BMW AG | Annual Report 2013

annual RepoRt

2

013

3

6

bmw gRoup in FiguRes

RepoRt oF the supeRvisoRy boaRd

14

statement oF the ChaiRman oF the

boaRd oF management

18

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

24

27

29

47

Overall Assessment by Management

General and Sector-specific Environment

Financial and Non-financial Performance Indicators

Review of Operations

Results of Operations, Financial Position and

Net Assets

62

Events after the End of the Reporting Period

6

3

1

Report on Outlook, Risks and Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

8

Internal Control System and Risk Management System

Relevant for the Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

8

2

5

BMW Stock and Capital Market in 2013

88

90

92

94

96

gRoup FinanCial statements

Income Statements for Group and Segments

Statement of Comprehensive Income for Group

Balance Sheets for Group and Segments

Cash Flow Statements for Group and Segments

Group Statement of Changes in Equity

Notes to the Group Financial Statements

96

Accounting Principles and Policies

1

14 Notes to the Income Statement

21 Notes to the Statement of

Comprehensive Income

1

22 Notes to the Balance Sheet

45 Other Disclosures

61 Segment Information

1

66 statement on CoRpoRate goveRnanCe (§289ꢀ hgb)

Part of the Combined Management Report)

(

1

66 Information on the Company’s Governing Constitution

67 Declaration of the Board of Management

and of the Supervisory Board pursuant to §161 AktG

68 Members of the Board of Management

69 Members of the Supervisory Board

1

72 Composition and Work Procedures of the Board of

Management of BMWAG and its Committees

74 Composition and Work Procedures of the Supervisory Board

of BMWAG and its Committees

1

79 Information on Corporate Governance

Practices Applied beyond Mandatory Requirements

80 Compliance in the BMW Group

1

85 Compensation Report

194 Responsibility Statement by the

Company’s Legal Representatives

195 Auditor’s Report

1

2

96 otheR inFoRmation

96 BMW Group Ten-year Comparison

98 BMW Group Locations

00 Glossary

02 Index

04 Financial Calendar

05 Contacts

3

BMW Group in figures

2009

2010

2011

2012

2013

Change in %

Automotive segment

Sales volume

1

BMW

1,068,770

216,538

1,002

1,224,280

234,175

2,711

1,380,384

285,060

3,538

1,540,085

301,526

3,575

1,655,138

305,030

3,630

7.5

1.2

1.5

6.4

MINI

Rolls-Royce

Total

1,286,310

1,461,166

1,668,982

1,845,186

1,963,798

Production volume

2

BMW

1,043,829

213,670

918

1,236,989

241,043

3,221

1,440,315

294,120

3,725

1,547,057

311,490

3,279

1,699,835

303,177

3,354

9.9

–2.7

2.3

MINI

Rolls-Royce

Total

1,258,417

1,481,253

1,738,160

1,861,826

2,006,366

7.8

Motorcycles segment

3

Sales volume

BMW

87,306

82,631

98,047

99,236

104,286

110,360

106,358

113,811

115,215

110,127

8.3

–3.2

9.7

4

Productionvolume

BMW

Financial Services segment

New contracts with retail customers

1,015,833

96,230

1,083,154

95,453

1,196,610

100,306

1,341,296

105,876

1,471,385

110,351

5

Workforce at end of year

BMW Group

4.2

1

Including automobiles from the joint venture BMW Brilliance (2009: 43,702 units, 2010: 53,701 units, 2011: 94,400 units, 2012: 141,165 units, 2013: 198,542 units).

Including automobiles from the joint venture BMW Brilliance (2009: 35,952 units, 2010: 55,588 units, 2011: 98,241 units, 2012: 150,052 units, 2013: 214,920 units).

Excluding Husqvarna, sales volume up to 2013: 59,776 units.

Excluding Husqvarna, production up to 2013: 59,426 units.

Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.

2

3

4

5

4

BMW Group in figures

2009

2010

2011

2012

2013

Change in %

Financial figures

in € million

Capital expenditure

3,471

3,600

4,921

3,263

3,682

8,149

3,692

3,646

8,110

5,240

3,541

9,167

6,687

3,739

9,450

27.6

5.6

Depreciation and amortisation

1

Operating cash flow

3.1

Revenues

50,681

43,737

1,069

15,798

3

60,477

54,137

1,304

16,617

4

68,821

63,229

1,436

17,510

5

76,848

70,208

1,490

19,550

5

76,058

70,629

1,504

19,874

6

–1.0

0.6

Automotive

Motorcycles

Financial Services

Other Entities

Eliminations

0.9

1.7

20.0

–10.8

–9,926

–11,585

–13,359

–14,405

–15,955

2

Profit before financial result (EBIT)

Automotive

289

–265

19

5,111

4,355

71

8,018

7,477

45

8,275

7,599

9

7,986

6,657

79

–3.5

–12.4

–

Motorcycles

Financial Services

Other Entities

355

30

1,201

–41

1,763

–19

1,558

58

1,643

44

5.5

–24.1

54.0

Eliminations

150

–475

–1,248

–949

–437

2

Profit before tax

Automotive

413

–588

11

4,853

3,887

65

7,383

6,823

41

7,803

7,170

6

7,913

6,561

76

1.4

–8.5

–

Motorcycles

Financial Services

Other Entities

Eliminations

365

51

1,214

45

1,790

–168

–1,103

1,561

3

1,639

164

5.0

–

2

574

–358

–937

–527

43.8

2

Income taxes

Net profit

–203

210

–1,610

3,243

–2,476

4,907

–2,692

5,111

–2,573

5,340

4.4

4.5

3

2

Earnings per share in €

0.31/0.33

4.93/4.95

7.45/7.47

7.75 /7.77

8.10/8.12

4.5/4.5

1

Cash inflow from operating activities of the Automotive segment.

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Common/preferred stock. In computing earnings per share of preferred stock, earnings to cover the additional dividend of €0.02 per share of preferred stock are spread over the

quarters of the corresponding financial year.

2

3

5

BMW Group in figures

*

Sales volume of automobiles

Revenues

in thousand units

in € billion

1,900

1,800

1,700

1,600

1,500

1,400

1,300

75

70

65

60

55

50

45

09

10

11

12

13

09

10

11

12

13

1,286.3 1,461.2 1,669.0 1,845.2 1,963.8

50.7

60.5

68.8

76.8

76.1

*

Includes cars manufactured by the BMW Brilliance joint venture.

Profit before financial result

Profit before tax

in € million

8,400

7,200

6,000

4,800

3,600

2,400

1,200

8,400

7,200

6,000

4,800

3,600

2,400

1,200

09

10

11

12

13

09

10

11

12

13

*

289

5,111

8,018

8,275

7,986

413

4,853

7,383

7,803

7,913

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

6

Joachim Milberg

Chairman of the Supervisory Board

7

RepoRt of the SupeRviSoRy BoaRd

Dear Shareholders and Shareholder Representatives,

The BMW Group has again fared extremely well over the past financial year. Throughout the twelve-

month period, we diligently supervised the Board of Management’s running of the business and, in joint

consultations, supported it in an advisory capacity. Our work within the Supervisory Board and in con-

junction with the Board of Management was conducted openly, constructively and in a spirit of trust.

Main emphases of the Supervisory Board’s monitoring and advisory activities In a total of five meet-

ings, we deliberated on the BMW Group’s current situation. Other matters at the forefront of our consulta-

tions were corporate strategy and planning for the BMW Group as a whole, the strategy being pursued for the

Financial Services segment in particular, risk management and levels of risk provision. Decisions were also

taken with respect to the composition and compensation of the Board of Management and an examination

of corporate governance within the enterprise was carried out. In 2013 we paid particular attention to the

progress being made in the field of electromobility and to the efforts expended and the challenges arising for

the BMW Group regarding the necessity to continue to reduce emissions.

We carefully monitored the performance of the BMW Group and were regularly kept informed of sales

performance, workforce developments and other significant matters, both at scheduled meetings and at

other times as the need arose. Moreover, the Chairman of the Board of Management, Dr Reithofer, informed

me directly about major business transactions and projects. In addition to scheduled meetings, Dr Kley, the

Chairman of the Supervisory Board’s Audit Committee, and Dr Eichiner, the Board of Management member

responsible for Finance and Financial Reporting, remained in direct contact at other times.

In its regular reports on the financial condition of the Group, the Board of Management presented its

assessment of economic developments in important regions of the world, commented on sales volume and

competitive issues within the Automotive and Motorcycles segments and highlighted fluctuations in the

size of the workforce. We were also kept informed of the performance of the Financial Services segment,

including new retail business volumes, the size of the contract portfolio with dealers and retail customers,

total business volume and the development of vehicle residual values on major markets.

The business status reports provided by the Board of Management also dealt with important ongoing

activities and projects, such as the current status of the realigned strategy adopted for BMW Motorrad as well

as the progress of cooperation discussions and projects with Toyota. The Supervisory Board was also informed

of any temporary delays affecting spare parts supplies during the summer and deliberated on causes and

countermeasures required.

One of the Supervisory Board meetings was held at the BMWsite in Berlin, where we visited BMWMotorrad’s

production facilities. The Board of Management and local management representatives took this opportunity

to present their vision of the new strategic direction of the motorcycle line of business, with its focus on the

premium segment. As well as receiving an insight into new product concepts, we were also informed of the

range of measures currently being implemented in the fields of production, sales and marketing, aimed at

attracting new motorcycle customer groups and making inroads on emerging markets with appropriate

products.

We looked at the regulatory situation on the world’s major markets, particularly in the EU, China, USA and

Japan, both for vehicles powered by combustion engines and those with alternative drive systems. The Board

of Management elucidated numerous options for achieving further reductions in carbon emission levels for

conventional vehicles and the genuine benefits that can be generated by expanding electromobility products

8

and services in various markets. Future emission targets currently being mulled over by policymakers, the

various proposals put forward in this context and their likely impact on the BMW Group as a premium manu-

facturer and on the competitive situation were also discussed with the Board of Management.

We devoted considerable time to deliberating on the expectations and needs of customers with respect to

electric mobility. In this context, we gave careful consideration to the production and marketing concepts for

the BMWi3, including complementary services and measures, such as the BMW Battery Certificate or Range

Extender, both of which have been developed to meet specific customer requirements.

At one two-day meeting of the Supervisory Board, corporate and product strategies were considered, the

Long-term Business Forecast examined and time set aside for a detailed look at a range of salient technical

and marketing topics.

During the first part of the meeting we again discussed with the Board of Management the findings of

its annual review of the Group’s Strategy Number ONE, including various potential risk scenarios. The

Board of Management reported on the distribution of sales volume and added value, focusing in particular

on the latest status of projects in China and on plans for building further production sites in Brazil, Russia

and the NAFTA region.

In conjunction with vehicle presentations, Supervisory Board members also had the opportunity to

test-drive a number of BMW, MINI and Rolls-Royce vehicles, including the BMW i3 and BMW i8. Presenta-

tions were also made by senior department heads on selected marketing and technical topics related to

electromobility.

After concluding the Annual Strategy Review, the second part of the meeting included an in-depth dis-

cussion of the long-term business forecast drawn up by the Board of Management for the years from 2014 to

2

019 and, after thorough examination and deliberation, we gave the required approval. We remain firm in

our conviction that the strategic direction set by the Board of Management for the BMW Group is robust and

sustainable.

The Board of Management reported to us on the performance and strategy of the Financial Services

segment, explaining the principal aspects of its internal management and organisation. We deliberated on

the role the segment plays within the Group, including a discussion of the impact of increasing regulation

in the financial sector.

We also thoroughly examined the Annual Budget for the financial year 2014, which was presented by the

Board of Management in November 2013. We fully support the focus being placed on growth and quality of

earnings.

We were also briefed in detail by the Board of Management on the results of regional customer surveys

relating to product quality, the perception of quality and the acceptance of concepts. The assurance and

improvement of quality processes and measures were explained to us and we were also afforded an interest-

ing insight into regional and cultural differences in customer expectations. In all cases, the Board of Manage-

ment emphasised its aspiration to maintain the highest level of quality.

The Supervisory Board and the Board of Management jointly addressed the topic of corporate governance

within the BMW Group on several occasions in 2013. Following the amendment to the variable component

of Supervisory Board compensation by the Annual General Meeting in May 2013, the remuneration structure

9

RepoRt of the SupeRviSoRy BoaRd

now complies with all relevant recommendations of the German Government Corporate Governance Code

Commission. In the most recent Declaration of Compliance, which was issued in December 2013, the

Board of Management and the Supervisory Board resolved that the BMW Group should comply with the

recommendations of the German Government Corporate Governance Code Commission published on

1

5 June 2013 (Code version; 15 May 2013), without exception and with effect from the applicable date.

Again in 2013, in both the Personnel Committee and the full Supervisory Board we examined both the

structure and the amount of the compensation that Board of Management members receive. In order to vali-

date the suitability of the system and the appropriateness of results, we reviewed the comparable trends for

business performance and Board of Management compensation on a multi-year basis. We also gave general

consideration to the development of the remuneration of executive managers and employees of BMWAG

within Germany over the course of time. Moreover, we sought the expertise of an external compensation

consultant, independent of both Company and Board of Management, and evaluated compensation studies

for the DAX. To accommodate the desire for a consistent remuneration model throughout the Group, the

Personnel Committee also made enquiries into the structure of management remuneration and the status

of any planned changes to that structure. Relevant points were discussed by the full Supervisory Board,

where, after deliberation, it was decided that a fundamental change to the Board of Management compensa-

tion system is not required.

Pension entitlements were also reviewed. Based on a proposal put forward by the Personnel Committee,

and after discussion with an independent compensation consultant, with effect from the financial year

2

013 we resolved to increase the extent to which contributions for Board of Management members are stag-

gered. Future calculations will be based on the length of service on the board as well as previous activities

and individual amounts will be increased to take account of benchmark developments in the DAX. For these

purposes, we considered the estimated impact on compensation as a whole and on the probable future level

of pensions.

In the course of implementing the recommendations of the German Government Corporate Governance

Code Commission, we set caps for the individual components and the total amount of compensation for

Board of Management members with effect from the financial year 2014. The target compensation levels for

Board of Management members remain unchanged. The employment contracts of current Board of Manage-

ment members were amended, with the agreement of those members, with effect from 1 January 2014.

Detailed information with respect to Board of Management compensation, including a summary of remunera-

tion caps, is shown in the Compensation Report.

In conjunction with the joint examination of corporate governance, the Board of Management informed

us (both in the Personnel Committee and in the full Supervisory Board) on the status of implementation of

the diversity concept throughout the BMW Group, a concept which is not merely restricted to a focus on gen-

der, but which is aimed at promoting diversity in other areas, particularly in terms of cultural diversity and

the international character of the workforce. In this context, the Board of Management informed us regarding

the percentage of women occupying management positions and changes thereto, in particular at senior

management level and executive level below the Board of Management, as well as the planned measures to

increase this percentage.

With regard to its own composition, based on a detailed composition profile, the Supervisory Board

decided upon specific appointment goals in 2010, which are discussed in detail in the Corporate Governance

Report. These appointment goals were not changed in 2013. No conflicts of interest arose during the year

under report on the part of members of either of the boards. Significant transactions with Supervisory

1

0

Board members and other related parties as defined by IAS 24, including close relatives and intermediary

entities, are examined on a quarterly basis.

We endeavour to assess and continuously improve the efficiency of the work performed by the Supervisory

Board and its committees. The Chairman of the Audit Committee and myself are therefore always glad to

receive comments and suggestions for improvement from Supervisory Board members. The formal examina-

tion of the Supervisory Board’s efficiency is also treated once each year as a separate agenda point for dis-

cussion, for which preparations are made with the aid of a questionnaire.

Each of the five Supervisory Board meetings in 2013 was attended on average by over 95% of its mem-

bers, a fact that can be tied in to the analysis of attendance fees for individual members, as disclosed in

the Compensation Report. No member of the Supervisory Board was absent at more than two meetings

during their period of office. Presiding Board and committee meetings were fully attended in the vast

majority of cases.

Description of Presiding Board activities and committee work In order to work more efficiently and

prepare complex issues and decisions with greater thoroughness, the Supervisory Board has established a

Presiding Board and several committees. A description of the duties, composition and work procedures of

these committees is provided in the Corporate Governance Report.

The relevant committee chairpersons provided timely and comprehensive accounts of the work of the

Presiding Board and committees and I personally brought the representatives of the shareholders up to date

about the work of the Nomination Committee.

In a total of four meetings, the Presiding Board focused mainly on preparing topics for the meetings of

the full Supervisory Board, unless this fell under the remit of one of the committees. Complex issues, such as

the Long-term Business Forecast and the Annual Strategic Review, were dealt with on the basis of written

and oral reports provided by Board of Management members and senior department heads. The Head of

Financial Services, for instance, reported to us on segment strategy, business developments, credit risks

and leasing vehicle residual value risks as well as providing us with detailed information on the current status

of various strategic projects. The Presiding Board selected further topics of discussion for Supervisory Board

meetings and made suggestions to the Board of Management regarding items to be included in its reports to

the full Supervisory Board.

The Audit Committee held four meetings and three telephone conference calls during 2013. The Interim

Financial Reports were discussed with the Board of Management in those telephone conference calls, prior

to their publication. Representatives of the external auditors were present during the telephone conference

call held to present the Interim Financial Report for the six-month period ended 30 June 2013. The report

had been subjected to review by the external auditors.

The Audit Committee meeting held in spring 2013 was primarily dedicated to preparing the Supervisory

Board meeting at which the financial statements were examined. Prior to proposing KPMG AG Wirtschafts-

prüfungsgesellschaft for election as Company and Group auditor at the 2013 Annual General Meeting, we

obtained a Declaration of Independence from KPMG.

The Audit Committee also considered the scope and composition of non-audit services, including tax

advisory services provided by KPMG entities to the BMW Group. There were no indications of conflicts of

interest, grounds for exclusion or lack of independence on the part of the auditor.

1

RepoRt of the SupeRviSoRy BoaRd

The fee proposals for the audit of the year-end Company and Group Financial Statements 2013 and the

review of the six-month Interim Financial Report were deemed appropriate by the Audit Committee. Sub-

sequent to the Annual General Meeting 2013, the Audit Committee therefore appointed KPMG AG for the

relevant engagements and, with due consideration to the suggestions made by the full Supervisory Board,

specified audit focus areas, which, in 2013, included the measurement of warranty and pension provisions

as well as the recognition of development costs incurred in conjunction with cooperation agreements.

The Head of Group Financial Reporting reported to the Audit Committee on risk management processes

in place throughout the BMW Group, including an in-depth description of the internal control system (ICS)

underlying financial reporting. The procedures for determining the degree of maturity of a unit’s ICS were ex-

plained on an illustrative basis for a plant, a sales company and a financial services company.

The Chairman of the BMW Group Compliance Committee reported to the Audit Committee on the cur-

rent compliance situation, which, as in the previous year, was deemed satisfactory overall. None of the in-

formation received relating to potential non-compliance or actual incidences of non-compliance identified in

specific cases give any indication of serious or systematic non-compliance with applicable requirements.

The Head of Group Internal Audit reported to us in the Audit Committee on the significant findings of

audits conducted by Group Internal Audit, on both the industrial and financial services sides of the business,

and put forward suggested recommendations for improvement.

We concurred in the Audit Committee with the decision of the Board of Management to raise the Com-

pany’s share capital in accordance with §4 (5) of the Articles of Incorporation (Authorised Capital 2009) by

€265,570 and to issue a corresponding number of new non-voting bearer shares of preferred stock, each with

a par value of €ꢀ1, at favourable conditions to employees.

The Personnel Committee convened four times during the financial year 2013.

In preparation of the full Supervisory Board’s meetings, we reviewed the structure and appropriateness

of Board of Management compensation, including pension entitlements. We also worked on proposals to

increase the extent to which pension contributions for Board of Management members are staggered and to

implement the latest recommendations of the German Government Corporate Governance Code Commis-

sion relating to compensation andꢀ/ꢀor changes in employment contracts. In one case, we also gave our approval

for a member of the Board of Management to accept the mandate for membership of the supervisory board

of a non-BMW Group entity.

The Nomination Committee convened twice during the financial year 2013. At these meetings, we de-

liberated on medium and long-term successor planning for the shareholders’ representatives on the Super-

visory Board and considered proposals for candidates for the Supervisory Board elections at the 2013 and

2

014 Annual General Meetings, taking the composition objectives stipulated for the Supervisory Board into

due account.

The statutory Mediation Committee (§27 (3)) of the Law on Worker Participation) was not required to be

convened during the financial year 2013.

Composition and organisation of the Board of Management It was with much regret, but also with a great

deal of respect and understanding, that we accepted the decision taken by Frank-Peter Arndt to step down

from his position as Board of Management member responsible for Production with effect from 31 March 2013

1

2

for reasons of health. We expressed our deep appreciation to Mr Arndt for his many years of committed and

conscientious service and for the personal contribution he made to the success of the BMW Group. Details of

the arrangements put in place for Mr Arndt following the termination of his board activities are provided in

the Compensation Report.

In conjunction with a reassignment of responsibilities within the Board of Management with effect from

1

April 2013, responsibility for Production was entrusted to Harald Krüger, who had been in charge of the

MINI, BMW Motorrad, Rolls-Royce and BMW Group Aftersales division since its creation in 2012. With effect

from 1 April 2013, the Supervisory Board appointed Peter Schwarzenbauer as member of the Board of Manage-

ment. With many years of management experience in the premium segment of the automobile industry

behind him, Mr Schwarzenbauer took over responsibility for the MINI, BMW Motorrad, Rolls-Royce, After-

sales BMW Group division from Mr Krüger as part of the reallocation of responsibilities within the Board

of Management. The appointment of one member of the Board of Management was renewed by the Super-

visory Board.

Composition of the Supervisory Board, the Presiding Board and Supervisory Board Committees Fol-

lowing the resignation of Oliver Zipse as executive staff representative on the Supervisory Board with effect

from 31 March 2013, in order to take up a new management position within the BMW Group, the District

Court of Munich – based on a proposal made by executive staff – appointed Dr Markus Schramm (Head of

Aftersales Business Management and Mobility Services BMW Group) as executive staff representative on

the Supervisory Board for the remaining term of office. Maria Schmidt retired on 30 June 2013 and therefore

ceased to be a member of the Supervisory Board. The Supervisory Board thanked the members leaving office

for their constructive work within the Supervisory Board. The District Court of Munich appointed Brigitte

Rödig as employee representative on the Supervisory Board to replace Maria Schmidt for the remaining term

of office. Following these changes, the proportion of women in the Supervisory Board remains at 20%.

Following my own re-election to the Supervisory Board at the Annual General Meeting 2013, the Super-

visory Board again decided to elect me as its Chairman and member of the Audit Committee. In accordance

with the relevant terms of reference, I remained Chairman of the Personnel and Nomination Committees.

Following his re-election to the Supervisory Board, Dr Kley was again elected as the 4th Deputy Chairman

of the Supervisory Board, as member of the Personnel and Nomination Committees and also Chairman of

the Audit Committee. The Corporate Governance Report includes an overview of the composition of the

Supervisory Board and its committees.

Examination of financial statements and the profit distribution proposal KPMG AG Wirtschaftsprüfungs-

gesellschaft conducted a review of the abridged Interim Group Financial Statements and Interim Group

Management Report for the six-month period ended 30 June 2013. The results of the review were also reported

orally to the Audit Committee. No issues were identified that might indicate that the abridged Interim

Group Financial Statements and Interim Group Management Report had not been prepared, in all material

respects, in accordance with the applicable provisions.

The Group and Company Financial Statements of Bayerische Motoren Werke Aktiengesellschaft for the

year ended 31 December 2013 and the Combined Management Report – as authorised for issue by the Board

of Management on 20 February 2014 – were audited by KPMG AG Wirtschaftsprüfungsgesellschaft and

given an unqualified audit opinion.

The Financial Statements and the Combined Management Report, the long-form audit reports of the

external auditors and the Board of Management’s profit distribution proposal were made available to all

1

3 RepoRt of the SupeRviSoRy BoaRd

members of the Supervisory Board in a timely manner. At the meeting held on 5 March 2014, these docu-

ments were examined and discussed in detail by the Audit Committee. The Supervisory Board subsequently

examined these documents at its meeting on 13 March 2014, after hearing the committee chairman’s report

on the meeting of the Audit Committee. In both meetings, the Board of Management gave a detailed expla-

nation of the financial reports it had prepared. Representatives of KPMG attended both meetings, reported

on significant findings and answered any additional questions raised by the members of the Supervisory

Board. They also confirmed that the risk management system established by the Board of Management is

capable of identifying any events or developments that might impair the going-concern status of the Com-

pany and that no material weaknesses in the internal control system and risk management system were

found with regard to the financial reporting process. Similarly, they confirmed that they had not identified

any facts in the course of their audit work that were inconsistent with the contents of the Declaration of

Compliance issued jointly by the two boards.

Based on thorough examination by the Audit Committee and the full Supervisory Board, we concurred

with the results of the external audit. In accordance with the conclusion reached after the examination by

the Audit Committee and Supervisory Board, no objections were raised. The Group and Company Financial

Statements of Bayerische Motoren Werke Aktiengesellschaft for the financial year 2013 prepared by the

Board of Management were approved at the Supervisory Meeting held on 13 March 2014. The separate finan-

cial statements have therefore been adopted.

Both in the Audit Committee and in the full Supervisory Board, we examined the proposal of the Board

of Management to use the unappropriated profit to pay a dividend of €ꢀ2.60 per share of common stock and

ꢀ2.62 per share of non-voting preferred stock. Taking account of the financial condition of the BMW Group,

we consider the proposal appropriate and concur with it.

€

Expression of appreciation by the Supervisory Board We are well aware that the motivation of our em-

ployees and their strong sense of identification with the BMW Group are key factors for its success and future

prospects. We wish to express our appreciation to the members of the Board of Management and the entire

workforce worldwide for their hard work and valuable contribution towards the successful financial statements

for the year ended 31 December 2013.

Munich, 13 March 2014

On behalf of the Supervisory Board

Joachim Milberg

Chairman of the Supervisory Board

1

4

Norbert Reithofer

Chairman of the Board of Management

1

5

StateMent of the ChaiRMan of the BoaRd of ManageMent

Dear Shareholders,

Our vision at the BMW Group focuses on long-term thinking, successfully charting our own course and

leading the way for our industry.

Four straight record years for the BMW Group. For years, we have stood at the pinnacle of the world’s

automotive premium segment. Even during the 2008ꢀ/ꢀ2009 global financial and economic crisis, we reported

a profit and paid a dividend. Since then, the BMW Group has enjoyed four consecutive record years. Investors

in our Company can look forward to long-term value enhancement and our shareholders can rely on us to

achieve profitable growth – even in the face of high volatility and challenges in our business environment. For

this reason, we continue to invest in our future, in all areas of individual mobility. For us as a premium manu-

facturer, innovation and entrepreneurial spirit are key towards growing and creating new trends.

2

013 financial year – the success continues. Our vehicles are more desirable than ever: we delivered

more than 1.96 million BMW, MINI and Rolls-Royce cars to customers in 2013, exceeding the previous year’s

record by 6.4%. Individually, our three automobile brands also posted record sales, with more than 65 mil-

lion BMW, over 305 000 MINI and exactly 630 Rolls-Royce motor cars sold. We offer customers a full

spectrum of premium products – from MINI in the small car segment to Rolls-Royce in the ultra-luxury class.

Our core BMW brand represents sheer driving pleasure: the BMW 3 Series, Series and Series models

1

.

,

3,

5

6

and the BMW X1 are all leaders in their respective segments. The BMW brand also comprises efficient high-per-

formance models from BMW M and the particularly sustainable vehicles of the BMW i family, with the

BMW i3 and, from 2014, the BMW i8.

BMW Motorrad, which celebrated its 90th anniversary last year, delivered more than 115,200 motorcycles

to customers. In the shrinking market segment above 500 cc, BMW Motorrad defied the trend, posting sig-

nificant growth and beating the previous year’s sales by 8.3 per cent. The Financial Services segment, with

operations in more than 50 countries, also continues to grow and made a significant contribution to our sales

and earnings in 2013.

Valuable premium brands and desirable products and services are the foundation for our business success.

Group profit before tax increased by 1.4% to around €ꢀ7.9 billion in 2013, reaching the same level as our 2012

record year, as forecast. Net profit rose by 4.5% to more than €ꢀ5.3 billion.

These results reflect the day-to-day performance, know-how and personal commitment of our employees

worldwide. All of us at the BMW Group share a passion for mobility. We identify with our Company and its

products. All business areas performed well in 2013. On behalf of the Board of Management, I would like to

thank all our employees for their dedication. I would also like to express our sincere gratitude to our retail

organisation, suppliers and partners, who all contribute to the success of the BMW Group.

Balanced growth a key ingredient for success. Our Company has its roots in Munich and in Germany.

But, today, the BMW Group is a global company that sells its products in more than 140 countries. Our

vehicles are produced at 28 locations in 13 countries. At all our locations, we take our corporate responsibility

seriously.

1

6

We target balanced growth in the three main economic regions of the world. Thanks to our highly flexible

production network, we are able to avoid overdependence on any one region and offset market fluctuations.

The flexibility of our production network allows us to quickly adapt to changing external circumstances.

In 2013, our sales were evenly distributed between the three main economic regions of Europe, Asia

and the Americas. Gains in the Americas and Asia compensated for weak markets in a number of Euro-

pean countries. In 2013, our two largest single markets, China and the US, accounted for around 20 and

1

9

%, respectively, of total Group sales, followed by our domestic market of Germany with around 13% of

sales.

When growth markets shift, it is imperative to strengthen our global presence. Since our production follows

the market, we currently produce more than 45% of our vehicles outside of Germany. At the same time,

more and more countries are recognising the economic importance of a locally based automotive industry as

a driving force for growth and employment. In late 2013, we laid the foundation stone of a new plant in the

growth market of Brazil.

Entering into e-mobility: we deliver on our promises. The BMW Group confirmed its position as the

pacesetter for future mobility in 2013. In late July, the series model of the BMW i3 made its world debut simul-

taneously in New York, London, Beijing and Munich. This innovative vehicle was specially designed for

electric mobility and has been well-received by the media worldwide. Customer demand is far exceeding our

expectations.

With the BMW i3, we have adopted a totally new approach to automobile manufacturing, employing new

and especially sustainable production processes. This is the first time an entire passenger compartment made

of carbon-fibre-reinforced plastics (CFRP) has been mass-produced. E-mobility is realised throughout our

competence network with locations in Leipzig, Dingolfing, Landshut, Wackersdorf and Moses Lake, USA.

The BMW i3 comes with our comprehensive 360°ELECTRIC service package to ensure that everyday

electric driving is easy and convenient for customers – through recharging at home, for example.

This will be followed in 2014 by the second model from the BMW i family, the BMW i8 plug-in hybrid

sports car.

Step by step towards our vision for 2020. Our vision for the year 2020 is to be the leading provider of

premium products and premium services for individual mobility.

One thing is certain: the Company is already more than just a car manufacturer. Attractive mobility

services and digital connectivity also play an increasingly important role. With the realignment of its BMW

ConnectedDrive services, BMW is expanding its position as the leading provider of Internet-based in-car

services, focusing on driver assistance systems with comfort and safety functions, as well as infotainment

and mobility services.

For more and more people worldwide, a vehicle is indispensable and desirable at the same time. That is

precisely why it is so essential to adapt individual mobility to present and future demands, as well as different

customer needs. To do this, we think far beyond the car simply as a means of transport.

To us, being the leading premium supplier also means being a leader in the field of sustainability. In every

project, we consider environmental and social factors, as well as economic aspects, in our decision-making

1

7 StateMent of the ChaiRMan of the BoaRd of ManageMent

processes. Sustainable development is an investment in our future competitiveness. We have therefore set

ourselves ambitious targets for 2020 in the relevant areas, namely products and services, production and

value creation, and employees and society. Two examples: first, we aim to reduce resource consumption per

vehicle produced by 45% from 2006 levels by 2020. Second – also by 2020 – we aim to halve the CO₂emis-

sions of our European new vehicle fleet from 1995 levels. These currently stand at 133 g/ꢀkm, but our cus-

tomers today can already choose between 39 models with emissions of less than 120 g CO /ꢀkm.

2

In the same way that we earned a competitive edge with Efficient Dynamics, we are now, once again, in-

vesting in our future. This applies equally to new models and vehicle concepts, alternative drive technologies,

new locations, mobility services and new business fields. Our research and development expenditure

therefore increased to around €ꢀ4.8 billion in 2013. Our financial strength allows us the necessary room to do

this. In this way, we are laying the foundations today for our future success.

People shape our future – our strength lies in diversity. It is part of our philosophy as an attractive em-

ployer to invest continuously in developing the skills of our employees. In the past seven years alone, we have

invested approximately €ꢀ1.5 billion in training. Welcoming diverse, complementary talents on board is

a further priority for us – because mirroring the diversity of our customers within the Company is another

way of optimising customer care. The actions we take together are rooted in our tradition and our culture of

cohesion. That is what makes the BMW Group so strong and unique.

Being a leader in the premium segment is about more than just good business results. As a global com-

pany in a changing world, it is both a challenge and a source of motivation for us to strive for long-term

success and profitability, to strike out independently in new directions and still remain true to our values

and reliable in our actions. We have worked hard to become the leading premium manufacturer – and we

will continue to be a pioneer. We must therefore strive to be bolder, more innovative and simply better

than our competitors.

We will build on our successful business performance in 2014, once again targeting record sales and

Group earnings. The EBIT margin in the Automotive Segment should remain between 8 and 10%. The

main risks and uncertainties we face stem from an ever-increasing competitive environment. We continue

to face challenges in some specific markets within Europe. 2014 will be another year of ground-breaking

innovations for us, as we add a large number of new models to our portfolio. In early March, we unveiled

the BMW 2 Series Active Tourer: this all-new vehicle concept will be the first BMW model with front-wheel

drive.

In 2016, the Company will celebrate its centenary. We view this milestone not only as an opportunity to

reflect on our heritage but also to be a springboard towards the future. We hope we can count on your con-

tinued trust and support as we move forward.

Norbert Reithofer

Chairman of the Board of Management

1

8

Combined management RepoRt

General Information on the BMW Group

Business Model

General information on the BMW Group is provided be- resources are prime objectives firmly embedded in our

low. There have been no significant changes compared

to the previous year.

corporate strategy. Thanks to these endeavours, we

have been among the most sustainable companies in

the automobile industry for many years.

1

8

Combined management RepoRt

General Information on the BMW Group Business model

18

20

23

Business Model

Management System

Research and Development

Bayerische Motoren Werke Aktiengesellschaft (BMWAG), The BMW Group operates on a global scale and is

which is based in Munich, Germany, is the parent

company of the BMW Group. The primary business

object of the BMW Group is the development, manufac-

ture and sale of engines as well as all vehicles equipped

with engines. The BMW Group is subdivided into

the Automotive, Motorcycles, Financial Services and

Other Entities segments (the latter primarily com-

prising holding companies and Group financing com-

panies).

represented in more than 140 countries. Our research

and innovation network is spread over twelve loca-

tions in five countries. At 31 December 2013 the pro-

duction network comprised a total of 28 locations in

13 countries.

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

BMW 3 Series and 4 Series models as well as petrol and

diesel engines are manufactured at the BMW plant in

Munich, next to the BMW Group’s headquarters. Models

62

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

of the BMW 1 Series,

3 Series and 4 Series as well

Bayerische Motoren Werke G.m.b.H. came into

being in 1917. Having been originally founded in

as the Z Roadster roll off the production lines at the

Regensburg plant. The largest BMW plant is located

in Dingolfing, where we build the BMW 3 Series Gran

4

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

1

916 as Bayerische Flugzeugwerke AG (BFW), it be-

came Bayerische Motoren Werke Aktiengesellschaft

BMW AG) in 1918. The BMW Group comprises

8

2

5

Turismo, models of the BMW 5, 6 and 7 Series and

(

hybrid BMW 5 and 7 Series vehicles. Chassis and drive

components are also manufactured at this plant. The

BMW Leipzig plant’s production range covers models of

the BMW 1 and 2 Series, the BMW X1 and the electri-

cally powered BMW i3 as well as the hybrid sportscar

BMW i8 (from 2014). The BMW 3 Series Sedan is manu-

factured at the plant in Rosslyn (South Africa). The

BMW plant in Spartanburg (USA) is responsible for pro-

ducing the BMW X3, X4 (from 2014), X5 and X6 models.

8

BMW Stock and Capital Markets

BMWAG and all subsidiaries, which BMWAG – either

directly or indirectly – has the power to control.

BMWAG is also responsible for managing the BMW

Group. General conditions on the world’s automobile

and motorcycle markets (such as the competitive situa-

tion, government policies, statutory regulations),

underlying trends within society as well as changes

in raw materials prices, exchange rates and interest

rates are some of the major external factors that exert

an influence over our business.

BMW X1 and models of the BMW 3 and

5 Series are

built exclusively for the Chinese market at the two

plants operated by the joint venture BMW Brilliance in

Shenyang (China).

The BMW Group is one of the most successful makers

of cars and motorcycles worldwide and among the

largest industrial companies in Germany. With BMW,

MINI and Rolls-Royce, the BMW Group owns three of

the strongest premium brands in the automotive in-

dustry. The vehicles it manufactures set the highest

standards in terms of aesthetics, dynamics, technology

and quality, a fact borne out by the BMW Group’s

Components for the worldwide production network

are manufactured at the BMW plants in Landshut and

Wackersdorf. The Eisenach plant is responsible for

toolmaking. The two production sites in Moses Lake

(USA) and Wackersdorf are operated by the joint venture

SGL Automotive Carbon Fibers (ACF) and supply carbon

leading position in engineering and innovation. In addi- fibre and carbon fibre cores for the production of

tion to its strong position in the motorcycles market,

the BMW Group also offers its customers a successful

range of financial services. In recent years, the Group

has also established itself as a leading provider of pre-

mium services for individual mobility. At the end of the

reporting period, the BMW Group had a worldwide

workforce of 110,351 employees.

BMW i models. The BMW Group’s largest engine manu-

facturing plant in Steyr (Austria) manufactures petrol

and diesel engines for the various BMW plants and die-

sel engines for the MINI production. In 2012 the joint

venture BMW Brilliance Automotive opened an engine

plant in Shenyang (China), which supplies petrol en-

gines to the neighbouring BMW plants.

Long-term thinking and responsible action have long

been the cornerstones of our success. Striving for eco-

logical and social sustainability along the entire value-

added chain, taking full responsibility for our products

and giving an unequivocal commitment to preserving

The primary function of the BMW Group’s assembly

plants is to serve nearby regional markets with

BMW cars currently being assembled in Chennai

(India), Jakarta (Indonesia), Cairo (Egypt), Kaliningrad

(Russia), Kulim (Malaysia) and Rayong (Thailand).

1

9 CoMBined ManageMent RepoRt

Five of the MINI models – Hatch, Clubman, Convertible, through and through by the desire for even greater sus-

Coupé and Roadster – are manufactured at the Oxford

plant (United Kingdom). The UK production triangle

also includes the components plant in Swindon as well

as the engine plant at Hams Hall, where petrol engines

are manufactured for MINI and BMW. In Graz (Austria),

Magna Steyr Fahrzeugtechnik manufactures the MINI

tainability, BMW i epitomises the electric vehicle of the

future – with its electric drivetrain, revolutionary light-

weight construction, exceptional design and an entirely

new range of mobility services.

BMW Motorrad is also focused on the premium segment

Countryman and, since 2012, the MINI Paceman for the and offers a range of motorcycles for the Tourer, Enduro,

BMW Group.

Sport and Roadster segments. The Maxi-Scooter for ur-

ban mobility was also added to this list in 2012. A wide

range of accessories and equipment is also available,

providing additional safety and comfort to customers.

The Rolls-Royce Phantom, Ghost and Wraith models

are manufactured exclusively at the Goodwood plant

(United Kingdom).

The Financial Services segment, which works in tan-

dem with the sales organisation, is represented in more

than 50 countries around the world. Credit financing

and the lease of BMW Group brand cars and motor-

cycles to retail customers is its largest line of business.

The BMW Group’s international multi-brand fleet

business, operating under the brand name “Alphabet”,

provides fleet financing products and comprehensive

management services for corporate car fleets in 19 coun-

tries. Within the multi-brand financing line of business,

The BMW plant in Berlin is responsible for the manu-

facture of BMW motorcycles as well as brake discs. One

additional motorcycle assembly plant is located in

Manaus (Brazil) and another, since the end of the year,

in Rayong (Thailand).

The worldwide automobile distribution network cur-

rently consists of around 3,250 BMW, 1,500 MINI and

20 Rolls-Royce dealerships. Products and services are

1

sold in Germany through BMW Group branches and by credit financing, leasing and other services are marketed

independent authorised dealers. Sales outside Germany to retail customers under the brand name “Alphera”.

are handled primarily by subsidiary companies and, in

The segment’s range of products is rounded off by pro-

a number of markets, by independent import companies. viding support to the dealer organisation and offering

The sales network for BMW motorcycles is organised

in a similar way to the automobile business. Currently,

there are approximately 1,000 BMW Motorrad dealer-

ships worldwide.

insurance and banking services.

This Combined Management Report combines the

management reports of BMW AG and the BMW Group.

Our premium brands – BMW, MINI and Rolls-Royce –

are well known and highly admired around the globe

for their innovative technologies and state-of-the-art

design. The BMW Group provides the full spectrum of

individual mobility, ranging from premium segment

small vehicles through to ultra-luxurious and powerful

vehicles. Our entire product range is linked by one

characteristic: efficiency. The MINI brand is a veritable

icon in the premium small car segment, offering un-

rivalled driving pleasure in its class. Rolls-Royce has a

long and distinguished tradition in the ultra-luxury

segment stretching back over more than 100 years. Our

core BMW brand manages to cover a broad spectrum

of customer wishes, ranging from fuel-efficient and

innovative models equipped with Efficient Dynamics

through to high-performance, extremely efficient BMW

M sub-brand vehicles, which bring the flair of motor

sport onto the roads. All BMW vehicles share one thing

in common: their impressive driving dynamics.

Our understanding of the term “premium” is now being

taken to a new level with the BMW i brand. Inspired

2

0

General Information on the BMW Group

Management System

The BMW Group applies a value-based management

performance, additional key performance figures are

approach. The key objectives of managing a business are measured at Group level for controlling purposes.

to achieve sustainable, profitable growth, increase the

value of the business for capital providers, safeguard jobs The focus at all controlling levels is always on increasing

1

8

Combined management RepoRt

General Information on the BMW Group and, last but not least, maintain corporate autonomy.

the value of the company. The contribution made to busi-

18

20

23

Business Model

Management System

Research and Development

These objectives can only be achieved if available equity ness value growth during the financial year is measured

and debt capital is employed profitably and if the

profit generated sustainably exceeds the cost of capital

employed.

in terms of “value added”. This approach is translated

for operational purposes at both Group and segment

level by identifying the main financial and non-financial

factors (“value drivers”) which affect the value of the

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

The BMW Group’s internal management system is multi- business. The link between value added and the relevant

2

4

9

7

layered. Operating performance is managed primarily

at the level of the segments. In order to assess the suc-

cess of the strategies adopted and to manage long-term

value drivers is shown in simplified form in the follow-

ing diagram.

62

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

Profit

+

− Expenses

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Return on sales

÷

×

8

2

5

Return on capital

(RoCE / RoE)

Value added

−

×

+ Revenues

8

BMW Stock and Capital Markets

Capital turnover

Capital employed

Cost of capital

Average weighted cost

of capital rate

Various value drivers which could have a significant

impact on profitability and the value of the company are

defined for each controlling level. The financial and

non-financial value drivers referred to above take the

form of the principal key performance indicators that

are generally relevant for business controlling purposes.

Due to the high aggregate impact of various factors,

it is difficult to manage a business pro-actively and de-

cide on the right set of measures simply by focusing on

value added. This key figure therefore only serves for

intermediate reporting purposes.

RoCEsꢀ/ꢀRoEs are fixed as the principal key financial per-

formance indicators for each segment. Profitability

(return on sales) and capital efficiency (capital turnover)

are aggregated in the RoCE together with a whole host

of business-relevant information that has an impact

on segment performance and changes in the value of

the company. Depending on the business model, the

segments are managed on the basis of total RoCEs or re-

turns on equity capital.

Automotive segment

The principal key performance indicator for the Auto-

motive segment is return on capital employed (RoCE),

measured on the basis of segment profit before finan-

cial result and the average level of capital employed

in operations. The strategic target for the Automotive

segment’s RoCE is 26%.

A corresponding control logic that utilises value-based

and return-based performance indicators measured

in conjunction with project decisions complements the

system.

