operating activities are insignificant. This has no material impact on the net assets, financial position, and results of operations of the Group. In addition, BSH Bosch und Siemens Hausgeräte Altersfürsorge GmbH, Munich, is not consolidated because its assets are defined as plan assets and these are deducted from pension provisions in accordance with IAS 19. The consolidated financial statements and group management report of BSH GmbH are published in the electronic German Federal Gazette. See Annex II of the notes to the consolidated financial statements for more information on shareholdings. Acquisitions are accounted for on the basis of the fair value applicable at the date of acquisition or first-time consolidation. Any positive difference between purchase price and fair value is recognized as goodwill. Intragroup balances, intragroup transactions, and any resulting intragroup profits and losses are eliminated in full. Deferred taxes are recognized for consolidation transactions recognized in the income statement.

67 ACCOUNTING AND VALUATION METHODS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Revenue Revenue from the sale of products is recognized when ownership or risk is transferred to the customer, a price has been agreed or can be determined, and its payment can be expected. Revenue is reported net of discounts, price reductions, customer bonuses, and rebates. Royalties are recognized on an accrual basis in accordance with the substance of the relevant agreement. 2.7 Research and development costs Research expenditure is expensed as incurred. Likewise, development expenditure is recognized as an expense when incurred. Project development costs that fully meet the following criteria are exempt from this rule: The product or system is clearly defined and the relevant expenditure can be clearly assigned and reliably measured. The technical feasibility of the product can be demonstrated. The product or system will be either marketed or used internally. The assets will generate future economic benefits (e.g., the entity can demonstrate the existence of a market for the product or, if it is to be used internally, its usefulness). There are adequate technical, financial, and other resources to complete the project. Costs are capitalized from the time the above criteria are first met. Costs recognized as expenses in previous accounting periods are not capitalized retrospectively. 2.8 Trade accounts receivable Trade receivables are reported at amortized cost. Any necessary write-downs, which are based on the probable risk of default, are taken into account. Non-interest-bearing or low-interest bearing receivables with maturities of more than one year are discounted. If the requirements of IAS are met, receivables and payables are netted. 2.9 Inventories Inventories are recognized at the lower of cost and/or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Work in process and finished goods are recognized at cost. This includes all costs that are directly attributable to the manufacturing process, plus a reasonable portion of the production overhead, including production-related depreciation and amortization, proportionate administrative expenses, and proportionate social security costs. Borrowing costs are not capitalized. Inventory risks that result from the duration of storage or reduced marketability are taken into account by applying write-downs. Lower values as of the reporting date due to reduced sales proceeds are recognized accordingly Financial assets The shares in non-consolidated affiliated companies and associates reported under financial assets are recognized at cost, unless a different market value is available. According to IAS 39, financial investments are broken down into the following categories: (a) Held-to-maturity investments, (b) Financial assets held for trading or at fair value through profit or loss, (c) Available-for-sale financial assets and (d) Loans and receivables. Financial assets with fixed or determinable payments and fixed maturity that the Company has the positive intent and ability to hold to maturity, other than loans and receivables, are classified as held-to-maturity investments. Financial assets obtained principally to generate a profit from shortterm fluctuations in price or exchange rates are measured and classified at fair value. Available-for-sale financial assets and financial assets held for trading and are recognized at market value, if available. If no market value is available, they are recognized at cost.

68 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Changes in the fair value of financial assets held for trading are recognized through the income statement. All other financial assets, other than loans and receivables originated by the Company, are classified as available-for-sale financial assets. Until realized, gains and losses on the fair-value measurement of an availablefor-sale financial asset are recognized directly in equity, taking deferred taxes into account. An impairment loss is recognized on available-for-sale securities and financial assets whose market value has fallen below their cost and this fall is not expected to be reversed Property, plant, and equipment Property, plant, and equipment is measured at cost, less straight-line depreciation and, in some cases, impairment losses. Low-value assets are fully depreciated in the year of acquisition. The cost of self-created property, plant, and equipment comprises all direct costs and a reasonable portion of the necessary material and production overheads. This includes production-related depreciation and amortization, as well as a proportion of the costs for the Company s pension plan and voluntary employee benefits. Borrowing costs are not capitalized. Depreciation is based on the following useful lives: Buildings years Machinery and equipment years Office equipment and vehicles years Land is not depreciated. In accordance with IAS 36, Impairment of Assets, impairment losses are recognized on property, plant, and equipment if both the realizable value and the value in use of the asset concerned fall below its carrying amount. If the reasons for impairment losses no longer apply, corresponding write-ups are performed, at a maximum of the book value. Depreciation and impairment losses are reported under functional costs and other operating expenses. Write-ups are shown under other operating income Intangible assets (excluding goodwill) Purchased and self-created intangible assets are recognized at cost. Assets with finite useful lives are amortized over their useful lives using the straight-line method. Amortization is based on the following useful lives: Normal useful life in the company (contract, license period etc.) Purchased software 4 years Self-created intangible assets 4 6 years Amortization is on a linear basis over a period of four to six years. The expense is allocated to functional area according to source. If impairment is identified, an impairment loss is recognized. If the reasons for an impairment loss no longer apply, the impairment loss is reversed, but such that the increased carrying amount of the asset does not exceed the carrying amount initially recognized for the asset net of amortization that would otherwise have applied. Assets with infinite useful lives are not amortized. Amortization and impairment losses are reported under functional costs and other operating expenses. Write-ups are shown under other operating income Goodwill Goodwill is capitalized in accordance with IFRS 3. Goodwill is tested for impairment regularly at least once a year; if required, an appropriate impairment loss is recognized. In accordance with IAS 36, Impairment of Assets, an impairment requirement is determined by comparing the expected discounted future cash flows of the cash-generating unit in question with the relevant goodwill amount assigned to the unit.

69 ACCOUNTING AND VALUATION METHODS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Pension provisions Provisions for pensions and other postretirement benefits are recognized using the projected unit credit method as specified in IAS 19, Employee Benefits. In addition to the pensions and vested benefits known as of the balance sheet date, this method takes into account expected future increases in salaries and pensions. Provisions for pension obligations are recognized net of any plan assets where such assets exist. The calculation is based on actuarial reports taking into account biometric calculation methods. As specified in IAS 19.93A onward, actuarial gains and losses incurred in the fiscal year are reported in the statement of recognized income and expense (SORIE) and recognized directly in equity Provisions A provision is reported only if a present (legal or constructive) obligation exists as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are tested at each balance sheet date and adjusted to the current best estimate. Where the effect of the time value of money is material, the provision amount is the present value of the expenditure expected to be required to settle the obligation. Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognized under other net financial income/finance cost. The related change in tax provision is recognized under tax expense Derivative financial instruments Derivative financial instruments are employed solely for hedging purposes, in order to reduce exchange rate, interest and fair value risks from operating business or the resultant finance requirements. According to IAS 39, all derivative financial instruments such as interest rate, cross-currency and combined interest rate and cross-currency swaps, as well as forward exchanges are to be recognized at fair value, regardless of the purpose or intention behind them. The fair value of derivative financial instruments is determined on the basis of market data and recognized valuation methods. The mark-to-market valuation of the derivative financial instruments is performed using computer-aided methods by the discounting of cash flows or by using option price models with parameters in line with market conditions. The effective part of the change in market value of the derivative financial instruments, for which Hedge Accounting is employed, is recognized in equity capital as part of the other comprehensive income. Transfer to the income statement takes place at the same time as the realization of the underlying transaction being hedged. That part of the change in market value not covered by the underlying transaction is to be recognized directly in income. If Hedge Accounting cannot be employed, the change in fair value of the derivative financial instruments is recognized in income. The change in market value of the derivative financial instruments not qualifying for hedge accounting is shown under other operating expenses and income. The changes affecting interest rate derivatives are recognized in other financial income. If this involves combined instruments, for which separate valuation of the embedded derivative instruments is not possible, the entire combined instrument is recognized as affecting the current result at fair value.

