a

Annual Report 2002

Bosch Group

7 Front-page illustration:Seventy-five years ago,Robert Bosch gave“auto-mobility” to thediesel engine, which untilthen had virtually onlybeen used in stationaryfunctions or in marineapplications. In Novem-ber 1927, full-scaleseries production ofdiesel injection pumpsand nozzles began,which now made it a

commercial proposi-tion to manufacturediesel engines for over-the-road vehicles. Thefirst commercial appli-cation was the in-linepump shown here foran MAN truck. In theforeground can beseen a modern com-mon-rail injector forcommercial vehicles.

Robert Bosch GmbH, Stuttgart

Originated as the “Workshop for Precision Mechanics and Electrical Engineering” founded by Robert Bosch in Stuttgart in 1886

Responsible for a total of 253 subsidiaries, of which 36 are domestic and the remaining 217 are situated outside Germany

Owners: Robert Bosch Stiftung GmbH, Stuttgart, 92%Bosch family, 8%Robert Bosch Industrietreuhand KG, Stuttgart, execution of the entrepreneurial ownership functions

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Table of Contents

Page

Key Figures 4

Introduction 5

Supervisory Council 6

Supervisory Council Report 7

Board of Management 8

Senior Management 10

Management Report 12

Automotive Technology Business Sector 22

Industrial Technology Business Sector 30

Consumer Goods and Building Technology Business Sector 34

International Business 38

Research and Development 42

Environmental Protection 44

Employees of the Bosch Group 46

Financial Statements of the Bosch Group Worldwide 50

Major Companies of the Bosch Group Worldwide 68

Financial Statements of Robert Bosch GmbH 70

Ten Year Statistics Bosch Group Worldwide 72

4

Key Figures(million euro)

Bosch Group Worldwide 2002 2001

Sales 34,977 34,029percentage change from prior year +2.8 + 7.8

Foreign salesas a percentage of sales 72 72

Research and development expense 2,487 2,274as a percentage of sales 7.1 6.7

Investments in tangible fixed assets 2,006 2,368as a percentage of depreciation 108 123

Number of employeesaverage for the year 225,897 218,377as of January 1, 2003/2002 224,341 220,999

Total assets 27,475 27,783

Equity capital 8,885 9,014as a percentage of total assets 32 32

Net income for the year 650 650

Unappropriated earnings(Dividends of Robert Bosch GmbH) 60 50

5

Introduction

To our business partners and friends

As for many other companies, 2002 was again a difficult year for Bosch: theworld economy in large part did not go beyond the first signs of recovery; theGerman economy stagnated for the second year in a row, with a significantslowing effect on all of Europe. Even an innovative and internationally broadlyrepresented company such as Bosch, could not avoid being negatively affectedby such an environment.

Although the business development was disappointing at first glance, 2002 didmeet our cautious expectations. The Bosch Group in total reached a sales vol-ume of about 35 billion euro. That was nearly 3% more than the year before.Because of the significant increase in the value of the euro, the good growth weexperienced in North America and Asia did not find its way into our salesfigures. Had the currencies remained stable, our sales growth would have been6%. Net income remained at the level of the prior year.

The business outlook for 2003 is not encouraging and above all very uncertain:another year of stagnation threatens. At present all plans worldwide are over-shadowed by the Iraq conflict; in Germany the mood is further dampened bya government program, which even after the announcement of correctiveactions, still does not enjoy a broad measure of confidence. The slow growth inthe world economy leads to a still more severe competitive environment. At thesame time, China, as a new, dynamic economic region, keeps gaining in impor-tance, opening up significant opportunities for us too. We will meet these chal-lenges with determination and do everything to further strengthen our businesspowers. To do so, we place our emphasis first and foremost on innovation, tech-nical competence and a worldwide regional presence. Our customers and sup-pliers will continue to find Bosch to be a strong, forward-looking and reliablepartner.

Hermann Scholl

6

Supervisory Council

Dr.-Ing. Wolfgang Eychmüller,Ulm/Donau,ChairmanChairman of the Supervisory Councilof Wieland-Werke AG

Walter Bauer, Kohlberg,Deputy ChairmanChairman of the Joint Shop Councilas well as of the Combined Shop Council, and Chairman of the ShopCouncil of the Reutlingen Plant ofRobert Bosch GmbH

Dr. jur. Peter Adolff, Stuttgart,former Member of the Board ofManagement of Allianz Versiche-rungs-Aktiengesellschaft

Knut Angstenberger, Stuttgart,(until June 30, 2002)Department Manager in theDiesel Systems Division, andChairman of the Joint SpeakerGroup of Robert Bosch GmbH andof the Group Speaker Committee

Dr.h.c. Bo Erik Berggren, Stockholm,former Chairman of the Board ofDirectors and Chief ExecutiveOfficer of The Stora KopparbergetCorp.

Henning Blum, Hildesheim,Chairman of the Shop Councilof the Hildesheim Plant andMember of the Joint Shop Council of Robert Bosch GmbH

Dr. jur. Ulrich Cartellieri, Frankfurt,Member of the SupervisoryCouncil of Deutsche Bank AG

Ruth Fischer-Pusch, Stuttgart,Trade Unions of the Metals Industry,District Management Baden-Württemberg

Dr.-Ing. Heiner Gutberlet,Fellbach-Oeffingen,(from April 17, 2002)Chairman of the Board of Trusteesof Robert Bosch Stiftung GmbH

Dr. jur. Karl Gutbrod, Stuttgart,(until April 16, 2002)former Member of the Board ofManagement of Robert Bosch GmbH

Dr.-Ing. Rainer Hahn, Stuttgart,(from April 17, 2002)former Member of the Board ofManagement of Robert Bosch GmbH

Dieter Klein, Wolfersheim,Chairman of the Shop Councilof the Homburg Plant and Memberof the Joint Shop Council ofRobert Bosch GmbH

Dieter Krause, Hildesheim,Chairman of the Shop Councilof Blaupunkt GmbH, and Memberof the Combined Shop Council

Prof. Gero Madelung, Munich,(until April 16, 2002)formerly Technical University MunichChair of Aviation Technology

Matthias Madelung, Munich,(from April 17, 2002)Member of the Board of Trusteesof Robert Bosch Stiftung GmbH

Prof. Dr. rer. nat. Hans-Joachim Queisser, Stuttgart,(until April 16, 2002)former Director at the Max-Planck-Institute for Solid-State Research

Urs B. Rinderknecht, Ennetbaden,Chief Executive of UBS AG

Wolf Jürgen Röder, Tübingen,Trade Unions of the Metals Industry,Managing Director

Gerhard Sautter, Erdmannhausen,Chairman of Main Election Manage-ment for the Supervisory CouncilElection, until April 27, 2002,Chairman of the Shop Council of theFeuerbach Plant, and DeputyChairman of the Joint Shop Councilof Robert Bosch GmbH and theCombined Shop Council

Hans Peter Stihl, Remseck, General Partner of STIHL HoldingAG & Co. KG

Jürgen Ulber, Frankfurt,Union Secretary at the ManagingDirectorate of the Trade Unionsof the Metals Industry

Jörg Vial, Nehren,(from July 1, 2002)Department Director for CentralPurchasing Projects and Methodsand Chairman of the Joint SpeakerGroup of Robert Bosch GmbH andof the Group Speaker Committee

Hans Wolff, Bamberg,Chairman of the Shop Council of theBamberg Plant and Member of theJoint Shop Council of Robert Bosch GmbH

Hubert Zimmerer, Stuttgart,former Member of the Board ofManagement of Robert BoschGmbH

7

In regular meetings, the Supervisory Council kept itself informed about theprogress of business and the company’s situation. Business developments,financial situation and investment plans, as well as new technical developmentswere presented and discussed in detail. Reporting and discussion included allimportant companies of the Bosch Group. Written monthly reports brought theSupervisory Council up to date on current business developments. Specialevents were covered in newsletters.

Ernst & Young Deutsche Allgemeine Treuhand AG, Stuttgart, audited the finan-cial statements of Robert Bosch GmbH and the consolidated financial state-ments as of December 31, 2002, and the condensed management report. Theauditors in all cases gave their unqualified opinion. The Supervisory Councilconcurs with the audit findings, without objections, and recommends that theshareholders approve the financial statements of Robert Bosch GmbH and theconsolidated financial statements and follow the proposal of the Board of Man-agement for the disposition of net income.

On April 16, 2002, Dr. jur. Karl Gutbrod, Prof. Gero Madelung and Prof. Dr.Hans-Joachim Queisser left the Supervisory Council, followed on June 30,2002 by Knut Angstenberger. The Supervisory Council expresses its thanks tothese gentlemen for their long and constructive work. The shareholdersappointed Dr.-Ing. Heiner Gutberlet, Dr.-Ing. Rainer Hahn and MatthiasMadelung as new members of the Council, effective April 17, 2002. On July 1,Jörg Vial joined the Council as replacement member.