Management of operating performance at segment level

Operating performance is managed at segment level

on the basis of capital rates of return. Specific target

Profit before financial result

RoCE Automotive

=

Capital employed

2

1 CoMBined ManageMent RepoRt

Capital employed corresponds to the sum of all current attributable to the segment. The target is a sustainable

and non-current operational assets, less liabilities that

return on equity of at least 18%.

do not incur interest (e.ꢀg. trade payables).

Profit before tax

Equity capital

RoE Financial

Services

=

Due to the key importance of the Automotive segment

for the Group as a whole, consideration is also given to

additional key value drivers which have a significant

impact on RoCE and hence on segment performance.

Strategic management at Group level

Strategic management is performed primarily at Group

The most important of these additional value drivers are level, including quantification of the financial impact

deliveries to customers, segment revenues and – as the of strategic issues on long-term forecasting. The most

key performance indicator for profitability – the operat- significant performance indicators at Group level are

ing return on sales (i.e. EBIT margin). Average carbon

emissions for the fleet are also taken into account, re-

flecting their potential impact on earnings in the short

Group profit before tax and the size of the workforce at

the year end. Group profit before tax is a good overall

measure of the Group’s performance after consolidation

term in the form of ongoing development expenses and procedures, and provides a transparent basis for com-

in the long term due to regulatory requirements. For

these purposes “carbon emissions for the fleet” corre-

paring performance, particularly over time. The size of

the Group’s workforce is monitored as an additional

sponds to average emissions of CO for new car sales in key non-financial performance indicator.

2

the EU-27 countries.

The two key performance indicators – Group profit

The use of additional key value drivers makes it easier

to identify the reasons for changes in the RoCE and to

before tax and size of the workforce – are supplemented

by a measurement of value added. This highly aggre-

define measures capable of influencing its development. gated performance indicator provides an insight into

capital efficiency and the (opportunity) cost of capital

Motorcycles segment

required to generate Group profit. Value added corre-

As with the Automotive segment, operating performance sponds to the amount of earnings over and above the

for the Motorcycles segment is managed on the basis

of RoCE. Capital employed is measured using the same

method as in the Automotive segment. The strategic tar-

get for the Motorcycles segment’s RoCE is 26%.

cost of capital and gives an indication of whether the

Group is meeting the minimum requirements for the

rate of return expected by capital providers. A positive

value added means that a company is creating more ad-

ditional value than the cost of capital.

Profit before financial result

RoCE Motorcycles

=

Capital employed

Value added Group = earnings amount – cost of capital

=

earnings amount – (cost of capital rate ×

capital employed)

The number of vehicles delivered to customers is also

taken into account as a non-financial value driver.

Capital employed comprises the average amount of

Group equity employed during the year as a whole, the

financial liabilities of the Automotive and Motorcycles

Financial Services segment

As is common practice in the banking sector, the per-

formance of the Financial Services segment is measured segments and pension provisions. “Earnings amount”

on the basis of return on equity (RoE). RoE for the Finan- for these purposes corresponds to Group profit before

cial Services segment is defined as segment profit before tax and after interest expense incurred in conjunction

taxes, divided by the average amount of equity capital

with the pension provision and on the financial liabilities

*

Value added Group

in € million

Earnings amount

Cost of capital (EC + DC)

2

013

2012

2013

2012

2013

2012

BMW Group

8,320

8,113

4,666

4,228

3,654

3,885

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

2

of the Automotive and Motorcycles segments (earnings

before interest expense and taxes).

The criteria used for taking decisions as well as the long-

term impact on periodic earnings is documented for all

project decisions and incorporated in the long-term

Group forecast. This system enables an analysis of the

periodic reporting impact of project decisions on earn-

ings and rates of return over the term of each project.

The overall result is a self-contained controlling model.

The cost of capital is the minimum rate of return ex-

General Information on the BMW Group pected by capital providers in return for the capital em-

1

8

Combined management RepoRt

18

20

23

Business Model

Management System

Research and Development

ployed by the Group. Since capital employed comprises

an equity capital element (e.ꢀg. share capital) and a debt

capital element (e.ꢀg. bonds), the overall cost of capital

rate is determined on the basis of the weighted average

rates for equity and debt capital, measured using stand-

ard market procedures. The pre-tax average weighted

cost of capital for the BMW Group in 2013 was 12%, un-

changed from the previous year.

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

62

6

3

1

Report on Outlook, Risks and

Opportunities

Value management used to control projects

63

68

77

Outlook

Risks Report

Report on Opportunities

Operations in the Automotive and Motorcycles segments

are shaped, to a large extent, by project work. Projects

have a substantial influence on future performance.

Project decisions are therefore a crucial component of

financial management for the BMW Group.

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

Decisions are taken on the basis of project calculations

measured in terms of the cash flows a project is ex-

pected to generate. Calculations are made for the full

term of a project, i.ꢀe. for all future years in which the

project generates cash flows. Project decisions are taken

on the basis of the capital value and internal rate of re-

turn calculated for the project.

The capital value of a project indicates the extent to

which a project will be able to generate a positive con-

tribution to earnings over and above the cost of capital.

A project with a positive capital value enhances value

added and therefore results in an increase in the value

of the company. The internal rate of return of the project

corresponds to the average return on capital employed

in the project and, in terms of scope, is equivalent to the

multi-year average RoCE for an individual project. It is

therefore entirely consistent with the principal key per-

formance indicator used for the Automotive and Motor-

cycles segments.

2

3 CoMBined ManageMent RepoRt

General Information on the BMW Group

Research and Development

Research and development play a vital role for the

BMW Group, given its broad range of products and

the high number of new models. Our vehicles and

services also set standards in terms of connecting car

occupants with the outside world. During 2013, a total

of 11,359 employees were engaged throughout the

BMW Group’s global research and innovation network

at twelve locations spread over five countries, to deliver

the best product quality possible and develop innova-

tive technologies for customers. Further information on

our research and development activities is provided in

the relevant section of the Report on Economic Position.

Research and development expenditure for the year

rose by 21

aimed at securing the Group’s future business (2012

952 million). The research and development ratio

.3% to €ꢀ4,792 million, mostly for projects

:

€ꢀ3,

was 6.3%, 1.2 percentage points higher than in the

previous year (2012: 5.1%).

The ratio of capitalised development costs to total re-

search and development costs for the period (capitali-

sation ratio) was 36 % (2012 27 %). Amortisation

of capitalised development costs totalled €ꢀ1,069 million

2012: €ꢀ1,130 million). Further information on research

.

4

:

.6

(

and development expenditure is provided in the section

Results of Operations, Financial Position and Net Assets

and in note 10 to the Group Financial Statements.

As one of the most innovative companies in the auto-

mobile industry, suppliers and external providers are

also highly involved in our research and development

activities. Close collaboration with the parties concerned

enables us to offer our customers new technologies

more quickly and underscores our aspiration to be inno-

vation leader in the sector. It also helps us to ensure that

important project-related technological expertise remains

within the BMW Group.

2

4

Report on Economic Position

Overall Assessment by Management

General and Sector-specific Environment

Overall assessment by management

the remainder of the region. France’s gross domestic

product (GDP) practically stagnated at a rate of 0.2%,

while Italy (–1.8%) and Spain (–1.3%) both suffered an-

other year of recession. Whereas positive data coming

from Spain towards the end of 2013 suggest the re-

cessionary phase may be coming to an end, the eco-

nomic position in Italy and France remained tense to

the end.

The BMW Group’s performance in 2013 was positive

overall and fully in line with our expectations. Good

progress was made in terms of results of operations,

financial position and net assets. This statement also

takes into account events after the end of the reporting

period.

18

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

General and sector-specific environment

General economic environment

After the downturn in the two preceding years, the

The UK economy – Europe’s largest outside the euro-

zone which had been flat in the previous year – re-

ported an upturn of 1.9% in 2013, partly benefiting

from support for the property market in the form of

monetary and fiscal policies.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

global economy stabilised over the course of 2013,

ending with a moderate growth rate of approximately

2.4%. Once again, the USA and China were the main-

stays of growth during the period under report. After

62

6

3

1

Report on Outlook, Risks and

Opportunities

6

7

3

8

7

Outlook

Risks Report

Report on Opportunities

s

ix consecutive quarters of recession, the eurozone

The economy in the USA grew surprisingly well in 2013,

registering a growth rate of 1.9%. This positive perfor-

mance was attributable entirely to the private sector,

with consumer spending and investments up again,

thanks to sharp improvements in the employment and

property markets. The public sector, by contrast, had

a negative impact on growth, owing firstly to further

spending consolidation and secondly to political dis-

agreement regarding the federal budget and debt ceiling.

finally managed to register its first minor positive

growth rates in the second half of 2013. Surprisingly

strong upturns in Japan and the United Kingdom

helped to stabilise the world economy. By contrast,

growth in some of the major emerging economies,

such as India, Brazil and Russia, slowed significantly.

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

Speculation that the US Reserve Bank is likely to put a

brake on its expansionary monetary policy caused inter-

est rate expectations to rise on the world’s capital mar-

kets. As a consequence, some international investors

withdrew capital from emerging economies, reduced in-

vestments in commodities and reallocated funds, pri-

marily in stock markets in the USA, Europe and Japan.

Practically all emerging economies registered drops in

growth rates, sometimes significant, as a result.

Japan’s new government managed to keep the country

out of renewed recession by employing heavily expan-

sionary monetary and fiscal policies, culminating in GDP

growth of 1.7% for the full year 2013.

Despite a small decline in the growth rate, which stood

at 7.7% in 2013, China nevertheless asserted its role

as the most dynamic of the world’s major economies.

Other emerging economies grew considerably more

slowly than expected. India’s growth rate of 4.7% was

High sovereign debt levels again exerted an influence

on economic developments, particularly in Europe. The

eurozone’s economy contracted overall by 0.4% in 2013. only about one half of the long-term prediction. Brazil

With the exception of Germany, where the growth rate

(2.3%) and Russia (1.5%) also fell well short of the growth

edged up to 0.4%, economic growth remained weak in rates recorded one year earlier.

Exchange rates compared to the euro

(Index: 31 December 2008 = 100)

120

115

110

105

100

Japanese Yen

Russian Rouble

US Dollar

9

5

0

5

British Pound

9

8

Chinese

Renminbi

09

10

11

12

13

Chinese Renminbi

Source: Reuters.

Japanese Yen

US Dollar

Russian Rouble

British Pound

2

5 CoMBined ManageMent RepoRt

Currency markets

in the premium market in 2013, benefiting from its

innovative strength on the one hand and from a well-

balanced regional spread of sales on the other. Global

diversification means that downturns in individual

At an annual average rate of US dollar 1.32 to the euro

in 2013, the US dollar exchange rate was slightly higher

than one year earlier and fluctuated within a relatively

narrow corridor over the twelve-month period. The euro markets can be compensated to a large degree by faster

also appreciated slightly against the British pound

with an annual average rate of British pound 0.85 to the

euro. Even though the European Central Bank (ECB)

growth rates in other regions.

Automobile markets

loosened monetary policy still further during the fourth The number of passenger cars and light commercial

quarter of 2013 by reducing the reference interest rate

to 0.25%, the perception on the markets is nonetheless

that the ECB is following a more restrictive course

vehicles sold worldwide rose by 5.1% to 76.5 million

units in 2013, primarily on the back of increased de-

mand in the USA and China. The strongest momentum

than the Reserve Bank in the USA and the Bank of Eng- for growth was generated in China, where the market

land in the UK. Since the exchange rate of the Chinese grew by million to 15 million units (+19 %).

renminbi remains more or less coupled to that of the US The next fastest growing market was the USA, where

2

.

5

.

8

.2

dollar, its value against the euro fell only marginally in

013, with an annual average exchange rate of Chinese

total sales rose by 1.1 million units to 15.6 million units

(+7.6%).

2

renminbi 8.14 to the euro. By contrast, the Japanese yen

and the currencies of numerous emerging economies,

In Europe, the number of new registrations fell once

such as India, Brazil and South Africa, lost a good deal of again in 2013

ground against the euro. The annual average exchange above-average decrease of 4.2%, new registrations in

rate of the Russian rouble was 42.30 to the euro, making Germany – the region’s largest single market – fell to

(12.2 million units; –1.8%). With an

it 6% weaker than in the previous year.

approximately 2.9 million units. The contraction in

France (–5.5%) and Italy (–7.8%) was even more pro-

Energy and commodity prices

With the situation in the Middle East still unsettled, the

price of crude oil stagnated at a high level throughout

Steel price trend

2013: the annual average price of Brent and WTI crude oil

(Index: January 2009 = 100)

was US dollar 108 and US dollar 98 per barrel respec-

tively. For the most part, metal prices fell slightly during

the course of the year, partly reflecting the reduction

of funds invested in commodities and partly due to the

fact that capacity utilisation rates in the steel and metals

industries were relatively poor, particularly in Europe

under the pervading influence of the euro crisis.

1

50

40

30

20

10

00

9

0

8

Sector-specific environment

09

10

11

12

13

Within an increasingly competitive environment, the

BMW Group was again able to assert its leading position

Source: Working Group for the Iron and Metal Processing Industry.

Oil price trend

Price per barrel of Brent Crude

1

40

20

00

Price in US Dollar

Price in €

8

0

6

4

2

09

10

11

12

13

Source: Reuters.

2

6

Precious metals price trend

(Index: 31 December 2008 = 100)

4

50

00

4

18

Combined management RepoRt

Palladium

18

General Information on the BMW Group

350

1

2

8

0

3

Business Model

Management System

Research and Development

300

250

200

150

24

Report on Economic Position

24

Overall Assessment by Management

General and Sector-specific

Environment

2

4

Platinum

Gold

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

100

2

4

9

7

09

10

11

12

13

62

Source: Reuters.

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

nounced. Registration figures in Spain (+3.3%) stabilised Within this difficult market environment, the BMW

at a very low level following the slump experienced in

previous years. The UK, by contrast, turned out to be in

good shape: boosted by a surprisingly strong economic

Group’s motorcycles business performed significantly

better than the general trend.

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

recovery, the UK car market grew by approximately 10.8% Financial Services

and Explanatory Comments

8

2

5

to 2.3 million units.

The situation on international financial markets seemed

8

BMW Stock and Capital Markets

to stabilise during the year under report. Lifting the

public debt ceiling in the USA helped to calm capital

markets. The Japanese Reserve Bank continued its ex-

pansionary monetary policy and kept the economy

propped up with massive support. The situation in the

eurozone also became more settled in 2013. The Euro-

pean Central Bank felt compelled to reduce its reference

interest rate to 0.25% in an endeavour to maintain eco-

nomic momentum.

Japan’s car market consolidated somewhat in 2013 to

approximately 5.2 million units. In the previous year,

demand had still been exceptionally high, owing to the

backlog caused by the natural disaster.

Car markets in the major emerging economies felt the

effect of the economic slowdown, with the Russian mar-

ket contracting by approximately

units and the Brazilian market, at

5

3.6

.

3

% to 2.6 million

million units,

also falling slightly short of the previous year (–1.2%).

The decrease in India was more pronounced, with new

registrations down by 7.0% to 2.5 million units.

Greater worldwide economic stability also had a positive

effect on credit losses, with bad debt levels continuing

to fall in both the USA and Asia. Some signs of improve-

ment were also noticeable in southern Europe.

Despite the continuing weakness of markets in Europe,

we came close to achieving the previous year’s sales

volume level and were thus able to buck the general

trend. Positive market developments in Asia and the

Americas also had a positive impact on unit sales of the

BMW Group in these regions.

Price levels on international used car markets in 2013

remained more or less stable across all regions, including

southern European markets, where prices stabilised at

a low level.

The BMW Group’s Financial Services business also

profited from the general stabilisation of the world’s car

and financial markets.

Motorcycle markets

The world’s 500 cc plus class motorcycle markets were

3.0% down worldwide on the previous year. Motorcycle

registrations in Europe fell by 9.1%. Germany (–0.7%)

recorded a relatively moderate decline, in contrast to

France (–11.2%) and Italy (–20.1%), where the drops

were again on a double-digit scale. The US motorcycle

market remained roughly at the previous year’s level

(–0.2%).

2

7 CoMBined ManageMent RepoRt

Report on Economic Position

Financial and Non-financial Performance Indicators

In the following section, as part of our review of

operations and the financial condition of the BMW

Group, we report on the principal financial and non-

financial performance indicators utilised to manage

the business.

To the extent that the indicators were included in the

previous year’s outlook, we compare them with actual

outcomes in 2013. We comment on the principal per-

formance indicators utilised by the BMW Group and its

segments as follows:

Comparison of previous year’s forecasts with actual outcomes

Forecast for 2013

in 2012 Annual Report

Actual outcome

in 2013

(change)

BMW Group

Profit before tax

€ million

in line with last year’s level

–

7,913 (+1.4%)

1

Workforce at end of year

110,351 (+4.2%)

Automotive segment

4

Sales volume

units

increase in single-digit

percentage range

1,963,798 (+6.4%)

133

1, 2

Fleet emissions

g CO /km

–

2

1

Revenues

€ million

–

8–10

>26

70,629 (+0.6%)

EBIT margin

%

9.4

Return on capital employed

63.3

Motorcycles segment

Sales volume

units

%

increase

–

115,215 (+8.3%)

16.4

1

Return on capital employed

Financial Services segment

Return on equity

%

>18

20.2

BMW Group

innovation throughout the Group. Qualified staff mem-

bers are required in order to meet strong demand for

our vehicles and develop new technologies, particularly

in the field of electromobility.

Profit before tax

The BMW Group continued to chart a successful course

in 2013 and – thanks to the sharp rise in the number

of vehicles sold – recorded its best pre-tax profit to date.

Despite increased levels of expenditure for future tech-

nologies, intense competition and higher personnel

Automotive segment

Sales volume

expenses, Group profit before tax rose by 1.4% to total

Despite the prevailing volatile environment, deliveries

of BMW, MINI and Rolls-Royce brand vehicles rose by

6.4% to 1,963,798 units (2012: 1,845,186 units). All

3

€

ꢀ

7

,

913 million (2012: €ꢀ

7

,

803 million). Actual profit

4

before tax was at a similar level to the previous year and

therefore in line with expectations.

1

Workforce at end of year

1

Not included in the previous year’s outlook.

EU-27.

Prior year figures have been adjusted in accordance with the revised version of

IAS 19, see note 7.

2

The workforce increased to 110,351 employees (2012:

05,876; +4.2%) over the course of the year, reflecting

the dynamic growth in business and the high pace of

3

1

4

Includes cars manufactured by the BMW Brilliance joint venture.

2

8

three brands proved their underlying strength by post-

Motorcycles segment

1

ing new sales volume records totalling 1,655,138 units

Sales volume

1

(

2012

:

1

,

540

,

085 units; +

7

.

5

%) for the BMW brand,

Despite the sharp contraction seen in numerous motor-

cycle markets, the Motorcycles segment achieved a new

sales volume record in the year under report. In total,

115,215 BMW motorcycles (2012: 106,358 units; +8.3%)

were sold worldwide. As forecast for 2013, motorcycles

sales volume continued to rise and was therefore in line

with our expectations.

3

05,030 units (2012: 301,526 units; +1.2%) for the MINI

18

24

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

brand and 630 units (2012 575 units; + %) for

3

,

:

3

,

1.5

the Rolls-Royce brand. These sales figures enabled the

BMW Group to retain its pole position in the premium

segment worldwide. As forecast for 2013, the number of

cars sold climbed at a single-digit percentage level and

hence in line with our expectations.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

9

Financial and Non-financial

Performance Indicators

Review of Operations

2

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

2

Return on capital employed

2

, 3

Fleet carbon emissions

The return on capital employed (RoCE) in the Motorcy-

cles segment improved from 1.8% in 2012 to 16.4% in

2013, reflecting strong demand for our premium prod-

ucts and the good progress made in general by the seg-

ment. Moreover, the previous year’s RoCE was affected

by the sale of Husqvarna Motorcycles.

The BMW Group is continually reducing fleet carbon

emissions by making its drivetrain systems more effi-

cient and increasing the scope of electrification, while

still setting standards in terms of sporting flair and

dynamic driving pleasure.

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

5

6

3

1

Report on Outlook, Risks and

Opportunities

The volume of carbon emissions produced by our vehi-

cle fleet sold in Europe continued to fall thanks to the

Financial Services segment

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

3

Return on equity

rigorous deployment of our Efficient Dynamics tech-

The Financial Services segment can look back on a

highly successful year, with credit and leasing business

with retail customers remaining one of the key growth

drivers. The return on equity (RoE) of 20.2% (2012:

8

2

5

nologies, and amounted to 133 g CO /ꢀkm (2012: 138 g

2

8

BMW Stock and Capital Markets

CO /ꢀkm; –3.6%).

2

4

Revenues

21.2% ) exceeded the target of at least 18% and was

Revenues from the sale of BMW, MINI and Rolls-Royce

thus in line with expectations.

brand cars edged up by 0.6% to €ꢀ70,629 million (2012:

€

ꢀ70,208 million), despite a challenging competitive en-

vironment. We put this development down primarily to

the expansion and rejuvenation of our model portfolio

on the one hand and generally favourable economic

conditions on the other. Revenues generated in Asia

and the Americas rose sharply, due to the good growth

rates enjoyed in these regions. By contrast, our automo-

bile business in Europe had to wrestle with challenging

conditions, under pressure from the effects of recent

crises.

EBIT margin and return on capital employed

The EBIT margin in the Automotive segment (profit be-

fore financial result divided by revenues) came in at

4

9

.4% (2012: 10.8% ). This performance was within our

forecast target corridor of 8 to 10% and reflected strong

demand for our premium brands. The return on capital

employed (RoCE) was 63

.

3

% (2012

:

73

.

7

%) and thus

1

Includes cars manufactured by the BMW Brilliance joint venture.

Not included in the previous year’s outlook.

EU-27.

Prior year figures have been adjusted in accordance with the revised version of

IAS 19, see note 7.

2

well ahead of our target return of at least 26%. Both per-

formance indicators were therefore in line with the fore-

casts expressed in the previous year’s outlook.

3

4

2

9 CoMBined ManageMent RepoRt

Report on Economic Position

Review of Operations

automotive segment

Sales volume at new all-time high

BMW Group – key automobile markets 2013

*

The BMW Group sold a total of 1,963,798 BMW, MINI

and Rolls-Royce brand vehicles during the year 2013,

the best sales volume performance ever achieved in the

as a percentage of sales volume

*

Company’s history (2012: 1,845,186 units; +6.4%). De-

Other

China

spite increasing volatility on many markets, particularly

in Europe, the BMW Group retained its pole position

in the premium segment worldwide.

USA

Italy

All three brands set new sales volume records. Sales

Japan

France

*

of BMW brand cars rose by

7

.

5

% to

085 units). In addition, 305

brand vehicles (2012 301 526 units; +

630 Rolls-Royce brand vehicles (2012: 3,575 units;

1.5%) were sold.

1

,

655

,

138 units

*

(

2012

:

1

,

540

,

030 MINI

Great Britain

Germany

:

,

1.2%) and

3

,

*

+

China

USA

19.9

France

Japan

Italy

3.3

19.2

13.2

9.6

Sharp sales volume rise in Asia

678 BMW

Germany

3.0

*

In Asia, we sold a total of 578

,

MINI and

Great Britain

Other

28.5

Rolls-Royce brand cars in 2013 (+17.3%), easily surpass-

ing the 500,000 threshold for the first time. Sales on

*

the Chinese mainland rose by 19.7% to 391,713 units.

a sales volume of 859,546 units (–0.7%). In Germany,

The Americas also made a good contribution to the

overall performance, with 463,822 units (+9.0%) sold in

this region, including 376,636 units sold in the USA

the BMW Group was unable to escape the steep down-

ward market trend, which resulted in sales volume

falling by

story in the UK, where the keys to 189

MINI and Rolls-Royce brand cars (+ %) were handed

9

.

8

% to 259

,

219 units. It was a very different

(+8.1%).

,

121 BMW

,

8.4

Despite ongoing uncertainties in Europe, sales in this

region were almost at the previous year’s level with

over to customers during the twelve-month period

under report.

BMW Group sales volume of vehicles by region and market

in 1,000 units

2

1

,000

,800

,600

,400

,200

,000

Europe

thereof Germany

*

Asia

*

thereof China

800

600

400

200

Americas

thereof USA

Other markets

09

10

11

12

13

Europe

thereof Germany

761.9

267.5

183.2

90.6

791.2

267.2

286.3

169.6

329.7

266.6

54.0

858.4

285.3

375.5

233.6

380.3

306.3

54.8

865.4

287.4

493.4

327.3

425.3

348.5

61.1

859.5

259.2

578.7

391.7

463.8

376.6

61.8

*

Asia

thereof China

Americas

*

294.2

242.1

47.0

thereof USA

Other markets

Total

1,286.3

1,461.2

1,669.0

1,845.2

1,963.8

*

Includes cars manufactured by the BMW Brilliance joint venture.

3

0

*

BMW achieves new sales volume record

BMW retained its pole position in the premium segment worldwide in 2013. The BMW X1 as well as the BMW 3

,

5

and 6 Series each headed their own segments.

18

24

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

*

Sales volume of BMW vehicles by model variant

24

4

Overall Assessment by Management

General and Sector-specific

Environment

in units

2

013

2012

Change Proportion of

in % BMW sales volume

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2013 in %

2

9

2

3

4

9

5

6

8

0

1

2

4

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

BMW 1 Series

Three-door

Five-door

31,021

157,163

12,417

13,010

14,462

176,066

20,015

–

–10.7

–38.0

–20.1

–5.8

Coupé

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Convertible

16,286

2

13,611

226,829

12.9

5

BMW 3 Series

Sedan

6

3

1

Report on Outlook, Risks and

Opportunities

348,560

96,173

15,240

17,418

22,941

294,045

59,144

29,525

24,038

–

18.5

62.6

–48.4

–27.5

–

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Touring

Coupé

8

2

5

Convertible

Gran Turismo

8

BMW Stock and Capital Markets

5

00,332

406,752

23.0

30.2

0.9

BMW 4 Series

1

4,763

–

BMW 5 Series

Sedan

295,877

50,820

20,295

280,504

57,425

5.5

–11.5

–3.8

2.2

Touring

Gran Turismo

21,087

3

66,992

359,016

22.2

BMW 6 Series

Coupé

6,278

5,496

8,480

7,880

–26.0

–30.3

–

Convertible

Gran Coupé

15,913

6,833

2

7,687

23,193

19.4

1.7

3.4

9.7

9.5

6.5

2.2

0.8

–

BMW 7 Series

BMW X1

BMW X3

BMW X5

BMW X6

BMW Z4

BMW i3

5

6,001

59,184

147,776

149,853

108,544

43,689

15,249

–

–5.4

9.2

1

61,353

57,303

07,231

5.0

–1.2

–16.0

–15.6

–

3

1

6,688

2,866

3

11

BMW total

1,655,138

1,540,085

7.5

100.0

*

Includes cars manufactured by the BMW Brilliance joint venture.

3

1 CoMBined ManageMent RepoRt

Reflecting the fact that the Coupé and Convertible

models are coming to the end of their product life cycles,

sales of the BMW 1 Series fell by 5.8% to 213,611 units.

MINI brand cars in 2013 – analysis by model variant

as a percentage of total MINI brand sales volume

The sales volume of 500,332 units recorded in 2013 for

MINI One

the BMW 3 Series was significantly up on the previous

year (+23.0%). Demand for the BMW 5 Series also re-

(including One D)

mained high at 366,992 units, surpassing the previous

year’s figure by 2.2%.

MINI Cooper

including Cooper D)

(

The various models of the BMW X family again performed

extremely well in 2013. Sales of the BMW X1 and the

MINI Cooper S

(including Cooper SD)

BMW X3 rose by

9

.

2

% and

5

.

0

% to 161

,

353 units and

1

57,303 units respectively. The BMW X5, with a sales

volume of 107,231 units, almost reached the previous

year’s high level despite the model change (–1.2%). The

new X5 has been available to customers since November

MINI Cooper

(including Cooper D) 44.0

MINI Cooper S (including Cooper SD) 35.7

MINI One (including One D) 20.3

2013.

New sales volume high for MINI

MINI achieved a new sales volume record in 2013 with

sales performance (–0.4%). The MINI Hatch – now ap-

proaching the end of its product life cycle – only just fell

short of the previous year’s figure (128,498 units; –2.3%).

3

05,030 units sold (+ 1.2%). The MINI Paceman (avail-

able since March 2013) got off to a good start with

14,687 units sold. With a sales volume of 101,897 units, the The new generation MINI was announced in November

MINI Countryman came very close to the previous year’s

2013 and will appear on the markets in spring 2014.

Sales volume of MINI vehicles by model variant

in units

2

013

2012

Change

in %

Proportion of

MINI sales volume

2013 in %

MINI Hatch

1

28,498

131,569

24,474

22,699

102,271

11,311

9,202

–2.3

–13.5

–7.4

–0.4

–25.4

1.2

42.1

6.9

MINI Convertible

MINI Clubman

MINI Countryman

MINI Coupé

2

1,167

1,030

6.9

1

01,897

33.4

2.8

8

9

,436

,315

MINI Roadster

MINI Paceman

3.1

1

4,687

–

4.8

MINI total

305,030

301,526

1.2

100.0

3

2

Sales volume of Rolls-Royce vehicles by model variant

in units

2

013

2012

Change

in %

1

2

8

4

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

Rolls-Royce

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Phantom (including Phantom Extended Wheelbase)

631

223

573

216

10.1

3.2

Coupé (including Drophead Coupé)

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Ghost

2,284

492

2,786

–

–18.0

–

2

9

Wraith

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

Rolls-Royce total

3,630

3,575

1.5

Rolls-Royce again records all-time high

September 2013. Stringent high standards for both

material selection and production processes have been

achieved in the areas of lightweight construction, sus-

tainability and the careful use of resources. For the first

time in the history of the automotive industry, CFRP is

being used on an industrialised series production scale

to manufacture the bodywork of the BMW i3. The carbon

fibre cores produced at the Wackersdorf plant together

with our joint venture partner SGL Automotive Carbon

Fibers GmbH & Co. KG, Munich, are processed at the

BMW Leipzig plant to form CFRP body parts. In autumn,

series production of drive module components for the

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Rolls-Royce Motor Cars remained market leader in

the ultra-luxury segment in 2013 and, with sales of

3,630 units, achieved a new sales volume record for the

fourth year in succession. The brand’s top model,

the Phantom, was handed over to 854 customers

5

6

3

1

Report on Outlook, Risks and

Opportunities

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

(

+8.2%) during the year under report. 2,284 units of

8

2

5

the Rolls-Royce Ghost were sold worldwide (–18.0%).

The newest model, the Rolls-Royce Wraith, was

launched in autumn 2013 (492 units).

8

BMW Stock and Capital Markets

Production network running at full capacity

In the course of the year under report the BMW Group’s

production network implemented numerous model

start-ups, commenced series production of the BMW i3

and continued to expand capacities at its various inter-

national sites. Despite these diverse challenges, new

production volume records were set. Thanks to its high

degree of flexibility, the production network was able

to even out regional sales volume fluctuations by adapt-

ing its production programme wherever necessary to

changing conditions.

BMW i3 began at the Group’s Dingolfing plant. The

Landshut plant not only produces carbon parts, but also

electric motors, range extenders and motor transmission

units for the BMW i series.

Vehicle production of the BMW Group by plant in 2013

in 1,000 units

Assembly plants

Graz²

Goodwood

Dingolfing

Rosslyn

1

Tiexi

In order to keep pace with ever-growing demand for

the broad range of vehicles in its fleet, total produc-

Dadong¹

Oxford

Spartanburg

tion volume in 2013 was increased by

7

.

8

%. In total,

366 vehicles, comprising

,699,835 BMW (+9.9%), 303,177 MINI (–2.7%) and

354 Rolls-Royce (+ %) brand cars.

*

we manufactured 2,006,

*

1

Leipzig

3

,

2

.

3

Regensburg

Munich

Electromobility production network now completed

One of the main focuses at the Leipzig, Dingolfing and

Landshut plants during the year under report was prep-

aration work for the series production start of the two

new BMW i models, both of which are being manufac-

tured in a multi-plant effort within the E-Mobility com-

petence network. The Leipzig plant in particular plays

a major role in the production and assembly of BMW i

1

Dingolfing

Spartanburg

Regensburg

Munich

342.6

Dadong

126.9

88.0

65.6

3.4

1

297.3

295.5

247.3

186.7

176.0

Tiexi

Rosslyn

Goodwood

2

Leipzig

Graz (Magna Steyr)

Assembly plants

125.6

51.5

Oxford

models and began series production of the BMW

Includes cars manufactured by the BMW Brilliance joint venture.

i

3

in

1

Joint venture BMW Brilliance.

Contract production.

*

2

3

3 CoMBined ManageMent RepoRt

More than one million vehicles produced in Germany

for third consecutive year

For the third year in a row, the Group manufactured

up capacity at the plant, with construction work contin-

uing for a new bodymaking facility on a 25-hectare ex-

pansion area. One further major construction measure

over one million vehicles at its German plants. The pro- undertaken at the Dingolfing plant was the ground,

duction start-up of the BMW 4 Series Coupé commenced breaking ceremony for the installation of a new high-

at the Group’s main plant in Munich. In future the plant speed servo press.

will be demonstrating its high degree of flexibility by

producing three different BMW 3 Series and BMW 4 Se- At the components plant in Landshut in November, a

ries models on one and the same production line. The

new die-casting foundry and a new core-moulding plant

BMW 4 Series Coupé is the basic model for the BMW M4 were taken into operation. As the only BMW produc-

Coupé, the production of which was prepared at the

Munich main plant over the course of 2013 and is

scheduled to start in 2014. During the year under report,

tion site to date that produces lightweight die-cast alloy

parts, it is now better able to serve the growing demand

for these components within the Group. The plant’s

production capacity now stands at 69,000 tons, which is

equivalent to some five million die-cast parts per year.

247,330 vehicles were manufactured in Munich – more

than ever before.

Production of the BMW 4 Series Convertible began at

the Regensburg plant in 2013. In addition, the plant

celebrated the topping-out ceremony for its new supply

centre. The expansion of logistics structures is keeping

pace with the increased need for materials and plays

a key role in making the supply of parts for assembly

Global presence strengthened

Over 45% of the BMW Group’s vehicles were manufac-

tured abroad during the year under report. The pro-

duction of the BMW 3 Series Sedan started at the Tiexi

plant in the Chinese city of Shenyang at the beginning

of the year. Operations at this plant had only begun in

*

even more efficient. In parallel to these changes, further 2012 and by September 2013, the 100,000th vehicle was

progress was made to increase bodymaking capacity at

the plant, a process initiated in the previous year. Pro-

rolling off the assembly line. The BMW 5 Series long-

wheelbase Sedan is manufactured at the Dadong plant

*

duction capacity in the pressing plant was also expanded in China. In July, the 100,000th four-cylinder petrol en-

with the commissioning into service of a new pressing

facility based on high-speed servo technology.

gine made for the Chinese market came off the produc-

tion line at the engine manufacturing plant in Shenyang.

At the same time, preparations got underway at the

site for the construction of a further plant to supply en-

gines for local production.

The BMW Group hired 700 new employees at its pro-

duction plant in Leipzig in 2013, mainly to build up

expertise and create capacity for its BMW i models, but

also in the area of conventional carmaking. Moreover,

two new pressing lines employing high-speed servo

In August 2013 the US plant in Spartanburg began manu-

facturing the new generation of the BMW X5. Since

pressing technology were taken into service at the BMW 2010, production capacity at the plant has practically

Leipzig plant with a view to increasing production

depth and flexibility in general. Series production of the

BMW 2 Series Coupé began in November. In parallel,

staff at the plant also made preparations for manufac-

turing the BMW 2 Series Active Tourer from 2014 on-

wards, the first BMW model to be produced with front-

wheel drive.

doubled. In the medium term, the plan is to increase ca-

pacity to accommodate up to 350,000 units per annum.

As from next year, as competence centre for the BMW X

models, the plant will also produce the BMW X4, the

latest addition to the X family. Furthermore, since this

year the American plant has been operating the world’s

largest connected fleet of hydrogenꢀ/ꢀfuel-cell-driven in-

dustrial logistics vehicles.

In autumn the Dingolfing plant celebrated its 40th anni-

versary as a BMW production location. We were again

The BMW plant in Rosslyn, South Africa, has been run-

able to increase flexibility at the plant over the course of ning on a 24-hour basis in three shifts since 2012 and –

the year. After a ten-year absence, the production start-

up of the Series Gran Turisimo in spring heralded

the return of a BMW 3 Series model to the Dingolfing

plant. Simultaneously, the plant began manufactur-

ing the BMW M6 Gran Coupé. The number of vehicles

produced per day stood at the record level of some

despite an eight-week strike in the car industry affecting

the entire country – manufactured a record volume of

65,646 units in 2013.

3

The BMW Group’s assembly plants in Egypt, India,

Indonesia, Malaysia, Russia and Thailand – whose

*

1,500 units. Further good progress was made in ramping

Joint venture BMW Brilliance.

3

4

primary function is to serve the corresponding regional engines for the new Efficient Dynamics engine family

markets – also remained on growth course in 2013, pro- deployed in BMW and MINI brand cars. At the Hams

ducing a total of 51,504 units in all. The BMW Group

will also soon be producing BMW motorcycles at its as-

sembly plant in Rayong, Thailand, exclusively for the

growing local market. The Rayong plant is therefore the

only one in the Group’s worldwide production network

to manufacture for three brands: the BMW, the MINI

and BMW Motorrad. Moreover, in December the BMW

Group laid the foundation stone for a new plant in

Araquari, Brazil (in the state of Santa Catarina). The

plant is scheduled to commence operations in autumn

Hall plant, measures were implemented to take over pro-

duction of drive systems for the BMW i8 as from 2014.

1

2

8

4

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

The production start-up of the latest generation of modu-

lar engines was also high on the agenda at the BMW

Group’s largest engine-making plant in Steyr. Since the

beginning of series production at the site, no fewer

than 16 million engines have been manufactured. Cur-

rently, the Steyr plant handles production of the BMW

4- and 6-cylinder diesel engines, 6-cylinder petrol en-

gines and MINI diesel engines. Since switching to the

use of electricity generated from renewable sources and

eco-friendly, climate-neutral process heat from the

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

2

014 and produce up to 30,000 units per year.

In November, the production of the third generation of

MINI models began at the Oxford plant to coincide with nearby biomass power plant in 2013, the engine plant

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

5

the plant’s 100th anniversary. The British production

triangle comprising the MINI plant in Oxford, the com-

ponents plant in Swindon and the engine production

facility in Hams Hall is a key part of the BMW Group’s

production network. The pressing plant in Swindon

introduced tactile laser welding technology during the

reporting period. This highly innovative process offers

has reduced its annual carbon emissions by more than

30,000 tons.

6

3

1

Report on Outlook, Risks and

Opportunities

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Due to the strong demand for 4-cylinder petrol engines

worldwide during the period under report, engine-

building activities at the Munich plant ran at full

8

2

5

8

BMW Stock and Capital Markets

capacity, with up to 2,000 engines produced per day.

advantages in terms of corrosion protection and will be In addition, the Munich plant also manufactures 8- and

utilised for the first time in producing the third MINI

model generation.

12-cylinder petrol engines as well as 6-cylinder diesels

for our M Performance models.

In order to secure further capacities for the planned

growth of the MINI, the BMW Group simultaneously

made preparations for producing the MINI under con-

tract with the Dutch carmaker VDL NedCar bv, Born.

Contract production of the MINI will commence in

the second half of the coming year. The MINI models

Countryman and Paceman are already being produced

under contract by the company Magna Steyr Fahrzeug-

technik in Graz, Austria.

The Rolls-Royce plant in Goodwood, England, celebrated

its tenth production anniversary during the year under

report. Series production of the Rolls-Royce Wraith began

at the plant in summer 2013.

Flexible, standardised production system for

engines introduced

Preparations were made to manufacture a new genera-

tion of low-consumption petrol and diesel engines at

the Munich, Hams Hall (UK) and Steyr (Austria) plants.

For this purpose a highly flexible, demand-oriented

production system was introduced at all three locations.

In September, production began of the 3- and 4-cylinder

3

5 CoMBined ManageMent RepoRt

motoRCyCles segment

BMW Motorrad sets new sales volume record

BMW Group – key motorcycle markets 2013

The Motorcycles segment also achieved its best sales

volume of all time in 2013, despite persistently difficult

market conditions. In total, we sold 115,215 BMW motor-

cycles (2012: 106,358 units; +8.3%) worldwide.

as a percentage of sales volume

Germany

Motorcycle sales up in nearly all markets

Other

Motorcycle sales in Europe rose to 68,961 units (+4.7%),

despite the fact that a number of markets suffered

further contraction. Sales volume in Germany also grew

by 4.7% and reached 21,473 units. Motorcycles busi-

ness in Italy stabilised at 10,230 units (+0.3%). The only

country in the region with lower sales than one year

earlier was France (10,400 units; –5.0%). By contrast, at

USA

France

Spain

Great Britain

Italy

Brazil

1

4

,

100 units, motorcycle sales in the USA were well

Germany

USA

18.6

12.2

9.0

Brazil

6.6

5.5

above the previous year’s level (+16.5%).

Great Britain

Spain

France

Italy

4.5

Model initiative continued

8.9

Other

34.7

In February, a number of special models (R1200 R,

R1200 RT and R1200 GS Adventure) as well as the new

F

9

800 GT were launched to mark BMW Motorrad’s

th anniversary. These launches were followed in

0

The new F 800 GS Adventure has been available since

mid-June. The model revision of the F 800 ST was

also launched in a version suitable for use by public

authorities.

March by the new generation of the R1200 GS, BMW

Motorrad’s most successful motorcycle to date. The

latest version of the world’s best-selling long-distance

enduro received a number of prestigious awards in

2

013. In March, with more than 30% of the votes, readers The R nineT, S1000 R, R1200 RT, R1200 GS Adventure,

of the magazine “Motorrad” voted the new R1200 GS C evolution, K 1600 GTL Exclusive and F 800 GS

first in the category “Trialꢀ/ꢀEnduros”. It also won a num- Adventure models were presented at the major autumn

ber of prestigious design prizes, such as the red dot and

the German Design Award. The bike has been excep-

tionally well received by customers and enjoyed much

acclaim in the motorcycle press, confirming the fact

that it sets new standards for long-distance enduros.

trade fairs and will be launched in the course of 2014.

Motorcycle production slightly reduced

In total, 110,127 BMW motorcycles were manufactured

during the period under report (2012: 113,811; –3.2%).

The BMW plant in Berlin spent much of the year pre-

paring for the production start-up of various motorcycle

models, including the fully electrically powered Maxi-

Scooter BMW C evolution and the BMW R nineT, which

is reminiscent of the brand values of 90 years of BMW

Motorrad history.

*

BMW sales volume of motorcycles

in 1,000 units

140

120

100

8

0

New strategic direction for motorcycles business

In line with its new strategic direction, the Motorcycles

segment is now fully focused on the BMW Motorrad

brand. Following approval by the Austrian Merger Con-

trol Authorities, Pierer Industrie AG, Austria, took over

Husqvarna Motorcycles on 6 March 2013.

6

4

2

09

10

11

12

13

87.3

98.0

104.3

106.4 115.2

*

Excluding Husqvarna, sales volume up to 2013: 59,776 units.

3

6

FinanCial seRviCes segment

Financial Services segment achieves best figures

to date

crease of 9.7% over the previous year. Leasing accounted

for 33.8% of new business, credit financing for 66.2%.

The proportion of new BMW Group cars leased or

financed by the Financial Services segment was 44.0%,

3.6 percentage points higher than one year earlier.

The Financial Services segment again benefited from

its attractive product range in 2013 and reported

profitable growth. The portfolio of leasing and credit

financing contracts in place with retail customers and

dealers grew by 7.4% to a total of 4,130,002 contracts,

the highest figure ever reported by the segment (2012:

3,846,364 contracts). Business volume in balance sheet

terms grew by 4.2% to stand at €ꢀ84,347 million at the

end of the reporting period (2012: €ꢀ80,974 million).

18

24

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

In the used car financing line of business, 315,919 new

contracts for BMW and MINI brand cars were signed

in 2013, 4.1% more than in the previous year (2012:

303,490 contracts).

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

2

3

4

9

5

6

8

0

1

2

4

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

The total volume of all new credit financing and leas-

ing contracts concluded with retail customers during

the twelve-month period amounted to €ꢀ39,241 million,

an increase of 7.0% over the previous year (2012:

€ꢀ36,664 million).