70 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.17 Leases A lease is classified as an operating lease if the lessor retains substantially all the risks and rewards incident to ownership. Lease payments under an operating lease are recognized as an expense over the term of the lease relationship using the straight-line method Government grants A government grant is not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to it, and that BSH will receive the grant. Government grants are recognized as income on a systematic and rational basis over the periods necessary to match them with the related costs that they are intended to compensate. Grants received for the acquisition of property, plant, and equipment are treated as a reduction in the purchase cost of such assets. Other grants received are initially recognized as a liability on the balance sheet (deferred income under other liabilities) and then recognized in income with the corresponding depreciation over the useful life of the asset concerned. 3 Changes in the consolidated group BSH Home Appliances Corporation Ltd./Électroménagers BSH Ltée, Mississauga, Canada, BSH Home Appliances Sdn. Bhd., Kuala Lumpur, Malaysia and TOV BSH Pobutova Technika, Kiev, Ukraine, have been included in the consolidated financial statements for the first time. The company BSH Ufesa Industrial, S.A. (Echarri-Aranaz) was deconsolidated with effect from December 31, The additions are not significant, and have been consolidated by means of the acquisition method. Comparability of the consolidated group with that of the previous year has not been adversely affected by the change. 4 Revenue Revenue was primarily generated from electrical appliances and gas appliances, as well as from related customer services; it breaks down as follows: 2007 % 2006 % Germany 1, , Western Europe (excluding Germany, including Turkey) 4, , Eastern Europe North America Latin America Asia Other Countries Total 8, , Cost of sales The cost of sales figure of EUR 5,683 million (2006: EUR 5,399 million) comprises the full production-related costs incurred in the manufacture of the products sold. 6 Selling and administrative expenses Selling and administrative expenses amounted to EUR 2,263 million (2006: EUR 2,063 million) and comprised solely costs, income, and expenses allocated to these categories. General administrative expenses include personnel and material costs, and depreciation/amortization in head office departments, that cannot be assigned to production, sales and marketing, or research and development. 7 Research and development costs Research and development costs of EUR 259 million (2006: EUR 235 million) include research costs and development expenditure that has not been capitalized. No development costs were capitalized during fiscal year 2007 (2006: EUR 0 million).

71 NOTES TO THE STATEMENT OF INCOME NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 69 8 Other operating income and expenses Income from the reversal of provisions (not function-related) Foreign currency gains from trade accounts receivable and payable Income from the reversal of valuation allowances and write-ups Leasing income 3 3 Income from the disposal of assets 5 1 Income from foreign exchange derivatives Income from costs transferred to third parties Miscellaneous other operating income Total other operating income Expenses to set up provisions (not function-related) Foreign currency losses from trade accounts receivable and payable Expenses incurred through valuation allowances Expenses in connection with the disposal of assets 4 4 Other taxes 2 6 Losses on foreign exchange derivatives Expenses from cost transfers 0 15 Miscellaneous other operating expenses Total other operating expenses Income from investments Income from investments primarily comprises dividends paid by Kreisbaugesellschaft Heidenheim GmbH, Giengen. 10 Net interest expense Interest income and expense calculated under the effective interest rate method was recognized in income for financial assets and financial liabilities not measured at fair value. 11 Other financial result Other financial result is derived from the market-value measurement of financial instruments, the disposal of securities, the measurement of receivables for liabilities denominated in foreign currency, the reversing of the discount to provisions, together with other financial income and expenses. In 2007, available-for-sale financial assets were sold. This resulted in a reduction in equity of EUR 23 million (2006: EUR 17 million) and the recognition in income of an equivalent figure under other financial result. Amortization amounting to EUR 2 million (2006: EUR 0 million) was recognized Interest income Interest expenses of which to non-consolidated affiliated companies EUR 0.5 million (2006: EUR 0.3 million) Net interest result of which from financial instruments from measurement categories as per IAS 39: 12 Income taxes Loans and receivables By origin, the BSH Group s taxes on income Financial assets, available for sale 7 16 break down as follows: Financial liabilities, valued at amortized cost Effective taxes Deferred income taxes Total income taxes

72 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Income taxes paid or payable in the various countries as well as deferred taxes are reported under income taxes. Deferred taxes are calculated on the basis of temporary differences between the carrying amounts of assets and liabilities in the IFRS financial statements and the tax base, and on the basis of consolidation transactions and recoverable loss carryforwards. The calculation is based on the tax rates expected to be in force in the various countries at the time the tax materializes. In all cases, the rates are derived from the laws and provisions in force or enacted at the balance sheet date. The corporate income tax rate in 2007 in Germany was 25 % plus a solidarity surcharge of 5.5% of the corporate income tax itself. Taking into account trade tax at 11.92%, the overall tax rate for German companies was 38.29% (2006: 39%). In light of corporate tax reform in Germany, fiscal 2008 will see the overall tax rate fall to 29.35%. The reduction in the tax rate has already been taken into account in determining deferred tax. The reported income tax expense in the year under review of EUR 226 million is EUR 18 million lower than the expected income tax expense of EUR 244 million that would in theory arise if the German tax rate were to be applied to the consolidated profit before tax. The reconciliation between the expected tax expense and the reported tax expense is as follows: Profit before tax Expected taxes when using the tax rate applicable to the parent company of 38.29% (2006: approx. 39%) Effects of differences in foreign tax rates Effects of changes in tax rates 15 0 Effects of permanent differences 5 34 Other variances (incl. change to write-downs of deferred tax assets) 40 6 Reported income tax expense Corporate tax rate in percent Deferred tax assets and liabilities are derived from the following individual balance sheet items: Deferred Deferred tax assets tax liabilities Intangible assets and property, plant, and equipment Receivables and other assets Inventories Liabilities Pension provisions Other provisions Available-for-sale securities Tax loss carryforwards and tax credit Gross total Write-downs Netting Deferred taxes after netting

73 NOTES TO THE BALANCE SHEET NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 71 Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available. At each balance sheet date, a new assessment is made of unrecognized deferred tax assets and of the carrying amount of deferred tax assets. A write-down of deferred tax assets was performed on tax loss carryforwards and tax assets amounting to EUR 78 million (2006: EUR 56 million) and on deductible temporary differences totaling EUR 13 million (2006: EUR 0), as direct use in the foreseeable future appears unlikely. The change in the write-downs was recognized in the income statement. Of the total amount from these potential tax advantages of EUR 91 million (2006: EUR 56 million), EUR 56 million (2006: EUR 46 million) can be carried forward without limitation and 35 EUR million (2006: EUR 10 million) for more than three years. As at December 31, 2007, the BSH group has unused tax loss carryforwards amounting to EUR 321 million (2006: EUR 375 million). The durations of the tax loss carryforwards are shown in the following table: Utilization periods Limited carryforward ability, less than three years 15 0 Can be carried forward with restrictions, more than three years Can be carried forward without restrictions The level of the tax loss carryforwards, not taking account of deferred tax assets, stands at 201 EUR million (2006: EUR 165 million). The deferred taxes recognized directly in equity include deferred tax liabilities on financial instruments and derivative financial instruments amounting to EUR 2 million (2006: EUR 4 million) and deferred tax assets on actuarial gains and losses related to pension liabilities totaling EUR 11 million (2006: EUR 46 million). 13 Minority interest The profit attributable to the minority interest in BSH Ev Aletleri Sanayi ve Ticaret A.Ş., Istanbul, and BSW Household Appliances Co., Ltd., Wuxi, is EUR 7 million (2006: EUR 8 million). 14 Other income statement disclosures The functional costs include the following personnel expenses: Wages and salaries 1,361 1,333 Social security contributions Retirement and support services Personnel expenses 1,704 1,654 The cost of materials totals EUR 4,436 million (2006: EUR 4,278 million). The breakdown of the average number of employees for the year is as follows: BSH GmbH blue-collar staff 6,605 6,820 white-collar staff 5,416 5,265 apprentices Other companies in Germany 1,715 1,641 Companies outside Germany 25,348 23,024 Total 39,418 37, Cash and cash equivalents The breakdown of cash and cash equivalents is as follows: Checks Cash on hand 6 6 Deposits with banks Cash and cash equivalents All items under cash and cash equivalents are due within three months, as in Securities In accordance with IAS 39, securities are classified as available for sale and recognized at a market value of EUR 90 million (2006: EUR 22 million).

