Supplying Value with Innovation...FEB-04 Supplying Value with Innovation Wolfgang Dehen, Group President Reinhard Pinzer, Chief Financial Officer Financial Market Day, February 17,

FEB-04

Supplying Value with Innovation

Wolfgang Dehen, Group PresidentReinhard Pinzer, Chief Financial Officer

Financial Market Day, February 17, 2004

2FEB-04

Group profit(in millions of euros)

Sales (in billions of euros)

Group profitmargin

FY03 FY02

Employees

R&D (in millions of euros) 692

We are on track with our financial performance

44,000

5.0 %

418

8.4

708

43,000

0.8 %

65

8.5

Q1 FY04

174

44,000

4.9 %

100

2.0

Financials

Global Competitiveness

Innovation and Customer Focus

Strategic Outlook

Rigorous use of top+ WIP ensures long-term profit and growth

3FEB-04

10.3%4.2%6.1%

0.4% 6.2% 9.9%

(1.8%)(1.4%)

1.7%

2.6%(2.6%)5.8% 3.7%1.4%4.2%

Automotive production is slowly recovering

Excellent growth prospects in the emerging Asian markets

16.7CY02

16.3CY03

16.8*CY04

59.0CY02

59.9CY03

62.1*CY04

16.9CY02

16.6CY03

16.9*CY04

19.2CY02

20.3CY03

21.1*CY04

6.2CY02

6.6CY03

7.3*CY04

Others

Asia

World

NAFTA

Source: Global Insight 12/2003

Light Vehicle Production

Western Europe

* estimate

9.1% (0.8%) 24.3%

0.3% 1.1% 4.9%

22.0% (7.3)%2.3%(5.9)% 10.4% 8.8%

10.4% 2.0% 4.2%

Heavy Vehicle Production

[mill.] Units

Financials



Strategic Outlook

4FEB-04

Automotive suppliers must cope with various factors

Regional aspects! Further globalization and consolidation of OEM! Strong growth in emerging markets like Asia and Eastern Europe! Saturated markets in US and Europe

Cost and contractual aspects! Annual price decline over product life time for orders! Demand for active participation in cost reduction programs year over

year! Fewer up-front payments for engineering and application work ! Extended warranties / guarantees for all markets

Innovation aspects! Increased pressure on OEM to differentiate themselves by

technology! Shortened development cycles force suppliers to provide perfect

products right from start of series production ! Good opportunities for suppliers with innovative portfolios and

optimized cost structures

Financials



Strategic Outlook

5FEB-04

~ 60 % in No. 1 or 2 positions

2003

~ 50 %

~ 10 %

~ 25 %

~ 15 %

No. 1

No. 4 or below

No. 3

No. 2

~ 90 % in No. 1 or 2 positions

No. 1

No. 4 or below

No. 3

No. 2

Innovation is essential for staying competitive

Nearly 90 % of our product portfolio will be in No. 1 or No. 2 market positions by 2008

2008

Financials



Strategic Outlook

6FEB-04

Diesel CR with Piezo

3D-Camera (CMOS) for Occupant Detection

Valvetronic

Electrical Parking Brake

Active Noise Tailoring

Tire Guard

Keyless GoIntelligent switching unit

Cockpit Module

P-sensor for side airbag

Mechatronicmodule for AT

Gasoline DI with Piezo

Advanced Weight Sensing

Integrated Driver Information System IDIS

Modular, scalable upgradable SW platform (TLA)

Digital Tachograph

Finger print sensor

IAFM Module

Integrated Multi Media System

1st European gasoline DI

Earlier �first to markets�:

� Speedometer - 1901� Metal substrate catalyst - 1987� Immobilizer - 1993� In-car navigation (Philips) - 1994

HUD

C-IQ

We continue to grow with trendsetting technologiesfor customer-oriented products

1995 2000 2005

First-to-market innovations ensureour global competitiveness

radiator motors

Financials



Strategic Outlook

7FEB-04

Outflow (abandon-ment of patents)

Our high number of patents is a key success factor

Our rapidly growing patent portfolio reflects the high rate of innovation in all business segments

Number of patents/ IPR *

CY02CY01 CY03

Patent portfolio(current status)

! Patents are among our most important assets

! We secure our position with consistent management of patents and intellectual property rights (IPR)

! We focus on patents for trendsetting technologies to support the competitiveness of our customers

! For our customers, we leverage Siemens� technology leadership based on more than 45,000 Siemens patents

20% p.a.

Inflow (new patents/IPR)

* Intellectual property rights

Financials



Strategic Outlook

8FEB-04

In line with market needs: our innovation-oriented portfolio

� comfort & convenience� safety� performance & service

Excellent market prospects with innovations for

EasyControl

Head-Up Display

Intelligent PedestrianProtection Systems

3rd generation piezo diesel injection Intelligent networks for

commercial vehicles

C-IQ - Intelligent Contenton Demand

Financials



Strategic Outlook

9FEB-04

The focus of innovation: customer benefits

! increases torque! Reduces fuel con-

sumption by up to 20%! greater flexibility with

EMS* 2 hardware and software platform for diesel and gasoline

We are in line with market trends and upcoming legal regulations

! improved functionality with indirect power supply! enables constant monitoring of tire status ! products available before US regulations take effect in