Credit financing and the lease of BMW Group brand

cars and motorcycles to retail customers is the segment’s

largest line of business. In our multi-brand line of busi-

ness, which operates under the brand name “Alphera”,

we also offer financing for vehicles of other manufac-

turers. Moreover, we support our own dealer organisa-

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

5

6

3

1

Report on Outlook, Risks and

Opportunities

This surge in new business had a positive impact on the

tion by providing financing for dealership vehicle inven- overall size of the contract portfolio, which grew to a

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

tories, real estate and equipment. In its international

multi-brand fleet business, which operates under the

brand name “Alphabet”, the BMW Group offers a wide

range of individualised mobility solutions for corpo-

rates, ranging from vehicle financing on the one hand

through to bespoke services and full fleet manage-

ment on the other. The segment’s range of products is

rounded off by a host of individualised insurance

products and attractive banking services.

total of

period (2012

3

,

793

,

768 contracts at the end of the reporting

534 620 contracts; + %). Growth

:

3

,

7.3

8

2

5

was recorded across all regions, with increases in the

Europeꢀ/ꢀMiddle East region (+8.8%), the Americas

region (+5.5%) and for the EU Bank (+2.4%). The most

significant rise was again recorded in the Asiaꢀ/ꢀPacific

region, where the contract portfolio grew by 23.6%.

8

BMW Stock and Capital Markets

Expansion of BMW Bank successfully completed

The process of turning BMW Bank into a European finan-

cial institution was successfully completed, following

Sharp rise in leasing and new credit business

The segment’s worldwide lease and credit financing busi- the formal conversion of the Italian subsidiary to the

ness with retail customers continued to grow in 2013. status of a BMW Bank branch. This process has entailed

With a total of 1,471,385 new contracts, the segment set various European financial services entities of the

a new record for the number of new contracts signed

in a year, surpassing the previous year’s figure by 9.7%

BMW Group being integrated in BMW Bank GmbH,

either in the form of branches or as subsidiaries. As a

credit institution operating throughout Europe, the

bank is able to enjoy the benefits of greater flexibility

(2012: 1,341,296 contracts).

Lease business and credit financing business contributed in the areas of liquidity and equity capital management,

equally to this strong growth, in both cases with an in-

thus increasing the overall stability of the segment.

Contract portfolio of Financial Services segment

BMW Group new vehicles financed by

in 1,000 units

Financial Services segment

4,200

4,000

3,800

3,600

3,400

3,200

3,000

in %

50

40

30

20

10

09

10

11

12

13

09

10

11

12

13

Financing

Leasing

24.7

24.3

24.1

20.0

21.1

20.7

19.7

22.5

21.5

3,086

3,190

3,592

3,846 4,130

3

7 CoMBined ManageMent RepoRt

Dealer financing up on previous year

Contract portfolio retail customer financing of

Financial Services segment 2013

as a percentage by region

In addition to retail customer financing, the Financial

Services segment also provides financing products

for the dealer organisation. The total volume of dealer

financing at 31 December 2013 was €ꢀ13,110 million,

an increase of 3.5% compared to one year earlier (2012:

Asia/Pacific

€

ꢀ12,669 million).

EU Bank

Europe/Middle

East/Africa

Deposit business decreased

Deposit-taking represents an important source of re-

financing for the BMW Group. The volume of customer

deposits went down by 4.3% during the twelve-month

period to €ꢀ12,457 million (2012: €ꢀ13,018 million).

Americas

Insurance business continues to grow

EU Bank

Americas

31.3

30.9

Europe/Middle East/Africa

Asia/Pacific

24.9 In addition to its financing and leasing products, the

12.9 Financial Services segment also offers a wide range of

individually packaged insurance services to customers

in 30 countries. There was no let-up in demand for

insurance products in 2013. The number of new con-

tracts rose worldwide by 6.3% to 1,041,530 contracts

(2012: 979,776 contracts). The insurance contract port-

folio expanded by 18.9% to 2,567,168 contracts (2012:

With the new structure in place, BMW Bank has its

headquarters in Germany, branches in Italy, Spain and

Portugal and a subsidiary in France.

2,158,892 contracts).

Fleet business remains on growth course

As a fleet management specialist offering a full range

of services including leasing and funding, Alphabet

is the fourth-largest provider in the European market.

The total portfolio of fleet-related contracts climbed

by 6.6% to stand at 535,528 contracts at the end of the

reporting period (2012: 502,397 contracts).

Stable risk profile

Helped by the positive trend in the global economy and

an easing of the euro crisis, the segment’s well-estab-

lished risk management procedures again proved their

worth. The credit risk situation in southern Europe was

also more stable. The loss ratio incurred on the segment’s

total credit portfolio was reduced by 2 basis points to

0.46% (2012: 0.48%).

Multi-brand financing on the rise

Demand for multi-brand financing increased again in

2

013. In total, 181,605 new contracts were signed in

013, surpassing the previous year’s equivalent figure

Reflecting developments on international used car mar-

kets, our vehicles’ residual values also improved slightly

worldwide over the course of the year. The only excep-

tion was in the countries of southern Europe, where,

although there was no improvement, prices at least sta-

bilised at a low level. Average losses on residual value

risks also decreased.

by 10

.8% (2012: 163,945 contracts). A portfolio of

452,009 contracts was in place at the end of the reporting

period (2012: 417,408 contracts; +8.3%).

Development of credit loss ratio

in %

Further information with respect to risks and opportuni-

ties related to Financial Services can be found in the

section “Report on risks and opportunities”.

0.9

0.8

0.7

0.6

0.5

0.4

0.3

09

10

11

12

13

0.84

0.67

0.49

0.48

0.46

3

8

ReseaRCh and development

Efficient Dynamics

electromobility suitable for daily use. It is based on an

innovative vehicle concept, which is tailor-made for

electromobility and includes a passenger compartment

made of CFRP. Driver assistance systems and mobility

services from BMW ConnectedDrive as well as the

services of 360° ELECTRIC have been specially developed

for the BMW i Series. The BMW i3 uniquely combines

dynamic driving (from 0 to 100 kmꢀ/ꢀh in 7.2 seconds)

with low electricity consumption (12.9 kWh in the EU

test cycle). It is powered by a lithium-ion battery spe-

cially developed and produced by the BMW Group,

which is integrated in the underbody to save space. The

energy storage capacity gives the car a range of 130 to

160 kilometres under everyday driving conditions.

The vehicles produced by the BMW Group feature in-

telligent lightweight design, optimised aerodynamic

characteristics and efficient engines. The well-thought-

out mixture of materials used to build our vehicles

enables us to continually reduce their weight. The BMW

Group is also one of the world’s leaders in the use of

CFRP in car production. The lightweight material is at

least as strong, but up to 50% lighter than steel and

around 30% lighter than aluminium. When combined

with an aluminium chassis, a thermoplastic outer

skin and comprehensive weight optimisation in many

other components, the CFRP passenger compartment

18

24

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

2

3

4

9

5

6

8

0

1

2

4

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

used in the BMW i3 is currently the most effective

implementation of intelligent lightweight carmaking

on the market.

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Connected mobility

5

With the new orientation of BMW ConnectedDrive ser-

vices, BMW continues to extend its outstanding posi-

tion as leading provider worldwide of online-based ser-

vices for vehicles. BMW ConnectedDrive is based on

two key areas, namely driver assistance systems (con-

venience and safety functions) and services (infotain-

ment and mobility services). Customers can now order

mobility services on an individual basis. Moreover, in-

dividual services can be ordered for limited periods of

6

3

1

Report on Outlook, Risks and

Opportunities

As from 2014, a completely new family of engines fea-

turing BMW TwinPower turbo technology will power

the first BMW and MINI models with new 3-, 4- and

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

6

-cylinder in-line engines, ensuring that the best pos-

8

2

5

sible Efficient Dynamics technology is available in all

segments and performance categories.

8

BMW Stock and Capital Markets

The EU6 emission standard, which is mandatory for all

newly registered automobiles as from autumn 2014, has time. The individualisation of services is now also avail-

already been met for most new BMW and MINI models

since 2013. BMW Blue Performance technology ensures

that the reduction in the percentage of nitrogen oxide

able for the first time for a used BMW. As a result, both

BMW and BMW i customers can benefit from a broad

range of services and far lower entry prices. Since July

in emissions required by the EU6 standard has been ful- 2013, many BMW models have been equipped with an

filled for BMW’s diesel models.

integrated SIM card as standard. The aim is, by 2017, to

connect around five million BMW vehicles worldwide

via Connected Drive by means of the permanently in-

stalled SIM card.

In the field of electromobility, too, the BMW Group is

relying on in-house developments for its drive systems.

BMW eDrive embraces all of the drive system compo-

nents required for fully electric driving, i.e. the electric

motor, power electronics, e-transmission and high-

voltage battery system.

In future it will be possible to order BMW Connected-

Drive services in the newly created BMW Connected-

Drive store, an option unique for the market. The store

is not only available online, but also when travelling,

via the vehicle’s on-board system.

Intelligent energy management ensures that the waste

heat generated by the drive system is reduced; kinetic

energy is produced as needed and recovered. The BMW

Group has done pioneering work in the field of recu-

peration technology, which it has gradually been intro-

ducing since 2007. The technology generates electrical

energy that is fed into the vehicle’s electrical system

during acceleration and braking phases.

With its intelligent emergency call feature, BMW already

offers a broader range of functions than that required

by EU legislation for 2015. Automatic position-finding

and accident severity detection also help to greatly

minimise the time between an accident occurring and

the arrival of medical and rescue teams. In future, the

intelligent emergency call will be offered as standard in

practically all markets and models.

The BMW i3

The fully electrically powered BMW

in 2013 and is the first electric car on the market to com- The range of optional driver assistance systems has

bine the pleasure of driving so typical for BMW with also been considerably expanded for the new MINI.

i3 was launched

3

9 CoMBined ManageMent RepoRt

Available for the first time are a head-up display above

the steering column, the Driving Assistant system in-

cluding camera-based, active speed control, collision

particularly on the cross-traffic assistant and the traffic

sign assistant. Via radio signals, the cross-traffic assis-

tant registers the data of all road users at any given

and pedestrian warning, high beam assistant and traffic crossing and, with the help of positioning technology

sign detection as well as a parking assistant and a re-

versing camera.

that is already available as standard equipment, can

manage to avoid many of the accidents that typically

occur at crossings. The second main focus was on

the traffic sign assistant, which, alongside a host of

other features, informs the driver of current speed

limits in traffic guidance systems or of approaching

congestion.

The diversity of the MINI Connected infotainment pro-

gramme, which is unique in its competitive environ-

ment, has been additionally increased. The new MINI

is the first vehicle in its segment that can be perma-

nently equipped with a SIM card, which means it has

the emergency call service with automatic position-

finding and accident severity detection as well as the

MINI teleservices at its disposal. The social networks

and infotainment functions, which can be integrated in

the vehicle via apps, are now available both for Apple

iPhones and for smartphones running the Android

operating system.

Awards for technological innovation and design

Engines newly developed by the BMW Group were

awarded two category prizes at the international

“Engine of the Year Awards 2013”. An international

jury awarded first prize in its capacity class to the

2.0-litre 4-cylinder TwinPower turbo engine, which

powers vehicles such as the BMW 1, 3 and 5 Series

models. In its class, the 1.6-litre 4-cylinder MINI Twin-

With functions such as traffic sign recognition and colli- Power turbo engine, which powers the MINI Cooper S,

sion warning technology, BMW Motorrad Connected-

Ride is bringing camera-based rider assistance systems

that are already standard features in BMW cars to the

world of motorcycling. The particular challenge in this

case is how to implement the functions to suit motor-

cycling conditions: the system still needs to work per-

fectly when leaning into corners and in all weathers.

For example, based on ultrasound technology, the Side

View Assist system warns the motorcycle rider of ob-

jects located in blind spots and vehicles approaching

from the sides by means of orange warning triangles

built into the base of the motorcycle’s mirrors.

recorded its seventh consecutive award win. The suc-

cess is further proof of the dominance of the BMW

Group with its globally recognised competence in

engine development. No other car manufacturer has

managed to gain more titles at the Engine of the Year

Awards in recent years.

The BMW Group celebrated dual success at the inter-

nationally acclaimed “Goldenes Lenkrad” automotive

awards. The BMW X5 was voted the most convincing

new model of the year in the SUV category – as the first

BMW model in this category. In the competition for

the “Grünes Lenkrad”, the BMW i3 won hands down

For a number of years now, the BMW Group has been

working on an electronic co-pilot that provides vehicles

with highly automated driving capabilities on motor-

against all other brands. The BMW i3 also secured first

place in the German Design Award 2014 in the “Trans-

portation and Public Space” category. An international

ways. As early as 2011, a trial vehicle drove from Munich jury of experts presented awards not only for the BMW i3,

to Nuremburg without assistance from the driver. A

highly automated switching from one motorway to an-

other at motorway intersections is now also possible,

thus managing a further key step in the automated ne-

gotiation of motorway networks.

but also for the concept study BMW Pininfarina Gran

Lusso Coupé and the BMW 1200 GS. A total of six

R

models designed by the BMW Group were honoured

at the world’s oldest and widely respected “GOOD

TM

DESIGN ” awards. The independent jury awarded

prizes to numerous vehicles, including the BMW 6 Series

Gran Coupé, the BMW 3 Series Sedan, the BMW M6

Coupé, the BMW M5 and the MINI Roadster. The BMW

Group also celebrated receiving four prizes at the red

dot award: product design 2013. In the “Automotive and

After four years of research work, in 2013 one of the

largest field trials worldwide for Car-to-X-Communica-

tion sim (Safe Intelligent Mobility – test field Ger-

many), involving more than 120 cars, was completed.

Numerous companies in the automotive and commu-

nications industries as well as research institutes joined

forces to test the electronic connectedness of vehicles

and traffic infrastructure. The BMW Group concentrated

TD

Transport” category the BMW

M6 Gran Coupé, the

BMW M135i, the BMW 3 Series Touring and the BMW

R1200 GS were each awarded the red dot design award

for their high-quality design.

4

0

puRChasing and supplieR netwoRk

As the leading provider of premium vehicles, the BMW

Group operates the supply chain together with its part-

ners. The focus here is on achieving the right balance

between quality, innovation, flexible supply structures

of our in-house component production facilities. The

expansion of the Landshut production plant for carbon

fibre parts emphasises the importance that the BMW

Group attaches to it as a competence centre for light-

1

2

8

4

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

and competitive costs. This enables us, even in a volatile weight construction and electromobility. This invest-

environment, to react swiftly and flexibly to fluctua-

tions in demand and to continue improving the quality

of our products and services.

ment in CFRP technology provides the basis for the large-

scale automated series production of carbon fibre parts

in the BMW Group.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

Numerous model start-ups

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

The year under report saw the launch of ten models in

total for the BMW, MINI and Rolls-Royce brands, for

which much of the groundwork was performed by the

purchasing team. The BMW i3 incorporates a large

number of innovations, implemented thanks to the co-

ordinated efforts of our suppliers and our own in-house

component manufacturing resources. Furthermore,

the new generation of the MINI marks the start of front-

wheel drive architecture for the BMW Group.

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

5

6

3

1

Report on Outlook, Risks and

Opportunities

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Internationalisation of procurement markets

In accordance with the basic principle applied that pro-

duction follows the market, the BMW Group is increas-

ingly shifting value-added processes into its respective

sales markets, thus providing a further defence against

currency exposures.

8

2

5

8

BMW Stock and Capital Markets

High level of investment safeguards productivity and

technology lead

The BMW Group’s Purchasing and Supplier team is also

responsible for component production sites and carries

out regular comparative analyses to ensure the efficiency

Regional mix of BMW Group purchase volumes 2013

in %, basis: production material

Africa

Asia/Australia

NAFTA

Central and

Eastern Europe

Germany

Rest of Western Europe

Germany

47.2

18.9

17.0

NAFTA

12.1

1.9

Rest of Western Europe

Central and Eastern Europe

Asia/Australia

Africa

1.9

4

1 CoMBined ManageMent RepoRt

sales and maRketing

The worldwide sales network currently consists of

of the BMW

i

3

in the USA, China and Japan, among

some 3,250 BMW, 1,500 MINI and 120 Rolls-Royce dealer- other countries.

ships. In China alone, more than 50 new BMW and

MINI dealerships were opened in 2013. The number of

dealerships in Europe was adapted to suit the current

economic conditions.

MINI extends model range

In March 2013, the MINI Paceman became the seventh

model in the MINI brand range. It is the first Sports

Activity Coupé in the premium compact segment. The

brand is therefore continuing to extend its model range

to include new vehicle concepts. April saw the market

launch of the John Cooper Works brand in China. In

Shanghai, MINI opened the first Experience Centre for

the brand in China.

BMW brings out numerous new models

The revised BMW Z4 model was introduced in March

2

013. This was followed in June by the launch of the

new M6 Gran Coupé, which offers the perfect balance

between design, performance and luxury. The new

BMW 3 Series Gran Turismo, as the third body variant

of this series, came onto the market in June 2013. It

combines the Sedan’s sporty, dynamic design with the

Touring’s functionality and versatility. The BMW 5 Se-

ries revised model has been available in the showrooms

since July. In addition to design modifications, a wider

selection of engines and additions to its broad choice

of features, the new BMW 5 Series offers a more exten-

sive range of standard equipment. October saw the

market launch of the new BMW 4 Series Coupé. With

its low centre of gravity and powerful engine models,

the sporty Coupé sets new standards for driving dy-

namics in its segment. The third generation of the

BMW X5 reached the showrooms in November. The dis-

tinguishing features of this successful model are its

increased sporting ability and lower fuel consumption.

In November, the BMW Group announced the third

generation of the MINI, which will be available on mar-

kets worldwide in spring 2014. The new MINI redefines

the premium small-car segment and offers numerous

innovations.

Rolls-Royce Wraith extends the brand experience

In 2013, Rolls-Royce Motor Cars presented the Wraith,

the most potent Rolls-Royce of all time. The Wraith

stands out for its unique design and has been available

in showrooms since September 2013. The Wraith has

received the highest accolades, both in the media and

from customers. Rolls-Royce Motor Cars also expanded

its global presence in the year under report to include

Turkey, the Philippines and Taiwan.

In April 2013, the BMW Group, together with its joint

venture partner Brilliance Automotive, announced

the launch of an electric vehicle developed specially for

China under the brand name ZINORO.

Comprehensive range of services centred

around BMW i

With 360°ELECTRIC, BMW i offers a comprehensive

package of services for easy, convenient electromobility.

BMW i3 and i8 can be recharged from a domestic power

socket. However, customers can charge up even more

quickly and conveniently using the BMW i wallbox, which

is also available with installation service. A solar car-

port is also available as an option. The public ChargeNow

network is accessible for customers without private

parking facilities. This is a network of public charging

infrastructure suppliers who provide access to more

Successful market launch of the BMW i3

At the end of July 2013, the BMW i3 was presented to

the public in three cities simultaneously: London, New

York and Beijing. The European sales launch of the

BMW i3 in November 2013 was accompanied by an ex-

tensive communication campaign. First successes

have already been recorded: the numbers of interested

parties, test drive enquiries and orders for the BMW

premium electric vehicle are surpassing expectations.

than 8,000 charging points located throughout Europe.

With ParkNow LongTerm, the customer can rent a

long-term parking space with charging station at a car

park cooperating in the scheme. BMW Add-on Mobility

makes it possible to book a conventional BMW vehicle

(e.ꢀg. for longer holiday trips) as a further service provided

to BMW i customers.

The BMW i3 is available directly from 196 European

dealerships with BMW i agency agreements (BMW

agents). In selected markets, the sales concept for the

i

BMW i has been extended to include purchase offers

by telephone and via the Internet. In addition, BMW i

product experts advise interested customers at the

BMW i agencies. The coming months will see the launch

Featuring comprehensive driver assistance systems and

connectivity solutions, BMW i ConnectedDrive services

4

2

woRkFoRCe

are designed to fulfil our customers’ desire for con-

Workforce increased

venience. BMW i3 Navigation includes a dynamic range The BMW Group’s worldwide workforce grew to a to-

assistant, which provides the customer with reliable

information on the location of charging stations along

the route or suggests efficient driving styles. The Assis-

tance Services package comprises BMW i Connected-

Drive functions for smartphone and navigation, which

support the driver when charging the vehicle and during

the journey. The service package can also include pub-

lic transport options in the mobility planning. With a

BMW i, the customer is also entitled to the comprehen-

sive BMW i Mobile Care package. This includes tele-

phone assistance, on-the-spot help and a replacement

vehicle if required. As part of the holistic approach of

tal of 110,351 employees at 31 December 2013 (2012:

105,876 employees; +4.2%). In order to satisfy the high

demand for our vehicles and to be ready to tackle future

challenges, skilled staff was recruited specifically for

the development and production of new technologies,

such as electromobility. The decrease in the Motorcycles

segment’s workforce was due to the sale of Husqvarna

Motorcycles in March 2013.

1

2

8

4

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

Training extended internationally

1,363 young people began their vocational training with

the BMW Group in 2013. In Germany, the number of

3

60

°

ELECTRIC, a customised maintenance and repair

1

,

200 apprentices remained constant compared to the

previous year. At the end of the reporting period, the

BMW Group employed 445 apprentices worldwide.

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

package is also offered in addition.

5

4

,

6

3

1

Report on Outlook, Risks and

Opportunities

Strong growth in customer service

For the BMW Group and its worldwide dealer organisa-

tion, the distribution of BMW and MINI spare parts,

accessories and services represents a key factor for suc-

cess. 2013 was yet another record year in our major

markets in Germany, the USA and China. Double-digit

growth in revenues was also achieved in Japan, Korea

and Russia.

Investment in employee training

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Expenditure on basic and further training in the BMW

Group rose by 2.1% to €288 million during the year un-

der report (2012: €282 million). This investment focused

principally on increasing skills in the field of electro-

mobility, the growing internationalisation of the BMW

Group and the development of a comprehensive range

of seminars in the area of healthcare.

8

2

5

8

BMW Stock and Capital Markets

New premium experience in showrooms

By 2017, the Future Retail programme will be imple-

mented worldwide with a view to enhancing the pre-

mium experience of our brands and products. Future

Retail comprises:

Attractive employer

Again in 2013, the BMW Group ranged among the most

attractive employers in the world, a fact reflected in

numerous studies and rankings tables. In “The World’s

Most Attractive Employers”, published by the Univer-

sum agency, the BMW Group again succeeded in being

ranked as the best German employer across all sectors

and the best automotive company of all. The BMW Group

also managed to rise further in Trendence’s European

rankings table compared to the previous year.

–

new and additional possibilities for contact with our

brands,

comprehensively improved dealerships, which offer

a premium experience and

targeted support for dealerships enabling customer

needs to be met even more effectively.

In 2013, a start was made on implementing the pro-

gramme in 22 markets. The use of our 700 Product

Geniuses worldwide in some 450 dealerships was par-

ticularly successful.

BMW Group apprentices at 31December

4,500

4,000

3,500

3,000

2,500

2,000

09

10

11

12

13

3,915

3,798

3,899

4,266 4,445

4

3 CoMBined ManageMent RepoRt

BMW Group employees

31.12.2013

31.12.2012

Change

in %

Automotive

Motorcycles

Financial Services

Other

100,682

2,726

96,518

2,939

4.3

–7.2

8.4

6,823

6,295

120

124

–3.2

4.2

BMW Group

110,351

105,876

In Trendence’s German Young Professional Barometer

the proportion rising to 13.8% (BMWAG: 10.9%). Com-

prehensive training and promotional programmes – for

2

013, the BMW Group occupied first place across all

target groups. Furthermore, in the Trendence Graduate both women and men – have been set up as part of the

Barometer Germany, the BMW Group, with its second

place in the fields of business and engineering and its

fourth place in IT, achieved its best result since 2007.

strategy of bringing the proportion of women in manage-

ment positions up to our target corridor of between

15 and 17% by the year 2020. Female representation in

trainee programmes throughout the BMW Group is al-

ready above 35%.

Productive diversity boosts competitiveness

As a result of the specific deployment of varied, com-

plementary talents, the BMW Group is able to boost its

efficiency, innovative strength and customer orienta-

tion by better reflecting the diversity of its customers. In

order to attract a broad spectrum of skillsets which en-

able us to fully engage the strengths of all our employees,

we promote a business culture based on appreciation

and mutual respect.

The proportion of women in the workforce, both in

management positions and in training programmes for

young talent, rose further during the year under report.

The proportion of women in the BMW Group’s work-

force at 31 December 2013 stood at 17.4% (BMWAG:

1

4.5%). Particularly good progress was made regarding

the number of women in management positions, with

1

Proportion of non-tariff female employees at

Employee attrition rate at BMWAG

1

BMW AG/BMW Group

as a percentage of workforce

in %

7.0

6.0

5.0

4.0

3.0

2.0

1.0

13

12

11

10

9

8

09

10

11

12

13

09

10

11

12

13

2

BMW AG

8.4

8.8

9.1

10.0

12.7

10.9

13.8

4.59

2.74

2.16

3.87

3.47

2

BMW Group

11.1

11.8

1

2

Number of employees on unlimited employment contracts leaving the Company.

After implementation of previously reported measures to reduce the size of the

workforce (voluntary employment contract termination agreements).

1

2

Percentage calculated for the BMW Group since 2010.

Figure adjusted.

4

sustainability

Economic success, the responsible use of resources and

the assumption of our social responsibilities are the

cornerstones for long-term growth and a continual rise

in the value of the business. For this reason, due con-

sideration to ecological and social criteria along the

entire value-added chain and a clear commitment to the

preservation of resources are values that are firmly em-

bedded in the philosophy of the BMW Group.

In 2013, the utilisation of resources and the emissions

per vehicle produced were again reduced by an average

of 6.6% compared with the previous year, thus giving

rise to savings of €6.8 million.

1

2

8

4

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

Despite extensive in-house production (e.ꢀg. CFRP manu-

facturing) and the constructionꢀ/ꢀcommissioning of new

structures worldwide (such as the new foundry at the

Landshut plant), we managed to further reduce the

energy consumption per vehicle produced to 2.36 MWh

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

Again in 2013, the Group successfully maintained its

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

leading position among the most sustainable carmakers or 2.1%. Improved energy efficiency, the utilisation of

worldwide – a fact borne out by the top places achieved highly efficient, ecologically sustainable combined heat

in prestigious ratings. The BMW share was again included and power plants (CHPs) and the use of electricity

in the Dow Jones Sustainability Indices (DJSI, Europe generated from renewable sources enabled us to reduce

and World), making the BMW Group the only carmaker the carbon emissions per vehicle produced by 5.6% to

4

7

6

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

to be consecutively listed in the top three for the last

years. In the Global 500 Rating of the Carbon Dis-

0.68 tons during the period under report.

5

1

5

6

3

1

Report on Outlook, Risks and

Opportunities

closure Project (CDP), in 2013 we achieved our best re-

sult of all time and with 100 out of 100 possible disclo-

sure points and a performance assessment in the best

In order to generate sufficient energy at its various pro-

duction plants, the BMW Group makes good use of its

own combined heat and power plants. The calculation

of energy efficiency within the BMW Group’s produc-

tion network has been adjusted to allow for increased

consumption caused by conversion due to the growing

use of CHP plants. The previous year’s figures have

been adjusted accordingly.

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

‘A’ ranking, making us leaders in our sector. More-

8

2

5

over, the BMW Group was again included in the British

FTSE4Good Index in 2013.

8

BMW Stock and Capital Markets

Clean production

The integration of environmental management in all

production processes enables us to minimise our use

of resources and cushion their environmental impact.

Since 2006 we have reduced both the resources utilised

and the emissions per vehicle produced by an average

of 41.4%.

The volume of water required per vehicle produced also

3

fell to 2.18 m (–1.8%) in 2013. The amount of process

3

wastewater produced decreased by 7.8% to 0.47 m per

vehicle produced. Measures implemented due to the

continual improvement process and good capacity utili-

sation at our plants contributed towards improved

efficiency in the use of both energy and water. At the

Spartanburg plant in the USA in particular, water con-

sumption was lowered by the use of condensed water

gained from the cooling system.

The individual figures are as follows:

Energy consumption

Water consumption

Process wastewater

Non-recyclable waste

Solvent emissions

^C^O2 emissions

–31.0%

–33.1%

–42.7%

–69.7%

–36.7%

–35.2%

The amount of non-recyclable production waste fell

significantly by 11.4% to 5.73 kg per vehicle produced

in 2013. A strong contributing factor was the decrease

in non-recyclable waste by almost one-quarter (23.3%)

at the Landshut plant.

Solvent emissions were reduced by an impressive 10.7%

Due to the increasing significance of contract production, to 1.59 kg per vehicle produced during the period un-

1

only vehicles manufactured at BMW production plants

are taken into account to calculate environmental per-

der report, an achievement primarily due to the retrofit-

ting of the paint shop to include an exhaust air filtering

2

formance indicators, since, looking forward, this is seen system at the Dadong plant in China.

as the best way to ensure a differentiated portrayal of

the resource efficiency of the BMW Group’s own produc-

tion capacities.

1

Including BMW Brilliance joint venture.

Joint venture BMW Brilliance.

2

4

5

CoMBined ManageMent RepoRt

*

Energy consumed per vehicle produced

Water consumption per vehicle produced

3

in MWh/vehicle

in m /vehicle

3.00

2.80

2.60

2.40

2.20

2.00

2.80

2.60

2.40

2.20

2.00

1.80

09

10

11

12

13

09

10

11

12

13

2.84

2.72

2.43

2.41

2.36

2.66

2.40

2.25

2.22

2.18

*

Excluding contract production.

Excluding contract production, adjusted for CHP losses.

Sustainability in the value-added chain

was added to the BMW Group’s vehicle fleet in 2013.

With increasing electrification, including that achieved

by means of hybrid technology, we will continue to

take a leading role in the lowering of carbon emissions

Sustainability criteria also play a major role in the field

of transport logistics as well as in the selection and as-

sessment of our suppliers. Sustainability requirements

apply not only to our suppliers, but also to our transpor- and fuel consumption. Looking into the future, these

tation service providers. The amount of energy needed

for transportation purposes has considerably increased

in recent years. In order to keep carbon emissions to an

absolute minimum, we work on the principle “produc-

technologies represent an important basis for fulfilling

legally mandatory carbon and consumption limits.

The average carbon emissions of the vehicles we sold in

tion follows the market”. In addition, we are working on Europe fell by 37% from 1995 to 2013. The BMW Group’s

improving our packaging and continually increasing fleet of new vehicles sold in Europe consumed an average

the percentage of low-carbon types of transportation. In of 4.8 litres of diesel per 100 km and 6.2 litres of petrol

total, 60.7% of all new cars left our plants by rail during

the twelve-month period under report. Moreover, in

respectively. The average carbon emissions in our cars

sold in Europe (EU 27) stood at 133 grams per kilometre

during the year under report. We also lead the field

among German premium-segment manufacturers with

carbon emissions of 139 g/ꢀkm. In 2013 the BMW Group’s

fleet already included 39 models using less than 120 g

2

013 we introduced measures to reduce the volume of

goods transported by airfreight.

Carbon emissions reduced across the fleet

The Efficient Dynamics technology package has been

CO /ꢀkm. Our efficient technologies have given us a

2

helping us reduce the amount of CO our vehicles emit

competitive edge, particularly in markets governed by

2

for many years. The 100% electrically powered BMW i3

a

CO -based vehicle tax.

2

*

CO emissions per vehicle produced

Process wastewater per vehicle produced

2

3

in t/vehicle

in m /vehicle

0.90

0.85

0.80

0.75

0.70

0.65

0.70

0.60

0.50

0.40

0.30

0.20

09

10

11

12

13

09

10

11

12

13

0.94

0.89

0.75

0.72

0.68

0.64

0.60

0.57

0.51

0.47

*

Excluding contract production.

Excluding contract production, adjusted for CHP losses.

4

6

*

Waste for disposal per vehicle produced

Volatile organic compounds (VOC)

in kg /vehicle

per vehicle produced

1

5.0

2.5

in kg/vehicle

1

2.00

18

24

Combined management RepoRt

General Information on the BMW Group

Report on Economic Position

10.0

1.75

7.5

5.0

2.5

1.50

2

4

Overall Assessment by Management

General and Sector-specific

Environment

1.25

1.00

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

2

9

29

35

36

38

40

41

42

44

Automotive Segment

Motorcycles Segment

Financial Services Segment

Research and Development

Purchasing

Sales and Marketing

Workforce

Sustainability

09

10

11

12

13

09

10

11

12

13

11.03

10.49

8.49

6.47

5.73

1.84

1.66

1.75

1.78

1.59

*

Excluding contract production.

4

7

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

56

Further information on the subject of sustainability in

the BMW Group is available in our online sustainability

report at: www.bmwgroup.comꢀ/sustainability. The

Sustainable Value Report 2012 was prepared in ac-

cordance with the guidelines of the Global Reporting

Initiative (GRI G3.1). At Level A+ (GRI-tested) it fulfils

the highest degree of application laid down by GRI

guidelines.

6

3

1

Report on Outlook, Risks and

Opportunities

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

4

7 CoMBined ManageMent RepoRt

Report on Economic Position

Results of Operations, Financial Position and Net Assets

1

Earnings performance

Revenues comprise mainly the sale of cars and motor-

The BMW Group is able to look back on another success- cycles (2013: €ꢀ56,811 million; 2012: €ꢀ58,039 million),

ful year. The number of BMW MINI and Rolls-Royce lease instalments (2013: €ꢀ 296 million; 2012: €ꢀ 900

brand cars sold rose by 6.4% to 1,963,798 units, enabling million), the sale of products previously leased to cus-

,

7

,

6,

2

the BMW Group to retain pole position at the head of

the premium segment in the automotive industry.

tomers (2013: €ꢀ6,412 million; 2012: €ꢀ6,399 million) and

interest income on loan financing (2013: €ꢀ2,868 mil-

lion; 2012: €ꢀ2,954 million).

The BMW Group recorded a net profit of €ꢀ5,340 million

(

2012: €ꢀ5,111 million) for the financial year 2013. The

Revenues from the sale of BMW, MINI and Rolls-Royce

post-tax return on sales was 7.0% (2012: 6.7%). Earnings brand cars were slightly down on the previous year

per share of common and preferred stock were €ꢀ8.10 and (2.1%). Adjusted for exchange rate factors, revenues in-

€

ꢀ8.12 respectively (2012: €ꢀ7.75 and €ꢀ7.77 respectively).

creased by 0.9%. Motorcycles business revenues were

.2% up on the previous year. Revenues generated with

1

Group revenues decreased by

1

.

0

% to €ꢀ76

,

058 million

Financial Services operations grew by 2.3%. Adjusted

for exchange rate factors, revenues of the Motorcycles

and Financial Services segments rose by 4.6% and 4.7%

respectively.

(

2012: €ꢀ76 848 million). Inter-segment revenue elimi-

,

nations increased as a result of the steep rise in new

leasing business. The depreciation of some of the major

currencies in which the BMW Group does business –

such as the US dollar, the Japanese yen, the Australian

dollar and the South African rand – also caused reve-

nues to fall slightly, despite the fact that sales volumes

were higher than one year earlier. Adjusted for ex-

change rate factors, the increase in revenues was 1.9%.

Group revenues were spread fairly evenly across all re-

gions, with the Europe region (including Germany)

accounting for 45.2% (2012: 45.7%), the Americas region

for 20.7% (2012: 21.2%) and the Africa, Asia and Oceania

region for 34.1% (2012: 33.1%) of business.

Group Income Statement

in € million

2

013

2012

Revenues

76,058

–60,784

15,274

76,848

–61,354

15,494

Cost of sales

Gross profit

Selling and administrative expenses

Other operating income

–7,255

841

–7,032

829

Other operating expenses

–874

7,986

–1,016

8,275

Profit before financial result

Result from equity accounted investments

Interest and similar income

Interest and similar expenses

Other financial result

398

184

271

224

–449

–206

–73

–375

–592

–472

7,803

Financial result

Profit before tax

7,913

Income taxes

–2,573

5,340

–2,692

Net profit

5,111

1

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Includes cars manufactured by the BMW Brilliance joint venture.

2

4

8

Revenues in the Africa, Asia and Oceania region to-

talled €ꢀ25,916 million (2012: €ꢀ25,420 million) and were

up by 2.0% compared to the previous year. These fig-

ures include China, where revenues grew by 6.2% due

to higher volumes within a sound economic environ-

ment. Revenues generated in Germany and in the Rest

of Europe were respectively 3.2% and 1.8% lower than

one year earlier. Revenues in the Americas region were

The proportion of development costs recognised as

assets was 36 % (2012 27 %).

.

4

:

.6

Compared to the previous year, selling and administra-

tive expenses increased by €ꢀ223 million to €ꢀ 255 mil-

1

8

Combined management RepoRt

18

General Information on the BMW Group

7,

18

20

23

Business Model

Management System

Research and Development

lion, with the rise in administrative expenses mainly

attributable to the higher workforce size and to group-

wide IT restructuring. Overall, selling and administra-

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

also 2.9% below their previous year’s high level, affected tive expenses were equivalent to 9.5% (2012: 9.2%) of

both by the depreciation of the US dollar and the steep

rise in new leasing business (the latter resulting in a

higher level of inter-segment eliminations).

revenues. Depreciation and amortisation on property,

plant and equipment and intangible assets recorded in

cost of sales and in selling and administrative expenses

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

29

4

7

amounted to €ꢀ3,739 million (2012: €ꢀ3,541 million).

62

Group cost of sales were

vious year and comprise mainly manufacturing costs

2013: €ꢀ36 572 million; 2012: €ꢀ37 648 million), cost

0.9% lower than in the pre-

6

3

1

Report on Outlook, Risks and

Opportunities

Other operating income and expenses improved from a

net expense of €ꢀ187 million to one of €ꢀ33 million. The

main reason for the improvement was that the previous

year’s figures had included one-time losses recognised

in advance of the planned sale of the Husqvarna Group.

63

68

77

Outlook

Risks Report

Report on Opportunities

(

,

of sales directly attributable to financial services (2013:

€ꢀ14,044 million; 2012: €ꢀ13,370 million) and research

and development expenses (2013: €ꢀ4,117 million; 2012:

€ꢀ3,993 million). In addition to changes in these items,

cost of sales for the year was also affected by the loss in

value of a number of major currencies and by inter-

segment eliminations.

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

The profit before financial result (EBIT) came in at

€ꢀ7,986 million (2012: €ꢀ8,275 million).

8

BMW Stock and Capital Markets

The financial result for the twelve-month period was a

net expense of €ꢀ73 million, an improvement of €ꢀ399 mil-

lion over the previous year. The result from equity ac-

counted investments, which improved by €ꢀ127 million,

comprised the Group’s share of results from interests

in the joint venture BMW Brilliance Automotive Ltd.,

Shenyang, the joint ventures with the SGL Carbon

Group, and the two DriveNow entities. Other financial

result benefited from the better outcome of changes in

the market values of interest rate and commodity de-

rivatives. Compared to the previous year, write-downs

Gross profit fell by 1.4% to €ꢀ15,274 million, resulting in

a gross profit margin of 20.1% (2012: 20.2%).

The gross profit margin recorded by the Automotive

segment was 18

.

2

% (2012

:

19

.

5

%), while that of the

Motorcycles segment was 16

.

7

% (2012 17 %). In the

:

.0

Financial Services segment, the gross profit margin

remained stable at 13.1%.

Compared to the previous year, research and develop-

ment expenses increased by €ꢀ124 million to €ꢀ4,117 mil- on available-for-sale marketable securities had a lower

lion, mirroring increased expenditure on new vehicle

projects and technologies. As a percentage of revenues,

impact on the financial result.

the research and development ratio increased by 0.2 per- Including all these factors, the profit before tax rose to

centage points to 5.4%. Research and development ex- €ꢀ7,913 million (2012: €ꢀ7,803 million). The pre-tax return

pense includes amortisation of capitalised development on sales was 10.4 % (2012: 10.2%).

costs amounting to €ꢀ1,069 million (2012: €ꢀ1,130 million).

Total research and development expenditure amounted

to €ꢀ4,792 million (2012: €ꢀ3,952 million). This figure com- €ꢀ2,

prises research costs, non-capitalised development

costs and capitalised development costs (excluding

Income tax expense amounted to €ꢀ2,573 million (2012:

692 million), resulting in an effective tax rate of

% (2012 34 %). Lower non-recoverable with-

holding taxes, the changed regional earnings mix and

32

.

5

:

.5

scheduled amortisation). The research and development intergroup pricing issues contributed to the decrease

expenditure ratio was therefore % (2012 %). in the income tax expense for the year.

6

.

3

: 5.1

4

9 CoMBined ManageMent RepoRt

Revenues by segment

Profit/loss before tax by segment

in € million

2

013

2012

2013

2012

Automotive

Motorcycles

Financial Services

Other Entities

Eliminations

Group

70,629

1,504

19,874

6

70,208

1,490

Automotive

Motorcycles

Financial Services

Other Entities

Eliminations

Group

6,561

76

7,170

6

19,550

5

1,639

164

1,561

3

–15,955

76,058

–14,405

76,848

–527

7,913

–937

7,803

Earnings performance by segment

venture BMW Brilliance Automotive Ltd., Shenyang,

Revenues of the Automotive segment increased by 0.6% the joint ventures with the SGL Carbon Group, and the

to €ꢀ70,629 million. The benefits of higher sales volume

figures were held down by the negative impact of the

depreciation in value of a number of major currencies

two DriveNow entities. Favourable changes in market

prices of commodity derivatives had a positive impact

on other financial result. Compared to the previous year,

(including the US dollar and the Japanese yen). Adjusted write-downs on available-for-sale marketable securities

for exchange rate factors, segment revenues rose by

had a lower impact on the financial result.

3.5%. At 18.2%, gross profit margin was down on the pre-

vious year’s high level of 19.5%.

Overall, the segment profit before tax amounted to

€ꢀ6,561 million (2012: €ꢀ7,170 million) and the effective

Selling and administrative expenses went up by

tax rate was 32.8% (2012: 34.2%).

€ꢀ250 million to €ꢀ6,112 million compared to the pre-

vious year, with the rise in administrative expenses

mainly attributable to the higher workforce size and

to group-wide IT restructuring. Segment selling

and administrative expenses were equivalent to 8.7%

In the Motorcycles segment, the number of BMW brand

motorcycles handed over to customers increased by

8.3%, while segment revenues edged up by 0.9%. Ad-

justed for exchange rate factors, segment revenues rose

by 4.4%.

(

2012: 8.3%) of revenues.

The net expense from other operating income and ex-

penses improved by €ꢀ133 million (2012: net expense

of €ꢀ222 million), helped by positive foreign currency

The pre-tax segment result improved by €ꢀ70 million

(2012: €ꢀ6 million). The previous year’s figure was nega-

tively impacted by one-time losses recognised in con-

translation effects in 2013 and the fact that the previous junction with the planned sale of the Husqvarna Group.

year’s figure had included negative first-time consoli-

dation effects.

Financial Services segment revenues increased by 1.7%

to €ꢀ19,874 million. Adjusted for exchange rate factors,

revenues increased by 4.0%. The segment’s performance

reflects the growth in the contract portfolio. The gross

profit margin remained at the previous year’s level of

The profit before financial result (EBIT) amounted to

€

ꢀ6,657 million (2012: €ꢀ7,599 million), giving an EBIT

margin of 9.4% (2012: 10.8%).

1

3.1%. Selling and administrative expenses went down

The segment financial result was a net expense of

€ꢀ96 million, an improvement of €ꢀ333 million over the

previous year. The result from equity accounted invest-

ments, which improved by €ꢀ127 million, comprised

the segment’s share of results from interests in the joint

slightly. The net amount of other operating income

and expenses improved by €ꢀ20 million. Overall the

Financial Services segment reports a profit before tax of

€ꢀ1,639 million, 5.0% up on the previous year’s figure of

€ꢀ1,561 million.

5

0

A profit before tax of €ꢀ164 million (2012: €ꢀ3 million) was By contrast, cash flows from investing and financial

recorded for the Other Entities segment. The positive

impact of market value changes of interest rate deriva-

tives, recorded in other financial result, was the main

reason for the improvement.

activities are based on actual payments and receipts.