74 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17 Trade accounts receivable Trade accounts receivable (third parties) 1,904 1,915 Trade accounts receivable (non-consolidated affiliated companies) 0 2 Valuation allowances Trade accounts receivable, net 1,819 1,809 Trade accounts receivable 1,904 1,917 of which neither impaired nor overdue as at date of financial statement 1,597 1,569 of which not impaired as at date of financial statement and overdue in the following time bands: less than 1 month between 1 month and 3 months more than 3 months The development of write-downs on trade receivablesisasfollows: At Jan Exchange rate difference 2 1 Change in consolidated group 0 0 Additions 9 19 Utilization Reversal 3 2 At Dec As regards trade receivables which are neither impaired nor in default, there were no indications as at the balance sheet date that the debtors are unable to meet their payment obligations. Additionally, the majority of trade receivables are insured, individually and on a nationally-specific basis, by the companies concerned. As at December 31, the 2007 the carrying amount of trade receivables stood at EUR 3 million, for which the contractual conditions were renegotiated (2006: EUR 8 million). Trade receivables include an amount of EUR 0.1 million (2006: EUR 0.3 million) with a maturity of more than one year. 18 Other current assets Other receivables (third parties) Other receivables due from nonconsolidated affiliated companies 0 1 Prepaid expenses Current derivative financial instruments (note 30) 9 11 Amounts receivable from tax authorities and employees Write-downs on other current assets 2 2 Total other current assets Prepaid expenses primarily consist of IT service payments made in advance. 19 Inventories Finished goods and merchandise Work in process Raw materials, consumables, and supplies Spare parts Advance payments made Total 1,103 1,019 The spare parts item comprises components held in warehouses to cover a 10-year parts warranty on home appliances. The writedown included in the year under review was EUR 103 million (2006: EUR 96 million). 20 Non-current financial assets Financial assets Financial investments 0 4 Other non-current assets Non-current financial assets Non-current financial assets comprise the following: The following table shows the breakdown of other non-current assets: Loans (third parties) 2 5 Non-current derivative financial instruments (note 30) 5 3 Miscellaneous other non-current assets Total other non-current assets 38 28

75 NOTES TO THE BALANCE SHEET NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 73 EUR 1 million of the loans have been impaired (2006: EUR 5 million), and there are no overdue loans. 21 Property, plant, and equipment The statement of changes in assets (see Annex I) shows a breakdown of the property, plant, and equipment items aggregated on the face of the balance sheet, together with the changes in these items in the year under review. At the balance sheet date, obligations incurred in connection with the acquisition of property, plant, and equipment amounted to EUR 3 million (2006: EUR 3 million), with constraints on disposal totaling EUR 5 million during the fiscal year. Government grants with a total value of EUR 0 million (2006: EUR 8 million) were deducted from new additions in the year under review, comprising development funds for German regions suffering from structural weaknesses. 22 Intangible assets Please refer to the statement of changes in assets (Annex I) for information on changes in intangible assets. Additions under this item included the costs of purchased software, tool licenses, and industrial and similar rights. A significant item in intangible assets was goodwill, for the most part attributable to the subsidiaries in Turkey and the USA. Additions to intangible assets (goodwill) of EUR 10 million resulted from the acquisition of additional shares in a subsidiary (2006: EUR 6 million). To meet the requirements of IFRS 3, in combination with IAS 36, and to test for goodwill impairment, the cash-generating units have been defined to coincide with the legal entities, and an impairment test has been performed. For the impairment test, the carrying amount of each cash-generating unit is determined by allocating assets and liabilities, including attributable goodwill and intangible assets. An impairment loss is recognized if the recoverable amount of a cash-generating unit is lower than its carrying amount. The recoverable amount is the higher of fair value less costs to sell and value in use. For its impairment tests, BSH uses a Discounted Cash Flow (DCF) method to determine the expected future cash inflows of the cash-generating unit. The calculation of the cash flows of each cash generating unit is based on business plans with a planning horizon of three years. We have assumed a uniform rate of increase due to inflation of 1.0% p.a. after the end of the three-year planning period. Country-specific discount rates vary between 8.0% p.a. and 15.5% p.a. (between 8.0% p.a. and 13.9% p.a. in 2006), including the risk mark-up. All goodwill items recognized in the consolidated balance sheet and assigned to cashgenerating units were tested for impairment. No impairment was recognized (2006: EUR 1 million). 23 Current and non-current financial liabilities Current and non-current financial liabilities comprise primarily liabilities to banks. The financial liabilities have the following remaining periods to repayment: up to one year years over 5 years Total Financial liabilities due within one year are reported as current financial liabilities; financial liabilities due in more than one year are classified as non-current financial liabilities.

76 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following tables show the contractually agreed (undiscounted) interest and redemption payments for primary financial liabilities and the derivative financial instruments with negative market value: Carrying >2013 amount 12/31/2007 Trade accounts payable Bank loans and overdrafts Other financial liabilities Derivative financial instruments Carrying >2013 amount 12/31/2006 Trade accounts payable Bank loans and overdrafts Other financial liabilities Derivative financial instruments Trade accounts payable Trade accounts payable are recognized at the higher of their nominal amount and repayment amount; all trade accounts payable are due within one year, as in Other liabilities and provisions (current) The breakdown of items under current provisions and other current liabilities is as follows: Provisions for taxes Other provisions Current provisions Notes payable Advance payments received Deferred liabilities Deferred income 1 6 Taxes payable Current derivative financial instruments (note 30) 4 2 Miscellaneous other liabilities Other current liabilities The statement of changes in provisions (note 26) gives details of changes in current provisions. 26 Other liabilities and provisions (non-current) The following table shows the breakdown of non-current other liabilities and non-current provisions: Miscellaneous other liabilities 11 5 Other non-current liabilities 11 5 Provisions for taxes Other provisions Non-current provisions The following table shows the breakdown of non-current other liabilities and non-current provisions: Provisions Personnel Obligation Other Total for taxes and social relating to provisions security the sales obligations function Jan. 1, Exchange rate differences Utilization Reversal Additions, including interest cost Reclassification Dec. 31, Current portion of provisions Non-current portion of provisions