On June 30, 2002, Claus Dieter Hoffmann retired from the Board of Manage-ment. The Supervisory Council thanks him for his long and successful careerwith the company. At its meeting on April 18, 2002, the Supervisory Council,acting on the recommendation of the shareholders, appointed Gerhard Küm-mel deputy member of the Board of Management of Robert Bosch GmbHeffective July 1, 2002.

As successor to the Chairman of the Board of Management, Dr.-Ing. HermannScholl, who leaves the Board on June 30, 2003 to join the Supervisory Coun-cil, the Council appointed Franz Fehrenbach effective July 1, 2003. As of Janu-ary 1, 2004, Dr. rer. nat. Siegfried Dais will take over from Tilman Todenhöfer asDeputy Chairman of the Board of Management. Tilman Todenhöfer will leavethe Board of Management on December 31, 2003, in order to join the Super-visory Council of the company on January 1, 2004. Effective July 1, 2003,Dr.-Ing. Bernd Bohr will take over the chairmanship of the Automotive Tech-nology Business Sector, which is currently held by Dr.-Ing. Hermann Scholl.

Stuttgart, March 2003For the Supervisory CouncilDr.-Ing. Wolfgang EychmüllerChairman

SupervisoryCouncil Report

8

Board of Management

Back row: Peter Marks, Gerhard Kümmel, Wolfgang Drees, Tilman Todenhöfer, Kurt LiedtkeMiddle row: Hermann Scholl, Wolfgang Chur, Bernd BohrFront row: Franz Fehrenbach, Siegfried Dais, Gotthard Romberg

9

● Divisions● Corporate Responsibilities● Regional Responsibilities

Board of Management

Hermann SchollChairman● Corporate Planning

Coordination Automotive TechnologyExecutive Personnel

Tilman TodenhöferDeputy Chairman● Human Resources and Social Welfare

Legal Affairs and TaxesPublic Relations

Bernd Bohr● Gasoline Systems; Diesel Systems (Technology)● Environmental Protection ● Japan

Wolfgang Chur● Sales Automotive Technology;

Automotive Aftermarket● Coordination OE Sales;

Quality; Licensing, Patents, Trademarks ● Korea

Siegfried Dais● Car Multimedia; Automotive Electronics;

Security Systems; Broad-band Networks● Research; Coordination Development;

Automotive Technology; Information Processing

Franz Fehrenbach● Diesel Systems

(Sales and Business Administration); Automation Technology; Packaging Technology

● Construction and Buildings● India

Claus Dieter Hoffmann(until June 30, 2002)

Kurt Liedtke● North America

Gotthard Romberg● Power Tools; Thermotechnology● Sales Organization (Trade)● China

Wolfgang Drees● Chassis Systems

Gerhard Kümmel(from July 1, 2002)● Business Administration

Finance and Financial StatementsPlanning and ControllingPurchasing and Logistics

Peter Marks● Energy Systems; Body Electronics● Manufacturing Coordination; Capital Expenditures;

CIP● Australia

South America

10

Senior Management

USAReiner Beutel1, 2

John Moulton1, 2

David D. Robinson1, 2

Hans-Joachim Weckerle1, 2

Knut Bendixen2

Robby DraveLee ManduzziMeredith NickolRichard Nork

FrancePatrick Mermilliod1

Dietmar Feder1

Gerold Lemperle

JapanStefan Stocker1

Helmut PfeifleKiyoto InoueFriedrich MegerleHidekazu OshizawaToshio TakataAndreas Wiegert2

ItalyRudolf Colm1

Massimo Guarini1

Automotive Technology

Gasoline SystemsLudwig Walz1

Reiner Leipold-Büttner1

Rolf LeonhardRainer Lohse1

Peter TyrollerJohn Moulton1

Diesel SystemsUlrich Dohle1

Klaus BohlerKarl NowakWerner StruthAndreas Wiegert

Chassis SystemsWolfgang DreesManfred DreyerJean DufourBernd Ehlers1

Günther Plapp1

Hans-Joachim Weckerle1

Energy and BodySystemsBeda-Helmut Bolzenius1

Herbert HemmingJoachim HoffPeter SchickDavid D. Robinson1

Car MultimediaWolfgang Malchow1

Klaus DieterichOtto MayerWolf-Henning Scheider

Automotive ElectronicsVolkmar DennerRainhard AßmannJosef Evers1

Rainer Kallenbach

Automotive AftermarketEugen Konrad1

Ruprecht HammerbacherUdo WolzKnut Bendixen

Industrial Technology

Bosch RexrothWinfried Witte1

Albert Hieronimus1

Manfred Grundke1

Georg Hanen1

Mehmet Varlik

Packaging TechnologyFriedbert KlefenzGebhard KönigFranz Thoren

Consumer Goods and Building Technology

Power ToolsUwe Raschke1

Boris GleißnerHolger JacobyReiner Beutel1

ThermotechnologyJoachim Berner1

Hans-Dieter EckhardtKlaus Huttelmaier

Security SystemsUwe GlockChristof ZieglerPeter Ribinski

Broad-bandNetworks(provisional)Werner ScheuerNorbert Lenge

1 At the same timeSenior Director ofRobert Bosch GmbH

2 At the same timeExecutive Vice PresidentDivisions

Names in bold print:Presidents of the Divisions

as of April, 2003

Executive Managementof Divisions and Subsidiaries

Executive Management ofselected Regional Subsidiaries

11

SpainMicha KirchhoffHarald Bronkal

BrazilEdgar Silva-Garbade1

Helmut Schwarz

U.K.Manfred MüllerManfred Seitz

OtherSubsidiaries

Hans-Peter BauerManfred BeeschHermann BirgKlaus Peter FouquetHeinz GreweHans-Karl HechtelGünter KäsPer KempelM. Lakshminarayan

Harald MargreiterKrister MellvéAndreas NobisPeter PangStefan SeiberthUwe ThomasV.K. Viswanathan

Dr. Hermann Scholl, StuttgartPresident

Dr. Peter Adolff, StuttgartDott. Alessandro Benetton, Treviso/VeniceDr. h.c. Bo Berggren, StockholmMiguel Boyer Salvador, MadridFernão Botelho Bracher, São PauloSir Alec Broers FRS FREng, CambridgeDr. Hugo Bütler, ZurichDr. Cornelius A. J. Herkströter, Wassenaar/The HagueKensuke Hotta, TokyoDr. Klaus Kinkel, St. Augustin/BonnDr. Henry A. Kissinger, WashingtonCharles F. Knight, St. LouisProfessor Gero Madelung, MunichFrançois Scheer, ParisDr. Guido Schmidt-Chiari, Vienna

Robert Bosch International Advisory Committee

Corporate Executive Management

Adolf Ahnefeld1

Ferdinand AllerkampStefan AsenkerschbaumerKlaus Bleier1

Theo-Ernst von BomhardFrank-Ulrich BreitsprecherDetlef ClasseKlaus DellerChristian DeplewskiHeinz Derenbach

Bernt Graf zu DohnaUlrich EichlerGerhard FeltenGerd FriedrichManfred GrafWolf-Dieter Haecker1

Thomas HeinzEva-Maria Höller-CladdersHans-Gerd HoltkampBertram HuberPeter KilgensteinDetlef KonterChristoph KübelWolfgang MierzwaManfred MöllendorfKlaus Neidhard1

Alfred Odendahl1

Gert SiegleKarl StrobelGerhard TurnerThomas WagnerHorst Wittmoser1

Gunter Zimmermeyer

Senior Vice Presidents –Original Equipment Sales

Dieter Eichler1

Robert HanserKarsten KöhnVolker Schmidt

12

Management Report

A well-maintained position in a difficult environment

Business in 2002 generally developed as expected. Following the worldwideeconomic weakening in 2001 and the terror attacks in the United States on Sep-tember 11 of that year, it was foreseeable that the general business climate in2002 would remain depressed. We had incorporated this in our planning. Inreality, economic growth worldwide for 2002 amounted to about 2%, whileWestern Europe and especially Germany came in considerably lower.

The Bosch Group in 2002 reached total sales of about 35 billion euro. That wasnearly 3% more than in the prior year. The increase, however, was entirely theresult of some newly consolidated entities. Primarily this was the first time thatRexroth was consolidated for the full twelve months. Eliminating these effects,our sales were nearly 1% lower than the year before. However, we lost approx-imately 3% in sales volume in euros because of the upward valuation of thiscurrency and the resulting exchange effects, mainly in our sales outside Europe.

The currency movements hide the fact that our business in the NAFTA areadeveloped well in comparison. Our sales – without changes in consolidation –on a U.S. dollar basis rose about 5%, supported above all by a similar increasein the American automobile production. In Asia, our Group sales increased byabout 9% in local currency. In both cases, the equivalent euro-denominatedsales were approximately the same as the year before. In contrast, we were dis-appointed primarily by the business development in Germany and LatinAmerica, where some of our divisions had to cope with noticeable decreases.In the European area outside Germany, business generally remained stable.The non-German portion of our consolidated sales stayed at 72 %.