The cash inflow from operating activities in 2013

1

8

Combined management RepoRt

18

General Information on the BMW Group

decreased by €ꢀ1,462 million to €ꢀ3,614 million (2012:

076 million), mainly due to rises in leased prod-

The negative impact on earnings at the level of profit be- ucts and receivables from sales financing totalling

18

20

23

Business Model

Management System

Research and Development

€ꢀ5,

24

Report on Economic Position

fore tax reported in the Eliminations column decreased

€ꢀ6,549 million (2012: €ꢀ5,409 million) brought about

by sales volume factors.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

from €ꢀ937 million in 2012 to €ꢀ527 million in 2013

,

mainly due to lower inter-segment eliminations. This

line item in the Eliminations column also includes a

positive exceptional impact of €ꢀ129 million, resulting

from fine-tuning the methodology used to measure

leased products.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

The cash outflow for investing activities amounted to

€ꢀ 981 million (2012: €ꢀ 433 million) and was thus

28 % higher than in the previous year. The increase

primarily reflects investments in property, plant and

equipment and intangible assets which went up by

€ꢀ1,433 million to €ꢀ6,669 million. Net investments in

marketable securities resulted in a cash outflow of

€ꢀ381 million (2012: €ꢀ175 million).

29

4

7

6

.

,

5

5,

62

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

Financial position

The consolidated cash flow statements for the Group

and the Automotive and Financial Services segments

show the sources and applications of cash flows for the

financial years 2013 and 2012, classified into cash

flows from operating, investing and financing activities. section on the net assets position.

Cash and cash equivalents in the cash flow statements

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

Further information on investments is provided in the

8

BMW Stock and Capital Markets

correspond to the amount disclosed in the balance

sheet.

Cash inflow from financing activities totalled €ꢀ2,703 mil-

lion 2012: €ꢀ952 million). Proceeds from the issue of

bonds amounted to €ꢀ 982 million (2012: €ꢀ 977 mil-

lion), compared with an outflow of €ꢀ7,242 million (2012:

€ꢀ 727 million) for the repayment of bonds. Non-cur-

(

8,

7,

Cash flows from operating activities are determined

indirectly, starting with Group and segment net profit.

6

,

Change in cash and cash equivalents

in € million

13,000

12,000

11,000

10,000

9

,000

8

7

6,000

5,000

4,000

3,000

2,000

1,000

Cash and cash

equivalents

Cash inflow

from operating

activities

Cash outflow

from investing

activities

Cash inflow

from financing

activities

Currency trans-

lation, changes in

Group composition

Cash and cash

equivalents

31.12. 2013

31.12. 2012

8

,370

+3,614

–6,981

+2,703

–42

7,664

5

1 CoMBined ManageMent RepoRt

rent other financial liabilities resulted in a cash inflow

of €ꢀ6,626 million (2012: €ꢀ7,427 million) and a cash out-

flow of €ꢀ4,996 million (2012: €ꢀ5,498 million). The net

cash outflow for current other financial liabilities was

Group with a total negative amount of €ꢀ42 million

(2012: negative amount of €ꢀ1 million), the various cash

flows resulted in a decrease of cash and cash equiva-

lents of €ꢀ706 million (2012: increase of €ꢀ594 million).

€

ꢀ721 million (2012: net cash inflow of €ꢀ230 million). The

change in commercial paper gave rise to a net cash in-

The cash flow statement for the Automotive segment

flow of €ꢀ1,812 million (2012: net cash outflow of €ꢀ858 mil- shows that the cash inflow from operating activities

lion). By contrast, the payment of dividends resulted in a exceeded the cash outflow for investing activities by

cash outflow of €ꢀ1,653 million (2012: €ꢀ1,516 million).

€ꢀ1,962 million (2012: €ꢀ3,637 million). Adjusted for net

investments in marketable securities amounting to

€ꢀ537 million (2012: €ꢀ172 million), mainly in conjunction

with strategic liquidity planning, the excess amount

was €ꢀ2,499 million (2012: €ꢀ3,809 million).

The cash outflow for investing activities exceeded cash

inflow from operating activities in 2013 by €ꢀ3,367 mil-

lion, compared to a shortfall of €ꢀ357 million in the pre-

vious year.

Free cash flow of the Automotive segment can be ana-

lysed as follows:

After adjusting for the effects of exchange-rate fluctu-

ations and changes in the composition of the BMW

in € million

31.12. 2013

31.12. 2012

Cash inflow from operating activities

Cash outflow for investing activities

Net investment in marketable securities

Free cash flow Automotive segment

9,450

–7,488

537

9,167

–5,530

172

2,499

3,809

The cash outflow for operating activities of the Finan-

cial Services segment is driven primarily by cash

flows relating to leased products and receivables from

inflow of €ꢀ324 million (2012: cash outflow of €ꢀ32 mil-

lion).

sales financing and totalled €ꢀ

5

,

358 million (2012

:

Net financial assets of the Automotive segment com-

prise the following:

€ꢀ4,

192 million). Investing activities resulted in a cash

in € million

31.12. 2013

31.12. 2012

Cash and cash equivalents

6,768

2,758

7,484

2,205

Marketable securities and investment funds

Intragroup net financial receivables

Financial assets

4,460

5,862

13,986

15,551

*

Less: external financial liabilities

–1,859

12,127

–2,224

Net financial assets

13,327

*

Excluding derivative financial instruments.

5

2

Refinancing

BMW Group – financial liabilities

Operating cash flow provides a stable financial basis for

the BMW Group. A broadly based range of instruments

transacted on international money and capital markets

is used to refinance worldwide operations. Almost all of

the funds raised are used to finance the BMW Group’s

Financial Services business.

in € million

35,000

30,000

1

8

Combined management RepoRt

18

General Information on the BMW Group

25,000

18

20

23

Business Model

Management System

Research and Development

20,000

1

5,000

0,000

24

Report on Economic Position

1

2

4

Overall Assessment by Management

General and Sector-specific

Environment

The overall objective of Group financing is to ensure the

solvency of the BMW Group at all times. Achieving this

objective is tackled in three strategic areas:

5,000

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Maturity (years)

within1

between1and5

later than5

29

4

7

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

1. the ability to act at all times by assuring permanent

access to strategically important capital markets,

2. autonomy through the diversification of refinancing

instruments and investors, and

30,854

36,046

3,404

62

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

3. focus on value by optimising financing costs.

the high level of acceptance it has on capital markets,

Financing measures undertaken centrally ensure access the BMW Group’s refinancing activities were not

to liquidity for the Group’s operating subsidiaries on negatively affected despite – in some cases – quite high

attractive and consistent conditions. Funds are acquired volatility on financial markets. In addition to the issue

with a view to achieving a desired structure for the com- of bonds and loan notes on the one hand and private

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

position of liabilities, comprising a finely tuned mix of

various financing instruments. The use of longer-term sued on good conditions. Additional funds were raised

financing instruments to finance the Group’s Financial via new securitised instruments and the prolongation

placements on the other, commercial paper was also is-

Services business and the maintenance of a sufficiently of existing instruments. As in previous years, all issues

high liquidity reserve serves to avoid the liquidity risk

intrinsic to any large portfolio of contracts. This pru-

dent approach to financing also supports BMWAG’s

ratings. Further information is provided in the “Liquidity

risks” section of the Report on outlook, risks and op-

portunities.

BMW Group – financial liabilities

in € million

Other

Derivative instruments

Commercial paper

Apart from issuing commercial paper on the money

market, the BMW Group’s financing companies also

issue bearer bonds. In addition, retail customer and

dealer financing receivables on the one hand and leas-

ing rights and obligations on the other are securitised

in the form of asset-backed securities (ABS) financing

arrangements. Financing instruments employed by the

Group’s in-house banks in Germany and the USA (e.ꢀg.

customer deposits) are also used as a supplementary

source of financing. Owing to the increased use of inter-

national money and capital markets to raise funds, the

scale of funds raised in the form of loans from interna-

tional banks is relatively small.

Liabilities to banks

Bonds

Asset backed financing

transactions

Liabilities from customer

deposits (banking)

Bonds

30,370

12,457

10,128

8,590

6,292

1,103

1,364

Liabilities from customer deposits (banking)

Asset backed financing transactions

Liabilities to banks

Commercial paper

As in previous years, operations were refinanced in the

year under report at an attractive level. Thanks to the

best rating in the European automobile industry and

Derivative instruments

Other

5

3 CoMBined ManageMent RepoRt

were highly sought after by private and institutional

investors.

The increase in non-current assets on the assets side of

the balance sheet related primarily to property, plant

and equipment (13.3%), leased products (5.9%), intangible

During 2013 the BMW Group issued five euro bench-

assets (18.7 %) and receivables from sales financing

mark bonds with a total issue volume of €ꢀ

4

billion

(1.0%). At the same time, deferred tax assets decreased

by 17.6%.

on European capital markets. Bonds were also issued

in Canadian dollars, British pounds, US dollars, Aus-

tralian dollars and other currencies for a total amount

of €ꢀ5.1 billion.

Within current assets, increases were registered in par-

ticular for financial assets (20.5%), receivables from

sales financing (4.3%) and other assets (16.4%). By con-

trast, decreases were recorded for inventories (1.4%),

cash and cash equivalents (8.4%) and trade receivables

(3.7%).

Ten ABS transactions were executed in 2013, including

two public transactions in the USA and one each in

Germany, Switzerland and South Korea with a total

volume equivalent to €ꢀ2.5 billion. Further funds were

also raised via new ABS conduit transactions in Japan,

Property, plant and equipment increased by €ꢀ1,772 mil-

Canada, Australia and South Africa totalling €ꢀ1.7 billion. lion compared to the previous year. The main focus in

013 was on product investments for production start-

2

The regular issue of commercial paper also strengthens

the BMW Group’s financial basis. The following table

ups (including the BMW 2 Series) and infrastructure im-

provements. In total, €ꢀ4,470 million was invested, most

provides an overview of existing money and capital mar- of which related to the Automotive segment. Depreciation

ket programmes of the BMW Group at 31 December

013:

on property, plant and equipment totalled €ꢀ2,492 mil-

lion (2012: €ꢀ2,298 million). At 31 December 2013, prop-

erty, plant and equipment accounted for 10.9% of total

assets (2012: 10.1%). Adjusted for exchange rate factors,

property, plant and equipment increased by 14.5%. Capi-

tal commitments for the acquisition of items of property,

plant and equipment totalled €ꢀ2,661 million at the end

of the reporting period.

2

Programme

Amount utilised

Euro Medium Term Notes

Commercial paper

€27.6 billion

€6.3 billion

At €ꢀ6,179 million, the carrying amount of intangible

The BMW Group’s liquidity position is extremely robust, assets was €ꢀ972 million higher than at 31 December

with liquid funds totalling €ꢀ10.7 billion on hand at 31 De- 2012. Within intangible assets, capitalised development

cember 2013. The BMW Group also has access to a syndi- costs rose by €ꢀ675 million. Investments in capitalised

cated credit line of €ꢀ6 billion, with a term up to October

018. This credit line, which is being provided on attrac-

development costs totalled €ꢀ1,744 million in the year

under report and were thus significantly up on the pre-

2

tive conditions by a consortium of 38 international banks, vious year’s figure (€ꢀ1,089 million). Intangible assets

was not utilised at the end of the reporting period.

also include the acquisition of licences amounting to

ꢀ379 million, which are being amortised on a straight-

€

Further information with respect to financial liabilities

is provided in notes 34 and 38 to the Group Financial

Statements.

line basis over a period of six years. The proportion

of development costs recognised as assets was 36.4%

(2012: 27.6%). Adjusted for exchange rate factors, in-

tangible assets increased by 18.8%. In total, €ꢀ2,217 mil-

lion was invested, most of which related to the Auto-

motive segment.

*

Net assets position

The Group balance sheet total increased by €ꢀ6,533 mil-

lion (+5.0%) to stand at €ꢀ138,368 million at 31 Decem-

ber 2013. Adjusted for exchange rate factors, the bal-

ance sheet total increased by 8.8%.

*

Prior year figures have been adjusted in accordance with the revised version of

IAS 19, see note 7.

5

4

Balance sheet structure – Group

Total equity and liabilities in € billion

Non-current assets

62%

26%

38%

Equity

62%

23%

18

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

40%

Non-current provisions and liabilities

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Current assets

38%

6%

38%

6%

37%

36%

Current provisions and liabilities

29

4

7

62

6

3

1

Report on Outlook, Risks and

Opportunities

thereof cash and cash equivalents

6

7

3

8

7

Outlook

Risks Report

Report on Opportunities

2013

2012

2013

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

1

38

132

138

8

2

5

8

BMW Stock and Capital Markets

Balance sheet structure – Automotive segment

Total equity and liabilities in € billion

Non-current assets

45%

43%

Equity

44%

41%

1

6%

14%

Non-current provisions and liabilities

Current provisions and liabilities

Current assets

55%

56%

43%

11 %

thereof cash and cash equivalents

9%

2

013

2012

2013

7

2

69

72

Total capital expenditure on intangible assets and prop-

erty, plant and equipment as a percentage of revenues

increased to 8.8% (2012: 6.8%). Capital commitments

for intangible assets totalled €ꢀ446 million at the end of

the reporting period.

The growth in business reported by the Financial Services

segment is reflected in increases in leased products

(€ꢀ1,446 million) as well as in current and non-current

receivables from sales financing (€ꢀ896 million and

€ꢀ307 million respectively). At the end of the reporting

5

5 CoMBined ManageMent RepoRt

period, leased products accounted for 18.7% of total as-

sets, similar to their level one year earlier (18.6%). Ad-

justed for exchange rate factors, they went up by 8.1%.

differences reduced equity by €ꢀ635 million. Deferred

taxes on items recognised directly in equity had the

effect of reducing equity by €ꢀ779 million. Group equity

increased on account of remeasurements of the net

Non-current receivables from sales financing accounted defined benefit liability for pension plans (€ꢀ

1

,

308 mil-

lion), primarily as a result of the higher discount rates

used in Germany and the USA. Fair value measurement

of derivative financial instruments (€ꢀ 357 million)

for 23.6% (2012: 24.5%) of total assets, current receiva-

bles from sales financing for 15.5% (2012: 15.6%). Total

receivables from sales financing relate to retail customer

1

,

and dealer financing (€ꢀ40,841 million) and finance leases and marketable securities (€ꢀ8 million) had a positive im-

€ꢀ13 276 million). Adjusted for exchange rate factors, pact on equity. Income and expenses relating to equity

non-current receivables from sales financing went up by accounted investments and recognised directly in equity

%, while current receivables from sales financing (before tax) reduced equity by €ꢀ million. The divi-

rose by 10 %. This includes the negative impact of the dend payment decreased equity by €ꢀ1,640 million. Mi-

(

,

7

.

6

7

.

4

depreciation in value of a number of major currencies

against the euro.

nority interests increased by €ꢀ81 million. Other changes

amounted to €ꢀ13 million.

Within current assets, increases were registered for other A portion of the Authorised Capital created at the

assets (€ꢀ601 million) and financial assets (€ꢀ947 million). Annual General Meeting held on 14 May 2009 in con-

Favourable developments with currency derivatives

as well as the purchase of commercial paper and invest-

ment certificates caused financial assets to rise. Other

assets relate to receivables from other companies in

which an investment is held, advance payments to sup-

pliers and collateral receivables.

junction with the employee share scheme was used

during the financial year under report to issue shares

of preferred stock to employees. An amount of €ꢀ17 mil-

lion was transferred to capital reserves in conjunction

with this share capital increase.

The equity ratio of the BMW Group improved overall

by 2.6 percentage points to 25.8%. The equity ratio of

the Automotive segment was 43.1% (2012: 41.0%) and

that of the Financial Services segment was 9.1% (2012:

8.6%).

Compared to the end of the previous year, inventories

decreased by €ꢀ140 million (1.4%) to €ꢀ9,585 million and

accounted for 6.9% (2012: 7.4%) of total assets. The

decrease relates primarily to finished goods. Adjusted

for exchange rate factors, inventories increased by 1.7%.

Pension provisions decreased from €ꢀ3,813 million to

€ꢀ2,303 million at the two respective year ends, mainly

as a result of the higher discount factors used in Ger-

many and the USA.

Trade receivables were €ꢀ94 million lower than at the end

of the previous year and accounted for 1.8% of total

assets (2012: 1.9%). Adjusted for exchange rate factors,

trade receivables decreased by 1.2%.

Trade payables went up from €ꢀ6,433 million to €ꢀ7,475 mil-

Cash and cash equivalents went down by €ꢀ706 million to lion, mainly reflecting higher production volumes and

€

ꢀ7,664 million.

increased capital expenditure levels. Trade payables ac-

counted for 5.4% of the balance sheet total at the end

On the equity and liabilities side of the balance sheet, in- of the reporting period (2012: 4.9%). Adjusted for ex-

creases were recorded for equity (16.5%), trade payables change rate factors, they increased by 17.9%.

16 %), non-current financial liabilities ( %) and

(

.

2

0.9

current financial liabilities (1.5%). By contrast, pension

provisions decreased by 39.6%.

Current and non-current financial liabilities increased

from €ꢀ69,507 to €ꢀ70,304 million over the twelve-month

period. Within financial liabilities, commercial paper

Group equity rose by €ꢀ5,037 million to €ꢀ35,643 million, went up by 37.5%, ABS transactions by 7.6% and bonds

mainly due to the profit attributable to shareholders of

BMWAG totalling €ꢀ5,314 million. Currency translation

by

1

9

.

7

4

%. By contrast, liabilities to banks went down

% and deposit liabilities by %. Adjusted for

4.3

5

6

exchange rate factors, both non-current financial liabili-

ties and current financial liabilities increased by 4.4%.

Overall, the earnings performance, financial position

and net assets position of the BMW Group continued to

develop very positively during the financial year under

report.

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Compensation report

The compensation of the Board of Management com-

prises both a fixed and a variable component. Benefits

are also payable – primarily in the form of pension

benefits – at the end of members’ mandates. Further

details, including an analysis of remuneration by each

individual, are disclosed in the Compensation Report,

which can be found in the section “Statement on Cor-

porate Governance”. The Compensation Report is a sub-

section of the Combined Management Report.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

29

4

7

62

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

*

8

2

5

Value added statement

The value added statement shows the value of work

performed less the value of work bought in by the BMW

Group during the financial year. Depreciation and

amortisation, cost of materials and other expenses are

treated as bought-in costs in the value added calcula-

tion. The allocation statement applies value added to

each of the participants involved in the value added

process. It should be noted that the gross value added

amount treats depreciation as a component of value

added which, in the allocation statement, is treated as

internal financing.

8

BMW Stock and Capital Markets

Net valued added by the BMW Group in 2013 increased

by 1.3% to €ꢀ19,215 million and was once again at a high

level.

The bulk of the net value added (46.8%) is applied to

employees. The proportion applied to providers of finance

fell to 9.3%, mainly due to the lower refinancing costs

on international capital markets for the financial services

side of the business. The governmentꢀ/ꢀpublic sector (in-

cluding deferred tax expense) accounted for 16.1%. The

proportion of net value added applied to shareholders,

at 8.9%, was higher than in the previous year. Minority

interests take a 0.1% share of net value added. The re-

maining portion of net value added (18 %) will be re-

.

8

tained in the Group to finance future operations.

*

Prior year figures have been adjusted in accordance with the revised version of

IAS 19, see note 7.

5

7 CoMBined ManageMent RepoRt

BMW Group value added statement

1

2

013

2013

in %

2012

in € million

2012

in %

Change

in %

in € million

Work performed

Revenues

76,058

455

98.3

0.6

76,848

–263

99.2

–0.3

Financial income

Other income

Total output

841

1.1

829

1.1

77,354

100.0

77,414

100.0

–0.1

2

Cost of materials

42,692

8,402

55.2

10.9

66.1

41,304

9,194

53.3

11.9

65.2

Other expenses

Bought-in costs

51,094

50,498

1.2

–2.4

1.3

Gross value added

Depreciation and amortisation

Net value added

26,260

7,045

33.9

9.1

26,916

7,955

34.8

10.3

24.5

19,215

24.8

18,961

Applied to

Employees

8,986

1,794

3,094

1,707

3,608

26

46.8

9.3

8,537

2,030

3,283

1,640

3,445

26

45.1

10.7

17.3

8.6

5.3

–11.6

–5.8

4.1

Providers of finance

Government/public sector

Shareholders

16.1

8.9

Group

18.8

0.1

18.2

0.1

4.7

Minority interest

Net value added

–

19,215

100.0

18,961

100.0

1.3

1

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Cost of materials comprises all primary material costs incurred for vehicle production plus ancillary material costs (such as customs duties, insurance premiums and freight).

2

BMW Group value added 2013

in %

46.8%

Employees

Depreciation and amortisation

Other expenses

Net value added

9.3%

Providers of finance

16.1%

Government/public sector

Cost of materials

8

.9%

Shareholders

Group

18.8%

0.1%

Minority interest

Net value added

Cost of materials

24.8

55.2

Depreciation and amortisation

Other expenses

9.1

10.9

5

8

Key performance figures

*

2

013

2012

18

Combined management RepoRt

1

8

General Information on the BMW Group

Group gross margin

Group EBITDA margin

Group EBIT margin

%

20.1

15.4

10.5

10.4

7.0

20.2

15.4

10.8

10.2

6.7

18

20

23

Business Model

Management System

Research and Development

2

4

Report on Economic Position

2

4

Overall Assessment by Management Group pre-tax return on sales

General and Sector-specific

Group post-tax return on sales

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Group pre-tax return on equity

25.9

17.4

25.8

43.1

9.1

28.5

18.7

23.2

41.0

8.6

Group post-tax return on equity

29

4

7

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Group equity ratio

Automotive equity ratio

62

Financial Services equity ratio

6

3

1

Report on Outlook, Risks and

Opportunities

Coverage of intangible assets, property, plant and equipment by equity (Group)

167.4

165.0

63

68

77

Outlook

Risks Report

Report on Opportunities

Return on capital employed

Group

%

21.4

63.3

16.4

23.0

73.7

1.8

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Automotive

Motorcycles

8

2

5

Return on equity

8

BMW Stock and Capital Markets

Financial Services

%

€ million

%

20.2

3,614

–6,981

51.8

21.2

5,076

–5,433

93.4

Cash inflow from operating activities (Group)

Cash outflow from investing activities (Group)

Coverage of cash outflow from investing activities by cash inflow from operating activities (Group)

Free cash flow of Automotive segment

Net financial assets Automotive segment

€ million

2,499

12,127

3,809

13,327

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

5

9 CoMBined ManageMent RepoRt

Comments on Financial Statements of BMWAG

materials per unit. As a consequence, gross profit in-

Bayerische Motoren Werke Aktiengesellschaft (BMWAG), creased by €ꢀ854 million to €ꢀ13.4 billion.

which is based in Munich, Germany, is the parent com-

pany of the BMW Group. The comments on the BMW

Administrative expenses were 25.9% up on the previous

Group and Automotive segment provided in earlier sec- year due to the restructuring of IT activities at corporate

tions are also relevant for BMWAG, unless presented

differently in the following section. The Financial State-

ments of BMWAG are drawn up in accordance with

level and higher expenses for new IT projects.

Research and development expenses were 22.1% higher

than in the previous year, driven for the main part by

expenses arising in connection with production start-ups

for new models as well as expenditure on alternative

drive technologies and lightweight construction.

the provisions of the German Commercial Code (HGB

and the relevant supplementary provisions contained

in the German Stock Corporation Act (AktG).

)

The main financial and non-financial performance in-

dicators relevant for BMWAG are largely identical and

synchronous with those of the Automotive segment

of the BMW Group and are described in detail in the

The decrease in net other operating income and expenses

was attributable mainly to the fact that taxes arising in

conjunction with profit and loss transfer agreements

were not allocated to the Group entities involved. Work-

ing in the opposite direction within other operating

income and expenses, fine-tuning of the methodology

“Report on Economic Position” section of the Combined

Management Report.

Differences between the accounting policies used in the used to measure warranties resulted in a higher level of

BMWAG Financial Statements (prepared in accordance

with HGB) and the BMW Group Financial Statements

income from reversals of provisions.

(

prepared in accordance with IFRSs) arise primarily in

The financial result deteriorated by €ꢀ229 million, mainly

connection with the accounting treatment of intangible as a result of the negative impact of the fair value meas-

assets, financial instruments and provisions.

urement of designated plan assets for pension and other

non-current personnel-related obligations.

Business environment and review of operations

The general and sector-specific environment in which

The profit from ordinary activities decreased from

BMWAG operates is the same as that for the BMW Group €ꢀ4,797 million to €ꢀ3,963 million.

and is described in the “Report on economic position”

section of the Combined Management Report.

The expense for income taxes relates primarily to current

tax for the financial year 2013. In addition, the first-time

application of IDW Position Statement RS HFA 34 means

BMWAG develops, manufactures and sells cars and

motorcycles as well as spare parts and accessories manu- that income-tax-related expenses are also now included

factured by itself, foreign subsidiaries and external sup-

pliers. Sales activities are carried out through the Com-

in the expense for income taxes.

pany’s own branches, subsidiaries, independent dealers After deducting the expense for taxes, the Company

and importers. In 2013, BMWAG was able to increase reports a net profit of €ꢀ 289 million compared to

131 million in the previous year.

2

,

its sales volume by 127,745 units to 1,995,903 units. This €ꢀ3,

figure includes 214,949 units relating to series sets sup-

plied to the joint venture BMW Brilliance Automotive Ltd., Capital expenditure on intangible assets and property,

Shenyang, an increase of 64,985 units over the previous plant and equipment in the year under report amounted

year. At 31 December 2013 BMWAG had 77 110 em- to €ꢀ 203 million (2012: €ꢀ 776 million), an increase

ployees, 2,539 more than one year earlier.

,

3

,

2,

of 15.4%. The main focus of capital expenditure was on

product and infrastructure investments in conjunction

with the production start-up of new models as well as

the acquisition of licences. Depreciation and amortisation

Results of operations, financial position and net assets

Revenues increased by 2.8% compared to the previous

year. The most significant increase was recorded in Asia. amounted to €ꢀ1,732 million (2012: €ꢀ1,613 million).

Sales to Group sales companies accounted for €ꢀ46.1 bil-

lion or 76.2% of total revenues of €ꢀ60.5 billion. The in-

crease in cost of sales was less pronounced than the

increase in revenues, mainly reflecting the lower cost of

Investments went up from €ꢀ3,094 million to €ꢀ3,377 mil-

lion, mainly as a result of a capital increase at the level

of BMW Automotive Finance (China) Co., Ltd., Beijing,

6

0

and a contribution to capital reserves at the level of

BMW Bank GmbH, Munich. An impairment loss of

Inventories were slightly higher than one year earlier

and stood at €ꢀ3,863 million at the end of the reporting

period (2012: €ꢀ3,749 million), reflecting higher busi-

ness volumes generally and stocking up in conjunction

with the introduction of new models.

€

ꢀ16 million was recognised in 2013 on the investment

in SGL Carbon SE, Wiesbaden.

18

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

BMWAG Balance Sheet at 31 December

24

4

Overall Assessment by Management

General and Sector-specific

Environment

in € million

2

013

2012

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

29

Assets

4

7

Intangible assets

474

8,982

178

7,806

62

Property, plant and equipment

Investments

6

3

1

Report on Outlook, Risks and

Opportunities

3,377

3,094

Tangible, intangible and investment assets

12,833

11,078

63

68

77

Outlook

Risks Report

Report on Opportunities

Inventories

3,863

659

3,749

858

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Trade receivables

Receivables from subsidiaries

Other receivables and other assets

Marketable securities

Cash and cash equivalents

Current assets

4,871

3,194

3,429

3,757

19,773

6,297

2,061

2,514

4,618

20,097

8

2

5

8

BMW Stock and Capital Markets

Prepayments

169

990

118

672

Surplus of pension and similar plan assets over liabilities

Total assets

33,765

31,965

Equity and liabilities

Subscribed capital

656

2,069

6,097

1,707

10,529

656

2,053

5,515

1,640

9,864

Capital reserves

Revenue reserves

Unappropriated profit available for distribution

Equity

Registered profit-sharing certificates

32

Pension provisions

Other provisions

Provisions

43

7,299

7,342

56

7,406

7,462

Liabilities to banks

Trade payables

1,463

4,818

8,795

285

1,408

3,900

8,451

800

Liabilities to subsidiaries

Other liabilities

Liabilities

15,361

14,559

Deferred income

501

48

Total equity and liabilities

33,765

31,965

6

1 CoMBined ManageMent RepoRt

BMWAG Income Statement

in € million

2

013

2012

Revenues

60,474

–47,067

13,407

58,805

–46,252

12,553

Cost of sales

Gross profit

Selling expenses

–3,528

–2,141

–4,362

542

–3,684

–1,701

–3,573

703

Administrative expenses

Research and development expenses

Other operating income and expenses

Result on investments

373

598

Financial result

–328

–99

Profit from ordinary activities

3,963

4,797

Income taxes

Other taxes

Net profit

–1,629

–45

–1,635

–31

2,289

3,131

Transfer to revenue reserves

–582

–1,491

Unappropriated profit available for distribution

1,707

1,640

The increase of other receivables and other assets to

BMW Trust e.ꢀV., Munich, in conjunction with Contractual

€ꢀ3,194 million (2012: €ꢀ2,061 million) was mainly attribut- Trust Arrangements (CTA), on a fiduciary basis. The as-

able to genuine repurchase (repo) transactions and

the higher level of receivables from other companies in

which an investment is held.

sets concerned comprise mainly holdings in investment

fund assets and a receivable resulting from a so-called

“Capitalisation Transaction” (Kapitalisierungsgeschäft).

Fund assets are offset against the related guaranteed

Liquidity within the BMW Group is managed centrally obligations. The resulting surplus of assets over liabilities

by BMWAG on the basis of a group-wide liquidity con- is reported in the BMWAG balance sheet on the line

cept, which revolves around the strategy of concentrating “Surplus of pension and similar plan assets over liabilities”.

a significant part of the Group’s liquidity at the level of

BMWAG. One instrument used to achieve this aim is

Pension provisions, net of designated pension plan as-

the cash pool headed by BMWAG. The liquidity position sets, decreased from €ꢀ56 million to €ꢀ43 million.

reported by BMWAG therefore reflects the global activi-

ties of BMWAG and other Group companies.

Trade payables increased by €ꢀ918 million to €ꢀ4,818 mil-

lion mainly due to higher business volumes.

Cash and cash equivalents went down by €ꢀ861 million

to €ꢀ3,757 million, whereby the decrease was more than

offset by the increase in funds invested in marketable

securities. Financial receivables from subsidiaries went

down sharply.

Liabilities to banks and financing liabilities to subsidiaries

increased in the year under report.

Other liabilities fell from €ꢀ800 million to €ꢀ285 million,

reflecting the fact that all commercial paper outstanding

at 31 December 2012 was repaid during the year and

no new commercial paper was issuedꢀ.

Equity rose by €ꢀ665 million to €ꢀ10,529 million and the

equity ratio improved from 30.9% to 31.2%.

In order to secure obligations resulting from pre-retire-

ment part-time work arrangements and the Company’s

pension obligations, assets have been transferred to

With effect from the beginning of the year under report,

deferred income includes for the first time income relat-

ing to service and maintenance contracts, for which all

6

2

Report on Economic Position

Events after the End of the Reporting Period

related work has not been carried out at the end of the

reporting period. In previous years, revenue was recog-

nised immediately and a provision recorded for any

Events after the end of the reporting period

No events have occurred since the end of the reporting

period which could have a major impact on the results

outstanding obligations under these contracts (reported of operations, financial position and net assets of

18

Combined management RepoRt

1

8

General Information on the BMW Group

in “Other provisions”).

BMWAG or the BMW Group.

18

20

23

Business Model

Management System

Research and Development

Risks and opportunities

2

4

Report on Economic Position

BMWAG’s performance is highly dependent on the same

set of risks and opportunities that affect the BMW Group

and which are described in detail in the “Report on Out-

look, Risks and Opportunities” section of the Combined

Management Report. As a general rule, BMWAG partici-

pates in the risks entered into by Group entities on the

basis of the relevant shareholding percentage.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

27

29

4

7

6

2

63

Report on Outlook, Risks and

Opportunities

6

7

3

8

7

Outlook

Risks Report

Report on Opportunities

BMWAG is integrated in the group-wide risk manage-

ment system and internal control system of the BMW

Group. For further information we refer to the “Internal

Control System and Risk Management System Relevant

for the Consolidated Financial Reporting Process” sec-

tion of the Combined Management Report.

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

Outlook

Due to its dominant role in the Group and its close ties

with Group entities, expectations for BMWAG with

respect to the Company’s financial and non-financial

performance indicators correspond largely to the BMW

Group’s outlook for the Automotive segment, which is

described in detail in the “Report on Outlook, Risks and

Opportunities” section of the Combined Management

Report.

KPMG AG Wirtschaftsprüfungsgesellschaft, Munich,

has issued an unqualified audit opinion on the financial

statements of BMWAG, of which the balance sheet and

the income statement are presented here. The BMWAG

financial statements for the financial year 2013 will be

submitted to the operator of the electronic version of the

German Federal Gazette and can be obtained via the

Company Register website. These financial statements

are available from BMWAG, 80788 Munich, Germany.

6

3 CoMBined ManageMent RepoRt

Report on Outlook, Risks and Opportunities

Outlook

The report on outlook, risks and opportunities describes After two years of recession, we expect the eurozone to

the expected development of the BMW Group, together grow moderately at a rate of approximately 1.0%. The

with associated material risks and opportunities, from

the perspective of Group management

German economy, the largest in Europe, should again

grow faster than the average for the region at a rate

.

of approximately 1.7%. The outlook assumes a growth

rate of % for France, whereby it should be noted

forward-looking assertions, which are based on BMWAG’s that simmering internal political conflicts and the loss

The report on outlook, risks and opportunities contains

0.8

expectations and assessments and are, by their nature,

subject to uncertainty. As a result, depending on the po-

of international competitiveness still pose significant

risks for the economy in that country. Similarly, we

litical and economic situation, actual outcomes could differ forecast a return to growth for Italy, albeit at a modest

substantially – either positively or negatively – from the rate of %. Spain is expected to grow by % and

expectations described below. Further information can be therefore escape the recession caused primarily by a

0

.

5

0.8

found in the section “Report on risks and opportunities”.

weak property market. A growth rate of 2.5% is pre-

dicted for the UK, Europe’s largest market outside the

eurozone.

Outlook

Assumptions used in outlook

The following outlook relates to a forward-looking period In the USA, the consequence of cuts in public spending

of one year and is based on the expected composition in 2014 is likely to be less significant, having held down

of the BMW Group during that period. The outlook takes growth quite substantially in 2013. We are therefore

account of all information known up to the date on

which the financial statements are authorised for issue

and which could have a material impact on the course of

working on the basis that the gross domestic product

GDP will continue to rise in 2014 (by 2.9%).

(

)

business of the BMW Group. The expectations contained The dominant issue for Japan’s economy is likely to be

in the outlook are based on BMWGroup’s forecasts for

014 and reflect the most recent status. The basis for

the increase in value added tax from 5 to 8% with effect

from 1 April 2014. This may have the effect of bringing

2

the preparation of and the principal assumptions used

in our forecasts, which take account of consensual

opinions of leading organisations, such as economic re-

search institutes and banks, are set out below. The

some business forward into the first quarter of 2014,

at the expense of a temporary downturn in domestic

spending in the second quarter. It is generally accepted

that the tax hike is unavoidable, however, given the

BMW Group’s forecast is drawn up on the basis of these need to fund the new government’s economic stimulus

assumptions.

programmes. For 2014 as a whole, the rate of growth is

set to slow down slightly to 1.6%.

Our continuous forecasting process ensures that the

BMW Group is always ready to take advantage of oppor- Economic growth in China should stabilise in the cur-

tunities as they arise and to react appropriately to un- rent year at the level of approximately 7.5%. The struc-

expected risks. The principal risks and opportunities are tural shift in economic growth from the construction

described in detail in the section “Report on risks and

opportunities”. The risks and opportunities discussed

in that section are relevant for all of the BMW Group’s

and heavy industries sectors to stronger domestic con-

sumer spending represents the most significant factor

for the way the Chinese economy is heading. The new

key performance indicators and could result in variances Chinese government is also keen to put economic growth

between the outlook and actual outcomes.

onto a more sustainable footing by increasing the market

orientation of the energy and financial sectors and im-

proving ecological and social conditions.

Economic outlook in 2014

For the purposes of the outlook, it is assumed that the

pace of global economic growth, having stabilised in

The growth rate in India should begin to pick up again

in the second half of the year, once the “wait-and-see”

phase in advance of parliamentary elections in spring

has stopped having a negative impact on domestic de-

mand. For 2014 as a whole, the growth rate is expected

to be in the region of 5.3%. At 2.2% in both countries,

2

3

013, will quicken slightly in 2014 to approximately

%. High public debt levels in Europe, the USA and

.

0

Japan, over-capacities in China and the unresolved con-

flicts in the Middle East and East Asia continue to pose

risk factors which could have a material, unexpectedly

adverse impact on the outlook. Further information can GDP rates in Brazil and Russia in 2014 are again expected

be found in the section “Risks Report”. to be lower than their recent past averages. In both of

6

4

these countries, stagnating or falling raw materials

prices are likely to have an unfavourable impact on ex-

ports. This effect will be exacerbated by the fact that

domestic demand will probably suffer from capital out-

flows as a consequence of the expected interest rate

turnaround in the USA.

interior provinces increasingly contributing to growth

due to the catch-up effect.

The end of recession in Europe in 2014 should also

help the region’s car markets to revive somewhat. The

German market is expected to grow by around 1.6%

to 3.0 million units. Registrations in France are forecast

to rise by 2.4% to some 1.8 million units. After the se-

vere slump experienced in recent years, the car market

in Italy should turn around in 2014 and grow by about

8.7% to approximately 1.4 million units.

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

Currency markets in 2014

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Outside the eurozone, the most important currencies

for the BMW Group’s international operations are

the Chinese renminbi, the US dollar, the Japanese yen,

the British pound and the Russian rouble.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

The Japanese car market is likely to suffer in 2014 as a

62

As in the past year, no fundamental changes are expected consequence of the value added tax increase due in

63

Report on Outlook, Risks and

Opportunities

on currency markets in 2014. Exchange rate fluctua-

tions, sometimes quite substantial ones, have been

observed in the past due to high public debt levels in

Europe, the USA and Japan. The uncertain economic

situation in the eurozone and the continued recovery of

the US economy point to a slight appreciation of the

US dollar against the euro. This would almost definitely

be the case, if – as expected – the US begins to retract

from its expansionary monetary policy.

April. Car registrations are forecast to be in the region

of 4.5 million units and hence 13.4% down on the pre-

vious year.

63

68

77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

After dropping back in 2013, we expect the markets in

the world’s major emerging economies to rebound in

2014. Russia’s car market is forecast to grow by 4.2% to

approximately 2.7 million units, while registrations in

8

2

5

8

BMW Stock and Capital Markets

Brazil are expected to rise by 3.3 % to approximately

million units. The corresponding figures for India

3.7

In the short term, it is assumed that the Chinese renminbi are 2.0% and about 2.6 million units.

will remain more or less pegged to the US dollar. In the

long term, however, it seems likely that volatility will

increase, following the announcement that capital mar-

kets in China are to be liberalised.

Motorcycle markets in 2014

The markets for 500 cc plus motorcycles are again only

likely to see vestiges of recovery in 2014. We expect

the corresponding markets in Europe to stabilise at the

current low level, which should also be the case for Ger-

many. Of all the outcomes possible, it seems more likely

that the markets in Italy and France will continue to

Following on from a sharp devaluation in 2013, the

Japanese yen is likely to remain weak, given that an end

to Japan’s expansionary monetary policies is not in

sight. The British pound is expected to remain relatively contract. The USA is also expected to see a repeat of 2013

stable, due to the current healthy state of the economy.

A first move toward restricting its expansionary mone-

tary policies was taken by the Bank of England at the

levels.

Financial Services sector in 2014

end of 2013 and further steps in that direction could fol- Despite improved prospects for the economy in the

low over the course of 2014. Due to the relatively weak

growth rates generated by Russia and a slight reduction

of pressure on energy markets, the likely trend is that

the Russian rouble will lose value against the euro.

eurozone, the European Central Bank (ECB) will pre-

sumably keep benchmark interest rates at historically

low levels through to the end of 2014. The ECB could

resort to additional monetary measures to provide

added stimulus to the economy. After a year of expan-

sionary monetary policies, the Bank of Japan aims to

Car markets in 2014

Overall, the world’s car markets are set to grow by ap-

proximately 4.7% in the current year to an estimated

achieve an inflation rate of 2% for the Japanese econ-

omy by the end of 2014. If similar positive progress

is made by the US economy as in 2013, the US Reserve

Bank could well feel the need to cut back its bond-buying

programme. The consequence of such a move could be

a sharp rise in interest rates on the capital markets.

Although the first steps towards tighter monetary policy

8

0.1 million units. Continuing its recovery after a num-

ber of weaker years, we forecast that the US market

will grow by % to 16 million units. Passenger car

registrations in China are expected to rise by 10

to approximately 17.4 million units, with the country’s

3

.

8

.2

.1 %

6

5 CoMBined ManageMent RepoRt

have been taken, the benchmark rate is nevertheless

likely to persist at a historically low level until at least

the end of 2014, thus ensuring that money markets

remain more or less stable.

Outlook for the BMW Group in 2014

The BMW Group in 2014

Profit before tax: significant increase expected

We forecast that high levels of expenditure for future

technologies, intense competition and higher personnel

expenses will again have an adverse impact on the

Given that the rate of growth of the global economy

is forecast to accelerate slightly in 2014, we expect credit pace at which the BMW Group’s earnings rise in 2014.

risk levels to remain stable in all regions.

Nevertheless, we forecast another successful year, with

Group profit before tax expected to be significantly

Used car markets in Asia and Europe in 2014 are fore-

up on the previous year’s figure (2013: €ꢀ7,913 million).

cast to perform on a level with the previous year. In the The pace at which earnings grow will ultimately reflect

North American market, however, we expect to see a

slight drop in price levels.

the impact of various trends currently shaping the auto-

mobile business. Continued difficult competitive condi-

tions in some markets are also likely to play a significant

role in how sales volumes turn out. The level of uncer-

tainty is particularly high in Europe, whereas North

America and China could generate additional momen-

tum. We expect both the Motorcycles segment and the

Expected impact on the BMW Group in 2014

Future developments on international automobile mar-

kets also have a direct impact on the BMW Group. At

the same time that competition is likely to intensify in

contracting markets, new opportunities are opening

in growth regions of the world. In some countries,

sales volumes will be influenced to a great extent by the

way we tackle new competitive challenges. The state of

Financial Services segment to perform solidly in 2014

.

Workforce at year-end: solid increase expected

The BMW Group will continue to hire staff on a targeted

health of Europe’s various markets remains the greatest basis in 2014. Qualified staff are required in order to

source of uncertainty. By contrast, we expect the mar-

kets in North America and China to develop positively.

meet strong demand for cars and to develop new tech-

nologies, particularly in the field of electromobility. The

increase of the size of the workforce should rise robustly

in 2014 (2013: 110,351 employees).

Thanks to our global presence, we are ideally placed

to exploit the potential arising in these markets and

thus compensate for unfavourable developments in

other regions. We are therefore confident that our strong

Automotive segment in 2014

Deliveries to customers (cars): significant increase expected

brands will continue to help us steer a successful course. We forecast that the Automotive segment will continue to

We will be helped in this endeavour by our attractive

range of models and services, which are designed to

perform well in 2014 on the back of strong sales volume

growth. Assuming economic conditions do not deterio-

meet the needs of individual mobility. We will also push rate, we forecast a significant rise in deliveries to cus-

*

tomers to a new high level (2013: 1,963,798 units) and

ahead with our investment in innovation, future tech-

nologies and the further internationalisation of our pro- thus, in all probability, enable the BMW Group to re-

duction network. With our focus on “premium”, we

are able – as the world’s leading provider – to benefit to

an exceptional extent from high demand for premium

main the world’s foremost premium car manufacturer

in 2014

.

segment vehicles. Given all these factors, we forecast that We expect positive momentum to be generated by the

the BMW Group will remain the world’s leading premium introduction of new, attractive models and from the

manufacturer in 2014.

generally dynamic market conditions in North America

and China. If the economic situation in Europe does

not continue to stabilise, new challenges will have to be

faced, despite the currently visible slight upwards trend.

Our highly flexible international production network

enables us to compensate for even substantial fluctua-

tions in demand. By investing in major growth markets,

we are laying the foundation for further growth. In

this context, it remains an important factor for us that

the global distribution of our sales is balanced, while

simultaneously expanding the global presence of the

BMW Group.

The BMW Group presented its new BMW M3 Sedan and

the BMW M4 Coupé models in February, both from the

high-performance segment, which are set to go on sale in

June.

*

Includes cars manufactured by the BMW Brilliance joint venture.