77 NOTES TO THE BALANCE SHEET NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 75 The additions include expenses from reversing the discount of EUR 7 million (2006: EUR 5 million). The reclassifications are shown under accrued liabilities. The provisions for personnel and social security obligations include primarily obligations for partial retirement, personnel restructuring, and long-service bonuses. The provisions for obligations relating to the sales function include primarily provisions for warranty obligations. Other provisions include provisions for guarantees, contractual agreements at home and abroad, environmental protection and other risks. 27 Provisions for pensions and other postretirement benefits 27.1 Defined benefit plans On December 31, 2007, the pension obligations in Poland, Portugal, Singapore, Slovenia and the United Arab Emirates were taken into account in the consolidation for the first time. There are postretirement benefit entitlements for employees in Germany, primarily granting capital/pension benefits and fixed individual amounts. For employees in other countries (Belgium, United Kingdom, Portugal, Sweden, Switzerland, Spain and Norway), the benefits mainly depend on the number of years of service and the salary received immediately prior to retirement. The postretirement benefits granted in France, Greece, Italy, Austria, Poland, Singapore, Turkey and the United Arab Emirates are lump-sum payments. The postretirement benefits in Germany are mainly financed by the recognition of pension provisions; part of the obligation is met through a support fund. In other countries, they are mainly financed through insurers and pension funds. The defined benefit obligation is measured annually using the projected unit credit method. In accordance with IAS 19.93A, the SORIE method is used to determine the pension provisions and the pension costs. Actuarial gains and losses are disclosed in the SORIE and recognized directly in equity. The breakdown of pension obligation funding is as follows: Germany Other Germany Other countries countries Net present value of unfunded pension obligations Net present value of funded pension obligations External plan assets Unrecognized actuarial gains (+)/losses ( ) Unrecognized past services costs Pension obligation The pension provisions changed as follows in the course of fiscal 2007: In Germany, contributions from the deferred compensation amounting to EUR 3 million were shown under service cost for the first time in In recent years, these contributions have been shown in personnel expenses. The expense recognized in the income statement breaks down as follows: The total expense is recognized in the functional areas. Germany Other Germany Other countries countries Brought forward Exchange rate differences Transfer values Pension and capital amounts paid by the company Employer contributions to external funds Reversal ( )/addition (+) Deferred compensation Amount recognized in SORIE Pension provison Germany Other Germany Other countries countries Service cost Interest cost Expected return on external plan assets Amortization of actuarial gains ( )/losses (+) Amortization of past service cost Expense (+)/income ( ) from curtailment and settlement Reversal ( )/addition (+) of deferred compensation

78 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The reconciliation of benefit obligations and assets is as follows: Germany Other Germany Other countries countries Present value of the obligation at beginning of year Deferred compensation Service cost Interest cost Employee contributions Actuarial gain ( )/loss (+) Exchange rate effects Total amount of pensions and capital paid Past service cost Transfer values Effect of curtailments and settlements Present value of the obligation at end of year Market value of plan assets at beginning of year Expected income from external plan assets Actuarial gain (+)/loss ( ) Exchange rate effects Employer contributions to external pension funds Employee contributions to external pension funds Amounts of pension and capital paid by external funds Transfer values Effects of termination benefits Market value of plan assets at end of year For 2008, contributions paid to external funds are expected to be a total of EUR 4 million. The actual return on plan assets was as follows: Germany Other Germany Other countries countries Expected return on external plan assets Actuarial gain (+)/loss ( ) Actual value of plan assets at end of year The amounts disclosed in the statement of recognized income and expense (SORIE) are as follows: Germany Other Germany Other countries countries Actuarial gain (+)/loss ( ) Effect of asset limitation (IAS 19.58(b)) Amount recognized in SORIE Total amounts disclosed in the SORIE Deferred taxes on actuarial gains (+)/losses ( ) Totals recognized in shareholders equity Net actuarial gains/losses reported in equity

79 NOTES TO THE BALANCE SHEET NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 77 The actuarial gains and losses incurred are attributable to the following categories: Germany Other Germany Other countries countries Difference between expected and actual return on external plan assets Difference between expected and actual values Adjustment due to changes in measurement assumptions Total actuarial gains (+)/loss ( ) The breakdown in the other prior reporting period in accordance with IAS A (p) is as follows: Germany Other Germany Other countries countries Present value of unfunded post-retirement benefit obligations External plan assets Actual income from external plan assets Actuarial gains (+)/losses ( ) included in SORIE Target/actual variance The breakdown of the reported plan assets is as follows: Germany Other Germany Other countries countries % % % % Shares and other securities Bonds Real estate Other assets Total % (2006: 20.7%) of the plan assets reported for Germany are invested in the sponsors of the support fund. The expected return on the reported external plan assets is as follows: % % Shares and other securities Bonds Real estate Other assets Weighted total

80 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS In Germany, part of the plan assets comprises receivables of the pension trust from BSH GmbH. As at December 31, 2007, the receivables stood at EUR 15 million (2006: EUR 14 million). The plan assets otherwise include no further property in own use or other assets employed by BSH. The expected return on external plan assets for companies outside Germany ranges between 4.0% and 6.7%. The expected return on each asset class is comparable to that reported for Germany. The expected return per asset class is derived from the relevant risk premium on the return on AA-rated corporate bonds (the return on AA-rated corporate bonds determines the relevant discount rate). The calculation of the pension obligations and pension expense was based on the following assumptions: Germany Other Germany Other countries countries % % % % Discount rate / Expected return on external plan assets Salary inflation Pension inflation The pension obligations of German companies have been remeasured as of December 31, 2007, using a discount rate of 5.25% p.a. The measurement assumptions for companies outside Germany are weighted average values. The expected long-term return on investment is determined on the basis of publicly available and internal capital market studies and predictions for each category of asset. In Germany, the 2005G Heubeck tables were used as the basis for the biometric calculation. Employee turnover probabilities were estimated for specific age groups and genders Defined contribution plans In 2007, the Company made contributions of EUR 83 million (2006: 80 million) to defined contribution plans (employer contributions to statutory pension insurance) Partial retirement agreements and long-service bonus commitments In some countries, there are also obligations relating to partial retirement agreements and long-service bonus commitments. The amount of the obligation for these plans was around EUR 104 million at the end of 2007 (2006: EUR 122 million); the expense recognized in 2007 amounted to EUR 18 million (2006: EUR 7 million). 28 Shareholders equity The statement of changes in shareholders equity shows the changes in the BSH Group s equity and its components. The exchange differences resulting from the translation of the financial statements of subsidiaries outside Germany are recognized directly in equity in the currency translation reserve. In accordance with IAS 19, the actuarial gains/losses item comprises actuarial gains/losses on pension provisions (net of deferred taxes) recognized directly in equity. The reserve for available-for-sale securities includes the measurement gains or losses on securities and derivative financial instruments, net of deferred taxes, recognized directly in equity. Retained earnings and reserves include the income earned in the past by the companies included in the consolidated financial statements, insofar as they have not been paid as dividends, and the changes in accumulated other equity capital. The minority interest item includes the paidin capital and the net profit for the year generated by the sales companies whose shares are held by Robert Bosch GmbH and Siemens AG. This item also includes the minority interest in the equity of BSH Ev Aletleri Sanayi ve Ticaret A.Ş., Istanbul, and BSW Household Appliances Co., Ltd., Wuxi, including any attributable pro rata profit or loss.