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Breakdown of salesBy business sectors in 2002 (as a percentage)

10 20 30 40 50 60 70 80 90 100

Automotive Technology

Industrial TechnologyConsumer Goods andBuilding Technology

66.8

11.3

21.9

13

Defense of market shares

Along with the continuing economic weakness and the accompanying overca-pacity, competition worsened also in many of our areas of activity. We werenevertheless able to maintain our leading market positions in most cases, evenimproving them further in important areas.

Although automobile production in our largest market, Western Europe,decreased in 2002 by 1.5 %, our Automotive Technology Business Sector wasable to keep its sales at around 23.3 billion euro, more or less equal to the pre-vious year. As in prior years, the high-pressure diesel-injection systems were animportant support for our business. They helped to further increase the shareof diesel-powered new-automobile registrations in Europe to over 40 %. Oursales of diesel systems amounted to approximately 6.5 billion euro. Since wehave decisively defined the diesel market with our innovations in recent years,we are confident that we can continue to meet the coming competition. In addi-tion, we see good opportunities in the medium and long-term for diesel systemsalso in North America and Asia, since alternative drive systems with a compa-rable potential for fuel savings by similar power output will not be available forsome time.

Business in chassis systems, with sales of nearly 5 billion euro our second largestarea of activity within automotive technology, increased as a result of usexpanding to become the producer of complete braking systems. During 2002we gained a large additional order volume, which will make us, from 2006onwards, by far the largest supplier of chassis systems in North America. Weare pleased that especially the business with our electronic stability program(ESP) developed positively in 2002. By the middle of 2003, we will have pro-duced 10 million of these systems. Statistically valid tests performed by sourcesindependent of Bosch have proven that ESP significantly contributes to thereduction in accident frequency.

(million euro)Investments in tangible fixed assets

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500 1000 1500 2000 2500 3000

2002

2001

2000

1999

1998

2,006

2,368

2,111

1,946

1,929

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Management Report

We are also making considerable efforts in the Consumer Goods and BuildingTechnology Business Sector to achieve greater growth in the future. Strongcyclical headwind in 2002, however, caused total sales of this sector to stagnateat around 7.7 billion euro. Especially consumer goods were subjected to sharplyincreased competitive pressure from the Far East, particularly by power toolsfrom China and by household appliances from Korea. Because of this chal-lenge, but also because of the large growth potential in these countries, we willincreasingly direct our activities at this region.

In industrial technology, we were forced to deal with the most unfavorable eco-nomic development in 2002. In comparison to the previous year, although oursales fell by 6% to about 4 billion euro, they were still in excess of our expec-tations. As is always the case when capacity utilization shrinks, investment vol-umes are adjusted at short notice, leading to declining sales in capital goods.Experience shows, however, that growth rates in the following periods ofupswing are all the stronger, thus permitting us to keep to our long-term expan-sion of this business. The successful integration of Rexroth into the BoschGroup serves as a further encouragement.

We are also continuing our efforts to reach a better balance among the variousbusiness sectors in the Bosch Group. Having included Rexroth in the consoli-dation for a full year, the share of industrial technology to total sales in 2002grew to more than 11%, while the share of automotive technology decreasedto 67%. Two years ago, those shares were 4% and 71% respectively. The Con-sumer Goods and Building Technology Business Sector share amounted toabout 22%. In this year, this will be supplemented by the take-over of thevideo-surveillance business from Philips, with which we have further strength-ened our security-technology activities.

By business sector 2002 (as a percentage)Investments in tangible fixed assets

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10 20 30 40 50 60 70 80 90 100

Automotive Technology

Industrial TechnologyConsumer Goods andBuilding Technology

Other

77.2

7.4

12.2

3.2

15

5

Power and precision:One of the first pur-chasers of our dieselinjection pumps in 1927was MAN. With thisequipment MAN wasable to develop anengine with more power,and lower fuel consump-tion than other contem-porary engines. Thuswas born the world’sstrongest diesel truck atthat time.

Profits remain levelProfits earned in 2002 were not satisfactory, at least not as measured by whatwe consider absolutely necessary for the protection and expansion of our busi-ness. In view of the unfavorable economic environment, however, we regard itas a success that we were, in general, able to achieve our profit plans for 2002.The operational results of our regular activities in 2002 were about the same asthe year before. Since we keep our long-term high growth goals, it remains thekey to our business strategy to improve profits as the source for financing ourgrowth.

Employment levels stay generally the sameAt the beginning of 2003 we employed about 224,000 people worldwide, ofwhich 122,000 or 55% worked outside Germany. Included in this total areapproximately 3,700 employees who were added during the year 2002 becauseof changes due to consolidation. Not counting these additions, we kept thenumber of employees nearly constant, despite the unfavorable business devel-opment. In the areas of development, application engineering and services thenumber even increased slightly. The continuing economic weakness, however,requires us to tighten our belts. Needed adjustments are made using above allthe available flexibility in union contracts. At the same time, however, struc-

16

Management Report

1

In our corporate researchand development area,we work on new, for eachapplication customized,materials – for instancepolymer-ceramic com-posites. Their basicmaterials can be formedflexibly thus allowing theeconomic manufacture ofsuch complex assembliesas diesel-engine glowplugs. These respondquickly and furthershorten the start-upphase of modern diesel-engine motor vehicles.

tural alignments are required at various locations, which we want to make associally acceptable to our employees as possible.

Successful quality workWe have made further progress with our quality work in all areas. Although thecomplexity of most of our products continued to increase, the total number ofcustomer complaint reports fell to the lowest level ever. Contributing especiallyto this is the continuing improvement of our development and productionprocesses, utilizing a systematic self-assessment in line with the Excellencemodel of the European Foundation for Quality Management (EFQM) and thebroad support provided by Six Sigma methods. But we also invite publicevaluations: during 2002, our plant in Bursa, Turkey, was awarded the Europeanquality prize “EFQM”. More crucial, however, is the fact that we work closelywith our customers and suppliers in securing quality.

17

Further globalization in purchasingWith sales of 35 billion euro in 2002, our purchasing volume amounted toapproximately 20 billion euro. In tact with the further globalization of our activi-ties, we enhanced the international aspect of our purchasing. Procurement out-side Germany increased to about 60%. Global Purchasing Management Teamscombine the requirements of the most important material groups in electronics,electromechanics and mechanics in our three most important market regions,and concentrate our demand on the most efficient suppliers. Our base ofpreferred suppliers in Asia and America was deliberately expanded, and wepersisted with the shift of the added-value share to our best suppliers. For thestandardization and acceleration of our operating processes we utilized theexpanded possibilities of the internet market SupplyOn.

Reduced investmentsIn view of the noticeable risks of an extended period of weakness in the econ-omy, we reduced our investments in tangible fixed assets in 2002. After thelarge volume of investments in prior years, this applied primarily to expansioninvestments. The construction of a new development center for automotivetechnology in Abstatt, which was started in 2001, however, was continuedaccording to plan. The first buildings there will be ready for occupancy in 2003.On the building site of the original Bosch location in Stuttgart we laid the cor-nerstone for a continuing education center, which is intended to become animportant focusing point for the Bosch Group.

Research and development continue at high levelsOur research and development activities in 2002 stayed at high levels. Thisentitles us to claim remaining the leader with innovations and thus to providefor our growth under our own power. Our 2002 research and developmentexpenditures amounted to 2.5 billion euro, or 7.1% of sales, compared to 6.7%the year before. At the beginning of 2003 we employed about 20,000 people,mostly scientists, engineers and technicians in worldwide research and devel-opment. Despite stagnating operations, this was 8% more than the prior year.As a result of their inventions, we were able to apply for more than 2,600patents.

BeQIK – be better, be BoschTo achieve the best-possible results with the resources applied, we continue towork toward a permanent improvement of our internal processes under themotto BeQIK. Q stands for quality, I for innovation and K for orientation tocustomer requirements. However, we want to stay unmistakably Bosch.Included therein is our traditionally strong sense of values, which we havebrought to bear and manifested in our entrepreneurial activities. This code ofvalues ranges from future and results orientation, by way of responsibility, ini-tiative, openness and trust, via fairness, reliability, credibility and legality all theway to cultural diversity.

18

Management Report

Total expenditures for research and development(million euro)

Value contribution as central control measureStarting in 2002, we introduced value contribution as a central business mea-sure for the control of operations. The assessment of results using return onsales as applied in the past is thus expanded by a stronger focus on the use ofresources. Through their value contribution we can tell which profit individualareas earn over and above our uniform internal return on capital, as well as theextent to which they contribute to the overall increase in the value of the com-pany. The variable portion of management compensation is tied to this index.