6

The new BMW 2 Series Coupé will become available in

March 2014 and will set new standards in terms of sporti-

effect from 2013, our range of products has been ex-

panded by the addition of electric powertrains in BMW i

ness within the compact segment. The worldwide launch vehicles. This strategy will ensure that we continue to

of the new BMW 4 Series Convertible will also take place

in the same month. A four-door Gran Coupé will be

added to the BMW 4 Series family from June onwards.

meet applicable statutory threshold values in the com-

ing years. 2014 will therefore not see any let-up in our

efforts to reduce carbon emissions for the fleet as a

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

*

whole. We forecast that fleet emissions will be reduced

24

Report on Economic Position

The BMW 2 Series Active Tourer was presented to the

public at the Geneva Motor Show. This new vehicle

concept, which is the perfect fusion of dynamism with

comfort and functionality, is the first BMW brand

model to be equipped with front-wheel drive. Within

the BMW X family, the highly successful BMW X3 is cur-

rently going through the process of model revision.

The BMW X4 will be launched in a new segment, thus

starting a new chapter in the BMW X family’s success

story.

moderately in 2014 (2013: 133 g CO /ꢀkm).

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

Revenues: significant increase expected

Strong demand worldwide for BMW, MINI and

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

Rolls-Royce brand cars will have a positive impact on

Automotive segment revenues. Accordingly, we ex-

pect revenues from automobile business to increase

significantly in the period covered by the outlook

(2013: €ꢀ70,629 million). Currency factors could have a

negative impact on revenues.

62

63

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Following on from its launch on a number of European

markets towards the end of 2013, over the course of

the current year the fully electric-powered BMW i3 will

also become available to customers in metropolitan re-

gions in the USA, Japan and China. The BMW i8 plug-

in hybrid, which will also enter the fray in 2014 as a

new-generation sports car, combines the dynamism of a

high-performance sports model with the consumption

and emission levels of a compact car.

EBIT margin in target corridor between 8 and 10% expected

Despite substantial levels of investment in new tech-

nologies, we aim to achieve an EBIT margin in the Auto-

motive segment within an unchanged target corridor

of between 8 and 10% (2013: 9.4%). We expect to see a

significant drop in segment RoCE, mainly reflecting the

substantial scale of investments necessary to deal with

coming challenges and pave the way for future growth.

However, the long-term target RoCE of at least 26% for

the Automotive segment will be clearly surpassed (2013:

63.3%).

8

2

5

8

BMW Stock and Capital Markets

The new generation of the MINI will make its first ap-

pearance in showrooms from spring 2014 onwards. It

will be introduced in March 2014 with a range of three

entirely new engines, all featuring MINI’s TwinPower

Turbo Technology. In the second half of 2014, the Dutch

car manufacturer, VDL NedCar bv, Born, will begin

producing MINI models under contract and provide the

necessary capacity to further develop the MINI brand.

Motorcycles segment in 2014

Deliveries to customers (motorcycles):

slight increase expected

Thanks to its attractive and extremely young model

range, we forecast a continuation of the Motorcycles

segment’s good performance, not least due to the

contribution expected from the new motorcycles (the

R nineT, S1000 R, R1200 RT, R1200 GS Adventure

and K1600 GTL Exclusive) presented at the autumn

trade fairs. Despite difficult conditions on interna-

tional motorcycle markets, we expect that deliveries of

BMW motorcycles to customers will be slightly up on

the previous year (2013: 115,215 units).

In December 2013 the cornerstone was laid for a new

automotive plant in Brazil. Start of production for the

BMW plant, with an annual productive capacity of up to

3

0,000 units, is scheduled for autumn 2014.

*

Carbon fleet emissions : moderate decrease expected

Ever-stricter legislation with respect to vehicle emissions

throughout the world is creating new challenges for

the automotive industry. Thanks to Efficient Dynamics,

the BMW Group has been able to play a pioneering role

in reducing fleet consumption and, therefore, carbon

fleet emissions. At the same time, we have continued to

develop the sporty, dynamic character of our vehicles.

Increasing the scope of electrification in our range will

reinforce our position as a key player in the pursuit to

reduce carbon emissions and fuel consumption. With

Another major step in the expansion of the segment’s

product range will be the series introduction of the

C evolution electric scooter in 2014.

Return on capital employed in line with last year’s

level expected

With market conditions still remaining difficult, we

nevertheless forecast that the impetus provided by the

*

EU-27.

6

7 CoMBined ManageMent RepoRt

new models will help to keep segment RoCE in line with

last year’s level (2013: 16.4%).

Financial Services segment in 2014

Return on equity: slight decrease expected

Based on the latest forecasts, we expect the BMW Group’s

Financial Services business to remain on growth course

in 2014. As a consequence of necessary investments,

the return on equity is likely to decrease slightly (2013

:

2

0

.

2

%), but still surpass the minimum target level of

1

8%.

Overall assessment by Group management for 2014

Based on our assessment, the BMW Group will con-

tinue to perform successfully in 2014. Owing to strong

demand for our vehicles worldwide, a fresh and attrac-

tive vehicle fleet and a leading position in the area of

innovation for all aspects of individual mobility, we

forecast further profitable growth in 2014. Group profit

before tax is expected to rise significantly despite a con-

tinuing volatile environment and thus reflect the sig-

nificantly higher level of sales volume and revenues

generated in the Automotive segment. At the same, we

*

also expect to be able to reduce carbon fleet emissions

moderately. We aim to achieve profitable growth through

a further solid ꢀincrease in the size of the workforce across

the Group. The Automotive segment’s EBIT margin

will remain within the target corridor of between 8 and

1

0%. In view of the substantial volumes of planned

capital expenditure, we expect the RoCE for the Auto-

motive segment to be significantly lower and the RoE

for the Financial Services segment to be slightly lower

than in the preceding financial year. Both performance

indicators will nevertheless be higher than their long-

term targets of 26% and 18% respectively. For the Motor-

cycles segment, we forecast a slight increase in sales

volume ꢀand a RoCE in line with last year’s level. De-

pending on the political and economic situation and the

outcome of the risks and opportunities described below,

actual business performance could differ from our cur-

rent forecasts.

*

EU-27.

6

8

Report on Outlook, Risks and Opportunities

Risks Report

Report on risks and opportunities

Report on Risks

In the dynamic environment in which it operates, the

BMW Group is constantly confronted with new oppor-

tunities and risks. Making full use of the opportunities

that present themselves is the basis for its corporate

success. In order to achieve growth, profitability, effi-

ciency and sustainable levels of business in the future,

Risk management system

The objective of the risk management system and one of

the key functions of risk reporting is to identify, record

and actively manage internal and external risks which

pose a threat to the attainment of corporate targets.

The risk management system covers all risks which are

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

the BMW Group consciously takes on certain risks. Good significant to the Group, or those which could pose a

2

4

Overall Assessment by Management

General and Sector-specific

Environment

management of opportunities and risks is a fundamen-

tal prerequisite for the ability to react appropriately to

changes in political, legal, technical or economic condi-

tions. Identified opportunities and risks are addressed

in the Outlook Report if they are likely to materialise.

threat to its going-concern status. With regard to the

structure of the risk management system, risk reporting

is the responsibility of each individual member of staff

and manager – in their various roles – and not with

that of any centralised unit in particular. Each and every

member of staff and manager is required to report risks

via the available reporting channels. This requirement

is set out in guidelines that apply throughout the Group.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

62

63

Report on Outlook, Risks and

Opportunities

The following sections focus on potential future develop-

ments or events, which could result in a positive or

negative variance in the BMW Group’s outlook. Posi-

tive variances are seen as opportunities, negative

variances as risks. As a general rule, risks and opportu-

nities are assessed over a medium-term period of two

years. In specific cases, for the purposes of additional

transparency, the assessment is made separately for a

more short-term period of up to one year. All potential

risks of losses (individual and accumulated risks) are

monitored and managed from a risk management

perspective. As a matter of principle, risks that could

pose a going-concern threat are not entered into. Unless

stated otherwise, the disclosures made relate to the

Automotive segment.

63

68

77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

The Group risk management system comprises a de-

centralised network covering all parts of the business,

which is steered by a centralised risk management func-

tion. Each of the BMW Group’s areas of responsibility

is represented within the risk management network by

so-called “Network Representatives”. The network’s

formal organisational structure helps to strengthen its

visibility and underline the importance attached to risk

management within the BMW Group. The duties, re-

sponsibilities, and tasks of the centralised risk manage-

ment unit and the Network Representatives are clearly

described, documented and acted on.

8

2

5

8

BMW Stock and Capital Markets

Risk management in the BMW Group

Group-wide risk management

Identification

Effectiveness

Reporting

Analysis and

Measurement

Supervisory Board

Risk management

Compliance

Committee

Usefulness

Risk Management

Steering Committee

Board of Management

Completeness

Monitoring

Controlling

Group Audit

Internal Control System

6

9 CoMBined ManageMent RepoRt

Group risk management is geared towards meeting

the following three criteria: effectiveness, usefulness

and completeness. One of the principal focuses in

sents one of the Group’s core corporate principles.

Risks and opportunities related to sustainability issues

are discussed by the Sustainability Committee. Strate-

gic options and measures open to the BMW Group

are put forward to the Sustainability Board, to which all

members of the Board of Management belong. Risk

aspects discussed at this level are integrated in the work

of the group-wide risk network. The composition of

the Risk Management Steering Committee on the one

hand and the Sustainability Committee on the other

ensures that risk and sustainability management are

closely coordinated.

2

013 was to ensure completeness. In this context, risk

catalogues containing lists of potential risks were

drawn up in collaboration with the Network Repre-

sentatives in order to facilitate the identification of

risks within each area of responsibility andꢀ/ꢀor each

sub-network, thus making a meaningful contribution

to ensuring completeness and highlighting any over-

arching risk profiles. The various risk catalogues have

been integrated in a newly developed IT tool, which

enables optimal recording and reporting of the risks

and countermeasures relevant for each network. The

new tool also helps to promote reciprocal networking

and cooperation, ensuring the seamless coordination

of the Group risk management system with the Com-

pliance Committee, the Internal Control System and

the Group Internal Audit.

Risk measurement

In order to determine which risks can be considered to

be significant in relation to the results of operations,

financial position and net assets of the BMW Group,

to identify changes in key performance indicators and

to measure their potential earnings impact, all identified

risks are classified on the basis of the following table.

The amount of the risks takes account of both its impact

(net of appropriate countermeasures) and the likelihood

of occurrence in each case.

Risk management process

The risk management process is applied throughout

the Group and comprises the early identification and

penetration of risks, comprehensive analysis and risk

measurement, the coordinated use of suitable manage-

ment tools and also the monitoring and evaluation

of measures in the short and medium term of up to two

years.

Class

Risk amount

Low

> €0–50 million

> €50–400 million

> €400 million

Medium

High

Risks reported to the centralised risk management from

the network are firstly presented for review to the Risk

Management Steering Committee, for which Group

Controlling is responsible. After review, the risks are

reported to the Board of Management and to the Super-

visory Board. Significant and going-concern-related

risks are classified on the basis of the potential scale of

impact on the Group’s results of operation, financial

position and net assets. The level of risk is quantified,

taking into account the probability of occurrence and

risk mitigation measures.

The overall earnings impact based on the assumption

that the risk will actually take place is sub-divided into

the following categories.

Class

Earnings impact

Low

> €0–500 million

> €500–2,000 million

> €2,000 million

Medium

High

The risk management system is tested regularly by the

Internal Audit. By sharing experiences with other com-

panies on an ongoing basis, the BMW Group ensures

that new insights are incorporated in the risk manage-

ment system, thus ensuring continual improvement.

Regular basic and further training as well as information

events throughout the BMW Group, and in particular

within the risk management network, are invaluable

ways of preparing people for new or additional chal-

Risks

Political and global economic risks

As one of the world’s leading providers of premium

products and services, the BMW Group faces a variety

of major challenges. The world is changing at great

speed, and in a great number of countries individual

mobility remains a key issue in terms of political regu-

lation and national industrial policy. Changing values

in society are constantly calling for new solutions in

lenges with regard to the processes in which they are in- the field of mobility. Unpredictable disturbances in eco-

volved.

nomic interdependencies, together with ever-increasing

competition, may give rise to knock-on reactions that

are practically impossible to predict. The sovereign

As a supplement to comprehensive risk management,

managing the business on a sustainable basis also repre- debt crisis in the euro region and volatile economic con-

7

0

ditions continue to exert an unsettling influence over

With its Efficient Dynamics concept, the BMW Group is

both markets and consumers. Further risks arise from playing a pioneering role in the premium segment in

other potential economic developments, in particular

a slowdown of economic momentum in China, one of

reducing both fuel consumption and emissions. With

effect from 2013, our range of products was expanded

18

Combined management RepoRt

1

8

General Information on the BMW Group

the BMW Group’s principal markets, which could in turn by the addition of electric powertrains in BMW i series

result in lower demand for the products and services the vehicles. This strategy will also enable us to fulfil legal

18

20

23

Business Model

Management System

Research and Development

Group offers. As in the previous year, the risk amounts

attached to such an outcome are classified as high.

rules and requirements at the same time. The BMW

Group is investing in the development of sustainable

drive technologies and materials, with the aim of pro-

viding highly efficient vehicles for individual mobility in

the premium segment, both now and in the future.

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Any escalation of political conflicts and terrorist ac-

tivities, natural disasters or possible pandemics could

have a negative impact on the world economy and inter-

national capital markets in general. The BMW Group

counters these risks primarily by internationalising

its sales and production structures in order to reduce

the potential impact of risk exposures in individual

countries. The risk amounts attached to these risks are

classified as low.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

The BMW Group is also committed to developing com-

prehensive recycling concepts aimed at recycling mate-

rials as efficiently as possible, closing material loops and

conserving precious resources to the greatest possible

extent. Statutory risks stemming from vehicle recycling

are minimised by means of a specialised in-house team

working in conjunction with regional managers.

62

6

3

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

Overall, as in the previous year, the risk amounts at-

tached to political and global economic risks are still

classified as high.

Medium- and long-term targets have already been put

in place in Europe, North America, Japan, China and

other countries to minimise fuel consumption and CO₂

emissions. Europe has set a target of achieving an aver-

8

BMW Stock and Capital Markets

Strategic and sector-specific risks

Innovation is the driving force behind the BMW Group’s age of 130 g CO ꢀꢀ/ꢀkm for all new vehicles by 2015. EU

2

success. The primary source of innovation is a world-

wide global research and innovation network, in which

employees work closely with one another to find to-

day’s solutions for tomorrow’s mobility issues. At the

same time, the technical challenges involved in reduc-

ing fuel consumption and emission, are constantly on

the rise. These requirements are accompanied by a

whole swathe of rules that govern individual mobility in

metropolitan areas.

regulations set targets for CO emissions based on ve-

hicle weight. For the BMW Group this means a target

2

of under 140 g CO ꢀꢀ/ꢀkm per vehicle. The average for

2

new car fleets in Europe has been set for 2020 at 95

g

CO ꢀꢀ/ꢀkm. Fuel economy targets have now been fixed in

2

the USA up to the year 2025. Beginning with a gradual

reduction for 2012 models, the new car fleets of all manu-

facturers are required to achieve an average emission

value of 250 g CO ꢀꢀ/mile (155 g CO ꢀꢀ/ꢀkm) by model year

2

016 and by 2025 an average value of 163 g CO ꢀꢀ/mile

2

New regulations and rising fuel and energy prices also

exert an influence on customer behaviour. One sig-

nificant risk for the car industry is the possibility that

laws and regulations could be tightened at short notice,

thus triggering the need for significantly higher levels

of investment. In some cases, changes in customer be-

haviour are not only brought on by new regulations, but

(101 g CO₂ꢀꢀ/ꢀkm). Japan has also announced ambitious

targets for reducing fuel consumption. The regulations

for individual vehicles and fleets have been implemented

jointly in China. The debate on the successor regulation

has already begun.

The broader market introduction of alternative drive

also through changes of opinion, values and environmen- systems presents new challenges and means additional

tal issues. Among other factors, global climate change

is having an effect on legislation, regulations and con-

sumer behaviour. In order to meet structural changes

in the demand for individual mobility that no longer

necessarily means actually owning a vehicle, the BMW

Group is offering corresponding mobility services, such

as the DriveNow car sharing model.

investment for the automotive industry. At the same

time the BMW Group also sees the changing situation

as an ideal opportunity to put its technological expertise

and innovative strengths to good use. Greater fuel

economy and the reduction of emissions are fundamen-

tal parameters that are automatically integrated in the

design of new products.

7

1 CoMBined ManageMent RepoRt

In the short to medium term, the BMW Group is work-

ing on achieving additional fuel economy by deploying

a wide range of measures from the electrification of

the drivetrain through to hybrid solutions. Solutions for

sustainable mobility in densely populated areas are

also in the process of being developed. Large-scale field

trials with the MINI E have been carried out in the UK,

Germany, France, the USA, China and Japan. A test fleet

of BMW ActiveE electric cars based on the BMW 1 Se-

ries Coupé has been on the road since 2011. The exten-

sive knowledge gained from the trials will be used in

ployee time accounts, but also by the ability to produce

specific models at additional sites if necessary. More-

over, risks arising from business interruption and loss

of production as a consequence of fire or natural disaster

are also insured up to economically reasonable levels

with insurance companies of good credit standing.

The level of risk attached to production interruptions is

classified as medium. There has been no change in this

assessment compared to the previous year.

the series development of the BMW Group’s electric cars. Purchasing

The BMW i3 came onto the market in 2013 as the first

series-produced electric car made by the BMW Group

and specially designed for the metropolitan regions of

the world.

Close cooperation between carmakers and automotive

suppliers generates economic benefits on the one hand,

but also raises levels of dependency. The increasing

trend towards modular-based production with a set of

common architectures covering various models and

product lines exacerbates the consequences of the loss

of a supplier or failure to supply on time. As part of

the supplier preselection process, the BMW Group is

Similar to the statutory requirements being imposed

on car manufacturers to reduce fuel consumption and

emissions, the rules for car safety are also becoming

continuously tougher, such as crash specifications in the careful to ensure that its future business partners come

USA. The specifications demanded of vehicles are chang- up to the same high ecological, social and corporate

ing so comprehensively that there is no option but to

develop new technologies to improve both active and

passive safety systems. Active safety systems such as

suspension regulation and driver assistance systems

make an essential contribution to the prevention of ac-

cidents, while passive safety systems help to reduce the

consequences of accidents.

governance standards by which the BMW Group is

generally measured. Suppliers are assessed on the basis

of the BMW Group Sustainability Standard which is

applied throughout the worldwide supplier network.

This set of fundamental principles and standards covers

both production and non-production aspects relevant

for the goods and services provided by suppliers, which

also includes compliance with internationally recog-

nised human rights and applicable labour and social

standards. The principal tool for ensuring compliance

with the BMW Group Sustainability Standard is a three-

stage sustainability and risk management approach

comprising a BMW Group-specific sustainability risk fil-

ter, a sustainability questionnaire and a sustainability

audit. In addition, the technical and financial capabilities

of suppliers – especially those supplying for modular-

based production – are continuously monitored during

As in the previous financial year, the amounts of risk

attached to strategic and sector-specific risks are classi-

fied as low.

Operational risks

Production

Production stoppages and downtimes – in particular

due to fire, but also those attributable to manufacturing

equipment breakdowns, logistical disruptions or new

vehicle production line start-ups – represent risks which both the development and production phases of the

the BMW Group counters with a broad range of appro-

priate measures. Production structures and processes

are designed from the outset with a view to reducing

potential damage and the probability of occurrence. In

addition to technical fire protection measures, the BMW

Group has implemented an array of strategies, includ-

Group’s vehicles. Supplier sites are assessed for expo-

sure to natural hazards, such as floods or earthquakes,

in order to identify supply risks at an early stage and im-

plement appropriate countermeasures.

Raw materials management procedures are in place to

ing preventative maintenance, spare parts management mitigate the risk of a production interruption due to

on a multi-site basis and back-up plans for alternative

transportation. The level of risk is also reduced by the

deployment of flexible work-schedule models and em-

shortages of supplies of critical raw materials. The supply

risk is also reduced by developing and implementing

systems governing minimum inventory levels.

7

2

The level of risk attached to supply risks is (in contrast

to last year) classified as high, mainly due to the insuffi-

cient availability of raw materials in Asia.

prehensive income” and hence directly in equity (within

revenue reserves).

As in the previous year, the level of risk attached to pen-

sion obligations is classified as high, whereas the poten-

tial impact on earnings is classified as medium.

1

8

Combined management RepoRt

18

General Information on the BMW Group

Sales and marketing

18

20

23

Business Model

Management System

Research and Development

Changes in global economic conditions and increas-

ingly protectionist trends are among the factors that

could result in lower demand as well as fluctuations

in the regional spread and the composition of sales of

vehicles and mobility services. Risks relating to these

developments can be reduced with the aid of flexible

selling and production processes. Increased competition

on the world’s markets, particularly in Western Europe,

24

Report on Economic Position

Further information on risks in conjunction with

pension provisions is provided in note 31 of the Group

Financial Statements.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

Information, data protection and IT risks

The BMW Group attaches great importance to the

the USA and China, requires constant analysis of selling protection of business secrets and employee and cus-

prices and margins. Selling price and margin risks are tomer information against unauthorised access andꢀ/ꢀ

determined on the basis of past experience and changing or misuse. Data and information security, based on

62

63

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

global economic conditions, with risk exposures meas-

ured using a cash-flow-at-risk model.

International Security Standard ISOꢀ/ꢀIEC 27001, is an

integral component of all business processes. Staff,

process design and information technology each play

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

Selling risks generally entail high levels of risk. This clas- a key role in the Group’s overall risk and security

and Explanatory Comments

8

2

5

sification remains unchanged from the previous year.

concept.

8

BMW Stock and Capital Markets

Risks relating to pension obligations

The BMW Group’s pension obligations to its employees

resulting from defined benefit plans are measured on

Standardised requirements, documented in guidelines

and manuals, are applicable group-wide. All employees

are required to treat confidential information (such

the basis of actuarial reports. Future pension payments as customer and employee data) in an appropriate way,

are discounted by reference to market yields on high- ensure that information systems are properly used and

quality corporate bonds. These yields are subject to mar- that risks pertaining to information technology are

ket fluctuation and therefore influence the level of pen-

sion obligations. Changes in other parameters, such

handled with transparency. Regular communication,

awareness-raising activities and training measures pro-

as rises in inflation and longer life expectancy, also im- mote a high degree of security and risk awareness

pact pension obligations and payments.

among the employees involved. A new Web-based data

protection training programme shows how prudent

handling of personal data can make the BMW Group

more attractive as an employer and have a positive im-

pact on customer loyalty. Employees receive training

from the Group’s Compliance Organisation to ensure

compliance with applicable requirements and in-house

rules.

Most of the BMW Group’s pension obligations are

administered in external pension funds or trust arrange-

ments and the related assets are kept separate from

Company assets. The amount of funds required to

finance pension payments out of operations in the

future is therefore substantially reduced, since most

of the Group’s pension obligations are settled out of

pension fund assets. The pension assets of the BMW

Group comprise interest-bearing securities, equities,

real estate and other investment classes. Pension fund

assets are monitored continuously and managed on a

risk-and-yield basis. A broad spread of investments

also helps to reduce risk. In order to reduce fluctuations

in pension funding shortfalls, investments are struc-

tured to coincide with the timing of pension payments

and the expected pattern of pension obligations. Re-

measurements on the obligations and fund asset sides

are recognised, net of deferred taxes, in “Other com-

Potential IT and data protection risks resulting from the

use of information technology and the processing of

information are systematically documented, monitored

on a regular basis and dealt with by the departments

responsible.

Standard technical data protection procedures in con-

stant use include virus scanners, firewall systems, access

controls at both operating system and application level,

internal testing procedures and the regular backing up

of data. Additional measures (e.ꢀg. data encryption) are

7

3 CoMBined ManageMent RepoRt

in place to protect highly confidential information,

eurozone (particularly in China and the USA) and the

such as corporate strategies. A high level of protection is procurement of production materials and funding is

afforded by regular analyses, detailed up-front controls

such as compliance with mandatory data protection

also organised on a worldwide basis, the currency risk

is an extremely important factor for Group earnings.

(

requirements) and rigorous security management.

Cash-flow-at-risk models and scenario analyses are

used to measure exchange rate risks. The results of

these analyses are regularly fed into the Group’s fore-

cast of exposures and serve as the basis for decision-

making with respect to operational currency manage-

ment. In 2013 the Chinese renminbi, the US dollar,

the British pound, the Russian rouble and the Japanese

yen constituted approximately 75% of the total foreign

The volume of enquiries with respect to data protection

has risen sharply in the wake of the NSA scandal and

the public debate regarding a possible new EU directive

on data protection. The BMW Group’s well-established

data protection network ensures the necessary trans-

parency and timely implementation of measures. Re-

sponsibility for data protection in each Group entity

lies with the Board of Management (of BMWAG) or the currency exposure of the BMW Group, with the Chinese

relevant Company management. Each entity has one or

more Local Data Privacy Protection Officers.

renminbi and the US dollar accounting for the lion’s

share of foreign currency transactions.

In the case of cooperation arrangements and business

partner relationships, the BMW Group protects its in-

The BMW Group manages currency risks both at a

strategic level (medium and long term) and at an oper-

tellectual property as well as its customer and employee ating level (short and medium term). Medium- and

data by stipulating clear instructions with regard to

data protection and the use of information technology.

Information pertaining to key areas of expertise is sub-

ject to particularly stringent security measures.

long-term measures include increasing production vol-

umes in non-euro-region countries (natural hedging)

and increasing purchase volumes denominated in for-

eign currencies. Constructing new plants in countries

such as the USA, China or Brazil have also helped reduce

foreign currency exposures. Currency risks are managed

in the short to medium term and for operational pur-

poses by means of hedging. Hedging transactions are

entered into only with financial partners of good credit

standing. A description of the methods applied for

risk measurement and hedging is provided in note 42

to the Group Financial Statements. Counterparty risk

management procedures are carried out continuously

in order to monitor the creditworthiness of business

partners.

The requirements placed on IT facilities – both exter-

nally and internally – are changing at a breathtaking

pace in the face of technological developments in this

area. There is a risk that these requirements will neces-

sitate far-reaching changes in IT systems, which could

entail a higher level of expenditure than currently

forecast. Forward-looking planning procedures are in

place to manage and implement new IT requirements

on a project basis. Risks identified during the imple-

mentation of complex IT applications, routine opera-

tions andꢀ/ꢀor in conjunction with the development

of the existing IT landscape are highlighted at an early

stage by IT risk management procedures and acted

upon accordingly.

A high level of risk is attached to short-term currency

risks. The potential impact on earnings is classified as

medium. The level of risk rises in the medium term due

to the lower number of hedge transactions entered into

for this period.

The levels of risk attached to information, data protec-

tion and IT risks are classified as medium. There has

been no change in this assessment compared to the

previous year.

If the relevant recognition criteria are fulfilled, deriva-

tives used by the BMW Group are accounted for as

hedging relationships. Further information on risks in

conjunction with financial instruments is provided in

note 42 to the Group Financial Statements.

Financial risks and risks relating to the use of

financial instruments

Currency risks

As an internationally operating enterprise, the BMW

Group conducts business in a variety of currencies,

Raw materials price risks

The availability of raw materials and the related price

thus exposing itself to currency risks. Since a substantial risks are monitored on the basis of a set of well-defined

portion of Group revenues is generated outside the management procedures. Price risks relating to precious

7

4

metals (platinum, palladium), non-ferrous metals (alu-

minium, copper, lead) and, to some extent, steel and

steel ingredients (iron ore, cokeꢀ/ꢀcoal) are hedged using

financial derivatives. Purchase contracts with fixed

pricing arrangements are also in place. A description

of the methods applied for risk measurement and

hedging is provided in note 42 to the Group Financial

Statements.

strategy and the solid liquidity base of the BMW Group.

Internationally recognised rating agencies have addi-

tionally confirmed the BMW Group’s strong creditwor-

thiness.

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

Similar to the previous year, both the level of risk and

the potential impact of illiquidity on earnings are clas-

sified as low – including the risk of the BMW Group’s

rating being downgraded and any ensuing deterioration

in financing conditions.

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Changes in the price of crude oil, as an important basic

material in the manufacture of components, have an

indirect impact on production costs. The price of crude

oil, combined with exchange rate fluctuations, also

has an impact on fuel prices, which, in turn, directly in-

fluence the purchasing behaviour of our customers

and hence the overall demand for vehicles. The BMW

Group counters this risk by developing and selling highly

efficient, low-consumption engines and by developing

alternative drive technologies.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

If the relevant recognition criteria are fulfilled, deriva-

tives used by the BMW Group are accounted for as

hedging relationships. Further information on risks in

conjunction with financial instruments is provided in

note 42 to the Group Financial Statements.

62

63

Report on Outlook, Risks and

Opportunities

63

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77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

Risks relating to the provision of financial services

The main categories of risk relating to the provision of

financial services are credit and counterparty risk, re-

sidual value risk, interest rate risk, liquidity risk and

operational risk. In order to evaluate and manage these

risks, a variety of internal methods has been developed

based on regulatory environment requirements (such

as Basel IIꢀ/ꢀIII) and which comply with both national and

international standards.

8

2

5

A high level of risk in the short therm is attached to

raw material risks. The potential impact on earnings is

classified as medium. The level of risk rises in the

medium term, due to the lower number of hedge trans-

actions entered into for this period.

8

BMW Stock and Capital Markets

If the relevant recognition criteria are fulfilled, deriva-

tives used by the BMW Group are accounted for as

hedging relationships. Further information on risks in

conjunction with financial instruments is provided in

note 42 to the Group Financial Statements.

A set of strategic principles and rules derived from regu-

latory requirements serves as the basis for risk manage-

ment within the Financial Services segment. At the

heart of the risk management process is a clear division

between front- and back-office activities and a compre-

hensive internal control system.

Liquidity risks

Based on experience gained during the financial crisis,

a target liquidity concept is rigorously adhered to.

Solvency is assured at all times throughout the BMW

Group by maintaining a liquidity reserve and by the

broad diversification of refinancing sources. The liquid-

ity position is monitored continuously at a separate

entity level and managed by means of a cash flow re-

quirements and sourcing forecast system in place

throughout the Group. Liquidity risks can arise in the

form of rising refinancing costs on the one hand and

restricted access to funds on the other. The major part

of the Financial Services segment’s credit financing

and lease business is refinanced on capital markets.

The key risk management tool employed within the

Financial Services segment is aimed at ensuring that

the Group’s risk-bearing capacity is not exceeded. In

this context, all risks defined as “unexpected losses”

must be covered at all times by an appropriate asset

cushion in the form of equity capital. Unexpected losses

are measured using a variety of value-at-risk techniques,

adapted to each relevant risk category. Risks are aggre-

gated after taking account of correlation effects. The to-

tal sum of risks calculated in this way is then compared

with the resources available to cover risks (asset cush-

ion). The segment’s risk-bearing capacity is monitored

continuously with the aid of an integrated limit system

which also differentiates between the various risk cate-

gories. The segment’s total risk exposure was covered at

all times during the past year by the available risk-cover-

age volumes.

Thanks to its excellent creditworthiness, the BMW

Group has good access to financial markets and, as in

previous years, was able to raise funds at good con-

ditions in 2013, reflecting a diversified refinancing

7

5 CoMBined ManageMent RepoRt

Credit and counterparty default risk

interest rate derivatives. Interest rate risks are also

managed on the basis of a value-at-risk approach and

stipulated limits. Limits are set using a benchmark-

oriented approach that focuses on interest rate arrange-

ments contained in the original contracts.

Credit and counterparty default risk arises within the

Financial Services segment if a contractual partner (i.ꢀꢀe.

a customer or dealer) either becomes unable or only

partially able to fulfil its contractual obligations, such

that lower income is generated or losses incurred. The

Financial Services segment utilises a variety of rating

systems in order to assess the creditworthiness of its

contractual partners. Credit risks are managed at the

The level of risk attached to interest rate risks in the

short and medium term is medium. The potential im-

pact on earnings in the short and medium term is

time of the initial credit decision, based on a calculation classified as low.

of the present value of standard risk costs and subse-

quently, during the term of the credit, by using a range

of risk provisioning techniques to cover risks emanat-

ing from changes in customer creditworthiness. In this

context, individual customers are classified by category

each month on the basis of their current contractual

status, and appropriate levels of allowance recognised

in accordance with that classification.

Liquidity and operational risks

Use of the “matched funding principle” to finance the

Financial Services segment’s operations eliminates

liquidity risks to a large extent. Regular measurement

and monitoring ensure that cash inflows and out-

flows from transactions in varying maturity cycles and

currencies offset each other. The relevant procedures

are incorporated in the BMW Group’s target liquidity

concept.

The level of risk attached to credit and counterparty de-

fault risks in the short and medium term is high. The

potential impact on earnings is classified as medium.

Operational risks are defined in the Financial Services

segment as the risk of losses arising as a consequence

of the inappropriateness or failure of internal procedures

(process risks), people (personnel-related risks), sys-

tems (infrastructure and IT risks) and external events

Residual value risk

A related residual value risk exists if the expected mar-

ket value of a vehicle at the end of the contractual term

is lower than its residual value calculated at the date the (external risks). These four categories of risk also include

contract is entered into. Each vehicle’s market value is

forecast on the basis of historical external and internal

data and used to predict the expected market value of

the vehicle at the end of the contractual period. As part

related legal and reputation risks.

As part of the process of managing operational risks,

loss events and risk scenarios are recorded in the

of the process of managing residual value risks, a calcu- Operational Risk Management Suite (OpRisk-Suite) by

lation is performed at the inception of each contract to OpRisk Officers from the various individual units or

determine the present value of risk costs. Market devel- entities, along with details of probability of occurrence,

opments are observed throughout the contractual period loss amounts and countermeasures. This comprehen-

and the risk assessment updated appropriately.

sive recording and measurement of risk scenarios and

loss events in the OpRisk-Suite provides the basis for

a systematic analysis of potential andꢀ/ꢀor actual opera-

tional risks. Annual self-assessments are also carried

out. In conjunction with the assessment of risk-bearing

capacity, operational risks are measured using the

standard approach and compared with the correspond-

ing limit.

High levels of risk are attached to residual value risks

in the short and medium term. The potential impact on

earnings for the segments affected in the short and

medium term is classified as medium. The potential im-

pact on earnings for the Group is classified as medium.

Interest rate risks

Interest rate risks in the Financial Services segment

relate to potential losses caused by changes in market

interest rates and can arise when fixed interest rate pe-

riods for assets and liabilities recognised in the balance

sheet do not match. Interest rate risks in the Financial

The level of risk attached to operational risks is medium.

The potential impact on earnings is classified as low.

Legal risks

Compliance with the law is a basic prerequisite for

Services line of business are managed by raising refinanc- the success of the BMW Group. Current law provides

ing funds with matching maturities and by employing the binding framework for the BMW Group’s various

7

6

business activities around the world. The growing

out that existing legal risks, if they materialise, could

international scale of operations of the BMW Group, the have a significantly adverse effect on the Group’s finan-

complexity of the business world and the whole gamut

of complex legal regulations increase the risk of laws

cial condition. Likewise, it cannot be ruled out that new

legal risks, as yet unidentified, could materialise and

18

Combined management RepoRt

18

General Information on the BMW Group

not being adhered to, simply because they are not known have a significant adverse effect on the Group’s financial

18

20

23

Business Model

Management System

Research and Development

or fully understood.

condition.

24

Report on Economic Position

The BMW Group has established a Compliance Organi-

sation aimed at ensuring that its representative bodies,

managers and staff act in a lawful manner at all times.

Further information on the BMW Group’s Compliance

Organisation can be found in the section “Corporate

Governance”.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

62

6

3

Report on Outlook, Risks and

Opportunities

Like all internationally operating enterprises, the BMW

Group is confronted with legal disputes relating, among

other things, to warranty claims, product liability, in-

fringements of protected rights, or proceedings initiated

by government agencies. Any of these matters could,

among other outcomes, have an adverse impact on the

Group’s reputation. Such proceedings are typical for

the sector and can arise as a consequence of realigning

product or purchasing strategies to suit changed market

conditions. Particularly in the US market, class action

lawsuits and product liability risks can have substantial

financial consequences and cause damage to the Group’s

public image. The BMW Group recognises appropriate

levels of provision for lawsuits. A part of these risks,

especially where the American market is concerned, is

insured where this makes business sense. Some risks,

however, cannot be assessed in full or completely defy

assessment. It cannot be ruled out that losses from

damages could arise which are either not covered or not

fully covered by insurance policies or provisions. The

high quality of the Group’s products, which is ensured

by regular quality audits and ongoing improvement

measures, helps to reduce this risk. In comparison with

competitors, this can also give rise to benefits and op-

portunities for the BMW Group. Changes in the regu-

latory environment may significantly influence sales

volume, revenues and earnings performance in specific

markets or economic regions. Further details are pro-

vided in the section “Strategic and sector-specific risks”.

63

68

77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

The BMW Group is not currently involved in any court

or arbitration proceedings which, based on the enter-

prise’s assessment, could have a significant impact on

its financial condition.

As in the previous year, the level of risk attached to legal

risks is classified as low. However, it cannot be ruled

7

7 CoMBined ManageMent RepoRt

Report on Outlook, Risks and Opportunities

Report on Opportunities

Management and identification of opportunities

New opportunities regularly present themselves in

the dynamic business environment in which the BMW

Group operates. General economic trends and sector-

specific developments – including external regulations,

suppliers, customers and competitors – are monitored

continuously. Identifying opportunities is an integral

which would have otherwise been unprofitable. The

new generation of engines allows a high degree of flexi-

bility in production in terms of the number of cylinders

and the choice between diesel and petrol engines, thus

maximising market potential.

Identified opportunities can be incorporated at short

part of the process of developing strategies and drawing notice into the opportunities management and re-

up forecasts for the BMW Group. The significance of

opportunities for the BMW Group is classified in the

categories “material” or “not material”.

porting system. The implementation of identified op-

portunities is undertaken on a decentralised basis and

monitored using a variety of suitable instruments.

The quarterly forecast report presented to the Board of

Management highlights the impact of opportunities

that have been realised.

Market, competition and scenario analyses are con-

ducted and evaluated and forecasts are drawn up

as part of the process of identifying opportunities. The

Group’s product portfolio is permanently reviewed in

the light of these analyses and, as appropriate, new

product projects are presented to the Board of Manage-

ment for consideration.

Opportunities

Political and global economic opportunities

Economic conditions influence the operations, financial

position, earnings performance and cash flows of the

BMW Group. Should the global economy develop sig-

nificantly better than reflected in the outlook, revenues

and earnings of the BMW Group could be significantly

higher than originally predicted. Economic opportuni-

Opportunities management also covers regular reviews

of cost drivers and other factors critical for success.

One of the key areas in this context is to ensure optimal

operations within the production and supplier network, ties present themselves in particular from the fact that

which are therefore subject to regular review. Potential

areas of improvement can be quickly realised after ap-

proval by the Board of Management and the benefits

factored into earnings forecasts. The forecasts drawn up

by the BMW Group reflect the expected impact of tar-

geted efficiency improvements on variable and fixed

costs. Efficiency improvement targets take account of

past experience as well as the current composition of

the product portfolio.

the BMW Group is fully committed to expanding busi-

ness volumes in the world’s growth markets. The BMW

Group sees an opportunity for above-average growth in

the Chinese market. Potential for recovery is also seen

elsewhere, particularly in southern European countries.

The outcome could be a sharp increase in sales volumes

as well as reduced competitive pressure and improved

selling prices. The BMW Group reviews its market fore-

casts at frequent intervals, adjusting them when neces-

sary to accommodate changed market conditions and

Business process optimisation and strict cost control are make full use of available market potential.

essential to ensure good profitability and a high return

on capital employed. The outlook is drawn up on the

assumption that profitability improvement measures

will be achieved. One good example of this is the rigor-

ous implementation of the so-called “architectural ap-

proach”. The new MINI presented in November is

the first vehicle to be built on the basis of this approach.

Greater communality of features between different

models and product lines, made possible by a modular

and architectural approach to building vehicles, helps

to improve profitability by reducing development

costs and investment on the series development of new

vehicles, by generating benefits of scale at the level of

production cost and by increasing flexibility in produc-

tion. The improved cost basis achieved opens up op-

portunities to move into additional market segments

In addition to the impact from economic developments,

the BMW Group’s earnings can also be positively af-

fected in the short to medium term by changes in the le-

gal environment. A possible reduction in tariff barriers,

in import restrictions or direct excise duties could lower

the cost of materials for the BMW Group and also en-

able products and services to be offered to the customer

at lower prices. Another factor to consider is that regu-

latory support for forward-looking technologies, such as

electromobility – in the form of incentives – help to

make the total cost of ownership more attractive for the

customer, thus opening up opportunities for faster mar-

ket penetration by means of these technologies. Oppor-

tunities of this nature could result in higher sales vol-

umes and, all other things being equal, to an improved

7

8

quality of earnings. Changes in the legal environment

are monitored continuously at a centralised level. The

impact of legislation that has been enacted or that is

highly likely to be enacted is incorporated in the out-

look.

ance of, and sales volumes generated with, planned fu-

ture product innovations could be better than expected

in the outlook. In the short term, however, any potential

positive impact is classified as not material.

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

The long-term trend towards greater sustainability pro-

At present, the BMW Group does not see any significant vides opportunities to boost sales of sustainable prod-

political andꢀ/ꢀor economic opportunities which could ucts and, under the right circumstances, achieve better

have a positive sustainable impact on the earnings per- selling prices. Innovations – such as the BMW i3 in the

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

formance of the BMW Group.

field of electromobility or Efficient Dynamics through-

out the whole product portfolio – provide excellent plat-

forms for future growth.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

Strategic and sector-specific opportunities

Innovation and a strong technological position are the

cornerstones of our success. The BMW Group con-

tinues to build on this solid basis and to set its sights on

putting these to good use in the world’s growth mar-

kets. Additions to the product portfolio and expansion

in growth regions are seen as the most important op-

portunities for growth in the medium to long term.

Remaining on growth course depends above all else on

the ability to develop innovative products and bring

them to market. The launching of the BMW i brand

opens up new customer target groups for the BMW

Group and consolidates the position of BMW as a sus-

tainable and forward-looking brand. The BMW i3 is

the first car built from the outset as an electric vehicle

for driving in an urban environment: optimally de-

signed for intelligent mobility in cities and for com-

muting, powered by a zero-emission electric drive sys-

tem. Creating the BMW i3 does nothing less than make

the whole Group fit for the future. A whole new vista

62

Potential is also seen by engaging in new product and

market categories and by tapping new customer target

groups. New business models and cooperation arrange-

ments with the BMW Group’s growing network of

business partners often provide the best means to take

advantage of these opportunities. Working together

with other business partners helps to increase market

coverage, expand the range of solutions on offer and

encourage the development of forward-looking tech-

nologies. Good examples of this are the partnerships

and programmes comprising the 360° ELECTRIC port-

folio in the field of electromobility and collaboration

with Toyota on a hydrogen fuel cell system. Coopera-

tions of this kind generally result in greater availability

of a wider range of new technologies for the customer

and increase the likelihood of a successful market launch

in the long term. The short- to medium-term impact of

such activities is generally not material.

63

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

81

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

of opportunities has now been opened up. BMW

i

products can be seen as “empowerment projects” for

new technologies and processes, which will also bene-

fit other vehicle concepts.

Given the long lead times involved in developing new

products and processes, strategic and sector-specific

opportunities are not expected to have a material short-

term impact on the earnings performance of the BMW

Group.

With the BMW 3 Series Gran Turismo and the MINI

Paceman, 2013 also saw the successful launching of two

further crossover products on the market. With all of

these new models, the BMW Group has demonstrated

its ability to translate identified opportunities into com-

mercial reality as well as its proactive commitment to

Opportunities from operational activities

Employees make a vital contribution to sustainable

growth and improved profitability through their inno-

vative skills. The BMW Group is constantly refining

tackling the challenges of the future. These products are the tools it uses to recruit employees, encourage career

the outcome of the early identification of growth oppor- development and bind employees to the enterprise.

tunities and customer-oriented product development

processes stretching over several years. Additional op-

Within this environment, employees find the optimal

environment in which to develop their skills. If these

portunities for growth can be generated by further addi- measures generate greater benefits than currently

tions to the product portfolio. Given the lead time re- expected, the BMW Group’s revenue, earnings perfor-

quired for product development, these opportunities are mance and cash flows could be positively impacted

built into short- and medium-term forecasts. The accept- and forecasted figures surpassed. Creating a successful

7

9 CoMBined ManageMent RepoRt

performance culture and the development of the skill-

sets of both staff and managers alike throughout the or-

ganisation could also have a positive impact on revenues

and profitability. Compared to the outlook, the BMW

this area, the BMW Group is registering faster growth

rates on the various platforms than its competitors,

measured in terms of the number of fans and visits.