81 NOTES TO THE FINANCIAL INSTRUMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 79 A dividend of EUR 152 million (2006: EUR 125 million) was paid out to the shareholders on May 10, 2007 according to their holdings. BSH-D recorded a net profit of EUR 195 million for the period in its annual statutory financial statement, and the management of the Group is proposing that a total of EUR 190 million be distributed to shareholders. 29 Notes to the cash flow statement The cash flow statement reports how the BSH Group s cash and cash equivalents changed in the course of 2007 as a result of cash inflows and outflows. In accordance with IAS 7 ( Cash Flow Statements ), a distinction is made between cash flows from operating, investing, and financing activities. The cash flow statement is determined using the indirect method starting from the profit before tax. The net cash from operating activities is determined after applying adjustments for non-cash income and expenses, primarily depreciation and amortization, and after taking into account any changes in working capital. Investing activities comprises additions under non-current assets and the purchase or sale of securities. Cash flows from financing activities shows cash inflows and outflows from the drawdown or repayment of financial liabilities and from dividends. The cash and cash equivalents reported in the cash flow statement comprises cash on hand, checks, and bank balances, providing they are available within three months. The effect of exchange rate changes on cash and cash equivalents and the effect of changes in the basis of consolidation are reported separately. The changes in the balance sheet items reported in the cash flow statement cannot be directly reconciled to the balance sheet statement because they have been adjusted for exchange rate effects. The exception to this is the figure for cash and cash equivalents. Cash and cash equivalents includes an amount of EUR 0 million (2006: EUR 1 million) that is subject to exchange control restrictions. 30 Financial instruments A financial instrument is a contract that simultaneously leads to a financial asset in one entity and a financial liability or equity instrument in another. Financial instruments involve primary as well as derivative assets or liabilities. Derivative financial instruments are used to hedge items on the balance sheet and future cash flows. IAS 39 gives four categories of financial instruments: Financial investments held to maturity Financial assets/liabilities held for trading Available-for-sale financial assets Loans and receivables Other financial liabilities In the BSH Group, financial instruments are generally classified as loans and receivables or as available for sale. The primary financial liabilities are assigned to the category other financial liabilities. Derivative financial instruments not qualifying for hedge accounting are classified as held for trading. Financial instruments are shown on the balance sheet upon purchase or sale on the settlement date under usual market conditions. Net gains/losses by category Loans and receivables Financial assets available for sale Financial assets and financial liabilities at fair value through profit or loss Financial liabilities measured at amortized cost The net gains/losses from loans and receivables include changes in the write-downs, gains and losses from derecognition and payments received, exchange rate gains and losses and increased valuations of originally written-down or derecognized credits and receivables.

82 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Net gains and losses from the availablefor-sale financial assets comprise gains and losses from the derecognition of availablefor-sale financial assets and interest income from these financial instruments. For the amount of unrealized gains and losses from the available-for-sale financial assets recognized directly in equity during the fiscal year, and the amount removed from equity and recognized as income in the year, see Consolidated Statement of Changes in Shareholders Equity. Net gains or losses on financial assets and liabilities recognized as income at fair value include not only the effects of changes in market value, but also interest expenses or income from these financial instruments. The net income from financial liabilities valued at amortized cost is made up of interest expenses and currency gains and losses.

83 NOTES TO THE FINANCIAL INSTRUMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 81 Carrying amounts and fair values by categories and classes 12/31/ /31/2006 Measurement Carrying Fair Value Carrying Fair Value categories amount amount IAS 39 ASSETS Cash LaR Trade accounts receivable LaR 1,819 1,819 1,809 1,809 Other financial receivables LaR Financial assets available for sale AfS Derivative financial assets not qualified for hedge accounting FAHfT Derivative financial assets (hedge accounting) n.a. 2 2 Financial assets with embedded derivatives FVTPL LIABILITIES Trade accounts payable FLAC Bank loans and overdrafts FLAC Other financial liabilities FLAC Finance lease liabilities n.a Derivative financial liabilities not qualified for hedge accounting FLHfT Derivative financial liabilities (hedge accounting) n.a. Financial liabilities with embedded derivatives FVTPL Of which aggregated by measurement categories Loans and receivables (LaR) 2,475 2,475 2,366 2,366 Available-for-sale financial assets (AfS) Financial assets held for trading (FAHfT) Financial liabilities measured at amortized cost (FLAC) 1,697 1,682 1,689 1,689 Financial liabilities held for trading (FLHfT) Financial assets at fair value through profit or loss (FVTPL) Reconciliation to balance sheet Other non-financial receivables (included in other current assets, securities and non-current financial assets) Other non-financial liabilities (included in other current and non-current liabilities) LaR AfS FAHfT FLAC FLHfT FVTPL Loans and Receivables Available for Sale Financial Assets Held for Trading Financial Liabilities measured at Amortized Cost Financial Liabilities Held for Trading Fair Value Through Profit or Loss

84 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30.1 Non-derivative financial instruments Available-for-sale financial instruments Available-for-sale financial instruments are always reported at fair value. The fair value is generally the market value. If there is no active market, fair value is determined using a generally accepted measurement technique. Investments in nonconsolidated subsidiaries and associates Shares in nonconsolidated subsidiaries and associates are always reported at amortized cost; impairment losses are recognized where appropriate. There is no active market for these companies and fair value cannot therefore be reliably determined with reasonable time and effort. Loans/receivables and financial liabilities Credits/loans and financial liabilities are measured at amortized cost using the effective interest method, provided they are not related to hedges. In particular these are Loans under financial assets Trade receivables and trade payables Other current assets and liabilities As last year, loans under financial assets essentially have a maturity in excess of four years, whereas trade accounts receivable and payable are, as last year, due within one year. The amortized cost of a financial liability is calculated as the amount in which a financial asset or a financial liability was measured on initial recognition, less any repayments, impairment losses, or uncollectibility writedowns, and net of the premium/discount. The premium/discount is allocated using the effective interest rate method over the life of the financial asset or liability Derivative financial instruments Hedging policy and financial derivatives The activities of BSH are impacted by a number of factors, including exchange rate fluctuations. It is the aim of the Company s business policies to limit these risks with hedging measures. Hedging transactions are conducted exclusively with first-rate national and international banks. A limit is imposed on transactions with each contract partner. Binding internal rules and guidelines provide firm guidance on permitted actions and responsibilities for hedging, especially the hedging relationship with operating business and financial investment or financing transactions. BSH does not use derivative financial instruments for speculative purposes. The Group employs the treasury controlling and value contribution monitor used in the finance unit to control interest and currency management activities. These information systems are used to support the identification and assessment of interest rate and currency risks throughout the Group for the next twelve months, based on planned cash flow. This takes place according to the minimum hedging rates stipulated in the company s financial guidelines, and taking account of the strategy laid down by the Treasury Committee which meets regularly under the chairmanship of a member of executive management. If hedge accounting is used, changes in the fair value of derivative financial instruments are shown in the shareholders equity as part of accumulated other shareholders equity. If hedge accounting cannot be employed, the changes in market value are recognized in the income statement. For current receivables and liabilities, amortized cost is the nominal amount or the repayment amount. There is no substantial concentration of payment default risk in reported receivables, nor is disclosure required.

85 NOTES TO THE FINANCIAL INSTRUMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 83 Exchange rate risks As a basis for controlling its exposure to exchange rate risks, BSH primarily uses a Group-wide cash-flow reporting system, differentiated by currency; the subsidiaries outside Germany prepare rolling monthly reports for headquarters. Most of the hedging instruments used are forward exchange contracts; options are used in some cases. To monitor the risks from financial derivatives, hedges are marked to market on each bank working day; this valuation, plus additional information such as exchange rate gains or losses and risks, is available to the employees concerned and to the managers responsible. The nominal volumes of the reported hedges represent the total of purchase and selling amounts on which the hedges are based. The market values disclosed in the above list were determined on the basis of information available on the balance sheet date. They represent the settlement amounts (redemption values) of the financial derivatives. Redemption values are calculated on the basis of quoted prices and standardized procedures. The maximum credit risk of derivative financial instruments is limited to the total positive market values in the event of default by a contract partner of BSH GmbH or the BSH Group companies. Changes in the value of financial instruments from the hedging of planned transactions and available-for-sale financial instruments are recognized directly in accumulated other shareholders equity. As at December 31, 2007, EUR 35 million (2006: EUR 44 million) are included in shareholders equity after the deduction of deferred taxes. Of this, the Nominal volumes Market value Maturity Up to 1 year to Up to 1 year to 1 year 5 years 1 year 5 years Derivatives with positive market value Foreign currency derivatives not qualifying for hedge accounting Currency forwards Currency options Other foreign currency derivatives Interest rate and other derivatives not qualifying for hedge accounting Other interest rate derivatives Other price hedging instruments 0 Foreign currency derivatives, hedge accounting Currency forwards 37 2 Derivatives with negative market value Foreign currency derivatives not qualifying for hedge accounting Currency forwards Currency options Other foreign currency derivatives 13 0 Interest rate and other derivatives not qualifying for hedge accounting Other interest rate derivatives 13 0 Other price hedging instruments

