Annual Report 2007

Reithofer: dividend increase for 2007 seen as first step
Average profit share of euro 5,600 per employee

Munich. The BMW Group plans to increase the level of shareholders' participation in the success of the BMW Group in the future. "We see the higher dividend for the financial year 2007 as being the first step", stated Norbert Reithofer, the Chairman of the Board of Management of BMW AG at the Annual General Meeting held on Thursday in Munich. Based on its Number ONE Strategy, the company's activities are being directed towards safeguarding the BMW Group's future and increasing its value. "We have taken the right steps to make BMW stock an even better and safer investment", continued Reithofer.

BMW Group achieves all of its targets in 2007

The BMW Group achieved all of the targets that it had set itself for the financial year 2007 by posting new record sales volume and revenue figures and an adjusted profit before tax higher than one year earlier. Profit before tax, at euro 3,873 million (2006: euro 4,124 million), was 6.1% down on the record level achieved in the previous year. Adjusted for the exceptional impact of the settlement of the exchangeable bond on shares in the British engine manufacturer, Rolls-Royce plc, the profit before tax, as previously announced, was 0.6% higher than in 2006. The exceptional gain on the conversion of the remaining options in 2007, at euro 97 million, was significantly lower than the previous year's gain of euro 372 million. Group EBIT rose by 4.0% to euro 4,212 million (2006: euro 4,050 million).

As a result of the exceptional positive effect of the corporate tax reform in Germany, the net profit also rose by 9.0% to a new all-time high level of euro 3,134 million (2006: euro 2,874 million). The net profit therefore surpassed the three billion euro figure for the first time. Group revenues climbed by 14.3% to euro 56,018 million (2006: euro 48,999 million) on the back of sharp rise in sales volume and thanks to the dynamic growth of financial services business. This means that revenues were able to break through the euro 50 billion barrier for the first time. Operating cash flow went up by 18% to euro 6,340 million (2006: euro 5,373 million).

The total number of BMW, MINI and Rolls-Royce brand vehicles delivered to customers in 2007 rose to its highest level to date, with the sales volume up by 9.2% to 1,500,678 units (2006: 1,373,970 units). The BMW Group therefore fully achieved the upper single-digit sales growth rate target set for the full year 2007.

The workforce increased slightly during the year, mainly as a result of the acquisition of Husqvarna Motorcycles and two acquisitions made by the Financial Services segment. At the end of 2007, the worldwide workforce comprised 107,539 employees (31 December 2006: 106,575 employees), an increase of 0.9%.

Shareholders to participate significantly more in success of business

The Board of Management and the Supervisory Board will propose at the Annual General Meeting that the dividend per share of common stock be increased by 51.4% to euro 1.06 (2006: euro 0.70) and that the dividend per share of preferred stock be increased by 50.0% to euro 1.08 (2006: euro 0.72). The total amount to be distributed is euro 694 million.

Earnings and sales volume outlook for 2008 reaffirmed

The BMW Group intends to continue its successful business performance in the financial year 2008. "Excluding the exceptional gain on the Rolls-Royce exchangeable bond recognised in 2007, we are aiming to achieve higher pre-tax group earnings in 2008 than in 2007" emphasised Reithofer. The BMW Group is currently heading towards sales volume records for all three brands in 2008.

Exceptional expenses totalling euro 236 million did somewhat cast a shadow over the strong first-quarter operating performance. Group revenues increased by 11.2% to euro 13,285 million (first quarter 2007: euro 11,951 million). The profit before financial result (EBIT) fell by 9.3% to euro 827 million (first quarter 2007: euro 912 million). The pre-tax profit amounted to euro 641 million (first quarter 2007: euro 852 million), down by 24.8%. The profit after tax decreased by 17.0% to euro 487 million (first quarter 2007: euro 587 million). Adjusted for exceptional items, however, EBIT improved by 16.6% to euro 1,063 million, corresponding to an EBIT margin of 8.0% (first quarter 2007: 7.6%).

First-quarter reported earnings were adversely affected by a number of factors, in particular the weaker US economy. The international financial crisis worsened and the climate for consumer spending became gloomier. As a consequence, pre-owned car prices -- and hence the level of revenues that can be generated on vehicles at the end of lease contracts -- declined. This development had been anticipated to a large extent in risk provisions recorded at the end of the financial year 2007 on the basis of the situation at that time.

The situation worsened, however, during the first few months of the year, particularly in March, necessitating additional measures in the first quarter. Unfavourable developments on the pre-owned car market in the USA during the first three months of 2008, including the expense for an additional risk provision recognised in the Automobiles segment, had a total negative impact of euro 157 million on first-quarter earnings. Expenses were incurred by both the Automobiles and Financial Services segments in conjunction with a shared business process aimed at optimising the remarketing of vehicles at the end of lease contracts. The expense for risk provision recorded by the Financial Services segment in the first quarter was euro 79 million higher than one year earlier. Based on its latest assessment of the situation, the BMW Group considers that the risk provision recognised in the first quarter will be sufficient for the remainder of the year.

New authorisation for share buy-back proposed

The Board of Management and the Supervisory Board of BMW AG will also propose a resolution at the Annual General Meeting to authorise the buy-back of up to 10% of the Company's share capital. The authorisation, if resolved, will be valid for a period of 18 months. The buy-back authorisation passed in the previous year remains valid until 14 November 2008. It has not yet been decided whether or the extent to which the new authorisation will be applied to buy back further shares.

Employees to receive an average profit share of euro 5,600

BMW AG's employees also participate directly in the success of the business. Employees will receive a profit share for the financial year 2007 along with their pay for July. The profit share is graduated and corresponds, for employees with a length of service over four years, to 156% of the gross monthly pay. The average profit share is euro 5,600 per employee putting the BMW Group ahead in comparison with competitors.

* * *Norbert Reithofer's speech at the Annual General Meeting can be downloaded from the BMW Group website at www. bmwgroup.com/ir.
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