The decisive advantage of digital communication is that

Group’s earnings performance is unlikely to benefit from the brands are able to engage in a direct dialogue with

efficiency improvements to a significantly greater ex-

tent than that incorporated in the outlook.

customers and thus create a more intense brand expe-

rience. The BMW Group considers that these opportu-

nities will not have a material impact compared to the

assumptions made in the outlook.

Further opportunities may arise due to other technical

innovations relating to products and processes and as

a result of organisational changes. In the field of light-

weight construction, carbon is being put to use in high

volumes for the first time in the automobile industry in

the construction of the BMW i3. The potential for effi-

ciency improvements in this area is quite considerable,

Pension benefits represent an important component of

the BMW Group’s overall remuneration package, mak-

ing it easier to recruit qualified staff and to gain them

for the enterprise on a long-term basis. Pension liabili-

ties are matched in part by corresponding pension plan

including the increased use of this material in other vehi- assets. Within a favourable capital market environment,

cle projects, as a result of which the competitiveness of

the products involved – both in terms of consumption

and driving dynamics – could be improved to a signifi-

cantly greater extent than originally planned. The op-

portunities presented by these new developments are

primarily relevant for the medium to long term and will

not have a material short-term impact on the BMW

Group’s earnings performance.

the return generated by pension assets may exceed

expectations and reduce the deficit of the relevant pen-

sion plans. This, in turn, could have a materially favour-

able impact on the net assets position and earnings per-

formance of the BMW Group. Pension plan assets also

help to reduce the interest and inflation risks attached

to pension liabilities.

Financial opportunities arising from currencies

and raw materials

The BMW Group focuses its selling capacities primarily

on markets with the greatest sales volume and revenue

potential and fastest growth rates. Investment in exist-

ing and new marketing concepts is firmly aimed at in-

tensifying relationships with customers. A good exam-

ple is the new marketing concept for BMW i products

and services, which will be offered in selected markets

in the future via an innovative multi-channel model.

There will be no let-up in the active search for new op-

portunities to create even greater added value for cus-

The ability to compete on global markets is also signifi-

cantly influenced by changes in exchange rates and raw

materials prices. Favourable developments in exchange

rates (in particular for China and the USA) and in raw

materials prices could have a positive impact on the

financial result of the BMW Group. Developments on

the financial markets are closely monitored, in order to

identify and make the best use of any opportunities

that may arise. Financial opportunities are managed by

tomers than currently expected, whilst at the same time employing the same processes and methodologies used

looking for ways to boost sales volumes and achieve

better selling prices.

to manage financial risks. The principal objective of

these management processes is to reduce risk by improv-

ing forecasting reliability. Currency and raw material

price opportunities could have a material impact on the

earnings performance of the BMW Group.

Developments in the field of digital communication are

also opening up opportunities for marketing the BMW

Group’s various brands. Consumers can meanwhile

be reached on a more targeted and individual basis,

thus helping to strengthen long-term relationships and

brand loyalty. The BMW Group keeps track of the latest

developments and trends in communication technology,

Further information in conjunction with financial in-

struments is provided in note 42 to the Group Financial

Statements.

including the use of social media and networks, in order Opportunities arising in conjunction with the provision

to extend customer reach. The BMW Group’s brands of financial services

are present on numerous platforms, such as Facebook, The principal risks arising in the Financial Services seg-

YouTube and Twitter. Thanks to its intensive efforts in ment, namely credit and residual value risks, are closely

8

0

linked to economic trends. If economies develop more

favourably than assumed in the outlook, there is a

chance that credit losses may be reduced and earnings

improved accordingly. Similarly, higher used car selling

prices could result in better-than-forecasted earnings

for the Financial Services segment. Positive interest rate

developments could reduce interest rate risks and there-

fore have a positive impact on forecast earnings. The

potential significance of opportunities arising in conjunc-

tion with the provision of financial services, in particular

opportunities related to residual value risks, are classified

by the BMW Group as material.

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

2

4

9

7

62

Overall assessment of the risk and

6

3

1

Report on Outlook, Risks and

Opportunities

opportunities situation

63

68

77

Outlook

Risks Report

Report on Opportunities

No risks have been identified that could jeopardise the

BMW Group’s future existence. Based on the risks and

opportunities described above, expected probabilities of

occurrence and current business prospects, no individ-

ual or aggregated risks have been identified that could

endanger the BMW Group’s going-concern status.

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

8

2

5

8

BMW Stock and Capital Markets

Identified risks are considered to be manageable, but

could – just like opportunities – have an impact on the

BMW Group’s forecasts. The assessment of the overall

risk situation has not changed significantly compared

with the previous year. The BMW Group’s liquidity is

stable and all cash requirements are currently covered

by available funds and accessible credit lines.

8

1

CoMBined ManageMent RepoRt

*

Internal Control System and Risk Management System Relevant for the

Consolidated Financial Reporting Process

The internal control system in place throughout the

BMW Group is aimed at ensuring the effectiveness of

Group level, thus ensuring that legal requirements and

internal guidelines are complied with and that all busi-

operations. It makes an important contribution towards ness transactions are properly executed. Controls are

ensuring compliance with the laws that apply to the

BMW Group as well as providing assurance on the pro-

priety and reliability of internal and external financial

reporting. The internal control system is therefore a sig-

nificant factor in the management of process risks. The

also carried out with the aid of IT applications, thus re-

ducing the incidence of process risks.

IT authorisations

All IT applications used in financial reporting processes

principal features of the internal control system and the throughout the BMW Group are subject to access restric-

risk management system, as far as they relate to individ- tions, allowing only authorised persons to gain access

ual entity and Group financial reporting processes, are

described below.

to systems and data in a controlled environment. Access

authorisations are allocated on the basis of the nature

of the duties to be performed. In addition, IT processes

are designed and authorisations allocated using the dual

control principle, as a result of which, for instance, re-

quests cannot be submitted and approved by the same

person.

Information and communication

One component of the internal control system is that of

“Information and Communication”. It ensures that all

the information needed to achieve the objectives set for

the internal control system is made available to those

responsible in an appropriate and timely manner. The

requirements relating to the provision of information

relevant for financial reporting at the level of BMWAG,

other consolidated Group entities and the BMW Group

Internal control training for employees

All employees are appropriately trained to carry out

their duties and kept informed of any changes in regu-

lations or processes that affect them. Managers and

are primarily set out in organisational manuals, in guide- staff also have access to detailed best-practice descrip-

lines covering internal and external financial reporting

issues, in accounting manuals and through training.

These instructions, which can be accessed at all levels

tions relating to risks and controls in the various pro-

cesses, thus increasing risk awareness at all levels.

As a consequence, the internal control system can be

via the BMW Group’s intranet system, provide the frame- evaluated regularly and further improved as necessary.

work for ensuring that the relevant rules are applied

consistently throughout the Group. The quality and

relevance of these instructions are ensured by regular

Employees can, at any time and independently, deepen

their understanding of control methods and design

using an information platform that is accessible through-

review as well as by continuous communication between out the entire Group.

the relevant departments.

Evaluating the effectiveness of the internal

Organisational measures

control system

All financial reporting processes (including Group finan- Responsibilities for ensuring the effectiveness of the

cial reporting processes) are structured in organisational internal control system in relation to individual entity

terms in accordance with the principle of segregation

of duties. These structures allow errors to be identified at fined and allocated to the relevant managers and pro-

an early stage and prevent potential wrongdoing. Regu- cess owners. The BMW Group assesses the design and

lar comparison of internal forecasts and external financial effectiveness of the internal control system on the basis

and Group financial reporting processes are clearly de-

reports improves the quality of financial reporting. The

internal audit department serves as a process-inde-

of internal review procedures (e.ꢀg. management self-

audits, internal audit findings). Continuous revision

pendent function, testing and assessing the effectiveness and further development of the internal control system

of the internal control system and proposing improve-

ments when appropriate.

ensures its continued effectiveness. Group entities are

required to confirm regularly as part of their reporting

duties that the internal control system is functioning

properly. Effective measures are implemented when-

Controls

Extensive controls are carried out by management in all ever weaknesses are identified and reported.

*

financial reporting processes at an individual entity and

Disclosures pursuant to §289 (5) HGB and §315 (2) no.5 HGB.

8

2

1

Disclosures Relevant forTakeovers and Explanatory Comments

Composition of subscribed capital

(a) subsequent payment of any arrears on dividends

The subscribed capital (share capital) of BMWAG

on non-voting preferred shares in the order of

accruement,

amounted to €ꢀ656,254,983 at 31 December 2013

655,989,413) and, in accordance with Article

of the Articles of Incorporation, is sub-divided into

01,995,196 shares of common stock (91 73 ) (2012

601,995,196; 91.77%) and 54,259,787 shares of non-voting

preferred stock (8.27%) (2012 53,994,217 ꢀ8.23%), each

(2012:

€

ꢀ

4

(

1

)

(b) payment of an additional dividend of €ꢀ0.02 per

€ꢀ1 par value on non-voting preferred shares and

(c) uniform payment of any other dividends on shares

on common and preferred stock, provided the

shareholders do not resolve otherwise at the Annual

General Meeting.

18

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

6

.

%

:

24

Report on Economic Position

:

;

2

4

Overall Assessment by Management

General and Sector-specific

Environment

with a par value of €ꢀ1. The Company’s shares are issued

to bearer. The rights and duties of shareholders derive

from the German Stock Corporation Act (AktG) in con-

junction with the Company’s Articles of Incorporation,

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Restrictions affecting voting rights or the transfer

of shares

2

4

9

7

the full text of which is available at www.bmwgroup.com. As well as shares of common stock, the Company has

62

The right of shareholders to have their shares evidenced

is excluded in accordance with the Articles of Incor-

poration. The voting power attached to each share cor-

also issued non-voting shares of preferred stock. Further

information relating to this can be found above in the

section “Composition of subscribed capital”.

6

3

1

Report on Outlook, Risks and

Opportunities

63

68

77

Outlook

Risks Report

Report on Opportunities

responds to its par value. Each €ꢀ

share capital represented in a vote entitles the holder to When the Company issues non-voting shares of pre-

one vote (Article 18 ) of the Articles of Incorporation). ferred stock to employees in conjunction with its Em-

The Company’s shares of preferred stock are shares ployee Share Scheme, these shares are subject as a

within the meaning of §139 et seq. AktG, which carry a general rule to a Company-imposed vesting period of

1 of par value of

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant for Takeovers

and Explanatory Comments

(

1

8

2

85

BMW Stock and Capital Markets

cumulative preferential right in terms of the allocation

of profit and for which voting rights are normally ex-

cluded. These shares only confer voting rights in excep-

tional cases stipulated by law, in particular when the

preference amount has not been paid or has not been

fully paid in one year and the arrears are not paid

in the subsequent year alongside the full preference

amount due for that year. With the exception of voting

rights, holders of shares of preferred stock are entitled

to the same rights as holders of shares of common

stock. Article 24 of the Articles of Incorporation con-

fers preferential treatment to the non-voting shares of

preferred stock with regard to the appropriation of

four years, measured from the beginning of the calen-

dar year in which the shares are issued.

Contractual holding period arrangements also apply

to shares of common stock required to be acquired by

Board of Management members and certain senior

department heads in conjunction with share-based

remuneration programmes (Compensation Report of

the Corporate Governance section; note 19 to the Group

Financial Statements).

Direct or indirect investments in capital exceeding

10 % of voting rights

the Company’s unappropriated profit. Accordingly, the Based on the information available to the Company, the

unappropriated profit is required to be appropriated

in the following order:

following direct or indirect holdings exceeding 10% of

the voting rights at the end of the reporting period were

held at the date stated:

1

2

Disclosures pursuant to §289 (4) HGB and §315 (4) HGB

Direct share of

voting rights (%)

Indirect share of

voting rights (%)

AQTON SE, Bad Homburg v.d.Höhe, Germany

17.4

0.4

Stefan Quandt, Bad Homburg v.d.Höhe, Germany

17.4

16.3

Johanna Quandt, Bad Homburg v.d.Höhe, Germany

Johanna Quandt GmbH, Bad Homburg v.d.Höhe, Germany

Johanna Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v.d.Höhe, Germany

Susanne Klatten, Munich, Germany

16.3

12.6

Susanne Klatten Beteiligungs GmbH, Bad Homburg v.d.Höhe, Germany

2

Based on voluntary balance notifications provided by the listed shareholders at 31 December 2012.

8

3 CoMBined ManageMent RepoRt

The voting power percentages disclosed above may have cified in §71 AktG, e.ꢀg. to avert serious and imminent

changed subsequent to the stated date if these changes

were not required to be reported to the Company.

Due to the fact that the Company’s shares are issued to

bearer, the Company is generally only aware of changes

in shareholdings if such changes are subject to manda-

tory notification rules.

damage to the Company and/ ꢀo r to offer shares to persons

employed or previously employed by BMWAG or one

of its affiliated companies. In accordance with Article 4

no.5 of the Articles of Incorporation, the Board of

Management is authorised – with the approval of the

Supervisory Board – to increase BMWAG’s share capital

during the period until 13 May 2014 by up to €ꢀ2,936,375

for the purposes of an Employee Share Scheme by

issuing new non-voting shares of preferred stock, which

carry the same rights as existing non-voting preferred

stock, in return for cash contributions (Authorised

Capital 2009). Existing shareholders may not subscribe

to the new shares. No conditional capital is in place at

the reporting date.

Shares with special rights which confer control rights

There are no shares with special rights which confer

control rights.

System of control over voting rights when employees

participate in capital and do not exercise their control

rights directly

The shares issued in conjunction with the Employee

Share Scheme are shares of non-voting preferred stock

which are transferred solely and directly to employees.

Like all other shareholders, employees exercise their

control rights over these shares on the basis of relevant

legal provisions and the Company’s Articles of Incor-

poration.

Significant agreements entered into by the Company

subject to control change clauses in the event of a take-

over bid

The BMWAG is party to the following major agreements

which contain provisions for the event of a change in

control or the acquisition of control as a result of a take-

over bid:

Statutory regulations and Articles of Incorporation

provisions with regard to the appointment and removal

of members of the Board of Management and changes

to the Articles of Incorporation

The appointment or removal of members of the Board

of Management is based on the rules contained in

– An agreement concluded with an international con-

sortium of banks relating to a syndicated credit line

(which was not being utilised at the balance sheet

date) entitles the lending banks to give extraordinary

notice to terminate the credit line (such that all out-

standing amounts, including interest, would fall due

immediately) if one or more parties jointly acquire

direct or indirect control of BMWAG. The term “con-

trol” is defined as the acquisition of more than 50%

of the share capital of BMWAG, the right to receive

more than 50% of the dividend or the right to direct

the affairs of the Company or appoint the majority of

members of the Supervisory Board.

– A cooperation agreement concluded with Peugeot SA

relating to the joint development and production of a

new family of small (1 to 1.6 litre) petrol-driven engines

entitles each of the cooperation partners to give ex-

traordinary notification of termination in the event of

a competitor acquiring control over the other contrac-

tual party and if any concerns of the other contractual

party concerning the impact of the change of control

on the cooperation arrangements are not allayed

during the subsequent discussion process.

§

84 et seq. AktG in conjunction with §31 of the German

Co-Determination Act (MitbestG).

Amendments to the Articles of Incorporation must

comply with §179 et seq. AktG. All amendments must

be decided upon by the shareholders at the Annual

General Meeting (§119 (1) no.5, §179 (1) AktG). The

Supervisory Board is authorised to approve amend-

ments to the Articles of Incorporation which only affect

its wording (Article 14 no.

poration); it is also authorised to change Article

3

of the Articles of Incor-

of

4

the Articles of Incorporation in line with the relevant

utilisation of Authorised Capital 2009. Resolutions

are passed at the Annual General Meeting by simple

majority of shares unless otherwise explicitly required

by binding provisions of law or, when a majority of

share capital is required, by simple majority of shares

represented in the vote (Article 20 of the Articles of

Incorporation).

– BMWAG acts as guarantor for all obligations arising

from the joint venture agreement relating to BMW

Brilliance Automotive Ltd. in China. This agreement

grants an extraordinary right of termination to either

joint venture partner in the event that, either directly

or indirectly, more than 25% of the shares of the

other party are acquired by a third party or the other

party is merged with another legal entity. The termi-

Authorisations given to the Board of Management

in particular with respect to the issuing or buying back

of shares

The Board of Management is authorised to buy back

shares and sell repurchased shares in situations spe-

8

4

nation of the joint venture agreement may result in

the sale of the shares to the other joint venture partner

or in the liquidation of the joint venture entity.

shares of the joint ventures from the affected share-

holder or to require the affected party to acquire the

other shareholder’s shares.

–

Framework agreements are in place with financial in-

stitutions and banks (ISDA Master Agreements) with

respect to trading activities with derivative financial

instruments. Each of these agreements includes an

extraordinary right of termination which triggers the

immediate settlement of all current transactions in

the event that the creditworthiness of the party in-

volved is materially weaker following a direct or in-

direct acquisition of beneficially owned equity capital

which confers the power to elect a majority of the

– An engine supply agreement between BMWAG and

Toyota Motor Europe SA relating to the sale of diesel

engines entitles each of the contractual parties to give

extraordinary notification of termination in the event

that one of the contractual parties merges with an-

other company or is taken over by another company.

1

8

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

24

Report on Economic Position

2

4

Overall Assessment by Management

General and Sector-specific

Environment

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Compensation agreements with members of the

Board of Management or with employees in the event

of a takeover bid

2

4

9

7

62

Supervisory Board of a contractual party or any other The BMW Group has not concluded any compensation

6

3

1

Report on Outlook, Risks and

Opportunities

ownership interest that enables the acquirer to exer-

cise control over a contractual party or which consti-

tutes a merger or a transfer of net assets.

agreements with members of the Board of Manage-

ment or with employees for situations involving a take-

over offer.

63

68

77

Outlook

Risks Report

Report on Opportunities

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant for Takeovers

and Explanatory Comments

– Financing agreements in place with the European

Investment Bank (EIB) entitle the EIB to request early

repayment of the loan in the event of an imminent

or actual change in control at the level of BMWAG

8

2

5

8

BMW Stock and Capital Markets

(partially in the capacity of guarantor and partially in

the capacity of borrower), if the EIB has reason to

assume – after the change of control has taken place

or 30 days after it has requested to discuss the situa-

tion – that the change in control could have a mate-

rial adverse effect, or, in all but two cases as an addi-

tional alternative, if the borrower refuses to hold such

discussions. A change in control of BMWAG arises

if one or more individuals take over or lose control of

BMWAG, with control being defined in the above-

mentioned financing agreements as (i) holding or hav-

ing control over more than 50% of the voting rights,

(

ii) the right to stipulate the majority of the members

of the Board of Management or Supervisory Board,

iii) the right to receive more than 50% of dividends

(

payable, or, in all but two cases as an additional alter-

native (iv) other comparable controlling influence

over BMWAG.

–

BMWAG is party to an agreement with SGL Carbon

SE, Wiesbaden, relating to the joint ventures SGL

Automotive Carbon Fibers LLC, Delaware, USA and

SGL Automotive Carbon Fibers GmbH & Co. KG,

Munich. The agreement includes call and put rights

in case – directly or indirectly – 50% or more of

the voting rights relating to the relevant other share-

holder of the joint ventures are acquired by a third

party, or if 25% of such voting rights have been ac-

quired by a third party if that third party is a com-

petitor of the party that has not been affected by the

acquisition of the voting rights. In the event of such

acquisitions of voting rights by a third party, the non-

affected shareholder has the right to purchase the

8

5 CoMBined ManageMent RepoRt

BMW Stock and Capital Markets in 2013

BMW stocks reached a new all-time high during the

period under report, when the price of BMW common

stock was quoted at €ꢀ85.69 per share. The BMW Group

has the best rating in the European automobile sector,

thus giving it excellent access to international capital

markets.

Development of BMW stock compared to stock exchange

indices since 30 December 2008

in %

500

400

300

200

Good year for stock markets on account of expansion-

ary monetary policies

100

Favourable economic prospects and the expansionary

monetary policies applied by the US Federal Bank (FED)

and the European Central Bank (ECB) helped to make

BMW

Prime

Automobile

DAX

preferred stock common stock

4

48.0

394.4

274.1

198.6

2

013 a good year for stock markets. Within a highly

volatile climate, the German stock index, the DAX, was

able to pick up where it left off in 2012 and climbed to

new heights in 2013.

resulted in a strong final quarter. Despite some inter-

mediate profit-taking, the DAX recorded a new all-time

high of 9,594.35points on 30 December 2013, before closing

the stock market year on the same day at 9,552.16 points,

marginally below its high for the year, but 1,939.77 points

or 25.5% up over the twelve-month period.

Having got off to a positive start, the mood on the mar-

kets was dampened towards the end of the first quarter

by political uncertainties caused by elections in Italy

and the threat of state bankruptcy in Cyprus. In April

the DAX reached its low for the year at 7,418.36 points.

Share prices came under pressure in June following the

FED’s announcement of its intention to bring its bond-

The Prime Automobile Performance Index did even

better, climbing by 417 points over the year under

report to reach 1,393 points, 42.8% higher than one year

buying programme to an end over the course of the year earlier.

and on rumours of a possible credit squeeze in China.

Good corporate and employment figures in the USA

helped to improve the mood considerably at the begin-

ning of the third quarter, only then for concerns about

political instability in the Middle East to cause quite

The EURO STOXX 50 finished the stock market year 17.9%

up at 3,109 points.

Both categories of BMW stock performed exceedingly

large substantial price drops towards the end of August. well within the volatile stock market environment de-

The ongoing expansionary monetary policies of the scribed above. After a good start to the year, BMW com-

ECB and the FED, combined with more favourable eco- mon stock reached a new high of €ꢀ76.16 in January.

nomic data from Europe and the USA, helped the DAX Partly as a reflection of the sharp rise in 2012, the share

to reach a new high of 8,770.10 by the end of September. price then fell as a result of profit-taking. The low for

Agreement in the US federal budget dispute and the

FED’s decision not to taper its bond-buying programme

the year of €ꢀ63.27 was recorded in April. It was only in

the second half of the year that BMW common stock

Development of BMW stock compared to stock exchange indices

(Index: 30 December 2008 = 100)

450

400

350

300

250

200

150

100

BMW preferred stock

BMW common stock

Prime Automobile

DAX

0

9

10

11

DAX

12

13

BMW preferred stock

BMW common stock

Prime Automobile

8

6

returned to profitable ground, finishing the year at

ꢀ85.22, a gain of 16.9% compared to the end of the pre-

vious year. A new all-time high of €ꢀ85.69 was recorded

on the final trading day of the stock market year.

BMW preferred stock gained 27.4% in value year-on-

shares of preferred stock. This increase was executed on

the basis of Authorised Capital 2009 in Article 4 (5) of

the Articles of Incorporation. The new shares of pre-

ferred stock carry the same rights as existing shares of

preferred stock and were issued to enable employees to

obtain an equity participation in the Company. In addi-

tion, 582 shares of preferred stock were bought back via

the stock market in order to service the employee share

scheme.

€

18

Combined management RepoRt

18

General Information on the BMW Group

18

20

23

Business Model

Management System

Research and Development

year. Its price at the end of the stock market year was

€ꢀ62.09. A new all-time high of €ꢀ65.00 was recorded on

24

Report on Economic Position

2

7 November.

2

4

Overall Assessment by Management

General and Sector-specific

Environment

Employee share scheme

BMWAG has enabled its employees to participate in its

success for more than 30 years. Since 1989 this partici-

pation has taken the form of an employee share scheme. the Board of Management and the Supervisory Board

In total, 266,152 shares of preferred stock were issued to will propose to the Annual General Meeting to use

employees in 2013 as part of this scheme.

2

7

Financial and Non-financial

Performance Indicators

Review of Operations

Results of Operations, Financial

Position and Net Assets

Events after the End of the

Reporting Period

Dividend proposal envisages increase

In view of the strong earnings performance for the year,

2

4

9

7

62

6

3

1

Report on Outlook, Risks and

Opportunities

BMWAG’s unappropriated profit of €ꢀ1,707 million to

pay a dividend of €ꢀ2.60 for each share of common stock

63

68

77

Outlook

Risks Report

Report on Opportunities

In this context, and with the approval of the Supervisory (2012: €ꢀ2.50) and a dividend of €ꢀ2.62 for each share of

Board, BMWAG’s share capital was increased by the preferred stock (2012: €ꢀ2.52). These figures correspond

Board of Management by €265,570 from €655,989,413 to to a distribution rate of 32.0% for 2013, unchanged from

8

Internal Control System and Risk

Management System Relevant for the

Consolidated Financial Reporting Process

Disclosures Relevant forTakeovers

and Explanatory Comments

82

€656,254,983 by the issue of 265,570 new non-voting

the previous year.

85

BMW Stock and Capital Markets

BMW stock

2

013

2012

2011

2010

2009

Common stock

Number of shares in 1,000

601,995

1

Stock exchange price in €

Year-end closing price

High

85.22

85.42

63.93

72.93

73.76

53.16

51.76

73.52

45.04

58.85

64.80

28.65

31.80

35.94

17.61

Low

Preferred stock

Number of shares in 1,000

54,260

53,994

53,571

53,163

52,665

1

Stock exchange price in €

Year-end closing price

High

62.09

64.65

48.69

48.76

49.23

35.70

36.55

45.98

32.01

38.50

41.90

21.45

23.00

24.79

11.05

Low

Key data per share in €

Dividend

2

Common stock

2.60

2.62

2.50

2.52

2.30

2.32

1.30

1.32

0.30

0.32

0.31

0.33

7.53

30.42

Preferred stock

3

, 6

Earnings per share of common stock

Earnings per share of preferred stock

8.10

7.75

7.45

4.91

4

, 6

8.12

7.77

7.47

4.93

5

Cash flow

14.41

54.31

13.98

46.66

12.38

41.34

12.45

36.53

6

Equity

1

Xetra closing prices.

Proposed by management.

Annual average weighted amount.

Stock weighted according to dividend entitlements.

Cash inflow from operating activities of the Automotive segment.

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

2

3

4

5

6

8

7 CoMBined ManageMent RepoRt

Further improvement in rating

interest shown in innovation days at the BMW plant in

Leipzig, the test driving event in Amsterdam and show-

room events in London and Paris, BMW i was a subject

of practically all discussions with analysts and investors.

In December 2013 the rating agency Standard & Poor’s

raised BMWAG’s long-term rating from A (stable out-

look) to A+ (stable outlook). BMWAG is the only Euro-

pean automobile manufacturer with this high rating.

The short-term rating remained at A-1, also the highest

level for the sector.

Following the change in Standard & Poor’s rating criteria

in November, the BMW Group received particularly

good marks for its financial strength. In terms of finan-

cial risk, the BMW Group was given the best classifi-

cation (risk category: minimal) thanks to its ability to

generate strong cash flows, its leading position in the

premium segment and the excellent financial indicators

it enjoys on the automotive side of the business. The

rating agency Moody’s also set the BMW Group on a

pedestal again by giving it the best rating of all Euro-

pean automobile manufacturers, unchanged from the

previous year. Since July 2011, BMWAG’s long-term

and short-term ratings are A2 and P-1 respectively.

These rating assessments underline the BMW Group’s

robust financial profile and excellent creditworthiness.

Thanks to these attributes, it not only has good access

to international capital markets, it also benefits from

attractive refinancing conditions, which are particularly

helpful for the BMW Group’s Financial Services busi-

ness.

Regular communication with capital markets continued

The BMW Group’s investor relations activities again

received high praise in the renowned Extel Survey con-

ducted by Thomson Reuters and in the specialist pub-

lication Institutional Investor. Analysts, institutional in-

vestors and rating agencies were kept up to date with

regular quarterly and year-end financial reports. Road-

shows and numerous one-on-one as well as group dis-

cussions were held, sometimes attended by members of

the Board of Management. This comprehensive com-

munication with relevant capital market participants

was supplemented by specialist socially responsible in-

vestment (SRI) roadshows for investors who wish to

incorporate sustainability criteria in their investment

decisions as well as debt roadshows for capital debt in-

vestors and credit analysts. The Investor Relations team

again handled a great many inquiries from private in-

vestors regarding BMW stock and bonds during the

period under report. One important focus of communi-

cation in 2013 was on the BMW i brand and particularly

on BMW i3 and BMW i8 vehicles. In addition to the

8

Group Financial StatementS

BMW Group

Income Statements for Group and Segments

Statement of Comprehensive Income for Group

Income Statements for Group and Segments

in € million

Note

Group

Automotive

unaudited supplementary information)

(

1

2

013

2012

2013

2012

Revenues

9

76,058

–60,784

15,274

76,848

70,629

–57,771

12,858

70,208

–56,525

13,683

Cost of sales

Gross profit

10

–61,354

15,494

Selling and administrative expenses

Other operating income

11

12

–7,255

841

–7,032

829

–6,112

741

–5,862

673

Other operating expenses

–874

7,986

–1,016

8,275

–830

6,657

–895

7,599

Profit/loss before financial result

Result from equity accounted investments

Interest and similar income

Interest and similar expenses

Other financial result

13

14

15

398

184

271

224

398

303

271

353

–449

–206

–73

–375

–592

–472

–534

–263

–96

–552

–501

–429

Financial result

Profit/loss before tax

7,913

7,803

6,561

7,170

Income taxes

16

–2,573

5,340

–2,692

–2,153

4,408

–2,453

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Net profit/loss

5,111

4,717

Attributable to minority interest

34

26

17

24

Attributable to shareholders of BMW AG

5,314

5,085

4,391

4,693

90

92

94

Basic earnings per share of common stock in €

Basic earnings per share of preferred stock in €

Dilutive effects

17

8.10

8.12

–

7.75

7.77

–

96

Notes

96

Accounting Principles and

Policies

Diluted earnings per share of common stock in

€

17

8.10

8.12

7.75

7.77

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Diluted earnings per share of preferred stock in

€

1

2

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Includes impact of exceptional items relating to the sale of the Husqvarna Group.

61 Segment Information

Statement of Comprehensive Income for Group

in € million

Note

1

1, 2

2

013

2012

Net profit

5,340

5,111

Remeasurement of the net defined benefit liability for pension plans

Deferred taxes

35

1,308

–372

936

–1,914

538

Items not expected to be reclassified to the income statement in the future

–1,376

Available-for-sale securities

8

1,357

–7

214

1,302

111

Financial instruments used for hedging purposes

Other comprehensive income from equity accounted investments

Deferred taxes

–407

–635

316

–511

–123

993

Currency translation foreign operations

Items expected to be reclassified to the income statement in the future

Other comprehensive income for the period after tax

Total comprehensive income

20

34

1,252

6,592

–383

4,728

Total comprehensive income attributable to minority interests

26

Total comprehensive income attributable to shareholders of BMW AG

6,566

4,702

1

Presentation adjusted in accordance with revised IAS 1.

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

2

8

9

Group Financial StatementS

Motorcycles Financial Services Other Entities Eliminations

unaudited supplementary information) (unaudited supplementary information) (unaudited supplementary information) (unaudited supplementary information)

(

1, 2

1

2012

2

013

2012

2013

2012

2013

2012

1

,504

1,253

51

1,490

–1,236

254

19,874

–17,270

2,604

19,550

–16,984

2,566

6

–

5

–

–15,955

15,510

–445

–14,405

13,391

–1,014

Revenues

–

Cost of sales

Gross profit

2

6

5

–

177

7

–181

8

–953

57

–980

101

–23

115

–54

44

–18

122

–51

58

10

–79

9

–75

Selling and administrative expenses

Other operating income

–

2

9

–72

9

–65

–129

1,558

77

131

Other operating expenses

7

1,643

–437

–949

Profit/loss before financial result

–

5

–

1

–

1,340

–1,279

59

–

1,542

–1,499

–98

–

–1,464

1,374

–

–1,672

1,684

–

Result from equity accounted investments

Interest and similar income

Interest and similar expenses

Other financial result

–

3

–

–3

–

–7

–2

–4

–5

7

–

3

–3

3

120

–55

–90

12

Financial result

7

6

1,639

1,561

164

3

–527

–937

Profit/loss before tax

–

25

–22

–527

–545

–68

96

5

200

323

Income taxes

5

1

–16

1,112

1,016

8

–327

–614

Net profit/loss

–

8

1

–

Attributable to minority interest

1

–16

1,104

1,015

95

7

–327

–614

Attributable to shareholders of BMWAG

Basic earnings per share of common stock in €

Basic earnings per share of preferred stock in €

Dilutive effects

Diluted earnings per share of common stock in €

Diluted earnings per share of preferred stock in €

9

0

BMW Group

Balance Sheets for Group and Segments at 31December

Assets

Note

Group

Automotive

(unaudited supplementary information)

*

2012

in € million

2013

31.12. 2012

(

1.1. 2012

(adjusted)

2013

adjusted)

Intangible assets

22

23

24

25

26

27

16

29

6,179

15,113

25,914

652

5,207

13,341

24,468

514

5,238

11,685

23,112

302

5,646

14,808

19

4,648

13,053

128

Property, plant and equipment

Leased products

Investments accounted for using the equity method

Other investments

652

514

553

548

561

5,253

–

4,789

–

Receivables from sales financing

Financial assets

32,616

2,593

1,620

954

32,309

2,148

1,967

803

29,331

1,702

1,881

577

1,183

2,226

2,797

32,584

759

Deferred tax

2,217

3,862

29,970

Other assets

Non-current assets

86,194

81,305

74,389

Inventories

30

31

26

27

28

29

32

33

9,585

2,449

21,501

5,559

1,151

4,265

7,664

–

9,725

2,543

20,605

4,612

966

9,638

3,286

20,014

3,751

1,194

3,374

7,776

–

9,259

2,184

–

9,366

2,305

–

Trade receivables

Receivables from sales financing

Financial assets

4,479

1,002

15,480

6,768

–

2,746

775

Current tax

Other assets

3,664

8,370

45

16,162

7,484

–

88

Group Financial StatementS

Income Statements

Statement of

Cash and cash equivalents

Assets held for sale

Current assets

52,174

50,530

49,033

39,172

38,838

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

Total assets

138,368

131,835

123,422

71,756

68,808

96

Notes

96

Accounting Principles and

Policies

Equity and liabilities

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Note

Group

Automotive

(unaudited supplementary information)

1

*

2012

in € million

2013

31.12. 2012

(

1.1. 2012

(adjusted)

2013

adjusted)

61 Segment Information

Subscribed capital

34

656

1,990

656

1,973

655

1,955

Capital reserves

Revenue reserves

33,167

–358

28,544

–674

26,343

–1,674

27,279

Accumulated other equity

Equity attributable to shareholders of BMWAG

35,455

30,499

Minority interest

34

188

107

65

Equity

35,643

30,606

27,344

30,909

28,202

Pension provisions

Other provisions

35

36

16

38

39

2,303

3,772

3,813

3,441

1,996

3,081

938

3,075

1,072

1,604

3,584

10,273

2,358

3,103

492

Deferred tax

3,554

3,081

3,315

Financial liabilities

39,450

3,603

39,095

3,404

37,597

2,911

1,775

3,394

11,122

Other liabilities

Non-current provisions and liabilities

52,682

52,834

48,900

Other provisions

36

37

38

40

39

33

3,411

1,237

30,854

7,475

7,066

–

3,246

1,482

30,412

6,433

6,792

30

3,069

1,363

30,380

5,340

7,026

–

3,039

1,021

725

2,605

1,269

1,289

5,669

18,652

–

Current tax

Financial liabilities

Trade payables

6,764

19,025

–

Other liabilities

Liabilities in conjunction with assets held for sale

Current provisions and liabilities

50,043

48,395

47,178

30,574

29,484

Total equity and liabilities

138,368

131,835

123,422

71,756

68,808

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

9

1

Group Financial StatementS

Assets

Motorcycles

Financial Services

Other Entities

Eliminations

(

unaudited supplementary information) (unaudited supplementary information) (unaudited supplementary information) (unaudited supplementary information)

*

2

013

2012

2013

2012

2013

2012

2013

2012

6

3

72

469

34

486

46

1

–

1

–

Intangible assets

2

71

–

242

Property, plant and equipment

Leased products

–

30,230

–

28,060

–

–4,335

–

–3,720

–

Investments accounted for using the equity method

Other investments

–

6

7

5,754

–

5,761

–

–10,460

–

–10,009

–

32,616

276

32,309

126

Receivables from sales financing

Financial assets

–

1,779

290

18,627

26,451

1,730

349

16,995

24,836

–645

–1,181

–21,906

–38,527

–467

–878

–21,384

–36,458

–

285

279

Deferred tax

–

1,436

65,352

1,330

62,643

Other assets

3

34

314

Non-current assets

3

1

18

20

–

348

114

–

8

145

11

123

–

Inventories

–

1

–

Trade receivables

Receivables from sales financing

Financial assets

21,501

826

20,605

813

–

936

60

1,480

59

–682

–427

–

89

132

–

Current tax

–

31

–

3,530

879

3,573

797

32,775

17

30,285

89

–47,520

–46,387

Other assets

–

Cash and cash equivalents

Assets held for sale

Current assets

–

45

538

–

4

7

38

26,978

26,054

33,788

31,914

–48,202

–46,814

72

852

92,330

88,697

60,239

56,750

–86,729

–83,272

Total assets

Equity and liabilities

Motorcycles Financial Services Other Entities Eliminations

unaudited supplementary information) (unaudited supplementary information) (unaudited supplementary information) (unaudited supplementary information)

(

*

2

013

2012

2013

2012

2013

2012

2013

2012

Subscribed capital

Capital reserves

Revenue reserves

Accumulated other equity

Equity attributable to shareholders of BMWAG

Minority interest

–

8,407

7,633

10,805

8,466

–14,478

–13,695

Equity

2

9

29

135

–

40

257

88

173

1,296

299

1,338

30

–

Pension provisions

Other provisions

1

41

–

5,266

14,376

20,084

40,023

4,777

6

5

–2,790

–645

–2,193

–467

Deferred tax

–

14,174

19,653

38,865

24,115

68

23,613

18

Financial liabilities

318

88

246

410

–20,451

–23,886

–19,907

–22,567

Other liabilities

4

25,784

25,004

Non-current provisions and liabilities

5

7

–

114

–

309

123

289

136

3

93

235

77

3

Other provisions

–

–682

–

–427

–

Current tax

–

16,006

502

16,830

474

14,805

5

12,720

13

Financial liabilities

2

04

277

21

30

442

Trade payables

2

3

–

26,960

–

24,470

–

8,744

–

10,235

–

–47,686

–

–46,586

–

Other liabilities

Liabilities in conjunction with assets held for sale

Current provisions and liabilities

2

7

84

43,900

42,199

23,650

23,280

–48,365

–47,010

72

852

92,330

88,697

60,239

56,750

–86,729

–83,272

Total equity and liabilities

9

2

BMW Group

Cash Flow Statements for Group and Segments

Note

Group

1, 2

in € million

2013

2012

Net profit

5,340

5,111

Reconciliation between net profit and cash inflow/outflow from operating activities

Current tax

2,435

126

2,908

–4

Other interest and similar income/expenses

Depreciation and amortisation of other tangible, intangible and investment assets

Change in provisions

3,830

479

3,716

443

Change in leased products

–2,048

–4,501

138

–1,421

–3,988

–216

407

Change in receivables from sales financing

Change in deferred taxes

Other non-cash income and expense items

Gain/loss on disposal of tangible and intangible assets and marketable securities

Result from equity accounted investments

Changes in working capital

–551

–22

–16

–398

983

–271

1,755

–108

744

Change in inventories

–192

22

Change in trade receivables

Change in trade payables

1,153

453

1,119

–1,065

–2,462

179

Change in other operating assets and liabilities

Income taxes paid

88

Group Financial StatementS

Income Statements

Statement of

–2,787

137

Interest received

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Cash inflow/outflow from operating activities

43

3,614

5,076

9

0

2

4

Investment in intangible assets and property, plant and equipment

Proceeds from the disposal of intangible assets and property, plant and equipment

Expenditure for investments

–6,669

22

–5,236

42

96

Notes

96

Accounting Principles and

Policies

–90

–171

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Proceeds from the disposal of investments

137

107

Cash payments for the purchase of marketable securities

Cash proceeds from the sale of marketable securities

Cash inflow/outflow from investing activities

–3,631

3,250

–6,981

–1,265

1,090

–5,433

1

43

61 Segment Information

Issue/buy-back of treasury shares

Payments into equity

–

17

–

19

Payment of dividend for the previous year

Intragroup financing and equity transactions

Interest paid

–1,653

–

–1,516

–

–122

8,982

–7,242

6,626

–4,996

–721

1,812

2,703

–102

7,977

–6,727

7,427

–5,498

230

Proceeds from the issue of bonds

Repayment of bonds

Proceeds from new non-current other financial liabilities

Repayment of non-current other financial liabilities

Change in current other financial liabilities

Change in commercial paper

–858

952

Cash inflow/outflow from financing activities

43

Effect of exchange rate on cash and cash equivalents

Effect of changes in composition of Group on cash and cash equivalents

Change in cash and cash equivalents

–89

47

–14

13

43

–706

594

Cash and cash equivalents as at 1January

8,370

7,664

7,776

Cash and cash equivalents as at 31December

8,370

1

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Prior year figures have been adjusted in accordance with the change in presentation described in note 43.

Interest relating to financial services business is classified as revenues/cost of sales.

2

3

9

3

Group Financial StatementS

Automotive

unaudited supplementary information)

Financial Services

(unaudited supplementary information)

(

1, 2

2

2012

2

013

2012

2013

4

2

3

,408

4,717

1,112

1,016

Net profit

Reconciliation between net profit and cash inflow/outflow from operating activities

Current tax

,516

3,026

104

–137

–3

–104

–

3

1

53

Other interest and similar income/expenses

Depreciation and amortisation of other tangible, intangible and investment assets

Change in provisions

,745

3,679

267

20

38

3

1

73

09

–

153

–2,895

–4,501

678

54

–2

23

–2,256

–3,988

497

–13

–2

Change in leased products

–

Change in receivables from sales financing

Change in deferred taxes

–

239

–391

265

–

55

22

Other non-cash income and expense items

Gain/loss on disposal of tangible and intangible assets and marketable securities

Result from equity accounted investments

Changes in working capital

–14

–

398

,015

226

–271

1,622

–54

–

1

24

18

–

4

–

Change in inventories

5

3

722

–25

45

19

Change in trade receivables

1

,188

41

2,487

91

,450

954

–1

Change in trade payables

1

–1,918

–2,191

249

269

–132

–

743

–139

–

Change in other operating assets and liabilities

Income taxes paid

–

3

1

Interest received

9

9,167

–5,358

–4,192

Cash inflow/outflow from operating activities

6,575

–5,074

35

–9

7

–37

7

Investment in intangible assets and property, plant and equipment

Proceeds from the disposal of intangible assets and property, plant and equipment

Expenditure for investments

1

5

–

528

37

3,445

,908

–384

65

–

1

163

–179

342

324

–

Proceeds from the disposal of investments

–

–1,167

995

–97

95

–32

Cash payments for the purchase of marketable securities

Cash proceeds from the sale of marketable securities

Cash inflow/outflow from investing activities

2

7,488

–5,530

–

19

–

Issue/buy-back of treasury shares

Payments into equity

1

7

–

1,653

–1,516

–833

–157

–

Payment of dividend for the previous year

Intragroup financing and equity transactions

Interest paid

–

582

149

–

3,844

–

1,505

–

3

1,099

–1,383

6,015

–4,940

517

1,189

–842

6,523

–5,101

231

–

Proceeds from the issue of bonds

Repayment of bonds

–

8

5

600

–127

35

Proceeds from new non-current other financial liabilities

Repayment of non-current other financial liabilities

Change in current other financial liabilities

Change in commercial paper

–

26

25

1

–

489

–4

–

2,672

–1,983

5,152

3,505

Cash inflow/outflow from financing activities

–

53

–11

12

–36

–

–3

1

Effect of exchange rate on cash and cash equivalents

Effect of changes in composition of Group on cash and cash equivalents

Change in cash and cash equivalents

4

7

–

716

1,655

82

–721

7

6

,484

,768

5,829

797

879

1,518

Cash and cash equivalents as at 1January

7,484

797

Cash and cash equivalents as at 31December

9

4

BMW Group

Group Statement of Changes in Equity

1, 2

in € million

Note

Subscribed

capital

Capital

reserves

Revenue reserves

1

January 2012, as originally reported

34

655

1,955

26,102

Impact of application of revised IAS 19

January 2012 (adjusted)

–

241

1

655

1,955

26,343

Dividends paid

–

–1,508

Net profit

–

5,085

–1,376

3,709

Other comprehensive income for the period after tax

Comprehensive income 31 December 2012

Subscribed share capital increase out of Authorised Capital

Premium arising on capital increase relating to preferred stock

Other changes

1

–

18

–

3

1 December 2012 (adjusted)

34

656

1,973

28,544

88

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

1, 2

in € million

Note

Subscribed

capital

Capital

reserves

Revenue reserves

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

1

January 2013, as originally reported

34

656

1,973

28,340

Impact of application of revised IAS 19

January 2013 (adjusted)

–

204

1

656

1,973

28,544

Dividends paid

–

–1,640

Net profit

–

5,314

936

Other comprehensive income for the period after tax

Comprehensive income 31 December 2013

6,250

Subscribed share capital increase out of Authorised Capital

Premium arising on capital increase relating to preferred stock

Other changes

–

17

–

13

3

1 December 2013

34

656

1,990

33,167

1

With effect from the first quarter of the financial year 2013, other revenue reserves and the effect of pension obligations recognised directly in equity are presented on a net basis.