86 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS effects of cash flow hedges amount to EUR 1 million (2006: EUR 0 million). The cash flow hedges have not as yet been revealed any lack of effectiveness for fiscal year Fluctuations in market prices can have significant risks for the BSH Group. Changes in exchange rates, interest rates and share prices affect worldwide operating business, as well as investment and financing activities. To represent these risks, IFRS 7 calls for sensitivity analyses which indicate the effects of hypothetical changes in relevant risk variables on net income and equity. The periodical effects are determined by relating the hypothetical changes in the risk variables to the inventory of financial instruments on the day of the financial statement. This assumes that the inventory as at the date of the financial statement is representative of the entire year. BSH has implemented a system based on the sensitivity analysis, made up of various risk analysis and risk management methods. The sensitivity analysis approximately quantifies the risk that can occur subject to the given assumptions, if particular parameters are changed to a defined extent. The risk assessment here assumes: The potential economic effects of this represent estimates. They are based on the assumption that the market changes implied within the framework of the sensitivity analysis occur. As a result of the global market developments actually taking place, the actual effects on the consolidated income statement can diverge significantly from these. More than half of BSH s subsidiaries are located outside the euro zone. As the Group s reporting currency is the euro, the company translates the financial statements of these companies into euros. In order to address translation-related currency effects in risk management, the working hypothesis that investments in foreign companies are in all cases long term in nature, and the returns are continuously reinvested, is applied. Translation-related effects occurring when the value of net asset positions converted into euros changes as a result of exchange rate fluctuations are recognized in the shareholders equity in the BSH consolidated financial statement and are not included in the sensitivity analysis. a simultaneous, parallel 10% devaluation/ upward revaluation of the US dollar against euro a simultaneous, parallel 10% devaluation/ upward revaluation of the pound sterling against euro a simultaneous, parallel 10% devaluation/ upward revaluation of the Turkish lira against euro a parallel shift in the interest curves of all currencies by 100 base points (1 percentage point) a 10% rise or fall in the prices of all listed investments classified as available-for-sale financial assets

87 NOTES TO THE FINANCIAL INSTRUMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 85 Foreign currency risks (conversion) USD +10% USD 10% On Dec. 31, 2007 On Dec. 31, 2006 On Dec. 31, 2007 On Dec. 31, 2006 Effect on Effect on Effect on Effect on Effect on Effect on Effect on Effect on net income other net income other net income other net income other movements movements movements movements in share- in share- in share- in shareholders equity holders equity holders equity holders equity Financial assets Cash (1) Trade accounts receivable (2) Other assets FVTPL (3) Financial assets AfS (4) Derivatives FVTPL Effects on financial assets before tax Financial liabilities Derivatives FVTPL Trade accounts payable (5) Financial liabilities (6) Effects on financial liabilities before tax Total pre-tax effect Foreign currency risks (conversion) GBP +10% GBP 10% On Dec. 31, 2007 On Dec. 31, 2006 On Dec. 31, 2007 On Dec. 31, 2006 Effect on Effect on Effect on Effect on Effect on Effect on Effect on Effect on net income other net income other net income other net income other movements movements movements movements in share- in share- in share- in shareholders equity holders equity holders equity holders equity Financial assets Cash (1) Financial assets AfS (4) Derivatives FVTPL Derivatives CFH (7) Effects on financial assets before tax Financial liabilities Derivatives FVTPL Trade accounts payable (5) Financial liabilities (6) Effects on financial liabilities before tax Total pre-tax effect The pound sterling is listed in accordance with IFRS 7.42, as significant transactions take place in this currency throughout the fiscal year that are not reflected in the balances on the balance sheet date.

88 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Foreign currency risks (conversion) TRY +10% TRY 10% On Dec. 31, 2007 On Dec. 31, 2006 On Dec. 31, 2007 On Dec. 31, 2006 Effect on Effect on Effect on Effect on Effect on Effect on Effect on Effect on net income other net income other net income other net income other movements movements movements movements in share- in share- in share- in shareholders equity holders equity holders equity holders equity Financial assets Cash (1) Trade accounts receivable (2) Other assets FVTPL (3) Effects on financial assets before tax Financial liabilities Derivatives FVTPL Trade accounts payable (5) Financial liabilities (6) Effects on financial liabilities before tax Total pre-tax effect AfS FVTPL CFH Available for Sale financial assets Fair Value Through Profit or Loss Cash Flow Hedge In 2006, the functional currency of the Turkish subsidiary (BSH-TR) was the euro. For reasons of comparability, it is assumed for the foreign currency valuation scenario that the Turkish lira was already the functional currency of BSH-TR in Explanatory notes: (1) Cash includes checks, cash on hand and deposits with banks. The currency risk encompasses corresponding revaluations. (2), (5) Trade accounts receivable and payable encompass both the external and company-internal receivables and payables subject to the risk of revaluation. (3) Other assets encompass in particular company-internal loan receivables and cash pool amounts subject to revaluation risks as a result of currency fluctuations. (4) AfS financial assets encompass in particular securities. In the case of interest-bearing financial instruments, a currency change brings about a change in market values which influences the result. No account is taken here of mutual funds in pensions and money market funds. Currency fluctuations in the case of stock and mutual funds in stocks would likewise be shown via the revaluation reserve. (6) Financial liabilities include both external borrowings and company-internal loan liabilities. The currency risk encompasses corresponding revaluations. (7) Derivative instruments with hedge accounting (cash flow hedge) include only currency exchanges. For the effective part, the influence of currency changes is thus recognized direct in equity. Interest risks In order to determine the interest risk, a flat-rate 1% increase or cut in the interest level is simulated. The changes in interest expense or income thus derive from the nominal volumes concerned. Changes in the market values of fixed-income securities and derivatives that react to interest rates are determined by calculation of the Basis Point Value (1% = 100 BP).

89 NOTES TO THE FINANCIAL INSTRUMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 87 Interest risk +1% 1% On Dec. 31, 2007 On Dec. 31, 2006 On Dec. 31, 2007 On Dec. 31, 2006 Effect on Effect on Effect on Effect on Effect on Effect on Effect on Effect on net income other net income other net income other net income other movements movements movements movements in share- in share- in share- in shareholders equity holders equity holders equity holders equity Financial assets Cash (1) Financial assets AfS (2) Derivatives FVTPL (3) Effects on financial assets before tax Financial liabilities Derivatives FVTPL (4) Financial liabilities (5) Effects on financial liabilities before tax Total pre-tax effect AfS FVTPL Available for Sale financial assets Fair Value Through Profit or Loss Explanatory notes: (1) Cash includes checks, cash on hand and deposits with banks. A change in the interest level would result in an increased/reduced interest income based on the demand and fixed-term deposits existing on the date of the balance sheet and accounts with balance interest calculation. (2) AfS financial assets encompass securities in particular. In the case of interest-bearing securities, a currency change brings about a change in market values, which is reflected in the revaluation reserves. No account is taken here of mutual funds in pensions and money market funds. Stock funds and mutual funds in stocks are here in particular subject to the other price risk, which is basically reflected in the revaluation reserves, and only in the case of existing impairments recognized as income does the simulation take place via the income statement. (3), (4) Derivatives not qualifying for hedge accounting include currency forwards, currency options, stock index futures, cross-currency swaps and interest rate index futures. An effect of the particular scenarios is in each case recognized as income. (5) Financial liabilities include both external borrowings and company-internal loan liabilities. A change in the level of interest would result in increased/reduced interest expenses based on the variable non-current interest-bearing borrowings existing on the balance sheet date. Other price risks Within the framework of the other price risk, a 10% flat-rate increase or reduction in the stock prices is simulated, with the result that the stock prices or the corresponding stock price indices (relative to the mutual funds invested in stock funds or relative to the index futures concerned) are shown as being 10% higher or lower. Other price risks Stocks +10% Stocks 10% On Dec. 31, 2007 On Dec. 31, 2006 On Dec. 31, 2007 On Dec. 31, 2006 Effect on Effect on Effect on Effect on Effect on Effect on Effect on Effect on net income other net income other net income other net income other movements movements movements movements in share- in share- in share- in shareholders equity holders equity holders equity holders equity Financial assets Financial assets AfS (1) Derivatives FVTPL Effects on financial assets before tax Financial liabilities Derivatives FVTPL (2) Effects on financial liabilities before tax Total pre-tax effect AfS FVTPL Available for Sale financial assets Fair Value Through Profit or Loss