Divisions with worldwide responsibilityWith increasing globalization of all business and further concentration at ourcustomers, our divisions have in the meantime taken on responsibility for theiractivities worldwide. They therefore plan and control their business for allcountries with continuous consolidation. This is combined and coordinated inour three business sectors. In order to coordinate the various regional interests,the managers of the most important regional subsidiaries overseas are at thesame time members in the executive management of the divisions. In the Euro-pean aftermarket business we have combined the sales and management func-tions of several countries.

Outlook for the current yearBusiness prospects for 2003 remain depressed: another year of stagnation islikely. The worldwide economic climate is overshadowed by the Iraq conflict.An incomplete and not very growth-oriented government program in Ger-many adds paralyzing uncertainties. Rarely was the environment for investorsand consumers as obscure and onerous as today. Whether these conditions willchange for the better during the further course of the year is open. Should amilitary escalation occur in the Middle East, together with massive oil-priceincreases, then a short economic collapse cannot be ruled out. Should the con-

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500 1,000 1,500 2,000 2,500 3,000

2002

2001

2000

1999

1998

2,487

2,274

2,030

1,921

1,778

19

flict be settled soon, however, there would be good chances for improvementof the worldwide economic climate.

We utilize the time to strengthen our own power to grow and to prepare for anenduring improvement in profitability. We achieve this with convincing inno-vations, consistent cultivation of the market and committed orientation to thecustomer, unremitting improvement in quality of our products and internalprocesses, permanent reduction in costs at all levels, further consolidation ofour areas of business through acquisitions, and further systematic expansion ofour activities outside Europe.

Risks inherent in future developmentThe greatest risks facing us for sales, employment, profits and liquidity lie in theextremely uncertain political and economic conditions, with difficult to calcu-late effects on sales, prices and rates of exchange.

7

Whether for automobileengines or large locomo-tive and marine engines –the development andproduction of injectionnozzles requires greatestprecision. In order fordiesel engines to workcleanly and economically,we test the injection-nozzle holes using preciseoptical measurementtechniques.

20

Management Report

We intend to apply the following measures in particular in order to limit thepossible negative effects of these risks:

– We have based our 2003 and later business plans on generally cautiousgrowth premises. A stronger economic collapse as a result of another Gulfwar is, however, not anticipated.

– We have assumed that the euro will experience a further increase in valuevis-à-vis the US dollar and other currencies, with the resulting lowering effecton our sales planning expressed in euro.

– In view of the uncertain economic background we have planned ourresources cautiously, keeping in mind however, not to pass up concrete long-term growth and profit opportunities in the process.

– We want to respond to employment fluctuations in 2003 by again using avail-able tools for flexible adaptation of work volumes.

We assess the growth and profit perspectives arising out of the assumptionsmade for the Bosch Group as realistic. Should things develop more unfavor-ably due to external influences, we will promptly take all measures in order toavoid substantial losses of earnings.

Our risk management is based on a clearly structured internal reporting sys-tem, which also includes all new business entities which were added in recentyears through acquisitions. For better transparency and worldwide control, thebusiness conducted by our non-German subsidiaries is, from 2003 forward, toa large extent consolidated in the applicable divisions.

Our risk management is complemented by central summarization and constantmonitoring of all financial and foreign currency movements of our worldwidebusiness units. Our monetary positions in the most important currencies are toa large extent in balance. The more significant open currency positions arehedged on a corporate-wide basis. In order to control the risks from changes invalue, we also adjust our capital investments to basic market developments ona timely basis and strictly in conformity with the principle of due care, so thatthe current liquidity needs of the Bosch Group are always fully covered.

21

Bosch hat die Lösung

Neues Drehmoment inder Oberklasse?

Der neue VolkswagenPhaeton mit Technik

von Bosch.

Der neue Phaeton von Volkswagenbietet Hightech in Reinkultur. Bosch istan Bord: mit Motor- und Ge-triebesteuerung, ESP, Airbagsteuerung,Rundumsensorik, Kombiinstrumentund 2-Motoren-Wischanlage.Bosch: sicher, sauber, sparsam.

Jaw

ww

.bo

sch

.de

Bosch hat die Lösung

Mit Sicherheitein neuer Star?

Die neue E-Klassevon Mercedes-Benz.

Die neue E-Klasse von Mercedes-Benz– innovative Technik für noch mehrSicherheit, Komfort und Fahrspaß:Durch die gemeinsam mit Mercedes-Benz entwickelte elektrohydraulischeBremse SBC und den fahrdynamischenMultikontursitz ist Bosch mit an Bord.Bosch: sicher, sauber, sparsam

Ja

ww

w.b

os

ch.d

e

Bosch hat die Lösung

Sportlichsparen?

Diesel fahren!

Durch feinste Zerstäubung sorgt Hoch-druck-Dieseldirekteinspritzung vonBosch dafür, dass der Kraftstoff hocheffizient in Energie umgesetzt wird.Das bedeutet sportlich hohe Leistungund souveränen Durchzug bei deutlichniedrigerem Verbrauch. Bosch: sicher, sauber, sparsam.

Ja

ww

w.b

os

ch.d

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Using our well-provenadvertising concept, wehave made the generalpublic even more strong-ly aware of our technicalcapabilities. These strik-ing advertisementsunderline our efficiencyand competence as oneof the world’s most inno-vative partners for theautomobile industry, aswell as informing thedriver: “Bosch has thesolution”.

Bosch hat die Lösung

Sicherheitserienmäßig?

Mit ESP.

Mercedes-Benz setzt seit Jahren dasElektronische Stabilitätsprogramm ESPserienmäßig in allen Pkw ein. Unter-suchungen zeigen, dass die Unfallquotedadurch deutlich gesunken ist. Wir gra-tulieren allen Mercedes-Benz-Fahrern. Bosch: sicher, sauber, sparsam.

Ja

ww

w.b

os

ch.d

e

Bosch hat die Lösung

Die besten Autosmit Bosch?

Wir gratulieren Audi,BMW, Mercedes-Benz,

Porsche undVolkswagen zuersten Plätzen.

Die Leser von „auto motor und sport“haben die besten Autos des Jahres ge-wählt. Wir freuen uns besonders, dassalle Sieger Technik von Bosch an Bordhaben. Bosch: sicher, sauber, sparsam.

Ja

ww

w.b

os

ch.d

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22

Automotive TechnologyBusiness Sector

The worldwide production of motorvehicles in 2002 rose by about 4%to 58 million units, while produc-tion in Western Europe declined by1.5%. The massive pressure onprices in the automobile industrycontinues without letup. We main-tain our position in this difficultenvironment with successfulproducts such as high-pressurediesel-injection systems and theelectronic stability program (ESP).Above all, we continue to directour innovative powers at the goals“safe, clean, economical”. We werethus able to keep sales of ourAutomotive Technology BusinessSector in 2002 at the prior-yearlevel, amounting to 23.3 billion euro.

Key numbers

2002 2001Sales 23.3 23.2 billion euroInvestments 1.5 1.9 billion euroR&D Expense 2.1 1.9 billion euro

23

Diesel technology continues its advanceThe diesel share of new passenger cars in Western Europe again increased, toover 40%. We expect this figure to grow to about 50% in the next few years.Our common-rail and unit-injector systems are significant contributors to thisgrowth. Of the common-rail systems for passenger cars alone, we have suppliedabout 10 million units between its production start in the middle of 1997 andthe end of 2002. There continues to be great growth potential in the NAFTAarea, in Asia and in Eastern Europe, where we are informing the public of theadvantages of the new diesel automobiles. We have thus also held “DieselDays”, which had found significant notice in the United States, with represen-tatives of the press and with politicians in Japan, Korea and Russia.

Piezo-injectors for diesel injection systems ready for mass productionWe continue to develop our injection systems for diesel engines further. Assuch, our diesel systems division in 2003 will start mass production of common-rail injectors, in which piezo-elements control the fuel injection. The new injec-tors are more compact, faster and more precise, and enable diesel engines tooperate still more efficiently, quietly and cleanly.

Second-generation common rail now also in commercial vehiclesAfter having started production for passenger cars, the second generation ofcommon-rail technology also went into production for commercial vehicles. Itshigher injection pressure lowers exhaust emission values and increases enginepower.

Gasoline systems with new technology for a cleaner environmentIn order to meet legal exhaust regulations, gasoline-engine injection systemsmust be adapted precisely to the geometry of the intake manifold and com-bustion chamber. The new injector EV14i from our gasoline systems divisionis so compact, that it can be directly integrated into the fuel rail independent ofthe engine type. The electrical connection is thus also simplified: only one cen-tral plug is needed for all injectors in an intake module.

7

By using aluminum, wewere able to design ournew brake calipers forfront-wheel disc brakesto be both very light andyet rigid. They are serv-ice-friendly and also meetthe requirements of thenew EU regulation onautomobile recycling.