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

2

9

5 Group Financial StatementS

2

Accumulated other equity

Equity

attributable to

shareholders

Minority

interest

Total

2

of BMW AG

Translation

differences

Securities

Derivative

financial

instruments

–

863

–61

–750

27,038

65

27,103

1 January 2012, as originally reported

–

241

–

241

Impact of application of revised IAS 19

863

–61

–750

27,279

65

27,344

1 January 2012 (adjusted)

–

–1,508

–

–1,508

Dividends paid

–

169

–

952

5,085

–383

26

–

5,111

–383

4,728

Net profit

–

128

Other comprehensive income for the period after tax

Comprehensive income 31 December 2012

–

128

4,702

26

–

1

18

–

1

18

Subscribed share capital increase out of Authorised Capital

Premium arising on capital increase relating to preferred stock

Other changes

7

–

7

16

23

–

984

108

202

30,499

107

30,606

31 December 2012 (adjusted)

Accumulated other equity

Securities

Equity

attributable to

shareholders

Minority

interest

Total

of BMW AG

Translation

differences

Derivative

financial

instruments

–

984

108

202

30,295

107

30,402

1 January 2013, as originally reported

–

204

–

204

Impact of application of revised IAS 19

984

108

202

30,499

107

30,606

1 January 2013 (adjusted)

–

–1,640

–

–1,640

Dividends paid

–

645

–

27

–

934

5,314

1,252

6,566

26

–

5,340

1,252

6,592

Net profit

–

Other comprehensive income for the period after tax

Comprehensive income 31 December 2013

–

26

–

17

–

17

Subscribed share capital increase out of Authorised Capital

Premium arising on capital increase relating to preferred stock

Other changes

–

13

55

68

–

1,629

135

1,136

35,455

188

35,643

31 December 2013

9

6

BMW Group

Notes to the Group Financial Statements

Accounting Principles and Policies

1

Basis of preparation

The consolidated financial statements of Bayerische

and lease financing – to both retail customers and

dealers. The inclusion of the financial services activities

Motoren Werke Aktiengesellschaft (BMW Group Finan- of the Group therefore has an impact on the Group

cial Statements or Group Financial Statements) at 31

December 2013 have been drawn up in accordance with

International Financial Reporting Standards (IFRSs)

as endorsed by the EU. The designation “IFRSs” also in-

cludes all valid International Accounting Standards

Financial Statements.

Inter-segment transactions – relating primarily to inter-

nal sales of products, the provision of funds and the

related interest – are eliminated in the “Eliminations”

column. Further information regarding the allocation

of activities of the BMW Group to segments and a de-

scription of the segments is provided in note 49.

(

IASs). All Interpretations of the IFRS Interpretations

Committee (IFRICs) mandatory for the financial year

013 are also applied.

2

The Group Financial Statements comply with §315a of

the German Commercial Code (HGB). This provision,

in conjunction with the Regulation (EC) No. 1606ꢀ/ꢀ2002

of the European Parliament and Council of 19 July

In conjunction with the refinancing of financial ser-

vices business, a significant volume of receivables

arising from retail customer and dealer financing is

sold. Similarly, rights and obligations relating to leases

are sold. The sale of receivables is a well-established

instrument used by industrial companies. These trans-

actions usually take the form of asset-backed financing

2

002, relating to the application of International Finan-

cial Reporting Standards, provides the legal basis for

preparing consolidated financial statements in accord-

ance with international standards in Germany and applies transactions involving the sale of a portfolio of receiv-

to financial years beginning on or after 1 January 2005.

ables to a trust which, in turn, issues marketable se-

curities to refinance the purchase price. The BMW Group

continues to “service” the receivables and receives an

appropriate fee for these services. In accordance with

IAS 27 (Consolidated and Separate Financial State-

ments) and Interpretation SIC-12 (Consolidation – Spe-

cial Purpose Entities) such assets remain in the Group

Financial Statements although they have been legally

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

The BMW Group and segment income statements are

presented using the cost of sales method. The Group

and segment balance sheets correspond to the classifi-

cation provisions contained in IAS 1 (Presentation of

Financial Statements).

90

92

94

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

In order to improve clarity, various items are aggregated sold. Gains and losses relating to the sale of such assets

in the income statement and balance sheet. These items are not recognised until the assets are removed from

are disclosed and analysed separately in the notes.

1

the Group balance sheet on transfer of the related sig-

nificant risks and rewards. The balance sheet volume of

the assets sold at 31 December 2013 totalled €ꢀ10.1 bil-

lion (2012: €ꢀ9.4 billion).

61 Segment Information

A Statement of Comprehensive Income is presented at

Group level reconciling the net profit to comprehensive

income for the year.

In addition to credit financing and leasing contracts,

In order to provide a better insight into the net assets, the Financial Services segment also brokers insurance

financial position and performance of the BMW Group business via cooperation arrangements entered into

and going beyond the requirements of IFRS 8 (Operating with local insurance companies. These activities are not

Segments), the Group Financial Statements also include

balance sheets and income statements for the Automo-

material to the BMW Group as a whole.

tive, Motorcycles, Financial Services and Other Entities The Group currency is the euro. All amounts are dis-

segments. The Group Cash Flow Statement is supple- closed in millions of euros (€ million) unless stated other-

mented by statements of cash flows for the Automotive wise.

and Financial Services segments. This supplementary

information is unaudited.

Bayerische Motoren Werke Aktiengesellschaft has its

seat in Munich, Petuelring 130, and is registered in the

Commercial Register of the District Court of Munich

under the number HRB 42243.

In order to facilitate the sale of its products, the BMW

Group provides various financial services – mainly loan

9

7 Group Financial StatementS

All consolidated subsidiaries have the same year-end

as BMWAG with the exception of BMW India Private

Ltd., Gurgaon, and BMW India Financial Services

Private Ltd., Gurgaon, both of whose year-ends are

version of the German Federal Gazette and can be ob-

tained via the Company Register website. Printed copies

will also be made available on request. In addition the

Group Financial Statements and the Combined Manage-

ment Report can be downloaded from the BMW Group

website at www.bmwgroup.comꢀ/ꢀir.

31 March.

The Group Financial Statements, drawn up in accord-

ance with §315a HGB, and the Combined Management The Board of Management authorised the Group Finan-

Report for the financial year ended 31 December 2013

will be submitted to the operator of the electronic

cial Statements for issue on 20 February 2014.

2

Consolidated companies

The BMW Group Financial Statements include, besides

BMWAG, all material subsidiaries, five special purpose

The number of subsidiaries – including special purpose

securities funds and special purpose trusts – consoli-

securities funds and 32 special purpose trusts (almost all dated in the Group Financial Statements changed in 2013

used for asset-backed financing transactions).

as follows:

Germany

Foreign

Total

Included at 31 December 2012

Included for the first time in 2013

No longer included in 2013

24

1

164

12

188

13

1

9

10

Included at 31 December 2013

24

167

191

4

8 subsidiaries (2012: 51), either dormant or generating

Minor Importance for the Group”, will also be posted

a negligible volume of business, are not consolidated

on the BMW Group website at www.bmwgroup.comꢀ/ꢀir.

on the grounds that their inclusion would not influence The List of Group Investments, the List of Third Party

the economic decisions of users of the Group Financial Companies which are not of Minor Importance for the

Statements. Non-inclusion of operating subsidiaries re- Group and the full list of consolidated companies are

duces total Group revenues by 1.0% (2012: 0.9%).

also posted as appendices on the BMW Group website.

The joint ventures SGL Automotive Carbon Fibers

GmbH & Co. KG, Munich, SGL Automotive Carbon

Fibers Verwaltungs GmbH, Munich, and SGL Auto-

motive Carbon Fibers LLC, Dover, DE, as well as BMW

Brilliance Automotive Ltd., Shenyang, are accounted

for using the equity method. Similarly, the joint ven-

tures DriveNow GmbH & Co. KG, Munich, and Drive-

Now Verwaltungs GmbH, Munich, are accounted for

using the equity method. Six (2012: four) participa-

tions are not consolidated using the equity method on

the grounds of immateriality. They are included in

the balance sheet in the line “Other investments”,

measured at cost less, where applicable, accumulated

impairment losses.

No subsidiaries were consolidated for the first time in the

financial year 2013. BMW Peugeot Citroën Electrification

GmbH, Munich, which was not part of the Group re-

porting entity at 31 December 2012, was merged with

BMWAG, Munich, with retrospective effect from 1 Janu-

ary 2013. In addition, Laja Mobilien Verwaltungs GmbH,

Grünwald, which was not part of the Group reporting

entity at 31 December 2012, was merged with BMW

Finanz Verwaltungs GmbH, Munich, in the fourth quar-

ter of 2013.

Husqvarna Motorcycles S.r.l., Cassinetta di Biandronno,

and Husqvarna Motorcycles NA, LLC, Wilmington, DE,

were sold and therefore ceased to be consolidated com-

panies. Alphabet International B.V., Amsterdam, was

A “List of Group Investments” pursuant to §313 (2) HGB merged with Alphabet Nederland B.V., Breda, with retro-

will be submitted to the operator of the electronic ver- spective effect from 1 January 2013 and hence ceased

sion of the German Federal Gazette. This list, along with to be a consolidated company. GVK Gesellschaft für Ver-

the “List of Third Party Companies which are not of mietung und Verwaltung von Kraftfahrzeugen mbH,

9

8

Munich, was merged with BMW Finanz Verwaltungs

GmbH, Munich, in the fourth quarter and therefore

ceased to be a consolidated company.

purpose securities fund and the deconsolidation of six

special purpose trusts.

The changes to the composition of the Group do not have

The Group reporting entity also changed by comparison a material impact on the results of operations, financial

to the previous year as a result of the first-time consoli-

dation of twelve special purpose trusts and one special

position or net assets of the Group.

3

Consolidation principles

The equity of subsidiaries is consolidated in accordance

with IFRS 3 (Business Combinations). IFRS 3 requires

that all business combinations are accounted for using

Under the equity method, investments are measured at

the BMW Group’s share of equity taking account of

fair value adjustments. Any difference between the cost

the acquisition method, whereby identifiable assets and of investment and the Group’s share of equity is ac-

liabilities acquired are measured at their fair value at

acquisition date. An excess of acquisition cost over the

Group’s share of the net fair value of identifiable assets,

counted for in accordance with the acquisition method.

Investments in other companies are accounted for as a

general rule using the equity method when significant

liabilities and contingent liabilities is recognised as good- influence can be exercised (IAS 28 Investments in Asso-

will as a separate balance sheet line item and allocated

to the relevant cash-generating unit (CGU). Goodwill of

ciates). As a general rule, there is a rebuttable assump-

tion that the Group has significant influence if it holds

€

ꢀ91 million which arose prior to 1 January 1995 remains between 20% and 50% of the associated company’s andꢀꢀ/

88

Group Financial StatementS

Income Statements

Statement of

netted against reserves.

or joint venture’s voting power.

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

9

0

2

4

Receivables, payables, provisions, income and expenses

and profits between consolidated companies (intra-group

profits) are eliminated on consolidation.

9

6

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

4

Foreign currency translation

come statement are also offset directly against accumu-

lated other equity.

The financial statements of consolidated companies

which are drawn up in a foreign currency are translated

using the functional currency concept (IAS 21 The

Effects of Changes in Foreign Exchange Rates) and the

modified closing rate method. The functional currency

of a subsidiary is determined as a general rule on the

basis of the primary economic environment in which it

operates and corresponds therefore usually to the rele-

vant local currency. Income and expenses of foreign

1

61 Segment Information

Foreign currency receivables and payables in the single

entity accounts of BMWAG and subsidiaries are re-

corded, at the date of the transaction, at cost. At the end

of the reporting period, foreign currency receivables

and payables are translated at the closing exchange rate.

The resulting unrealised gains and losses as well as the

subsequent realised gains and losses arising on settle-

subsidiaries are translated in the Group Financial State- ment are recognised in the income statement in ac-

ments at the average exchange rate for the year, and

assets and liabilities are translated at the closing rate.

Exchange differences arising from the translation of

shareholders’ equity are offset directly against accumu-

lated other equity. Exchange differences arising from

the use of different exchange rates to translate the in-

cordance with the underlying substance of the relevant

transactions.

The exchange rates of those currencies which have a

material impact on the Group Financial Statements were

as follows:

Closing rate

Average rate

31.12. 2013

31.12. 2012

2013

2012

US Dollar

1.38

0.83

1.32

0.81

1.33

0.85

1.29

0.81

8.11

British Pound

Chinese Renminbi

Japanese Yen

Russian Rouble

8.34

8.23

8.16

144.55

45.29

114.10

40.41

129.70

42.34

102.63

39.91

9

9 Group Financial StatementS

5

Accounting policies

terest expense from refinancing the entire financial ser-

vices business, including the expense of risk provisions

and write-downs, are reported in cost of sales.

The financial statements of BMWAG and of its subsidi-

aries in Germany and elsewhere have been prepared

for consolidation purposes using uniform accounting

policies in accordance with IAS 27 (Consolidated and

Separate Financial Statements).

In accordance with IAS 20 (Accounting for Government

Grants and Disclosure of Government Assistance), pub-

lic sector grants are not recognised until there is reason-

Revenues from the sale of products are recognised when able assurance that the conditions attaching to them

the risks and rewards of ownership of the goods are

transferred to the dealer or customer, provided that the

amount of revenue can be measured reliably, it is

have been complied with and the grants will be received.

They are recognised as income over the periods neces-

sary to match them with the related costs which they are

probable that the economic benefits associated with the intended to compensate.

transaction will flow to the entity and costs incurred

or to be incurred in respect of the sale can be measured

Basic earnings per share are computed in accordance with

reliably. Revenues are stated net of settlement discount, IAS 33 (Earnings per Share). Basic earnings per share

bonuses and rebates. Revenues also include lease rentals are calculated for common and preferred stock by di-

and interest income earned in conjunction with finan-

cial services. Revenues from leasing instalments relate

to operating leases and are recognised in the income

statement on a straight line basis over the relevant term

of the lease. Interest income from finance leases and

viding the net profit after minority interests, as attribut-

able to each category of stock, by the average number

of outstanding shares. The net profit is accordingly allo-

cated to the different categories of stock. The portion of

the Group net profit for the year which is not being dis-

from customer and dealer financing are recognised using tributed is allocated to each category of stock based on

the effective interest method and reported as revenues the number of outstanding shares. Profits available for

within the line item “Interest income on loan financing”. distribution are determined directly on the basis of the

If the sale of products includes a determinable amount dividend resolutions passed for common and preferred

for subsequent services (multiple-component contracts), stock. Diluted earnings per share would have to be dis-

the related revenues are deferred and recognised as

income over the relevant service period. Amounts are

normally recognised as income by reference to the pat-

tern of related expenditure.

closed separately.

Share-based remuneration programmes which are ex-

pected to be settled in shares are, in accordance with

IFRS 2 (Share-based Payments), measured at their fair

value at grant date. The related expense is recognised

in the income statement (as personnel expense) over the

Profits arising on the sale of vehicles for which a Group

company retains a repurchase commitment (buy-back

contracts) are not recognised until such profits have been vesting period, with a contra (credit) entry recorded

realised. The vehicles are included in inventories and

stated at cost.

against capital reserves.

Share-based remuneration programmes expected to be

Cost of sales comprises the cost of products sold and the settled in cash are revalued to their fair value at each

acquisition cost of purchased goods sold. In addition

to directly attributable material and production costs, it

also includes research costs and development costs not

recognised as assets, the amortisation of capitalised

development costs as well as overheads (including de-

preciation of property, plant and equipment and amor-

tisation of other intangible assets relating to produc-

tion) and write-downs on inventories. Cost of sales also

includes freight and insurance costs relating to deliveries

to dealers and agency fees on direct sales. Expenses

balance sheet date between the grant date and the settle-

ment date (and on the settlement date itself). The ex-

pense for such programmes is recognised in the income

statement (as personnel expense) over the vesting pe-

riod of the programmes and recognised in the balance

sheet as a provision.

The share-based remuneration programme for Board

of Management members and senior heads of depart-

ment entitles BMWAG to elect whether to settle its

which are directly attributable to financial services busi- commitments in cash or with shares of BMWAG com-

ness (including depreciation on leased products) and in- mon stock. Following the decision to settle in cash,

1

00

this programme is accounted for as a cash-settled share- ture that can be attributed directly to the development

based transaction. Further information on share-based

remuneration programmes is provided in note 19.

process, including development-related overheads.

Capitalised development costs are amortised system-

atically over the estimated product life (usually four to

eleven years) following start of production.

Purchased and internally-generated intangible assets

are recognised as assets in accordance with IAS 38

(

Intangible Assets), where it is probable that the use of

Goodwill arises on first-time consolidation of an ac-

quired business when the cost of acquisition exceeds

the Group’s share of the fair value of the individually

identifiable assets acquired and liabilities and contingent

liabilities assumed.

the asset will generate future economic benefits and

where the costs of the asset can be determined relia-

bly. Such assets are measured at acquisition andꢀ/ꢀor

manufacturing cost and, to the extent that they have

a finite useful life, amortised over their estimated use-

ful lives. With the exception of capitalised develop-

ment costs, intangible assets are generally amortised

over their estimated useful lives of between three and

six years.

All items of property, plant and equipment are considered

to have finite useful lives. They are recognised at acqui-

sition or manufacturing cost less scheduled depreciation

based on the estimated useful lives of the assets. De-

preciation on property, plant and equipment reflects the

pattern of their usage and is generally computed using the

straight-line method. Components of items of property,

plant and equipment with different useful lives are de-

preciated separately.

Development costs for vehicle and engine projects are

capitalised at manufacturing cost, to the extent that

attributable costs can be measured reliably and both

technical feasibility and successful marketing are as-

sured. It must also be probable that the development

expenditure will generate future economic benefits.

Capitalised development costs comprise all expendi-

88

Group Financial StatementS

Income Statements

Statement of

Systematic depreciation is based on the following useful

lives, applied throughout the BMW Group:

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

in years

Factory and office buildings, residential buildings, fixed installations in buildings and outside facilities

Plant and machinery

8 to 50

3 to 21

2 to 25

96

Notes

96

Accounting Principles and

Policies

Other equipment, factory and office equipment

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

For machinery used in multiple-shift operations, depre-

ciation rates are increased to account for the additional

utilisation.

Non-current assets also include assets relating to leases.

The BMW Group uses property, plant and equipment

as lessee on the one hand and leases out vehicles pro-

duced by the Group and other brands as lessor on the

other. IAS 17 (Leases) contains rules for determining,

61 Segment Information

The cost of internally constructed plant and equipment

comprises all costs which are directly attributable to the on the basis of risks and rewards, the economic owner

manufacturing process and an appropriate proportion

of production-related overheads. This includes produc-

of the assets. In the case of finance leases, the assets are

attributed to the lessee and in the case of operating leases

tion-related depreciation and an appropriate proportion the assets are attributed to the lessor.

of administrative and social costs.

In accordance with IAS 17, assets leased under finance

As a general rule, borrowing costs are not included in

acquisition or manufacturing cost. Borrowing costs that

are directly attributable to the acquisition, construction

or production of a qualifying asset are recognised as a

part of the cost of that asset in accordance with IAS 23

leases are measured at their fair value at the inception

of the lease or at the present value of the lease payments,

if lower. The assets are depreciated using the straight-

line method over their estimated useful lives or over the

lease period, if shorter. The obligations for future lease

instalments are recognised as financial liabilities.

(Borrowing Costs).

1

01 Group Financial StatementS

Where Group products are recognised by BMW Group

entities as leased products under operating leases, they

are measured at manufacturing cost. All other leased

products are measured at acquisition cost. All leased

products are depreciated over the period of the lease

using the straight-line method down to their expected

residual value. Changes in residual value expectations

are recognised – in situations where the recoverable

amount of the lease exceeds the carrying amount of

the asset – by adjusting scheduled depreciation pro-

spectively over the remaining term of the lease

contract. If the recoverable amount is lower than the

expected residual value, an impairment loss is recog-

nised for the shortfall. A test is carried out at each

balance sheet date to determine whether an impair-

ment loss recognised in prior years no longer exists

or has decreased. In these cases, the carrying amount

of the asset is increased to the recoverable amount.

The higher carrying amount resulting from the rever-

sal may not, however, exceed the rolled-forward amor-

tised cost of the asset.

lower than the carrying amount of the asset, then its

fair value less costs to sell are also determined. If the lat-

ter is also lower than the carrying amount of the asset,

then an impairment loss is recorded, reducing the car-

rying amount to the higher of the asset’s value in use

or fair value less costs to sell. The value in use is deter-

mined on the basis of a present value computation.

Cash flows used for the purposes of this calculation are

derived from long-term forecasts approved by manage-

ment. The long-term forecasts themselves are based on

detailed forecasts drawn up at an operational level

and, based on a planning period of six years, correspond

roughly to a typical product’s life-cycle. For the purposes

of calculating cash flows beyond the planning period,

the asset’s assumed residual value does not take growth

into account. Forecasting assumptions are continually

brought up to date and regularly compared with exter-

nal sources of information. The assumptions used take

account in particular of expectations of the profitability

of the product portfolio, future market share develop-

ments, macro-economic developments (such as currency,

interest rate and raw materials) as well as the legal en-

vironment and past experience. Cash flows of the Auto-

motive and Motorcycles CGUs are discounted using a

risk-adjusted pre-tax weighted average cost of capital

(WACC) of 12.0% (2012: 12.0%). In the case of the Finan-

cial Services CGU, a sector-compatible pre-tax cost of

equity capital of 13.4% (2012: 13.4%) is applied. In con-

junction with the impairment tests for CGUs, sensitivity

analyses are performed for the main assumptions.

Analyses performed in the year under report confirmed,

as in the previous year, that no impairment loss was re-

quired to be recognised.

If there is any evidence of impairment of non-financial

assets (except inventories and deferred taxes), or if an

annual impairment test is required to be carried out –

i.ꢀe. for intangible assets not yet available for use, intan-

gible assets with an indefinite useful life and goodwill

acquired as part of a business combination – an impair-

ment test pursuant to IAS 36 (Impairment of Assets)

is performed. Each individual asset is tested separately

unless the asset generates cash flows that are largely

independent of the cash flows from other assets or

groups of assets (cash-generating unitsꢀ/ꢀCGUs). For the

purposes of the impairment test, the asset’s carrying

amount is compared with its recoverable amount, the

latter defined as the higher of the asset’s fair value less

costs to sell and its value in use. An impairment loss

If the reason for a previously recognised impairment

loss no longer exists, the impairment loss is reversed up

to the level of the recoverable amount, capped at the

is recognised when the recoverable amount is lower than level of rolled-forward amortised cost. This does not ap-

the asset’s carrying amount. Fair value is the price that

would be received to sell an asset in an orderly trans-

action between market participants at the measurement

date. The value in use corresponds to the present value

ply to goodwill: previously recognised impairment losses

on goodwill are not reversed.

Investments accounted for using the equity method are

of future cash flows expected to be derived from an asset (except when the investment is impaired) measured at

or groups of assets.

the Group’s share of equity taking account of fair value

adjustments on acquisition. Investments accounted

for using the equity method comprise joint ventures and

significant associated companies.

The first step of the impairment test is to determine the

value in use of an asset. If the calculated value in use is

1

02

Investments in non-consolidated Group companies and

interests in associated companies not accounted for

using the equity method are reported as Other invest-

ments and measured at cost or, if lower, at their fair

value.

term are measured at amortised cost using the effective

interest method. All financial assets for which published

price quotations in an active market are not available

and whose fair value cannot be determined reliably are

required to be measured at cost.

Participations are measured at their fair value. If this

value is not available or cannot be determined reliably,

participations are measured at cost.

In accordance with IAS 39 (Financial Instruments:

Recognition and Measurement), assessments are made

regularly as to whether there is any objective evidence

that a financial asset or group of assets may be impaired.

Impairment losses identified after carrying out an im-

pairment test are recognised as an expense. Gains and

losses on available-for-sale financial assets are recog-

nised directly in equity until the financial asset is dis-

posed of or is determined to be impaired, at which time

the cumulative loss previously recognised in equity is

reclassified to profit or loss for the period.

Non-current marketable securities are measured ac-

cording to the category of financial asset to which they

are classified. No held-for-trading financial assets are

included under this heading.

A financial instrument is a contract that gives rise to a

financial asset of one entity and a financial liability or

equity instrument of another entity. Once the BMW

Group becomes party to such to a contract, the finan-

cial instrument is recognised either as a financial asset

or as a financial liability.

With the exception of derivative financial instruments,

all receivables and other current assets relate to loans

and receivables which are not held for trading. All such

items are measured at amortised cost. Receivables with

maturities of over one year which bear no or a lower-

than-market interest rate are discounted. Appropriate

impairment losses are recognised to take account of all

identifiable risks.

88

Group Financial StatementS

Income Statements

Statement of

Financial assets are accounted for on the basis of the

settlement date. On initial recognition, they are meas-

ured at their fair value. Transaction costs are included

in the fair value unless the financial assets are allocated

to the category “financial assets measured at fair value

through profit or loss”.

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

96

Notes

96

Accounting Principles and

Policies

Receivables from sales financing comprise receivables

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

from retail customer, dealer and lease financing.

Subsequent to initial recognition, available-for-sale and

held-for-trading financial assets are measured at their

fair value. When market prices are not available, the fair

value of available-for-sale financial assets is measured

1

Impairment losses on receivables relating to financial

services business are recognised using a uniform method-

ology that is applied throughout the Group and meets

61 Segment Information

using appropriate valuation techniques e.ꢀg. discounted the requirements of IAS 39. This methodology results

cash flow analysis based on market information available in the recognition of impairment losses both on indi-

at the balance sheet date.

vidual assets and on groups of assets. If there is objec-

tive evidence of impairment, the BMW Group recog-

Available-for-sale assets include non-current investments, nises impairment losses on the basis of individual

securities and investment fund shares. This category assets. Within the retail customer business, the existence

includes all non-derivative financial assets which are not of overdue balances or the incidence of similar events

classified as “loans and receivables” or “held-to-maturity in the past are examples of such objective evidence. In

investments” or as items measured “at fair value through the event of overdue receivables, impairment losses are

profit and loss”.

always recognised individually based on the length

of period of the arrears. In the case of dealer financing

receivables, the allocation of the dealer to a correspond-

Loans and receivables which are not held for trading

and held-to-maturity financial investments with a fixed ing rating category is also deemed to represent objec-

1

03 Group Financial StatementS

tive evidence of impairment. If there is no objective evi-

dence of impairment, impairment losses are recognised

on financial assets using a portfolio approach based on

similar groups of assets. Company-specific loss proba-

bilities and loss ratios, derived from historical data, are

plied, changes in fair value are recognised either in in-

come or directly in equity under accumulated other

equity, depending on whether the transactions are clas-

sified as fair value hedges or cash flow hedges. In the

case of fair value hedges, the results of the fair value

used to measure impairment losses on similar groups of measurement of the derivative financial instruments

assets.

and the related hedged items are recognised in the in-

come statement. In the case of fair value changes in

cash flow hedges which are used to mitigate the future

cash flow risk on a recognised asset or liability or on

forecast transactions, unrealised gains and losses on the

hedging instrument are recognised initially directly in

The recognition of impairment losses on receivables

relating to industrial business is also, as far as possible,

based on the same procedures applied to financial ser-

vices business. Impairment losses (write-downs and

allowances) on receivables are always recorded on sepa- accumulated other equity. Any such gains or losses are

rate accounts and derecognised at the same time the

corresponding receivables are derecognised.

recognised subsequently in the income statement when

the hedged item (usually external revenue) is recog-

nised in the income statement. The portion of the gains

Items are presented as financial assets to the extent that or losses from fair value measurement not relating to

they relate to financing transactions.

the hedged item is recognised immediately in the in-

come statement. If, contrary to the normal case within

the BMW Group, hedge accounting cannot be applied,

the gains or losses from the fair value measurement of

derivative financial instruments are recognised imme-

diately in the income statement.

Derivative financial instruments are only used within

the BMW Group for hedging purposes in order to re-

duce currency, interest rate, fair value and market price

risks from operating activities and related financing

requirements.

In accordance with IAS 12 (Income Taxes), deferred

taxes are recognised on all temporary differences

between the tax and accounting bases of assets and lia-

bilities and on consolidation procedures. Deferred tax

assets also include claims to future tax reductions which

arise from the expected usage of existing tax losses

available for carryforward to the extent that future usage

is probable. Deferred taxes are computed using enacted

or planned tax rates which are expected to apply in the

relevant national jurisdictions when the amounts are

recovered.

All derivative financial instruments (such as interest,

currency and combined interestꢀ/ꢀcurrency swaps, for-

ward currency and forward commodity contracts) are

measured in accordance with IAS 39 at their fair value,

irrespective of their purpose or the intention for which

they are held.

If there are no quoted prices on active markets for

derivative financial instruments, credit risk is taken

into account as an adjustment to the fair value of the

financial instrument. The BMW Group applies the

option of measuring the credit risk for a group of finan- Inventories of raw materials, supplies and goods for re-

cial assets and financial liabilities on the basis of its

net exposure. Portfolio-based value adjustments to the

individual financial assets and financial liabilities are

allocated using the relative fair value approach (net

method).

sale are stated at the lower of average acquisition cost

and net realisable value.

Work in progress and finished goods are stated at the

lower of average manufacturing cost and net realisable

value. Manufacturing cost comprises all costs which

are directly attributable to the manufacturing process

and an appropriate proportion of production-related

overheads. This includes production-related depreciation

Derivative financial instruments are measured using

market information and recognised valuation tech-

niques. In those cases where hedge accounting is ap-

1

04

and an appropriate proportion of administrative and

social costs.

on an independent actuarial valuation which takes into

account all relevant biometric factors.

Borrowing costs are not included in the acquisition or

manufacturing cost of inventories.

Remeasurements of the net defined benefit liability for

pension plans are recognised, net of deferred tax, directly

in equity (revenue reserves).

Cash and cash equivalents comprise mainly cash on hand

and cash at bank with an original term of up to three

months.

Net interest expense on the net defined benefit liability

andꢀ/ꢀor net interest income on the net defined benefit

asset are presented separately within the financial result.

Assets held for sale and disposal groups held for sale are All other costs relating to allocations to pension pro-

presented separately in the balance sheet in accordance

with IFRS 5, if the carrying amount of the relevant as-

sets will be recovered principally through a sale trans-

action rather than through continuing use. This situa-

tion only arises if the assets can be sold immediately in

their present condition, the sale is expected to be com-

pleted within one year from the date of classification

and the sale is highly probable. At the date of classifica-

tion, property, plant and equipment, intangible assets

and disposal groups which are being held for sale are

measured at the lower of their carrying amount and

their fair value less costs to sell and scheduled deprecia- of more than one year are discounted to the present

tionꢀ/ꢀamortisation ceases. This does not apply, however, value of the expenditures expected to settle the obligation

to items within the disposal group which are not covered at the end of the reporting period.

by the measurement rules contained in IFRS 5. Simul-

taneously, liabilities directly related to the sale are pre-

sented separately on the equity and liabilities side of the tion at cost which corresponds to the fair value of the

visions are allocated to costs by function in the income

statement.

Other provisions are recognised when the BMW Group

has a present obligation (legal or constructive) arising

from past events, the settlement of which is probable

and when a reliable estimate can be made of the amount

of the obligation. Measurement of provisions is based

on the best estimate of the expenditure required to

settle the present obligation at the end of the reporting

period. Non-current provisions with a remaining period

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

96

Notes

Financial liabilities are measured on first-time recogni-

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

balance sheet as “Liabilities in conjunction with assets

held for sale”.

consideration given. Transaction costs are also taken

into account except for financial liabilities allocated to

the category “financial liabilities measured at fair value

through profit or loss”. Subsequent to initial recogni-

tion, liabilities are – with the exception of derivative

financial instruments – measured at amortised cost using

the effective interest method. The BMW Group has no

1

61 Segment Information

Provisions for pensions and similar obligations are rec-

ognised using the projected unit credit method in ac-

cordance with IAS 19 (Employee Benefits). Under this

method, not only obligations relating to known vested

benefits at the reporting date are recognised, but also the liabilities which are held for trading. Liabilities from

effect of future increases in pensions and salaries. This

involves taking account of various input factors which

finance leases are stated at the present value of the fu-

ture lease payments and disclosed under other finan-

are evaluated on a prudent basis. The calculation is based cial liabilities.

6

Assumptions, judgements and estimations

ties. Judgements have to be made in particular when as-

The preparation of the Group Financial Statements in

accordance with IFRSs requires management to make

certain assumptions and judgements and to use estima-

tions that can affect the reported amounts of assets and

sessing whether the risks and rewards incidental to

ownership of a leased asset have been transferred and,

hence, the classification of leasing arrangements.

Major items requiring assumptions and estimations are

liabilities, revenues and expenses and contingent liabili- described below. The assumptions used are continuously

1

05 Group Financial StatementS

checked for their validity. Actual amounts could differ

from the assumptions and estimations used if busi-

ness conditions develop differently to the Group’s ex-

pectations.

these purposes, the main factors taken into considera-

tion are past experience, current market data (such as

the level of financing business arrears), rating classes

and scoring information. Further information is provided

in note 26.

Estimations are required to assess the recoverability of a

cash-generating unit (CGU). If the recoverability of an

asset is being tested at the level of a CGU, assumptions

must be made with regard to future cash inflows and

outflows, involving in particular an assessment of the

The disposal of an asset or of a disposal group pursuant

to IFRS 5 is considered to be highly probable by the BMW

Group if management is committed to a sales plan, an

active programme to locate a buyer has begun, the price

forecasting period to be used and of developments after offered is reasonable in relation to the fair value of the

that period. For the purposes of determining future

cash inflows and outflows, management applies fore-

casting assumptions which are continually brought up

assetꢀ/ꢀdisposal group concerned and it is expected at the

date of classification that the final negotiations with the

buyer and completion of the sale will take place within

to date and regularly compared with external sources of one year. Further details can be found in note 33.

information. The assumptions used take account in par-

ticular of expectations of the profitability of the product

portfolio, future market share developments, macro-

economic developments (such as currency, interest rate

Estimations are required for the purposes of recognis-

ing and measuring provisions for warranty obligations

(statutory, contractual and voluntary). In addition to

and raw materials) as well as the legal environment and statutorily prescribed manufacturer warranties, the

past experience.

BMW Group also offers various categories of warranty

depending on the product and sales market concerned.

Warranty provisions are recognised when the risks

and rewards of ownership of the goods are transferred

to the dealer or retail customer or when a new category

of warranty is introduced. In order to determine the

level of the provision, various factors are taken into con-

The BMW Group regularly checks the recoverability of

its leased products. One of the main assumptions re-

quired for leased products relates to their residual value

since this represents a significant portion of future cash

inflows. In order to estimate the level of prices likely to

be achieved in the future, the BMW Group incorporates sideration, including estimations based on past experi-

internally available historical data, current market data ence with the nature and amount of claims. These

and forecasts of external institutions into its calculations. estimations also involve assessing the future level of po-

Internal back-testing is applied to validate the estima-

tions made. Further information is provided in note 24.

tential repair costs and price increases per product and

market. Provisions for warranties are adjusted regularly

to take account of new circumstances and the impact

The valuation technique used to measure leased products of any changes recognised in the income statement. Fur-

was further refined in the year under report at segment ther information is provided in note 36.

level. Data, which can now be collated automatically

at a local level for each individual contract, is aggregated In the event of involvement in legal proceedings or when

at the level of individual entities. The impact of the

change, which was recognised in the income statement

for the year ended 31 December 2013, was not material.

Similarly, the shift in earnings between the Eliminations

column and the Financial Services segment in 2013 was

also not material. Further information is provided in

note 24.

claims are brought against a Group entity, provisions

for litigation and liability risks are recognised when an

outflow of resources is probable and a reliable estimate

can be made of the amount of the obligation. Manage-

ment is required to make assumptions with respect to

the probability of occurrence, the amount involved and

the duration of the legal dispute. For these reasons,

the recognition and measurement of provisions for liti-

gation and liability risks are subject to uncertainty. Fur-

ther information is provided in note 36.

The bad debt risk relating to receivables from sales

financing is assessed regularly by the BMW Group. For

1

06

The calculation of pension provisions requires assump-

tions to be made with regard to discount factors, salary

trends, employee fluctuation and the life expectancy

of employees. As in previous years, discount factors are

determined by reference to market yields at the end of

the reporting period on high quality corporate bonds.

The salary level trend refers to the expected rate of

salary increase which is estimated annually depending

on inflation and the career development of employees

within the Group. Further information is provided in

note 35.

The calculation of deferred tax assets requires assump-

tions to be made with regard to the level of future taxa-

ble income and the timing of recovery of deferred tax

assets. These assumptions take account of forecast op-

erating results and the impact on earnings of the rever-

sal of taxable temporary differences. Since future busi-

ness developments cannot be predicted with certainty

and to some extent cannot be influenced by the BMW

Group, the measurement of deferred tax assets is sub-

ject to uncertainty. Further information is provided in

note 16.

7

Adjustments as a result of IAS 19 (revised 2011)

In June 2011 the IASB published amendments to IAS 19 the contract date up to the end of working phase of such

Employee Benefits), in particular in relation to post arrangements and then released over the period of the

(

-

retirement benefits and pensions. The revised Standard work-free phase (rather than recognising the full amount

was endorsed by the EU in June 2012. The revised version as a provision at the start of the working phase).

of IAS 19 is mandatory for annual periods beginning on

or after 1 January 2013.

The revised version of IAS 19 also changes the presen-

tation of financial result in the income statement. As

a result of the fact that net interest is now required to

be computed on the basis of the net defined benefit

88

Group Financial StatementS

Income Statements

Statement of

As a result of the revised Standard, the BMW Group

has made amendments mainly in connection with the

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

9

0

2

4

measurement of obligations for pensions and pre-retire- liability for pension plans, the expense arising from

ment part-time working arrangements.

unwinding the interest on pension obligations is now

offset against interest income from plan assets. The

statement of total comprehensive income now includes

the line item “Remeasurement of the net defined bene-

fit liability for pension plans”. In previous financial

statements (up to the Group Financial Statements for

the year ended 31 December 2012), the corresponding

amounts were designated as actuarial gains and losses

on defined benefit pension benefits, similar obligations

and plan assets.

9

6

Notes

The change in the measurement of pension obligations

relates primarily to the treatment of other expected

administrative costs, which may no longer be included

in the measurement of the obligation. In addition, more

extensive disclosure requirements now apply.

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

The requirement to recognise past service cost imme-

diately as expense (rather than spread such costs over

the term) also results in an adjustment to pension provi-

sions.

The removal of the corridor method and other amend-

ments to IAS 19 do not have any impact on the BMW

The adjustments to the provision for pre-retirement part- Group.

time working arrangements result from a change in

the measurement of top-up amounts, which are now

required, in accordance with revised IAS 19.8, to be

recognised as other long-term employee benefits. Under

the new rules, the expense for top-up amounts is re-

quired to be recognised in instalments with effect from

The new rules are required to be applied retrospectively.

For this reason, the opening balance sheet at 1 January

2012, the comparative figures and the opening balance

sheet at 1 January 2013 were adjusted and made com-

parable.

1

07 Group Financial StatementS

The following tables show the impact on the opening

balance sheet at 1 January 2012, on the balance sheet at

and statement of comprehensive income for the finan-

cial year 2012:

3

1 December 2012, as well as on the income statement

Change in Group Balance Sheet presentation

1

January 2012

As originally

reported

Adjustment

–7

As reported

123,422

in € million

Total assets

123,429

Total non-current assets

thereof deferred taxes

74,425

1,926

568

–36

–45

9

74,389

1,881

577

1

thereof non-current other assets

Total current assets

49,004

3,345

29

49,033

3,374

1

thereof current other assets

29

Total equity

27,103

27,038

26,102

49,113

2,183

241

–213

–187

–68

42

27,344

27,279

26,343

48,900

1,996

thereof equity attributable to shareholders of BMW AG

2

thereof revenue reserves

Total non-current provisions and liabilities

thereof pension provisions

1

thereof non-current other provisions

3,149

3,081

3

thereof deferred taxes

3,273

3,315

Total current provisions and liabilities

47,213

3,104

–35

47,178

3,069

1

thereof current other provisions

1

Adjustments relating to contracts for pre-retirement part-time working arrangements.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €98 million.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €43 million.

2

3

1 December 2012

As originally

reported

Adjustment

–15

As reported

131,835

in € million

Total assets

131,850

Total non-current assets

thereof deferred taxes

81,336

2,001

800

–31

–34

3

81,305

1,967

803

1

thereof non-current other assets

Total current assets

50,514

3,648

16

50,530

3,664

1

thereof current other assets

16

Total equity

30,402

30,295

28,340

53,017

3,965

204

–183

–152

–72

30,606

30,499

28,544

52,834

3,813

thereof equity attributable to shareholders of BMW AG

2

thereof revenue reserves

Total non-current provisions and liabilities

thereof pension provisions

1

thereof non-current other provisions

3,513

3,441

3

thereof deferred taxes

3,040

41

3,081

Total current provisions and liabilities

48,431

3,282

–36

48,395

3,246

1

thereof current other provisions

1

Adjustments relating to contracts for pre-retirement part-time working arrangements.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €88 million.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €39 million.

2

3

1

08

Change in Group Income Statement presentation

1

January to 31 December 2012

As originally

reported

Adjustment

As reported

in € million

1

Selling and administrative expenses

Profit before financial result

Interest and similar income

Interest and similar expenses

Financial result

–7,007

8,300

753

–25

–529

538

9

–7,032

8,275

224

–913

–481

7,819

–2,697

5,122

5,096

7.77

–375

–472

7,803

–2,692

5,111

5,085

7.75

Profit before tax

–16

2

Income tax

5

Net profit

–11

Profit attributable to shareholders of BMW AG

Basic earnings per share of common stock in €

Basic earnings per share of preferred stock in €

Diluted earnings per share of common stock in €

Diluted earnings per share of preferred stock in €

–11

–0.02

7.79

7.77

7.75

7.79

7.77

1

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €–14 million.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €4 million.

2

88

Group Financial StatementS

Income Statements

Statement of

*

Change in presentation of the Statement of Comprehensive Income

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

1 January to 31 December 2012

in € million

As originally

reported

Adjustment

As reported

9

0

2

4

Net profit

5,122

–1,881

531

–11

–33

7

5,111

–1,914

538

9

6

Notes

Remeasurement of the net defined benefit liability for pension plans

Deferred taxes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Items not expected to be reclassified to the income statement in the future

Other comprehensive income for the period after tax

Total comprehensive income

–1,350

–357

–26

–37

–1,376

–383

1

4,765

4,739

4,728

4,702

61 Segment Information

Total comprehensive income attributable to shareholders of BMW AG

*

Presentation adjusted in accordance with revised IAS 1.

The adjustments resulting from revised IAS 19 do not

have any cash flow impact. For this reason, there are no

and the segments in the financial year 2012. There are,

however, some shifts between individual reconciliation

changes in the overall operating cash flow for the Group line items within operating activities.

1

09 Group Financial StatementS

The following tables show the impact on the balance

sheet at 31 December 2013 and on the income state-

ment and statement of comprehensive income for the

financial year 2013 of applying IAS 19 in its 2008 version:

Impact on the Group Balance Sheet if IAS 19 (2008) were still applied

3

1 December 2013

IAS 19

(2011)

Adjustment

39

IAS 19

(2008)

in € million

Total assets

138,368

138,407

Total non-current assets

thereof deferred taxes

86,194

1,620

954

50

58

86,244

1,678

946

1

thereof non-current other assets

–8

Total current assets

52,174

4,265

–11

52,163

4,254

1

thereof current other assets

Total equity

35,643

35,455

33,167

52,682

2,303

–339

334

311

79

35,304

35,116

32,828

53,016

2,614

thereof equity attributable to shareholders of BMW AG

2

thereof revenue reserves

Total non-current provisions and liabilities

thereof pension provisions

1

thereof non-current other provisions

3,772

3,851

3

thereof deferred taxes

3,554

–56

44

3,498

Total current provisions and liabilities

50,043

3,411

50,087

3,455

1

thereof current other provisions

44

1

Adjustments relating to contracts for pre-retirement part-time working arrangements.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €–99 million.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €–43 million.