90 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Explanatory notes: (1) AfS financial assets encompass securities in particular. In the case of interest-bearing securities, a currency change brings about a change in market values, which is reflected in the revaluation reserves. No account is taken here of mutual funds in pensions and money market funds. Stock funds and mutual funds in stocks are here in particular subject to the other price risk, which is basically reflected in the revaluation reserves, and only in the case of existing impairments recognized as income does the simulation take place via the income statement. (2) Derivatives not qualifying for hedge accounting include currency forwards, currency options, stock index futures, crosscurrency swaps and interest rate index futures. An effect of the particular scenarios is in each case recognized as income. Credit and liquidity risks The liquidity risk for the company consists in its possibly being unable to meet its financial liabilities, for example the repayment of financial liabilities and the payment of purchase commitments. BSH limits this risk by means of effective central cash-management, global access to lines of credit provided by highly rated credit institutes and a syndicated loan primarily concluded for contingencies. A significant portion of the external bank credits has been taken out over the long term, thus excluding short-term liquidity risks from repayment obligations. To supplement the above-mentioned liquidity management tools, BSH continuously follows up the financing options offered on the financial markets. In addition the Group monitors developments relating to availability and cost. A major objective here is to secure BSH s financial flexibility and to limit unreasonable refinancing risks. No deficits from financial investments subject to credit risks had been identified as at the date of the financial statement. 31 Leases The breakdown of future minimum lease payments under non-cancelable leases is as follows: Maturity within one year second to fifth year more than five years Total The minimum lease payments relate primarily to rents paid for real estate. Payments under rental agreements and leases amounting to EUR 57 million were recognized in income in 2007 (2006: EUR 49 million). The leases for the land belonging to BSHAF-D and leased to BSH-D and BSH Hausgeräte Service Nauen GmbH (BSHHSN-D) had initial terms that expired on March 31, 2003 (BSH-D) and November 30, 2005 (BSHHSN-D) respectively. From these dates, the lessees had the right to request from the lessor a five-year renewal of the lease. This option is available up to four times. BSH-D exercised its first option for a renewal up to March 31, 2008; BSHHSN-D also exercised its first option for a renewal up to November 30, BSHAF-D is assuming that the leases will be renewed on all four occasions. 32 Contingent liabilities and other financial liabilities No provisions have been recognized for the following contingent liabilities, stated at their nominal values, because it is not deemed probable that the risk will occur Surety and letters of support Guarantees on notes 1 3 Other contingent liabilities 1 0 Total Related party disclosures The following companies or persons are related parties for BSH GmbH under IAS 24: Robert Bosch GmbH, Stuttgart, Germany Siemens AG, Munich and Berlin, Germany Companies directly or indirectly controlled by BSH GmbH, Other consolidated and non-consolidated affiliated companies of the Robert Bosch Group and the Siemens Group, Members of the executive management or the Supervisory Board, Companies in which Robert Bosch GmbH, Siemens AG, or members of the management hold a significant portion of the voting rights.

91 NOTES TO THE BALANCE SHEET NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 89 Transactions with these related parties are conducted on an arm s length basis. The goods and services bought from related parties mainly comprise production supplies and sales services, and a small amount of training and other services. The goods and services supplied to related parties primarily involve the sale of household appliances. Sales, receivables and liabilities of BSH GmbH with related companies: Robert Bosch Siemens Robert Bosch Siemens Group Group Group Group Receivables Liabilities Sales Remuneration of members of the Board of Management and the Supervisory Board The remuneration paid to the Supervisory Board amounted to EUR 0.1 million (2006: EUR 0.1 million); executive management remuneration amounted to EUR 3.4 million (2006: EUR 3.7 million). Former members of executive management and their surviving dependents received payments of EUR 1.4 million, including pensions and transitional payments (2006: EUR 1.8 million). As of December 31, 2007, provisions amounting to EUR 19.7 million (2006: 22.2 million) were recognized for pensions and benefit entitlements for these persons. In 2007, as in 2006, there were no loans to members of the executive management or the Supervisory Board. The members of the executive management and the Supervisory Board are listed in the annexes. Munich, February 28, 2008 BSH Bosch und Siemens Hausgeräte GmbH Executive Management

92 90 GROUP FINANCIAL STATEMENTS Appendix I Consolidated Statement of Changes in Assets January 1 to December 31, 2007 (in EUR million) Note Jan. 1, 2007 Purchase and production cost Currency translation differences Changes in the consolidated group Additions Disposals I. Property, plant, and equipment 21 Land and buildings Technical equipment and machinery 1, Other equipment, operating, and office equipment 1, Assets under construction Advance payments on property, plant, and equipment , II. Intangible assets 22 Purchased intangible assets Patents, licenses, etc. (excl. software) Software Goodwill Advance payments on intangible assets Self-created intangible assets Software Development expenses Intangible assets being created ,

93 CONSOLIDATED STATEMENT OF CHANGES IN ASSESTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 91 Reclassifications Dec.31, 2007 Jan.1, 2007 Depreciation, amortization, impairment losses Currency translation differences Changes in the consolidated group Current year* Disposals Reclassifications Reversal Dec.31, 2007 Carrying amounts Dec. 31, , , , ,727 2, ,324 1, ,072 2, ,417 1,655 * Including EUR 7 million impairment of property, plant and equipment.

94 92 GROUP FINANCIAL STATEMENTS Consolidated Statement of Changes in Assets January 1 to December 31, 2006 (in EUR million) Note Jan. 1, 2006 Purchase and production cost Currency translation differences Changes in the consolidated group Additions Disposals I. Property, plant, and equipment 21 Land and buildings Technical equipment and machinery 1, Other equipment, operating, and office equipment 1, Assets under construction Advance payments on property, plant, and equipment , II. Intangible assets 22 Purchased intangible assets Patents, licenses, etc. (excl. software) Software Goodwill Advance payments on intangible assets Self-created intangible assets Software Development expenses ,

95 CONSOLIDATED STATEMENT OF CHANGES IN ASSESTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 93 Reclassifications Dec. 31, 2006 Jan.1, 2006 Depreciation, amortization, impairment losses Currency translation differences Changes in the consolidated group Current year* Disposals Reclassifications Reversal Dec.31, 2006 Carrying amounts Dec. 31, , , ,436 1, ,152 1, ,748 2, ,235 1,513 * Including EUR 33 million impairment of property, plant and equipment and EUR 1 million impairment of intangible assets.