2006

Tire Guard II:Second generation of tire pressure monitoring system

We offer trendsetting technologies and excellent components

Piezo direct injectionfor gasoline engines

DEKA VIIinnovative valvesfor port injection

! fuel is finelyatomized and burned efficiently

! minimizes exhaust emissions! Modular design for easy

application in the development phase

* Engine Management System

Financials



Strategic Outlook

10FEB-04

Taking the lead in infotainment and interior

! greater flexibility for configuring interior modules

! plug-and-play technology for four modules! modular electronics architecture ! mechatronic integration ensures increased

functionality and drastic variant reduction

CESAR � Modular Cockpit Architecture

We develop key enabling technologies for infotainment

Human Machine Interface

Navi Audio/TV Phone Entertain

Java-based TLA ! open scalable hard- and software platform ! modular approach for high-end multimedia

and mass market navigation! constant updates in running series

We increase value added through modularity

TLA � Top Level Architecture

CESAR: Cockpit Electro-mechanical System Architecture

Financials



Strategic Outlook

11FEB-04

Driving innovation through systems orientation and standardization

Systems OrientationStandardization

Modularity

Vehicle Systems Group� Cross-divisional systems

orientation� design of E/E* systems� competence for functional

integration

Modular approach in R&D

� Top Level Architecture for multimedia

� EMS 2 platform for improved engine management

AUTOSAR**� standardization

initiative of OEM's and suppliers

Software & SystemsInitiative @ SV� basis for a higher

degree of innovation� improved SW quality

(CMMI 3 Level)

**Automotive Open System Architecture(A consortium of BMW, DaimlerChrysler, VW, Bosch, Continental and Siemens VDO)

*electric/electronic

Financials



Strategic Outlook

12FEB-04

Cooperate on standards, compete on functions

The AUTOSAR initiative

! facilitate integration of functional modules from different suppliers for different OEM vehicle and platform variants

! ensure reusability of software ! provide constant updates or upgrades over vehicle lifetime

Targets

! establish standard core solutions for OEM and suppliers ! define standards for scaleable, modular electrical /

electronic architecture

Tasks

! increase in functionality independent from hard- and software

! shortened development cycles ! reduced risk for OEM and suppliers ! volume scale effects

Results

Financials



Strategic Outlook

13FEB-04

To increase profitability, we are improving our innovation process

! supports standardized and transparent innovation process

! improves Siemens VDO's technology roadmap through a market-driven evaluation of new ideas

! allocates limited R&D resources according to a funding structure

! controls performance of technology projects

! shortens the time between product idea and SOP (start of production)

! ensures higher and faster ROI for customers and Siemens VDO

! helps increase flow of innovations

Central lever for improvement: the technology board

Financials



Strategic Outlook

14FEB-04

! Become EVA positive in FY 05! Focused execution of top+ WIP program within Siemens

Management System

Short-termfocus

! Achieve best-in-class quality / quality benchmark in industry! Sustain profitable, above-average growth! Reach more No.1 and 2 positions in all competence areas! Rapid expansion of business in NAFTA and Asia

Strategicfocus

! Focus on total customer satisfaction through total customer care

Customers

! Establish �Process House� for optimizing all processes! Enforce our cross-divisional initiatives

(quality, software, project management, design-to-cost)! Improve innovation process through technology board ! Strengthen advanced and basic engineering

Business excellence

Employees ! Our highly motivated and skilled employees are driving the worldwide process of innovation

Our aim: profitable growth through innovation

Our Commitment: Supplying value

Financials



Strategic Outlook

15FEB-04

Backup

Financials



Strategic Outlook

16FEB-04

Dr. Egger Dehen Hauptmann Dehen

Business overview: Our organizational structure

Customers

Market Segment Units:Independent Aftermarket /Consumer Electronics, Special Original Equipment Manufacturers / Parts &Accessories, Fleet, Original Equipment Services

! Gasoline Systems

! Diesel Systems

! Air Fuel Modules

! Engine Actuators & EmissionManagement

! Fuel SupplySystems

! Sensors

! Electronics & Drivetrain

! Restraint Systems, Safety Electronics

! Body & ChassisElectronics

! Electric Motor Drives

! Information SystemsPassenger Cars

! Commercial Vehicles

! Cockpit Modules &Systems

! InfotainmentSolutions

! Service & Special Solutions

PowertrainChassis & Carbody

Interior & Infotainment

Service & Special Solutions

Siemens VDO Automotive in FY 03:Sales: EUR 8.4 bn., Employees: 44,000

Financials



Strategic Outlook

17FEB-04

3 %

29 % 56 %

2

10 %

East. Europe

West. Europe

ROWAsia

NAFTA

7% 2

69 %

19 %

3 %West. Europe

NAFTA

AsiaROW

East. Europe

EUR 8.4bn.

2003 2008

Growth by Region

Customer-focused innovation will helpus exploit growth potential in Asia and NAFTA

Financials



Strategic Outlook

18FEB-04

Siemens Investor Relations Team

Webpage: http://www.siemens.com Investor Relations

e-mail: [email protected]

Fax: +49-89-636-32830

Marcus Desimoni +49-89-636-32445

Constantin Birnstiel +49-89-636-36165

Christina Schmöe +49-89-636-32677

Claudia Wagner +49-89-636-33693

Disclaimer:This presentation contains forward-looking statements based on beliefs of Siemens' management. Suchstatements reflect the company's current views with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results to be materially different, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products, lack of acceptance of new products or services and changes in business strategy. Actual results may vary materially from those projected here. Siemens does not intend or assume any obligation to update these forward-looking statements.

Documents

Supplying Value with Innovation...FEB-04 Supplying Value with Innovation Wolfgang Dehen, Group President Reinhard Pinzer, Chief Financial Officer Financial Market Day, February 17,