7 We produce high-pres-sure injection pumps forfuel-saving gasolinedirect-injection. They reg-ulate pressure in accord-ance with need, thusoperating very efficiently.Their flow rate was fur-ther increased.

24

New Electronic Stability Program (ESP) line enters series productionOur chassis systems division has introduced a new series of brake-control sys-tems, which is extremely compact and which has been expanded with additionalfunctions. The basic ABS version can be supplemented by an ASR function, orexpanded to form an ESP system. The ESP version first went into series pro-duction at the end of 2002. Between the start of production in 1995 and the endof 2002, we have already produced 8 million ESP units, thereby contributingsignificantly to greater driving safety.

Electric power steering in series productionZF Lenksysteme GmbH in Schwäbisch Gmünd, a fifty-fifty partnership ofBosch and ZF Friedrichshafen AG, has commenced full-scale production ofelectric power steering. This system can replace the traditional hydraulicsteering assists and requires power only upon steering maneuvers. This leadsto approximate fuel savings of 0.2 liters per 100 kilometers.

Automotive Technology Business Sector

3 What was limited in prioryears to diesel engines,has now reached thegasoline user: greatlyreduced fuel consump-tion. Here: componentsof our electronicallycontrolled system forgasoline direct-injection.

Thanks to state-of-the-arttechnology, in Gener-ation 8 of the ElectronicStability Program (ESP),computing power wasincreased, while at thesame time weight wasreduced and a widevariety of innovative func-tions were introduced.Shown below: The new

5 Generation 8 ESP.

25

7

We started manufacture ofthe first gasoline direct-injection in 1952. Thisworldwide first was standardequipment for the Goliath700GP and the GutbrodSuperior 600.

3

Greatest precision in theproduction of gasolinedirect-injection: laserwelding of the swirl plateto the valve needle forhigh-pressure injectionvalves.

Improved controls over occupant-protection systemsOur newest control system for passenger safety is modular and flexibly expand-able. Key components are the controller with integrated sensors, and additionalacceleration and pressure sensors in the vehicle body. The new electronicsprocesses data from up to twelve decentralized sensors, and controls, asneeded, a maximum of 38 restraint devices, such as airbags or seatbelt tighten-ers. The newly developed software can, with the large number of sensors, ana-lyze the type and gravity of an accident even more precisely and apply therestraint devices in optimal fashion.

More driving safety through awareness of the environmentWe have combined our activities in the automobile electronics division into anarea called driver-assistance systems. The emphasis of our developments lies insystems which monitor the vehicle environment and which can detect danger-ous situations early. To this purpose, we developed highly sensitive sensors andefficient software, which evaluates and interprets the data. The “vigilant vehi-cle”, which supports the driver and alerts him to critical situations, thusbecomes a distinct possibility.

Automotive Technology Business Sector

26

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Sales of Automotive Technology(billion euro)

10 20 30 40

2002

2001

2000

1999

1998

23.2

23.3

22.5

18.1

16.3__

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ESP equipment rateESP-equipped vehicles as a percentage of passenger-car productionin selected markets 2001/2002

25 50 75 100

Germany

Western Europe1

North America

Japan

5548

2720

54

55

20022001

1 including Germany

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Diesel equipment rateDiesel-engine passenger cars as a percentage of new-car registrationsin selected markets 2000–2002

25 50 75 100

Germany

France

Western Europe1

3835

30

6256

49

4036

32

200220012000

1 including Germany

27

TwinCeiver: the smallest double tuner in the worldClearly better radio reception is what the newly-developed TwinCeiver con-cept from our subsidiary Blaupunkt offers. We equip top-of-the-line car radiosboth as standard equipment and in the aftermarket with this concept. We havecombined new double receive circuits and new antenna technology on a singlesemiconductor chip. The TwinCeiver evaluates the digital signals of two anten-nas and combines them into one strong, interference-free signal.

Digital radio reception and MP3 in one instrumentWith the Woodstock DAB 52, we have introduced a further new type of carradio into the market. It processes not only the traditional wavelengths – ultra-short wave, medium wave and long wave – , but also the signals of digital audiobroadcasting (DAB) and thus offers radio sound of CD quality. Recordingmedia with digitalized music in MP3 format can also be used. As storagemedium, we for the first time use a chip-card. The compact instrument fits thestandard installation slot.

1

With the help of elec-tronic systems, wecontinually find newfunctions which renderdriving safer, cleaner andmore economical. Here:test of a controller inairbag development.

3

Integrated solution forautomobile repair shops:under the title “BoschDiagnostics”, we com-bine all products whichrepair shops need todiagnose, maintain andservice vehicles. Trainingand a hotline for technicalquestions supplementthe range of test equip-ment and applicable soft-ware we have to offer.

28

Automotive Technology Business Sector

29

Attractive start in dynamic navigationWith its new radio navigation system TravelPilot DX-R52, Blaupunkt offersdrivers, at an attractive price, not only a well-equipped car radio with CDplayer, but at the same time a complete navigation system for routingsearches in traffic. The compact unit can easily be installed in the standardradio slot in all common vehicles. Routing to destinations is announced byvoice and also by display.

Commercial-vehicle industry in focusBecause of its long-term growth potential, we see exceptional sales opportunitiesfor a wide range of our innovative products in the commercial-vehicle market.In order to optimally tap this potential, we have established commercial-vehicledepartments in the relevant divisions staffed by employees who concentratetheir activities exclusively on commercial-vehicle customers.

Bosch Engineering GmbH: all engineering services under one roofThis subsidiary, formerly known as ASSET Automotive Systems and Engi-neering Technology GmbH, continued to grow rapidly in 2002. The companynow performs development services in the area of electronic vehicle systemsfor nearly all automobile manufacturers. We have placed our Motorsportdepartment in this organization as well, in order to take advantage of furthersynergies in the area of engineering services.

Bosch service workshops: the change to bumper-to-bumper serviceThe Bosch service organization is changing its concept by offering new servicesfor the entire vehicle, so that the car driver receives optimal service in one place– from diagnostics with the latest hard- and software to original replacementparts. With nearly 10,000 workshops and a worldwide new market image weare in the process of enhancing the familiarity of the Bosch name with cardrivers.

7 Getting there withoutinterference: OurBlaupunkt subsidiary hasestablished an EMCcenter – accredited byboth the German federaltraffic agency and thegovernment regulatoryadministration fortelecommunications. Inan anechoic chamber wedetermine with specificmeasurements and qual-ity tests the electromag-netic tolerance of ourvehicle navigation sys-tems.

7

An alternator’s high per-formance and efficiencyare achieved primarily bya very dense winding ofthe copper wire in thestator grooves. To do so,the wires are first woundonto a flat stator core,which is easier to access,after which it is then bentinto the usual roundedform.

30

Industrial TechnologyBusiness Sector

Key numbers

2002 2001Sales 4.0 3.2 billion euroInvestments 149 145 million euroR&D Expense 207 171 million euro

Even though the integration of ournew company, Bosch Rexroth AG,was successful, the weak capital-goods demand in 2002 left itsmark on our Industrial TechnologyBusiness Sector, whose salesamounted to 4 billion euro. Thiswas nearly a quarter more than in2001, but only because Rexrothwas consolidated for the first timefor a full year. The comparablesales of Bosch Rexroth AG actuallydecreased by 7% as a result of theweakness in capital investments.Our packaging technology division,however, was able to continue itsgrowth. Looking forward beyondthis year, we again see goodgrowth perspectives for our indus-trial technology. After all, BoschRexroth means to mechanicalengineering what Bosch automo-tive technology means to the auto-mobile industry: a technical leaderand a partner with a broad range ofproducts.

31

The Drive & Control Company: Bosch Rexroth offers one-stop solutionsThe marketplace has accepted the new Bosch Rexroth AG very well. Weincreased market share in 2002 in some areas. Both in industrial and mobilehydraulics, Bosch Rexroth plays a leading role worldwide. In addition, the inte-gration has led to sensible product complements. For instance, assembly tech-nology, which Bosch contributed, was not in the Rexroth portfolio. We arenow, more than before, able to offer solutions from one source – not only infactory automation, but also for mobile applications. That is exacly why BoschRexroth AG carries the slogan: “The Drive & Control Company”. This conceptcorresponds to the prevailing customer trend towards systems solutions.

Cooperation and a new plant: greater presence in the growth region of AsiaDuring 2002, Bosch Rexroth expanded its product range in pneumatics byentering into cooperation with the Japanese manufacturer Koganei. This stepalso improved our presence in the growth market Asia. We are presentlyexpanding our production capacity, especially in China. A new plant for indus-trial hydraulics is under construction there in Wujin.