96 94 Share owner BSH Bosch und Siemens Hausgeräte GmbH as at Dezember 31, 2007 Appendix II Consolidated subsidiaries according to IAS Capital investment in % Germany Constructa-Neff Vertriebs-GmbH, Munich 50 Neff GmbH, Munich 100 BSH Hausgeräte Service GmbH, Munich 100 BSH Hausgerätewerk Nauen GmbH, Nauen 100 BSH Hausgeräte Service Nauen GmbH, Nauen 100 Gaggenau Hausgeräte GmbH, Munich 100 BSH Vermögensverwaltungs-GmbH, Munich 100 BSH Hausgeräte Vetriebs GmbH, Munich 100 Europe BSH Home Appliances S.A., Brussels 100 BSH Hvidevarer A/S, Ballerup 100 BSH Kodinkoneet Oy, Helsinki 100 BSH Electroménager S.A.S., Saint Ouen 100 Gaggenau Industrie S.A.S., Lipsheim 100 BSH Ikiakes Syskeves A.B.E., Athens 100 BSH Home Appliances Ltd., Milton Keynes 100 BSH Elettrodomestici S.p.A., Milan 100 BSH Huishoud-elektro B.V., Amsterdam 100 Gaggenau Nederland B.V., Nieuwegein 100 BSH Husholdningsapparater A/S, Oslo 100 BSH Hausgeräte Gesellschaft mbh, Vienna 100 BSH Home Appliances Holding GmbH, Vienna 100 BSH Finance Management GmbH, Vienna 100 BSH Sprzet Gospodarstwa Domowego Sp.z o.o., Warsaw 100 BSHP Electrodomésticos, sociedade unipessoal, Lda., Carnaxide 100 BSH Electrocasnice S.R.L., Bucharest 100 OOO BSH Bytowaja Technika, Moscow 100 OOO BSH Bytovye Pribory, St. Petersburg 100 BSH Hushållsapparater A.B., Stockholm 100 BSH Hausgeräte AG, Geroldswil 100 BSH Drives and Pumps s.r.o., Michalovce 100 BSH Hišni Aparati d.o.o., Nazarje 100 BSH Electrodomésticos España, S.A., Huarte 100 BSH PAE, S.L., Vitoria 100 BSH Krainel, S.A., Vitoria 100 BSH domácí spotřebiče s.r.o., Prague 100 BSH Ev Aletleri Sanayi ve Ticaret A.Ş., Istanbul 96,75 BSH Háztartási Készülék Kereskedelmi Kft., Budapest 100 TOV BSH Pobutova Technika, Kiev 100 Capital investment in % South America BSH Electrodomésticos S.A., Buenos Aires 100 BSH Continental Eletrodomésticos Ltda., São Paulo 100 BSH Continental da Amazônia Ltda., Manaus 100 BSH Electrodomésticos S.A.C., Callao-Lima 100 Briky S.A., Montevideo 100 Asia BSW Household Appliances Co., Ltd., Wuxi 60 BSH Home Appliances Co., Ltd., Chuzhou 100 Jiangsu BS Home Appliances Sales Co., Ltd. Nanjing 100 BSH Electrical Appliances (Jiangsu) Co., Ltd. Nanjing 100 BSH Home Appliances Ltd., Hong Kong 100 BSH Home Appliances Ltd., Tel Aviv 100 BSH Home Appliances Pte. Ltd., Singapore 100 BSH Home Appliances Ltd., Auckland 100 BSH Home Appliances Pty Ltd, Clayton, Victoria 100 BSH Home Appliances Ltd., Bangkok 100 BSH Home Appliances Manufacturing Ltd., Kabinburi 100 BSH Home Appliances FZE, Dubai 100 BSH Home Appliances Sdn. Bhd., Kuala Lumpur 100 Africa BSH Home Appliances (Pty) Ltd., Johannesburg 100 Consolidated subsidiaries according to IAS (b) Robert Bosch Hausgeräte GmbH, Munich Siemens-Electrogeräte GmbH, Munich Constructa GmbH, Munich Not consolidated subsidiaries according to IAS BSH Bosch und Siemens Hausgeräte Altersfürsorge GmbH, Munich 100 Not consolidated subsidiaries due to immateriality BSH Home Appliances Sarl, Tunis 100 BSH électroménagers S.A., Luxemburg 100 Plus one subsidiary without business operation Profilo Elektrogeräte-Vertriebsgesellschaft mbh, Munich 100 North America BSH Electrodomésticos, S.A. de C.V., Mexico City 100 BSH Home Appliances Corporation, Huntington Beach/New Bern 100 BSH Home Appliances Ltd./Électroménagers BSH Ltée, Mississauga 100

97 Independent Auditors Report NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 95 We have audited the consolidated financial statements prepared by BSH Bosch und Siemens Hausgeräte GmbH, Munich, comprising income statement, balance sheet, statement of changes in equity, cash flow statement, and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31, The preparation of the consolidated financial statements and the group management report in accordance with IFRS as adopted by the EU, and the additional requirements of German commercial law pursuant to 315a Abs. (paragraph) 1 HGB are the responsibility of the parent company s management. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position, and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and consolidation principles used, and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the consolidated financial statements of BSH Bosch und Siemens Hausgeräte GmbH, Munich, comply with IFRS as adopted by the EU, the additional requirements of German commercial law pursuant to 315a Abs.1 HGB, and give a true and fair view of the net assets, financial position, and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Munich, February 28, 2008 Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft Dr. Plendl Prosig Wirtschaftsprüfer Wirtschaftsprüfer (German Public Auditors)

98 96 Summary of Past Performance BSH Bosch und Siemens Hausgeräte GmbH (Group) (in EUR million) IFRS IFRS IFRS HGB HGB HGB HGB HGB Sales 8,818 8,308 7,340 6,844 6,296 6,289 6,092 6,278 Year-to-year change in percent Foreign share of sales in percent Workforce (in thousands at Jan.1 of the following year) Personnel expenses 1,704 1,654 1,448 1,486 1,458 1,448 1,392 1,354 Investment in tangible fixed assets* In percent of sales Depreciation of tangible fixed assets* In percent of capital investment Balance sheet total 6,276 5,950 5,325 4,311 3,844 3,611 3,584 3,493 Fixed assets 2,374 2,259 1,957 1,571 1,484 1,277 1,291 1,154 Inventories 1,103 1, Trade receivables and other current assets 2,053 2,052 1,655 1,587 1,407 1,181 1,209 1,295 Share capital and reserves 2,372 2,057 1,859 1,535 1, In percent of balance sheet total Provisions 1,673 1,709 1,581 1,462 1,426 1,380 1,322 1,255 EBITDA EBIT Results from ordinary activities Net income for the year (before profit transfer) *Including intangible assets, excluding goodwill.

99 Oslo Stockholm Helsinki St. Petersburg Toronto Ballerup Amsterdam Nauen Berlin Warsaw Bad Neustadt Milton Keynes Brussels Bretten Łódz Luxembourg Prague Giengen Dillingen Michalovce Paris Lipsheim Traunreut Munich Vienna Geroldswil Budapest Nazarje Bucharest Milan Santander Huarte Vitoria Esquiroz Estella La Cartuja Lisbon Montañana Athens Moscow Kiev Çerkezköy Istanbul Chuzhou Nanjing Wuxi Hong Kong New Bern Tunis Huntington Beach La Follette Tel Aviv Kabinburi Bangkok Dubai Kuala Lumpur Mexiko City Singapore Callao Johannesburg Hortolândia São Paulo Melbourne Auckland Group Headquarters Subsidiaries Buenos Aires Factories Cooking Refrigeration/Freezing Dishwashing Washing/Drying Consumer Products Motors, pumps Wide-coverage sales and customer service network As at: May 2008

100 BSH Bosch und Siemens Hausgeräte GmbH Carl-Wery-Straße 34 D Munich Tel Fax BSH Bosch und Siemens Hausgeräte GmbH, 2008 General information and ordering the following reports: Konzern-Geschäftsbericht 2007 Group Annual Report 2007 Verantwortung für Umwelt und Gesellschaft 2007 Environmental and Corporate Responsibility 2007 Corporate Communications Tel Fax