D&C engine: knowing in the planning phase how the system will operateConsidering the business by industry, construction and agricultural machinery,packaging and wind energy, developed positively. Bosch Rexroth’s strength liesnot least in the many new products which went to market in 2002, such as thebuckling-arm robot and the drive series IndraDrive. We are working underhigh pressure on our new simulation system, the D&C engine. This system willallow computer testing of the dynamic characteristics of machines and assem-blies as early as the development phase. That is exactly what customers want:to know during the planning process how a system will operate as a unit.

7 Electricity for a wholecity: the largest offshorewind-energy project inthe world was erected offthe Danish North Seacoast. In the summer of2002, a total of 80 wind-mills went into operationthere. Bosch Rexrothprovided the gearsets forthese mills. This allowsthe new windfarm to pro-duce a rated output of160 megawatt. That isenough for about150,000 Danish house-holds.

7

Into the wind: azimuthgears always turn themachine pod of windpower plants in the rightdirection. Bosch Rexrotheach year supplies sev-eral thousand sets ofgears for the generationof renewable energy.A contribution to theprotection of the climate.

32

Industrial Technology Business Sector

3

Movement on the stagesof the world: whether inWarsaw, Bayreuth,Budapest or in theBeijing Opera, stagetechnology from BoschRexroth operates in thebackground – quietly,reliably and with preci-sion. We deliver a com-plete package, includingdrive and control sys-tems, for this purpose.When needed, we evenassume the role of gen-eral contractor.

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Sales of industrial technology(billion euro)

1 2 3 4 5

2002

2001

2000

1999

1998

4.0

1.1

1.1

3.2

1.2

33

7

High tech in agriculture:at Bosch Rexroth we com-bine powerful hydraulicswith state-of-the-artelectronics and softwareinto ready-to-assemblesystems, including databus connection. Thus weincrease the productivityof tractors for the toughjobs in all climates.

1

Clinically clean: that iswhat counts in pack-aging technology for thepharmaceutical industry,which is our domain. Thepicture above shows amachine with six stationsfor cleaning ampulesboth on the inside andoutside.

Service automation: growth in services despite market trendJust how customer-specific Bosch Rexroth operates is also visible in the pro-duction of engineering and software modules. With these and other services,we were able in 2002 to expand our new Service Automation department inGermany despite a negative market trend. This positive experience will be uti-lized by Bosch Rexroth step-by-step in other European and later in overseasmarkets.

Bosch Packaging Control: packaging machines become even more flexibleOur packaging machinery division also supplements its product range with anextensive service program. Customized to the specific wishes of customers, itranges from planning entire production lines to on-the-job training of customeremployees. This has become important because packaging machines arebecoming still more powerful and, especially, more flexible as a result of ournewly created control platform, Bosch Packaging Control (BPC).

One area, where we focus the applications of our packaging technology, is thefood and confectionery industry. We have held a strong position in this indus-try for a long time. With our packaging machines for the pharmaceutical indus-try we are the market leader, both in filling injection solutions and in packagingcapsules. In all these areas our business has an international orientation: in2002, 85% of our sales of packaging technology was outside Germany.

34

Consumer Goods andBuilding TechnologySector

2002 was a difficult year for ourConsumer Goods and BuildingTechnology Sector. The continuingweakness in the worldwide econ-omy slowed our business just asdid the crisis in the German con-struction industry. As a result, oursales in consumer goods andbuilding technology stagnated in2002 at close to 7.7 billion euro.However, we see good growthopportunities in the long term. Thatis why we have again deliberatelyexpanded our portfolio of productsin 2002. For instance, we took overthe video-monitoring businessfrom Philips as an addition to oursecurity systems. At the same timewe are doing everything we canto grow internally. To this end, ourpower tool division is rapidlyexpanding its manufacturingcapacities in Hungary and China.

Key numbers

2002 2001Sales 7.7 7.6 billion euroInvestments 245 248 million euroR&D Expense 219 235 million euro

35

Power tools: breaking the ground for a new plant in HungaryOur power tool division, like other brand-name producers, is the object ofattacks by so-called no-name suppliers. Their equipment is often inferior inquality, but they nevertheless put pressure on prices. In response, we are con-centrating the production of our basic tools in each of our three major marketregions at an efficient and at the same time low-cost location. Aiming at theEuropean market, for instance, we have commenced building a new plant atMiskolc in Hungary – groundbreaking took place in the summer of 2002.

In 2002 we maintained our position as leading supplier of brand-name tools,even though the market in our core business, power tools, weakened slightlyworldwide. Key to our success are innovative tools, which specifically meet cus-tomer needs. Examples are the new Akku product line and the Rotak lawn-mower with Powerdrive system.

Thermotechnology: new equipment for the Chinese marketThe innovations in our thermotechnology division are oriented toward thespecific characteristics of each country. For instance, during the summer of2002, we introduced a new generation of gas water heaters for the Chinese mar-ket. These units, which are manufactured in our Shunde, China, plant have aninstallation depth of only 10 centimeters. Despite a weakening world market,we were even able to achieve some sales growth in this area of operations. Wethereby consolidated our position among the most important producers of gas-operated space- and water heaters.

Household appliances: growth primarily in Western Europe and AsiaBoth sunlight and shadows marked the year 2002 for the business of BSHBosch und Siemens Hausgeräte GmbH, a 50-50 Bosch and Siemens joint ven-ture. Sales increased by 3.2% to 6.3 billion euro, but growth came primarilyfrom Western Europe and Asia, not from Germany. The share of non-Germansales in total sales rose from 71% to 73%. BSH was successful with its aggres-sive innovations, and concentrated on selling high-value items.

7 Wet, heavy or even highgrass is a problem formany lawnmowers, butnot for our new Rotakwith Powerdrive system.It has an extremely strongand high-speed electricmotor, as well as a trans-mission. Compared totraditional direct-driveelectric lawnmowers, theRotak develops approxi-mately ten times thepower at the blade. Atlow rotational speeds itgenerates the greatesttorque. The advantage:if high or heavy grassslows the blade, power isautomatically increaseduntil even the most stub-born grass has been cut.

1 Figures from 1999 oninclude the product areas ofsecurity systems and broad-band networks; from 1999 to2001 also including aero-space technology

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Sales of consumer goods and building technology1(billion euro)

2 4 6 8 10

2002

2001

2000

1999

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7.7

7.6

7.5

6.7

5.8

36

Consumer Goods and Building Technology Sector

3

Ever drilled into an elec-tric wire or a water pipe?That annoyance is now athing of the past. Ournew wall scanner D-tect100 from our power toolsdivision virtually renderswalls transparent. Itlocates metals and evenplastic pipe up to adepth of 10 centimeters.It is a cost saver for bothcraftsman and thedemanding do-it-your-selfer.

Security technology: among the top five in product salesEven though the economic environment is difficult, the world market for secu-rity systems grows – especially in the 2.6 billion euro video-monitoringsegment. In just this area we were able to strengthen ourselves significantly: wetook over Philips’ activities in the professional video-monitoring business. Thiscatapulted us into the group of five largest product suppliers in the world.We have also expanded our sales organization in the security systems division.We are represented in 36 countries with subsidiaries.

Broadband networks: interactive services and digital television are on the wayIn the broadband-network business we are only active in Germany. The mar-ket here keeps expanding, even though the reforms are not completed. Ournetworks grew markedly in 2002. We improved our networks technically inorder to be able to offer additional and digitally transmitted television pro-grams as well as interactive services. In Hagen, in Westfalia, we started opera-tions of a new city network for that purpose.

37

7

Such advertising carriesa punch: throughoutEurope our power tooldivision positions itsgreen power-tools line fordo-it-yourselfers anew.With integrated advertis-ing and sales promotion,from classic hard-copyads and TV spots, toidentical-design productpackaging, we areenhancing the strengthof the brand. More clearlythan ever before, we dif-ferentiate our productsfrom the competition,especially from the risingflood of no-name prod-ucts.

3

What bothers the cus-tomer out there? To findthat out in practice, we,in the thermotechnologydivision, established the“day at the customer”.Employees who usuallydo not get out of theiroffices or workshops geta chance to experiencethe daily routine atwholesalers, plumbers,electricians, heatinginstallers, architects orchimney sweeps. KlausHuttelmaier (at left),responsible in divisionalmanagement for sales,set a good example: hevisited the Michel heatingfirm in Schorndorf.

38

We have greatly expanded ourinternational business in recentyears. Our non-German share oftotal sales is 72%, compared with65% in 1998. Eliminating currencyfluctuations, our non-German salesrose in 2002 by about 7.5%. Wemanufacture our products at 236locations, of which 179 are outsideGermany. We are present throughsubsidiaries and affiliates in morethan 50 countries. On this basis weintend to continue to resolutelyexpand our international activitiesin the coming years.

International Business

Key numbers

2002 2001Sales 25.4 24.6 billion euroInvestments 1,103 1,463 million euroR&D Expense 803 777 million euro

39

China: double digit growth in 2002Aside from Japan, the Asian area showed the highest growth rate of all regions.In China, our consolidated 2002 sales increased by 30% to 580 million euro.The sales of all our companies located in China, including those not consoli-dated, rose to around 1 billion euro. We employ almost 9,000 people in Chinaand develop, produce and sell products of automotive technology, automationtechnology, packaging technology, thermotechnology, and security technol-ogy, as well as power tools and household appliances.

We achieved a better-than-average growth in China with diesel systems. Herethe market was stimulated by the introduction of the Euro-I-Norm and thegood development in the commercial-vehicle market. Mid-2002 we brokeground for the erection of a new local production and application engineeringplant for antilock braking systems, which will go into operation in early 2004.As a second step, we plan production of the electronic stability program (ESP).Our joint venture company, ZF Lenksysteme GmbH was also able to expandits China business significantly, supported primarily by the production launchat our Chinese subsidiary for steering pumps. In security technology we aboveall utilized the cost advantages of production in China. We were able toincrease exports from China significantly.

Korea: another step for the local manufacture of the common-rail diesel-injection systemIn Korea we achieved a similar high rate of growth as in China: 26%. Thegrowth of our subsidiary there was primarily the result of investments in thelocal production. In December 2002, our Taejon plant delivered the firstinjectors for common-rail diesel injection, after having started production of theaccompanying ECUs in the year before.

Japan: our new company is among the ten largest automotive suppliersIn Japan, too, we experienced in 2002 growing demand from original equip-ment customers for our diesel systems. In the middle of the year we combinedour activities there by merging Bosch Braking Systems Corporation into BoschAutomotive Systems Corporation. The resulting company, with consolidated

7

In the spring of 2002, weopened in Dubai a newliaison office for aftermar-ket products in automo-tive technology. Fromhere, we will provide sup-port in sales, marketingand customer service forour agencies on theArabian peninsula. Here:Sheik Ahmed Bin SaudAl Maktoum and EugenKonrad, president of theautomotive aftermarketdivision.

7 Two sights worth seeingat one glance: As part ofthe introductory advertis-ing for the new gas waterheaters with the HydroPower brand fromJunkers in Spain, localpublic transport in theentire country was deco-rated with the “water andflames” theme. A sightworth seeing in front ofthe “Sagrada Familia” inBarcelona.

40

sales of 2.5 billion euro, ranks among the ten largest automotive suppliers inJapan. Of its approximately 10,300 employees, almost 1,400 work in develop-ment.

North America: more growth than expected, but only in U.S. dollarsBosch’s largest overseas market is North America. Business in 2002 there devel-oped more favorably than we had expected after the terror attacks on Septem-ber 11 of the year before. Automobile production in the NAFTA area, whichincludes Canada and Mexico besides the United States, rose by 5.7%. Contin-ued intensive sales promotions by American automobile producers signifi-cantly contributed to this growth. In this positive environment our U.S. dollarsales in North America, including those from newly-consolidated companies,increased by 10.2%. Over the long term, we foresee good opportunities fordiesel in the United States too. One understands there in the meantime that thenew diesel technology will reduce fuel consumption substantially. For instance,our common-rail system is already in use in American light trucks. In thefuture, one can count on increased exports of European diesel vehicles to theUnited States.

Expansion of business in Central and Eastern EuropeOur business in Central and Eastern Europe continues to develop positively.We were able to further expand our position in this growth market and raiseour sales by 11.1% to more than 1.4 billion euro. We achieved the highest ratesof growth in Slovenia, Belarus and the Ukraine. During 2002, the number ofour employees in this region increased by 1,000 to 15,300. This increase wasprimarily the result of the expansion in production capacities for high-pressurediesel pumps in the Czech Republic.

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Breakdown of salesBy regions 2002 (as a percentage)

10 20 30 40 50 60 70 80 90 100

Europe

America

Asia, Africa, Australia

64.9

21.0

14.1

The most importantyear 2002 marketsoutside Germany

Sales (billion euro)NAFTA 6.6France 3.1Japan 2.2U.K. 1.8Italy 1.8Spain 1.4Korea 0.8Austria 0.7Sweden 0.7Brazil 0.7

41

1

China is one of the mostimportant growth mar-kets for many industries,as it is for our powertools. With the openingof our first Chineseservice center in theGuangzhou region, welaid the groundwork forthe expansion of our

service network and atthe same time set thebenchmark for theChinese market. Forinstance, we are the firstproducer of power toolsin China to guaranteecustomers in the area ofthe center repair serviceswithin 48 hours.

42

Research andDevelopment

Innovation creates a competitiveedge. That is the reason why wespend large sums each year forresearch and development. Boschrates as one of the most innovativecompanies, regularly rankingamong the leaders with its highnumber of annual patent applica-tions. A major contributor to thissuccess is our corporate researchand development department. It works in close contact with thedivisions on new materials, tech-nologies, methods and tools forthe efficient development andmanufacture of products, as wellas on fundamentals, concepts andprototypes for new products andsystems. This allows us to expandour technical competence in allareas of work.

43

77 Multimedia becomesmobile: navigation, tele-phone and entertainmentmedia keep moving intothe automobile. Wedevelop technologieswhich interconnect thedifferent applications and make them easier to operate.

7 Using laser-opticalmethods, we analyzeenlarged, transparentmodels for flows insideair and fuel-carrying components and systems.It is, for instance, thuspossible to examine the complex flow of fuel in the nozzles of ourcommon-rail injectionsystems. From this, product optimizationmeasures can be derived,which lead to still bettercombustion.

3

An important role in manyof our products is playedby ceramic multi-layeredcomponents, into whichcomplex sensors or activeand passive electronicmodules are integrated.With new materials andmanufacturing processes,we improve the functionof the ceramic foils usedfor these applications.

44

EnvironmentalProtection

At Bosch, environmental protectionand efficiency are compatible witheach other. In our second environ-mental report which we publishedin the fall of 2002 under the title“People, Environment, Products2001/2002” this is illustrated withmany examples and data fromexperience. The report found a verypositive response. The introductionto the brochure states: “Since thetime that Robert Bosch farsightedlyintroduced social programs foremployees and their families, thecombination of economic goals andsocial and ecological dimensionshas proven to make sense to us.”

45

From old to new: replacement parts of best quality at favorable pricesWe make an important contribution to the protection of resources with themass remanufacture of automotive-technology products. In doing so, we saveon new material and ensure environmentally friendly separation and reuse ofmaterials and components. We not only replace wear parts and defective com-ponents with original replacement parts, but also completely test the resultingproducts. In these tests of the parts’ functions, we use the same standardsapplied to new parts going into original equipment. We thus offer car driversand workshops quality, favorable prices and long useful product life.

At the end there is a new beginning: reusability of power toolsNot only automotive products, but also power tools have a new start at the endof their life cycle. This is made possible by the environmentally friendly designto which we have committed ourselves. This ensures simple disassembly and a high degree of recycling for our power tools. The recovered materials returnto the raw-material cycle or are reused in the manufacture of our products. Our recycling service operates at many of our European locations.

Well-prepared for the recycling of old automobilesWe are very well prepared for the application of the year 2000 regulation bythe European Union as it pertains to the treatment of old automobiles. Since asearly as 1995, we take into account the subsequent possibility of reuse and utili-zation in the development of our automotive technology products. Togetherwith the automobile manufacturers, we thus work toward an ecologically soundcar design.

7

This symbol for environ-mental protection atBosch stands for uncon-taminated water, clean air,and unspoilt nature. Theclosed circle is symbolicof the life cycle as

applied to nature and toman-made products: fromdevelopment, throughproduction, to disposal.The Q shape implies theconnection to the Boschquality symbol.

7 Under the brand name“Bosch Exchange”, weoffer car drivers andworkshops a broadpalette of replacementparts for timely and efficient repair. Here: disassembly of alternatorsin our Göttingen plant,where we, since 1987,remanufacture 1,000 dif-ferent types of startersand alternators in volume.Starting in 2003, we willadd ignition distributors,air-flow sensors and com-ponents for disc brakes.For each of the morethan 2,500 productswhich are reconditionedevery day in Göttingenand bear our brandname, we extend thesame warranty as fornew products.

46

Employees ofthe Bosch Group

“Find a good man, and the work isdone.” This sentence by thefounder of our company showedalready how important qualifiedemployees are for a company. Toattract such people, our humanresources department literally con-tinues to tread new paths. As anexample: in 2002 an informationvan went from university to uni-versity with the slogan “Boschmeets Campus”. Just as innovativeis our social services department.We were, in 2002, the first Germanindustrial company to establish aseparate company pension fund.That too shows how progressivewe are as an employer.

47

A company also needs values: a new code provides guidanceBosch belongs to the companies, which, by tradition, strongly orient themselvesto a set of values. To a large extent these go back to the founder, Robert Boschhimself. However, in the course of decades, several of the principles havechanged, and others have been added. Good enough grounds for us to formulatethe values by which we operate. What, for instance, mean the following to us:future and profit orientation, responsibility, initiative, openness and trust, fairness,reliability, credibility and legality, and cultural diversity? We have answered thesequestions in a codex of values, which should provide guidance. This leads tobetter and faster decisions, to more personal initiative and ability to carryresponsibility, and all-in-all makes our company a better one.

From university to university by van: a campaign to attract young peopleIt is very important that we convey our values also to the many new employ-ees we hire each year. In 2002 alone, we hired in Germany 2,150 universitygraduates, of which 78% were engineers or scientists. In view of the competi-tion for qualified young employees, we consider this a success. But this takes aneffort: we participated in the internet fair “Jobfair 24”, and under the motto“Bosch meets Campus”, in 2002 we visited 22 universities with an informationvan. The latter met with particularly great interest: about 5,000 studentsinformed themselves in personal conversations about our company, above allabout traineeships, dissertations toward degrees, and job openings.

77 Female “employees” atBosch can be this young:under the motto “StartEarly”, both big and smallgirls had a chance on“Girls’ Day” to gain manyinteresting insights intothe work environment ofour company.

77 Learn to prepare for thereal world: with wellthought-out learning sys-tems and graphic “Teach-ware”, Rexroth didacticserves the worldwidemarket for training andcontinuing education in allautomation technologies.In total, we support ourcustomers with more than200 different seminars –at their place or in ourtraining centers.

7

Globalization on the job:close cooperation ofworldwide operatingteams with our cus-tomers and supplierscontributes substantiallyto achieving high qualitystandards. Here: circuitdeveloper and layouterdesigning a chip.

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That too is career support: feedback for young employees in their technicaland managerial careersWhoever has started out with Bosch does not stay behind. Instead, he or she isspecifically supported in his or her career. Both in Germany and abroad, we thusorganize development seminars lasting several days, for our young, aspiringtechnical and managerial staff. In the course of the seminars, participants getindividualized feedback on personal weaknesses and strengths from trainedobservers among our leadership cadre.

Learning at Bosch: aspiring microtechnologists produce chipsAs much as we expect lifelong learning from our employees, we also offeryoung people a well-grounded education, and thus confront the continuing lackof skilled workers. On January 1, 2003, worldwide about 5,700 young peoplewere undergoing training at Bosch, of which 4,200 were in Germany – 305 ofthem in cooperation with a technical college. We established a new trainingcenter at our Reutlingen location. Our aspiring microtechnologists can evenmake chips there. Where else would you find a training laboratory for semi-conductor production?

Employees of the Bosch Group

5

Bosch team at the Ger-many Tour: In June of2002 the best bicycleprofessionals in the worldstarted from our Bühlertallocation on the “Kings”stretch of the GermanyTour through the BlackForest. Six members ofour bicycle sports groupparticipated as “TeamBosch Bühlertal” in theamateur division. Sup-ported and cheered on byfellow workers, theyreached the finish inStuttgart after seventough days of competition.

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The pension fund: an innovative offer which is well-received Not only mature, but also young employees must keep their old-age pensionsin mind. That is why we , since July 2002, have an innovative offer on the table:a separate company pension fund. There our employees can invest their owncontributions under a government-promoted scheme. Their contributions cancome from gross or net earnings, or from a combination of the two. This is inconformity with the law on old-age capital formation and the union contract ofthe metals and electronics industry. Our separate pension fund supplements thelong-time existing company-wide old-age care plan. The fund in the meantimehas proven its attractiveness: by the end of 2002, it had already registered its10,000th participant.

We express our appreciation: words of thanks to our employees and unionrepresentativesWhat would an innovative company like Bosch be without the ideas, theknowledge the commitment and performance of its employees? We have all thereasons to thank our Bosch staff. Our appreciation also applies to the unionrepresentatives, who reacted constructively to new challenges.

1

Training with a difference:in June 2002, a group ofapprentices designed,nearly entirely on theirown, a page in ouremployee newspaper“Bosch-Zünder”. A workshop took place inBamberg on the occasionof the jubilee “100-yearsspark plug”. As reportersin the plant, apprenticescould test their team spiritand social abilities, andlast but not least, theircreativity. They evenclimbed onto theiremployer’s roof to getthe front-page photo.

50

Financial Statements of the Bosch Group WorldwideConsolidated Balance Sheet as of December 31, 2002(million euro)

Assets Appendix December 31, 2002 December 31, 2001

Fixed assets (6)

Intangible fixed assets 2,569 986

Tangible fixed assets 7,174 7,436

Financial investments 917 919

10,660 9,341

Current assets

Leased products 48 39

Inventories (7) 3,761 3,932

Accounts receivable and other assets (8)

Accounts receivable 5,285 5,733

Other receivables and assets 1,204 1,830

Marketable securities 4,196 3,688

Liquid assets 2,288 3,180

16,782 18,402

Deferred expenses 33 40

27,475 27,783

51

Liabilities and Equity Appendix December 31, 2002 December 31, 2001

Equity capital (9)

Capital stock 1,200 1,200

Capital surplus 4,557 4,557

Earned surplus 2,717 2,489

Unappropriated earnings 60 50

Minority interests 351 718

8,885 9,014

Accruals with valuation reserve portion (10) 126 205

Accruals

Accruals for pensions and similar obligations 4,576 4,406

Other accruals (11) 7,073 6,888

11,649 11,294

Liabilities (12)

Liabilities from financing 3,082 3,557

Accounts payable 2,195 2,134

Other liabilities 1,512 1,553

6,789 7,244

Deferred income 26 26

27,475 27,783

52

Financial Statements of the Bosch Group WorldwideConsolidated Statement of Income for the period from January1to December 31, 2002(million euro)

Appendix 2002 2001

Sales (15) 34,977 34,029

Changes in finished goods and work-in-progress inventoriesand other capitalized costs (16) 261 171

Total operating performance 35,238 34,200

Other operating income (17) 2,263 2,195

Cost of materials (18) –16,236 –16,284

Personnel costs (19) –10,815 –9,959

Depreciation and amortization of tangibleand intangible fixed assets –2,480 –2,502

Other operating expenses (17) –6,406 –6,419

Net income from investments (20) 83 155

Amortization of financial investments and securities includedwith current assets –233 –101

Interest income, net of expenses (21) 4 126

Income from ordinary business activities 1,418 1,411

Taxes on income (22) –768 –761

Net income for the year 650 650

Including profit and loss of minority shareholders (23) 64 –42

53

Financial Statements of the Bosch Group WorldwideCapital Flow Statement1(million euro)

2002 2001

Net income for the year 650 650

Depreciation of fixed assets 2,509 2,551

Increase in long-term accruals and accruals with valuation reserve portion 193 480

Cash flow 3,352 3,681

Decrease in inventories and leased products 162 278

Decrease in receivables 1,081 513

Increase in short-term accruals 83 188

Change in liabilities 20 –857

Additions to funds from business activities (1) 4,698 3,803

Additions to fixed assets –4,386 –2,860

Retirements of fixed assets 254 432

Changes in the consolidated group –430

Application of funds to investment activities (2) –4,132 –2,858

Dividends 2001/2000 –50 –2,603

Capital increase Robert Bosch GmbH 2,470

Change in liabilities from financing –475 587

Other changes in balance-sheet items –444 92

Decreases in/additions to funds from financial activities (3) –969 546

Change in liquidity (1) + (2) + (3) –403 1,491

Liquidity at the beginning of the year 6,868 5,084

Changes in the consolidated group 19 293

Liquidity at the end of the year 6,484 6,868

1 not published in the Federal Gazette

54

Financial Statements of the Bosch Group Worldwide2002 Development of Fixed Assets(million euro)

Intangible fixed assets

Concessions, patents, trademarks and similar rights

and assets, as well as licenses to such rights and assets 297 1 116 1

Goodwill 2,466 214 1,884

Advance payments 1 1 –1

2,764 215 2,001

Tangible fixed assets

Land, leasehold rights and buildings,

including buildings on land owned by others 4,461 273 137 76

Production equipment and machinery 12,078 235 897 192

Other equipment, fixtures and furniture 4,921 31 393 272

Advance payments and construction in progress 684 5 579 –540

22,144 544 2,006

Financial investments

Investments in affiliated companies 518 –289 151

Loans to affiliated companies 8 –2 7

Investments in associated companies 155 28

Other financial investments 334 7 184

Long-term investments 175 1

Other loans 42 8

1,232 –284 379

Total fixed assets 26,140 475 4,386

Jan.1, 2002 Changes in the Additions Transfersconsolidated

group

Cost of acquisition or manufacture

55

105 310 245 65 81 125

558 4,006 1,503 2,503 904 490

1 1 1

663 4,317 1,748 2,569 986 615

173 4,774 2,673 2,