2

3

Impact on the Group Income Statement if IAS 19 (2008) were still applied

1

January to 31 December 2013

IAS 19

(2011)

Adjustment

IAS 19

(2008)

in € million

1

Selling and administrative expenses

Profit before financial result

Interest and similar income

Interest and similar expenses

Financial result

–7,255

7,986

184

–17

–7,272

7,969

622

438

–435

3

–449

–73

–884

–70

Profit before tax

7,913

–2,573

5,340

5,314

8.10

–14

7,899

–2,570

5,329

5,303

8.08

2

Income tax

3

Net profit

–11

Profit attributable to shareholders of BMW AG

Basic earnings per share of common stock in €

Basic earnings per share of preferred stock in €

Diluted earnings per share of common stock in €

Diluted earnings per share of preferred stock in €

–11

–0.02

8.12

8.10

8.08

8.12

8.10

1

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €–15 million.

Thereof adjustments relating to contracts for pre-retirement part-time working arrangements €4 million.

2

1

10

*

Impact on the Group Statement of Comprehensive Income if IAS 19 (2008) were still applied

1

January to 31 December 2013

IAS 19

(2011)

Adjustment

IAS 19

(2008)

in € million

Net profit

5,340

1,308

–372

936

–11

–160

36

5,329

1,148

–336

812

Remeasurement of the net defined benefit liability for pension plans

Deferred taxes

Items not expected to be reclassified to the income statement in the future

Other comprehensive income for the period after tax

Total comprehensive income

–124

–135

1,252

6,592

6,566

1,128

6,457

6,431

Total comprehensive income attributable to shareholders of BMW AG

*

Presentation adjusted in accordance with revised IAS 1.

The amounts shown as adjustments for the current pe-

adjustment relates to pension provisions (negative ad-

riod also include the impact of the first-time application justment of €ꢀ136 million), remeasurements of the net

of IFRS 13. Based on the measurement rules contained defined benefit liability for pension plans (positive

in IFRS 13, plan assets are €ꢀ136 million higher than they adjustment of €ꢀ136 million) and related deferred taxes

would have been in accordance with IAS 19 (2008). The

(negative adjustment of €ꢀ27 million).

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

8

New financial reporting rules

(

a) Financial reporting rules applied for the first time in the financial year 2013

90

92

94

The following Standards, Revised Standards, Amendments and Interpretations were applied for the first time in the

financial year 2013:

Standard/Interpretation

Date of

issue by IASB

Date of

mandatory

application

IASB

Date of

mandatory

application

EU

Expected impact

on BMW Group

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

IFRS 1

IFRS 7

Amendments with Respect to Fixed

20.12.2010

13.3.2012

16.12.2011

1.7.2011

1.1.2013

None

Insignificant

Transition Dates and Severe Inflation

61 Segment Information

Amendments relating to Government

Loans at a Below Market Rate of Interest

Notes Disclosures: Offsetting

of Financial Assets and Financial Liabilities

IFRS 13

IAS 1

Fair Value Measurement

12.5.2011

16.6.2011

1.1.2013

1.7.2012

Significant in principle

*

Changes to Presentation of Items in

Other Comprehensive Income (OCI)

1.7.2012

1.1.2013

IAS 12

IAS 19

Amendments to Deferred Taxes:

Realisation of Underlying Assets

20.12.2010

16.6.2011

1.1.2012

1.1.2013

Insignificant

Changes in Accounting for

Significant in principle

Employee Benefits, in particular forTermination

Benefits and Pensions

IAS 36

Impairment of Assets – Recoverable

Amount Disclosures for Non-Financial

Assets (Amendments to IAS 36)

29.5.2013

1.1.2014

Insignificant

IFRIC 20

Stripping Costs in the Production Phase of

a Mine

19.10.2011

17.5.2012

1.1.2013

None

Annual Improvements to IFRS 2009–2011

Insignificant

*

Mandatory application in annual periods beginning on or after 1 July 2012.

1

11 Group Financial StatementS

IFRS 13 (Fair Value Measurement) provides a uniform

definition of fair value which applies across all Stand-

ards. The uniform requirements set out in IFRS 13

must now be applied to all fair value measurements re-

quired in other Standards. The only Standards to

which IFRS 13 does not apply are IFRS 2 (Share-based

Payment) and IAS 17 (Leases). The Standard also re-

places and supplements disclosures about fair value

measurement.

7 above, the introduction of IFRS 13 did not have any

further material impact on the measurements of assets

and liabilities within the BMW Group.

The Amendment to IAS 1 changes the presentation of

other comprehensive income in the statement of total

comprehensive income. Items reported in other com-

prehensive income which will subsequently be reclassi-

fied to the income statement (“recycling”) are now re-

ported separately from those that will never be recycled.

If items are presented gross (i.ꢀe. without offset of the

deferred tax impact), deferred taxes are also allocated to

Fair value is defined in IFRS 13 as an exit price, in other

words as the price that would be received to sell an as-

set or paid to transfer a liability. Fair value measurement the two groups of items (and not shown as a single

must take account of the characteristics of the asset or

liability and be based on a market perspective. Similar

amount).

to the approach already taken to the fair value measure- The BMW Group has complied with the new disclo-

ment of financial instruments, a fair value hierarchy sure requirements and amended comparative figures

has been introduced that categorises into three levels the accordingly.

inputs to valuation techniques used to measure fair

value. Categorisation is determined on the basis of how

near the inputs are to the market. The Standard also

sets out the rules for selecting appropriate valuation

techniques to measure fair value.

The Amendment to IAS 36 has been applied early, with-

out having any impact on the results of operations, finan-

cial position and net assets of the BMW Group.

(

b) Financial reporting pronouncements issued by the

In accordance with the transition requirements of

IFRS 13, the BMW Group has applied the new rules for

fair value measurement prospectively in the financial

year 2013 and has not disclosed comparative figures for

the previous year. Apart from the adjustments made in

conjunction with amended IAS 19, as described in note

IASB, but not yet applied

The following Standards, Revised Standards, Amend-

ments and Interpretations issued by the IASB during

previous accounting periods, were not mandatory

for the period under report and were not applied in the

financial year 2013:

Standard/Interpretation

Date of

issue by IASB

Date of

mandatory

application

IASB

Date of

mandatory

application

EU

Expected impact

on BMW Group

IFRS 9

Financial Instruments

12.11.2009/

Open

No

Significant in principle

28.10.2010/

16.12.2011/

1

9.11.2013

12.5.2011

IFRS 10

IFRS 11

IFRS 12

Consolidated Financial Statements

Joint Arrangements

1.1.2013

1.1.2014

Significant in principle

Disclosure of Interests in

Other Entities

Changes in Transitional Regulations

28.6.2012

1.1.2013

1.1.2014

1.1.2016

1.1.2014

No

Significant in principle

Insignificant

(IFRS 10, IFRS 11 and IFRS 12)

Investment Entities (Amendments to

IFRS 10, IFRS 12 and IAS 27)

31.10.2012

30.1.2014

IFRS 14

Regulatory Deferral Accounts

Insignificant

1

12

Standard/Interpretation

Date of

issue by IASB

Date of

mandatory

application

IASB

Date of

mandatory

application

EU

Expected impact

on BMW Group

IAS 19

Defined Benefit Plans:

21.11.2013

1.7.2014

No

Insignificant

Employee Contributions (Amendments to IAS 19)

Separate Financial Statements

IAS 27

IAS 28

12.5.2011

1.1.2013

1.1.2014

None

Investments in Associates and

Joint Ventures

IAS 32

Presentation – Offsetting of Financial Assets

and Financial Liabilities

16.12.2011

27.6.2013

1.1.2014

Insignificant

IAS 39

Novation of Derivatives and Continuation

of Hedge Accounting (Amendments to IAS 39)

IFRIC 21

Levies

20.5.2013

12.12.2013

1.1.2014

1.7.2014

No

Insignificant

Annual Improvements to IFRS 2010 –2012

Annual Improvements to IFRS 2011 –2013

In November 2009 the IASB issued IFRS 9 (Financial

Instruments: Classification and Measurement) as part

of its project to change the accounting treatment for

financial instruments. This Standard marks the first of

three phases of the IASB project to replace the exist-

ing IAS 39 (Financial Instruments: Recognition and

Measurement). The first phase deals initially only with

financial assets. IFRS 9 amends the recognition and

measurement requirements for financial assets, includ-

ing various hybrid contracts.

overhaul the requirements for hedge accounting by in-

troducing a new hedge accounting model. They also

enable entities to change the accounting for liabilities

they have elected to measure at fair value, before apply-

ing any other requirements in IFRS 9, such that fair

value changes due to changes in “own credit risk” would

not require to be recognised in profit or loss. The man-

datory effective date of 1 January 2015 was removed

and a new application date left undecided. The BMW

Group will not apply IFRS 9 early. The impact of adop-

tion of the Standard on the Group Financial Statements

is currently being assessed.

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

It applies a uniform approach, under which financial

assets must be measured either at amortised cost or fair

value, thus replacing the various rules contained in

61 Segment Information

I

n May 2011 the IASB issued three new Standards –

IAS 39 as well as reducing the number of valuation cate- IFRS 10 (Consolidated Financial Statements), IFRS 11

gories for financial instruments on the assets side of the (Joint Arrangements), IFRS 12 (Disclosure of Interests

balance sheet.

in Other Entities) – as well as amendments to IAS 27

Consolidated and Separate Financial Statements) and

(

The new categorisation is based partly on the entity’s

business model and partly on the contractual cash flow

characteristics of the financial assets.

to IAS 28 (Investments in Associates and Joint Ventures)

all relating to accounting for business combinations.

The Standards are mandatory for the first time for annual

periods beginning on or after

1 January 2013. Early

In October 2010, additional rules for financial liabilities

were added to IFRS 9. The requirements for financial

liabilities contained in IAS 39 remain unchanged with

the exception of new requirements relating to the

measurement of an entity’s own credit risk at fair value.

A package of amendments to IFRS 9 was announced on

adoption is permitted. The new Standards are required

to be applied retrospectively. EU endorsement stipulates

a later mandatory date (from 1 January 2014) due to in-

creased implementation expense.

IFRS 10 replaces the consolidation guidelines contained

1

9 November 2013. On the one hand, the amendments in IAS 27 and SIC-12 (Consolidation – Special Purpose

1

13 Group Financial StatementS

Entities). The requirements for separate financial

statements remain unchanged in the revised version

of IAS 27.

it easier for entities to apply the Standards retrospec-

tively. The amendments also restrict the requirement

to disclose comparative amounts to the immediately

preceding reporting period at the date of first-time

application.

IFRS 10 introduces a uniform model which establishes

control as the basis for consolidation – control of a

subsidiary entity by a parent entity – and which can be

applied to all entities. The control concept must there-

fore be applied both to parent-subsidiary relationships

IFRS 10 is not expected to have any significant impact

on the BMW Group reporting entity. The removal of the

option for accounting for joint ventures (as stipulated by

based on voting rights as well as to parent-subsidiary re- IFRS 11) will not have any impact since the BMW Group

lationships arising from other contractual arrangements. accounts for joint ventures using the equity method.

Under the control concept established in IFRS 10, an in- There will, however, be a change in the classification of

vestor controls another entity when it is exposed to or

joint arrangements in accordance with IFRS 11. With

has rights to variable returns from its involvement with effect from the first quarter of the financial year 2014, the

the investee and has the ability to affect those returns

through its power over the investee.

investments in SGL Automotive Carbon Fibers GmbH &

Co. KG, Munich, SGL Automotive Carbon Fibers Ver-

waltungs GmbH, Munich, and SGL Automotive Carbon

Fibers LLC, Dover, DE – previously accounted for as

IFRS 11 supersedes IAS 31 (Interests in Joint Ventures)

and SIC-13 (Jointly Controlled Entities – Non-Monetary equity accounted investments – will be classified as joint

Contributions by Ventures). This Standard sets out the operations, with the result that the BMW Group will

requirements for accounting for joint arrangements and then only account for its own share of assets, liabilities,

places the emphasis on the rights and obligations that

arise from such arrangements. IFRS 11 distinguishes

between two types of joint arrangements, namely joint

operations and joint ventures, and therefore results in

a change in the classification of joint arrangements. A

joint operation is a joint arrangement whereby the par-

revenues and expenses of the joint operations. If IFRS 11

were to have been applied in the financial year 2013,

changes in presentation of the individual balance sheet

line items affected would have resulted in the balance

sheet total increasing in a low double-digit range (mil-

lion). In the Group Income Statement, there would only

ties that have joint control of the arrangement have rights have been a shift between the individual line items.

to the assets, and obligations for the liabilities, relating

to the arrangement. A joint venture is a joint arrange-

ment whereby the parties that have joint control of the

Application of IFRS 12 will have an impact on the notes

to the BMW Group Financial Statements, in particular

arrangement have rights to the net assets of the arrange- as a result of the requirement to disclose more detailed

ment. IFRS 11 requires joint operators to account for

their share of assets and liabilities in the joint operation

financial information with respect to significant joint

ventures. The BMW Group will not adopt the Amend-

(and their share of income and expenses). Joint venturers ments early.

are required to account for their investment using the

equity method. The withdrawal of IAS 31 means the re-

moval of the option to account for joint ventures using

either the proportionate consolidation or the equity

method. The equity method must be applied in accord-

ance with amended IAS 28.

IFRS 12 sets out the requirements for disclosures relat-

ing to all types of interests in other entities, including

joint arrangements, associated companies, structured

entities and unconsolidated entities.

The amendments to the transitional regulations in

IFRS 10, IFRS 11 and IFRS 12 have the objective of making

1

14

BMW Group

Notes to the Group Financial Statements

Notes to the Income Statement

9

Revenues

Revenues by activity comprise the following:

in € million

2013

2012

Sales of products and related goods

Income from lease instalments

Sale of products previously leased to customers

Interest income on loan financing

Other income

56,811

7,296

6,412

2,868

2,671

76,058

58,039

6,900

6,399

2,954

2,556

Revenues

76,848

An analysis of revenues by business segment and geographical region is shown in the segment information in

note 49.

10

Cost of sales

Cost of sales comprises:

in € million

2013

2012

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Manufacturing costs

36,572

4,117

1,243

14,044

1,483

435

37,648

3,993

1,200

13,370

1,819

798

Research and development expenses

Warranty expenditure

90

92

94

Cost of sales directly attributable to financial services

Interest expense relating to financial services business

Expense for risk provisions and write-downs for financial services business

Other cost of sales

96

Notes

96

Accounting Principles and

Policies

2,890

60,784

2,526

61,354

Cost of sales

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

Cost of sales include €ꢀ15,962 million (2012: €ꢀ15,987 mil- Total research and development expenditure, compris-

lion) relating to Financial Services business.

61 Segment Information

ing research costs, development costs not recognised

as assets on the one hand and capitalised development

As in the previous year, manufacturing costs do not con- costs excluding the scheduled amortisation thereof on

tain any impairment losses on intangible assets and

property, plant and equipment. Cost of sales is reduced

by public-sector subsidies in the form of reduced taxes

on assets and reduced consumption-based taxes amount-

ing to €ꢀ45 million (2012: €ꢀ45 million).

the other, was as follows:

in € million

2013

2012

Research and development expenses

Amortisation

4,117

–1,069

1,744

4,792

3,993

–1,130

1,089

New expenditure for capitalised development costs

Total research and development expenditure

3,952

11

Selling and administrative expenses

Selling expenses amounted to €ꢀ4,885 million (2012:

Administrative expenses amounted to €ꢀ2,370 million

(2012 : €ꢀ1,885 million) and comprise expenses for ad-

*

€

ꢀ5,147 million) and comprise mainly marketing, adver-

ministration not attributable to development, produc-

tion or sales functions.

tising and sales personnel costs.

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

1

15 Group Financial StatementS

12

Other operating income and expenses

in € million

2013

2012

Exchange gains

346

183

13

385

114

4

Income from the reversal of provisions

Income from the reversal of impairment losses and write-downs

Gains on the disposal of assets

Sundry operating income

53

41

246

841

285

829

Other operating income

Exchange losses

–323

–265

–37

–386

–309

–22

Expense for additions to provisions

Expenses for impairment losses and write-downs

Losses on the disposal of assets

Sundry operating expenses

–27

–38

–222

–874

–261

–1,016

Other operating expenses

Other operating income and expenses

–33

–187

Other operating income includes public-sector grants of €ꢀ73 million (2012: €ꢀ19 million).

13

Result from equity accounted investments

The profit from equity accounted investments

Fibers LLC, Dover, DE. Similarly, the BMW Group’s

share of earnings of the joint ventures DriveNow

GmbH & Co. KG, Munich, and DriveNow Verwaltungs

GmbH, Munich, is also included in the result from eq-

uity accounted investments.

amounted to €ꢀ398 million (2012: €ꢀ271 million) and in-

cludes the results from the BMW Group’s interests in

the joint ventures BMW Brilliance Automotive Ltd.,

Shenyang, SGL Automotive Carbon Fibers GmbH &

Co. KG, Munich, SGL Automotive Carbon Fibers Ver-

waltungs GmbH, Munich, and SGL Automotive Carbon

14

Net interest result

*

in € million

2013

2012

Net interest income on the net defined benefit liability for pension plans

–

Other interest and similar income

184

224

thereof from subsidiaries: €20 million (2012: €19 million)

Interest and similar income

184

224

Net interest expense on the net defined benefit liability for pension plans

Expense from reversing the discounting of other long-term provisions

Write-downs on current marketable securities

–127

–5

–90

–74

–

–7

Other interest and similar expenses

–310

–211

thereof to subsidiaries: €–6 million (2012: €–7 million)

Interest and similar expenses

Net interest result

–449

–265

–375

–151

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

1

16

15

Other financial result

in € million

2013

12

2012

5

Income from investments in subsidiaries and participations

thereof from subsidiaries: €8 million (2012: €1 million)

Impairment losses on investments in subsidiaries and participations

Expenses from investments in subsidiaries

Result on investments

–91

–2

–175

–

–81

–170

Losses and gains relating to financial instruments

–125

–422

Sundry other financial result

–422

Other financial result

–206

–592

The result from investments in 2013 was negatively

impacted by an impairment loss on other investments

amounting to €ꢀ73 million (2012: €ꢀ166 million).

The improvement in other financial result was pri-

marily attributable to fair value gains on interest rate

and commodity derivatives.

16

Income taxes

Taxes on income comprise the following:

88

Group Financial StatementS

Income Statements

Statement of

*

Comprehensive Income

Balance Sheets

in € million

2013

2012

9

0

2

4

Cash Flow Statements

Group Statement of Changes in

Equity

Current tax expense

Deferred tax expense/income

Income taxes

2,435

138

2,908

–216

9

6

Notes

96

Accounting Principles and

Policies

2,573

2,692

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Current tax expense includes €ꢀ222 million (2012: €ꢀ128 mil- surcharge of 5.5% applies in Germany, giving a tax rate

lion) relating to prior periods. of 15.8%. After taking account of an average municipal

trade tax multiplier rate (Hebesatz) of 420 %, the mu-

nicipal trade tax rate for German entities is 14 %.

The overall income tax rate in Germany is therefore

ences and the reversal of temporary differences brought 30.5%. All of these German tax rates are unchanged

1

61 Segment Information

.

0

*

A deferred tax expense of €ꢀ23 million (2012 : income of

ꢀ729 million) is attributable to new temporary differ-

.7

€

forward.

from the previous year. Deferred taxes for non-German

entities are calculated on the basis of the relevant coun-

try-specific tax rates and remained in a range of between

12.5% and 46.9% once again in the financial year 2013.

Changes in tax rates resulted in a deferred tax expense of

€ꢀ2 million (2012: €ꢀ21 million).

As in the previous year, tax expense was reduced by

€ꢀ5 million as a result of utilising tax lossesꢀ/ꢀtax credits

brought forward, for which deferred assets had not

previously been recognised.

The change in the valuation allowance on deferred tax

assets relating to tax losses available for carryforward

and temporary differences resulted in a tax expense of

The actual tax expense for the financial year 2013 of

*

€ꢀ

2

,

573 million (2012 : €ꢀ

2

,

692 million) is €ꢀ160 million

*

(2012 : €ꢀ312 million) higher than the expected tax ex-

*

€

ꢀ7 million (2012: expense of €ꢀ3 million).

pense of €ꢀ2,413 million (2012 : €ꢀ2,380 million) which

would theoretically arise if the tax rate of 30.5%, appli-

cable for German companies, was applied across the

Group.

Deferred taxes are computed using enacted or planned

tax rates which are expected to apply in the relevant

national jurisdictions when the amounts are recovered.

A uniform corporation tax rate of 15.0% plus solidarity

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

1

17 Group Financial StatementS

The difference between the expected and actual tax expense is explained in the following reconciliation:

*

in € million

2013

2012

Profit before tax

7,913

30.5%

2,413

7,803

30.5%

2,380

Tax rate applicable in Germany

Expected tax expense

Variances due to different tax rates

–131

164

–56

302

Tax increases (+)/tax reductions (–) as a result of non-deductible expenses and tax-exempt income

Tax expense (+)/benefits (–) for prior years

Other variances

222

128

–95

–62

Actual tax expense

2,573

32.5%

2,692

34.5%

Effective tax rate

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Tax increases as a result of non-deductible expenses were

significantly lower than in the previous year, mainly

in connection with the impact of non-recoverable with-

holding taxes and intragroup transfer pricing issues.

Tax reductions due to tax-exempt income amounted to

The line “Other variances” comprises primarily recon-

ciling items relating to the Group’s share of results of

equity accounted investments.

The allocation of deferred tax assets and liabilities to

balance sheet line items at 31 December is shown in the

following table:

€

ꢀ117 million (2012: €ꢀ89 million).

Deferred tax assets

2013

2012

Deferred tax liabilities

*

in € million

2013

2012

Intangible assets

Property, plant and equipment

Leased products

Investments

9

26

5

37

1,571

264

5,779

5

1,356

260

436

441

5,837

11

6

11

Other assets

1,078

725

1,067

923

3,747

–

3,503

–

Tax loss carryforwards

Provisions

3,220

2,928

2,570

0,998

3,219

2,984

2,729

11,416

47

95

Liabilities

449

661

12,523

350

Eliminations

626

1

12,038

Valuation allowance

Netting

–409

–492

–8,957

1,967

–

–8,969

3,554

–

–8,957

3,081

1,114

–8,969

1,620

Deferred taxes

Net

1,934

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Deferred tax assets on tax loss carryforwards and capi-

tal losses before allowances totalled €ꢀ725 million (2012:

(2012: €ꢀ1.3 billion). This includes an amount of €ꢀ42 mil-

lion (2012: €ꢀ92 million), for which a valuation allowance

of €ꢀ14 million (2012: €ꢀ27 million) was recognised on the

€

ꢀ923 million). After valuation allowances of €ꢀ409 mil-

lion (2012: €ꢀ492 million), their carrying amount stood at related deferred tax asset. For entities with tax losses

€

ꢀ316 million (2012: €ꢀ431 million).

available for carryforward, a net surplus of deferred tax

assets over deferred tax liabilities is reported at 31 De-

cember 2013 amounting to €ꢀ192 million (2012: €ꢀ204 mil-

lion). Deferred tax assets are recognised on the basis of

Tax losses available for carryforward – for the most part

usable without restriction – decreased to €ꢀ0.9 billion

1

18

management’s assessment of whether it is probable

that the relevant entities will generate sufficient future

taxable profits, against which deductible temporary

differences can be offset.

Netting relates to the offset of deferred tax assets and lia-

bilities within individual separate entities or tax groups

to the extent that they relate to the same tax authorities.

Deferred taxes recognised directly in equity amounted

to €ꢀ451 million (2012: €ꢀ1,222 million), a decrease of

€ꢀ771 million (2012 : increase of €ꢀ27 million) compared

to the previous year. The change includes a reduction

in deferred taxes recognised in conjunction with cur-

rency translation amounting to €ꢀ1 million (2012: reduc-

tion of €ꢀ3 million).

Capital losses available for carryforward in the United

Kingdom which do not relate to ongoing operations

amounted to €ꢀ2.0 billion at the end of the reporting pe-

riod, unchanged from one year earlier. As in previous

years, deferred tax assets recognised on these tax losses

*

–

amounting to €ꢀ395 million at the end of the reporting

period after tax rate changes in 2013 (2012: €ꢀ465 mil-

lion) – were fully written down since they can only be

utilised against future capital gains.

Changes in deferred tax assets and liabilities during the

reporting period can be summarised as follows:

*

in € million

2013

2012

Deferred taxes at 1 January

1,114

138

1,347

–216

–30

Deferred tax expense/income recognised through income statement

Change in deferred taxes recognised directly in equity

Exchange rate impact and other changes

770

–88

13

88

Group Financial StatementS

Income Statements

Statement of

Deferred taxes at 31 December

1,934

1,114

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

9

0

2

4

Changes in deferred taxes include changes relating to

items recognised either through the income statement

or directly in equity as well as the impact of exchange

rate and first-time consolidations. Deferred taxes recog-

nised directly in equity increased in total by €ꢀ770 mil-

Deferred taxes are not recognised on retained profits of

€ꢀ28.0 billion (2012: €ꢀ24.8 billion) of foreign subsidiaries,

as it is intended to invest these profits to maintain and

expand the business volume of the relevant companies.

A computation was not made of the potential impact

of income taxes on the grounds of disproportionate

expense.

9

6

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

*

lion (2012 : decrease of €ꢀ30 million). Of this amount,

€ꢀ421 million (2012: €ꢀ498 million) related to the fair value

measurement of derivative financial instruments and

marketable securities (recognised directly in equity),

shown in the summary above in the line items “Other

1

61 Segment Information

The tax returns of BMW Group entities are checked

regularly by German and foreign tax authorities. Taking

account of a variety of factors – including existing in-

*

assets” and “Liabilities”. A further €ꢀ349 million (2012 :

decrease of €ꢀ528 million) related to the remeasurements of terpretations, commentaries and legal decisions taken

the net defined benefit liability for pension plans, shown relating to the various tax jurisdictions and the BMW

in the summary above in the line item “Provisions”.

Group’s past experience – adequate provision has, as

far as identifiable, been made for potential future tax

obligations.

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

1

19 Group Financial StatementS

17

Earnings per share

*

2

013

2012

Net profit for the year after minority interest

€ million

5,314.4

5,084.9

Profit attributable to common stock

Profit attributable to preferred stock

€ million

4,876.0

438.4

4,668.4

416.5

Average number of common stock shares in circulation

Average number of preferred stock shares in circulation

number

601,995,196

53,993,635

601,995,196

53,571,312

Basic earnings per share of common stock

Basic earnings per share of preferred stock

€

8.10

8.12

7.75

7.77

Dividend per share of common stock

Dividend per share of preferred stock

€

2.60

2.62

2.50

2.52

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Basic earnings per share of preferred stock are com-

puted on the basis of the number of preferred stock

shares entitled to receive a dividend in each of the rele-

vant financial years. As in the previous year, diluted

earnings per share correspond to basic earnings per

share.

18

Other disclosures relating to the income statement

The income statement includes personnel costs as follows:

*

in € million

2013

2012

Wages and salaries

7,396

1,590

7,100

1,437

Social security, retirement and welfare costs

*

thereof pension costs: €958 million (2012 : €845 million)

Personnel expenses

8,986

8,537

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Personnel costs include €ꢀ48 million (2012: €ꢀ59 million)

of expenditure incurred to adjust the workforce size.

The average number of employees during the year

was:

2

013

2012

Employees

99,961

7,162

95,748

6,484

Apprentices and students gaining work experience

1

07,123

102,232

The number of employees at the end of the reporting period is disclosed in the Combined Management Report.

1

20

The fee expense pursuant to §314 (1) no. 9 HGB recog-

nised in the financial year 2013 for the Group auditors

amounted to €ꢀ26 million (2012: €ꢀ26 million) and con-

sists of the following:

in € million

2013

2012

Audit of financial statements

14

3

14

3

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Other attestation services

3

4

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Tax advisory services

2

7

6

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Other services

3

2

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Fee expense

1

–

26

9

26

8

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

The total fee comprises expenses recorded by BMWAG,

Munich, and all consolidated subsidiaries.

The fee expense shown for KPMG AG Wirtschafts-

prüfungsgesellschaft, Berlin, relates only to services

provided on behalf of BMWAG, Munich, and its

German subsidiaries.

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

19 Share-based remuneration

The BMW Group operates three share-based remunera-

tion schemes, namely the Employee Share Scheme (for

entitled employees), share-based commitments to mem- held or, at its discretion, pays the equivalent amount

bers of the Board of Management and share-based com- in cash (share-based remuneration component) pro-

holding period is fulfilled, BMWAG grants one addi-

tional share of BMWAG common stock for each three

90

92

94

96

Notes

mitments to senior heads of department.

vided that the term of office has not been terminated

before the end of the agreed contract period (except in

the case of death or invalidity).

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

In the case of the Employee Share Scheme, non-voting

shares of preferred stock in BMWAG were granted to

qualifying employees during the financial year 2013 at

favourable conditions (see note 34 for the number and

price of issued shares). The holding period for these

shares is up to 31 December 2016. The BMW Group re-

corded a personnel expense of €ꢀ5 million (2012: €ꢀ5 mil-

lion) for the Employee Share Scheme in 2013, corre-

1

With effect from the financial year 2012, qualifying de-

partment heads are also entitled to opt for a share-based

remuneration component, which, in most respects, is

comparable to the share-based remuneration arrange-

ments for Board of Management members.

61 Segment Information

sponding to the difference between the market price and The share-based remuneration component is measured

the reduced price of the shares of preferred stock pur- at its fair value at each balance sheet date between grant

chased by employees. The Board of Management reserves and settlement date, and on the settlement date itself.

the right to decide anew each year with respect to an

Employee Share Scheme.

The appropriate amounts are recognised as personnel

expense on a straight-line basis over the vesting period

and reported in the balance sheet as a provision.

For financial years beginning after

1 January 2011,

BMWAG has added a share-based remuneration com-

ponent to the existing compensation system for Board

of Management members.

The cash-settlement obligation for the share-based re-

muneration component is measured at its fair value at

the balance sheet date (based on the closing price of

BMWAG common stock in Xetra trading at 31 Decem-

ber 2013).

Each Board of Management member is required to in-

vest 20% of hisꢀ/ꢀher total bonus (after tax) in shares of

BMWAG common stock, which are recorded in a sepa-

rate custodian account for each member concerned

The total carrying amount of the provision for the share-

based remuneration component of Board of Manage-

ment members and department heads at 31 December

2013 was €ꢀ1,647,188 (2012: €ꢀ657,276).

(

annual tranche). Each annual tranche is subject to a

holding period of four years (vesting period). Once the

1

21 Group Financial StatementS

BMW Group

Notes to the Group Financial Statements

Notes to the Statement of Comprehensive Income

The total expense recognised in 2013 for the share-based shares (2012: 22,915 shares) of BMWAG common stock

remuneration component of Board of Management

members and department heads was €ꢀ989 912 2012:

542 162).

or a corresponding cash-based settlement measured at

the relevant market share price prevailing on the grant

date.

,

(

€

ꢀ

,

The fair value of the two programmes at the date of grant Further details on the remuneration of the Board of

of the share-based remuneration components was Management are provided in the 2013 Compensation Re-

ꢀ1,453,500 (2012: €ꢀ1,379,723), based on a total of 19,196 port, which is part of the Combined Management Report.

€

20

Disclosures relating to total comprehensive income

Other comprehensive income for the period after tax comprises the following:

1

1, 2

in € million

2013

2012

Remeasurement of the net defined benefit liability for pension plans

Deferred taxes

1,308

–372

–1,914

538

Items not expected to be reclassified to the income statement

in the future

936

–1,376

Available-for-sale securities

8

48

214

174

thereof gains/losses arising in the period under report

thereof reclassifications to the income statement

Financial instruments used for hedging purposes

thereof gains/losses arising in the period under report

thereof reclassifications to the income statement

Other comprehensive income from equity accounted investments

Deferred taxes

–40

40

1,357

1,536

–179

–7

1,302

770

532

111

–407

–635

–511

–123

Currency translation foreign operations

Items expected to be reclassified to the income statement

in the future

316

993

Other comprehensive income for the period after tax

1,252

–383

1

Presentation adjusted in accordance with revised IAS 1.

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

2

Deferred taxes on components of other comprehensive income are as follows:

*

2012

in € million

2013

Before

tax

Deferred

taxes

After

tax

Before

tax

Deferred

taxes

After

tax

Remeasurement of the net defined benefit liability for pension plans

Available-for-sale securities

1,308

8

–372

19

936

27

–1,914

214

538

–45

–1,376

169

Financial instruments used for hedging purposes

1,357

–425

932

1,302

–437

865

Other comprehensive income for the period from

equity accounted investments

–7

–635

2,031

–1

–

–8

–635

1,252

111

–123

–410

–29

–

82

–123

–383

Exchange differences on translating foreign operations

Other comprehensive income

-779

27

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

The result from equity accounted investments is reported amount of €ꢀ5 million) and in the line item “Financial in-

in the Statement of Changes in Equity in the line item struments used for hedging purposes” with a positive

Exchange differences on translating foreign operations” amount of €ꢀ2 million (2012: positive amount of €ꢀ87 mil-

“

with a negative amount of €ꢀ10 million (2012: negative

lion).

1

22

BMW Group

Notes to the Group Financial Statements

Notes to the Balance Sheet

21

Analysis of changes in Group tangible, intangible and investment assets 2013

Acquisition and manufacturing cost

1

in € million

1.1.2013

Adjust-

ment

Translation

differences

Additions

Reclassi-

fications

Disposals

31.12.

2013

2

Development costs

Goodwill

8,488

374

–

1,744

–

565

–

9,667

374

Other intangible assets

Intangible assets

1,008

9,870

–6

473

22

1,453

11,494

2,217

587

Land, titles to land, buildings, including buildings on

third party land

8,169

26,808

2,314

–

–124

–211

–55

485

2,202

178

224

975

15

51

961

8,703

28,813

2,331

Plant and machinery

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

121

2,608

–37

1,605

4,470

–1,214

–

3

2,959

39,899

–427

1,136

42,806

3

Leased products

31,412

514

–46

–

–734

–

13,192

364

–

11,338

226

32,486

652

Investments accounted for using the equity method

Investments in non-consolidated subsidiaries

Participations

205

571

–

–1

–

66

6

–

30

2

240

575

–

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Non-current marketable securities

Other investments

–

776

–1

72

32

815

90

92

94

1

Including mergers.

2

Amended for the effect of refining the accounting policy for leased products as described in note 6.

This line includes the amendments described in note 24.

Including assets under construction of €2,569 million.

96

Notes

3

4

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Analysis of changes in Group tangible, intangible and investment assets 2012

1

Acquisition and manufacturing cost

61 Segment Information

1

in € million

1.1.2012

Translation

differences

Additions

Reclassi-

fications

Disposals

31.12.

2012

Development costs

Goodwill

8,393

374

–

1,089

–

994

–

8,488

374

Other intangible assets

Intangible assets

1,040

9,807

–3

123

3

156

1,007

9,869

1,212

1,150

Land, titles to land, buildings, including buildings on

third party land

7,776

25,625

2,170

–26

–24

–11

–8

366

1,311

218

74

407

21

24

517

86

8,166

26,802

2,312

Plant and machinery

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

992

2,133

4,028

–504

–2

8

2,605

36,563

–69

635

39,885

2

Leased products

30,073

302

–74

–

13,297

350

–1

11,883

125

31,412

514

Investments accounted for using the equity method

–13

Investments in non-consolidated subsidiaries

Participations

221

501

–

–1

–

89

70

13

–

117

–

205

571

–

Non-current marketable securities

Other investments

–

722

–1

159

13

117

776

1

Including impact of first-time consolidations.

This line includes the amendments described in note 24.

Including assets under construction of €2,205 million.

2

3

1

23 Group Financial StatementS

Depreciation and amortisation

Carrying amount

1

1.1.2013

Adjust-

ment

Trans-

lation

differ-

ences

Current

year

Changes

not effect-

ing net

Dis-

posals

31.12.

2013

31.12.

2013

31.12.

2012

2

income

4

,141

–

1,069

–

565

–

4,645

5

5,022

369

4,347

369

Development costs

Goodwill

5

516

–11

178

18

665

5,315

788

491

Other intangible assets

Intangible assets

4

,662

1,247

583

6,179

5,207

Land, titles to land, buildings, including buildings on

third party land

3

,667

–

–53

–166

–40

–

251

2,082

159

–

34

946

3,831

22,068

1,794

–

4,872

6,745

537

4,502

5,705

530

2

1,098

Plant and machinery

1,784

109

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

4

–

2,959

15,113

2,604

13,341

2

6,549

–259

2,492

1,089

27,693

3

6

,944

–

–175

–

–132

–

3,215

–

3,280

–

6,572

–

25,914

652

24,468

514

Leased products

Investments accounted for using the equity method

5

8

–

16

75

–

–57

–

74

188

–

166

387

–

147

401

–

Investments in non-consolidated subsidiaries

Participations

1

70

–

Non-current marketable securities

Other investments

2

28

91

–57

262

553

548

Depreciation and amortisation

Carrying amount

1

1.1.2012

Trans-

lation

differ-

ences

Current

year

Reclassi-

fications

Changes

not effect-

ing net

Dis-

posals

31.12.

2012

31.12.

2012

31.12.

2011

income

4

,004

–

1,130

–

993

–

4,141

5

4,347

369

4,388

369

Development costs

Goodwill

5

558

–2

113

2

155

516

4,662

491

481

Other intangible assets

Intangible assets

4

,567

1,243

1,148

5,207

5,238

Land, titles to land, buildings, including buildings on

third party land

3

,433

–9

–20

–9

251

1,886

161

–

11

497

74

3,664

21,097

1,782

1

4,502

5,705

530

4,335

5,896

463

1

9,728

Plant and machinery

1,706

–2

–

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

3

1

–

2,604

13,341

991

2

4,868

–38

2,298

–2

582

26,544

11,685

2

6

,960

–

–10

–

4,239

–

4,245

–

6,944

–

24,468

514

23,112

302

Leased products

Investments accounted for using the equity method

9

0

2

–

9

166

–

–68

–

41

–

58

170

–

147

401

–

132

429

–

Investments in non-consolidated subsidiaries

Participations

7

–

Non-current marketable securities

Other investments

1

62

175

–68

41

228

548

561

1

24

22

Intangible assets

Intangible assets mainly comprise capitalised develop-

ment costs on vehicle and engine projects as well as

subsidies for tool costs, licences, purchased development

projects, software and purchased customer bases. Amor-

Intangible assets amounting to €ꢀ43 million (2012: €ꢀ44 mil-

lion) are subject to restrictions on title.

As in the previous year, there was no requirement to

tisation on intangible assets is presented in cost of sales, recognise impairment losses or reversals of impairment

selling expenses and administrative expenses. losses on intangible assets in 2013.

In addition, intangible assets include a brand-name right No borrowing costs were recognised as a cost compo-

amounting to €ꢀ43 million (2012: €ꢀ44 million), goodwill

of €ꢀ33 million (2012: €ꢀ33 million) allocated to the Auto-

motive cash-generating unit (CGU) and goodwill of

nent of intangible assets during the year under report.

An analysis of changes in intangible assets is provided

€

ꢀ336 million (2012: €ꢀ336 million) allocated to the Finan- in note 21.

cial Services CGU.

23

Property, plant and equipment

No borrowing costs were recognised as a cost compo-

nent of property, plant and equipment during the year

under report.

(finance leases). The leases to which BMWAG is party,

with a carrying amount of €ꢀ37 million (2012: €ꢀ39 mil-

lion) run for periods up to 2028 at the latest and contain

price adjustment clauses as well as extension and pur-

chase options. The asset leased by BMW Tokyo Corp.

88

Group Financial StatementS

Income Statements

Statement of

As in the previous year, there was no requirement to

recognise impairment losses in 2013.

has a carrying amount of €ꢀ2 million (2012: €ꢀ3 million)

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

9

0

2

4

under a lease with a remaining term of 18 years. BMW

Osaka Corp. is party to finance leases running until

2022 for operational buildings with a carrying amount

A break-down of the different classes of property, plant

and equipment disclosed in the balance sheet and

changes during the year are shown in the analysis of

changes in Group tangible, intangible and investment

assets in note 21.

9

6

Notes

of €ꢀ2 million at 31 December 2013 (2012: €ꢀ2 million).

96

Accounting Principles and

Policies

The finance lease contract accounted for at the level of

BMW of North America LLC has a remaining term of

two years and includes a purchase and a renewal option

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

Property, plant and equipment include a total of €ꢀ42 mil- for the underlying asset which has a carrying amount

lion (2012: €ꢀ46 million) relating to land and operational of €ꢀ million at the end of the reporting period (2012

buildings used by BMWAG BMW Tokyo Corp., BMW €ꢀ1 million).

Osaka Corp., and BMW of North America LLC, for

which economic ownership is attributable to the BMW Minimum lease payments of the relevant leases are as

61 Segment Information

1

:

,

Group due to the nature of the lease arrangements

follows:

in € million

31.12.2013

31.12.2012

Total of future minimum lease payments

due within one year

14

13

44

5

23

52

80

due between one and five years

due later than five years

7

1

Interest portion of the future minimum lease payments

due within one year

3

7

3

8

due between one and five years

due later than five years

13

17

28

2

3

Present value of future minimum lease payments

due within one year

11

6

2

15

35

52

due between one and five years

due later than five years

31

4

8

1

25 Group Financial StatementS

24

Leased products

The BMW Group, as lessor, leases out its own products

and those of other manufacturers as part of its finan-

cial services business. Minimum lease payments of

€ꢀ12,906 million (2012: €ꢀ12,797 million) from non-can-

cellable operating leases fall due as follows:

in € million

31.12.2013

31.12.2012

within one year

6,314

6,587

5

6,215

6,570

12

between one and five years

later than five years

Minimum lease payments

12,906

12,797

Contingent rents of €ꢀ171 million (2012: €ꢀ166 million),

based principally on the distance driven, were recog-

nised in income. Some of the agreements contain price

adjustment clauses as well as extension and purchase

options.

Based on data collated at local level for each individual

contract, the historical acquisitionꢀ/ꢀmanufacturing

costs of leased assets and historical depreciation

thereon were adjusted, without any impact on carry-

ing amounts.

Impairment losses recognised on leased products to-

talled €ꢀ139 million.

An analysis of changes in leased products is provided

in note 21.

25

Investments accounted for using the equity method

and other investments

Munich, SGL Automotive Carbon Fibers LLC, Dover,

DE, DriveNow GmbH & Co. KG, Munich, and DriveNow

Verwaltungs GmbH, Munich.

Investments accounted for using the equity method

comprise the Group’s investments in the joint ventures

BMW Brilliance Automotive Ltd., Shenyang, SGL

Automotive Carbon Fibers GmbH & Co. KG, Munich,

SGL Automotive Carbon Fibers Verwaltungs GmbH,

The Group’s share of results of joint ventures and its

accumulated interest in investments accounted for using

the equity method are as follows:

in € million

31.12.2013

31.12.2012

Disclosures relating to the income statement

Income

Expenses

Profit

4,531

–4,133

398

3,516

–3,245

271

Disclosures relating to the balance sheet

Non-current assets

1,426

1,389

1,018

991

Current assets

Equity

951

169

663

117

Non-current liabilities

Current liabilities

Balance sheet total

1,695

2,815

1,229

2,009

Capital commitments to the joint ventures SGL Auto-

motive Carbon Fibers GmbH & Co. KG, Munich, and

SGL Automotive Carbon Fibers LLC, Dover, DE, at

the end of the reporting period totalled €ꢀ139 million

Other investments relate to investments in non-con-

solidated subsidiaries, interests in associated companies

not accounted for using the equity method, participa-

tions and non-current marketable securities.

(2012: €ꢀ95 million).

1

26

Additions to investments in non-consolidated sub-

sidiaries relate primarily to capital increases at the level

of BMW Milano S.r.l., Milan, BMW Retail Nederland

B.V., Haaglanden, and BMW i Ventures B.V., Rijswijk.

Impairment losses on participations – recognised with

income statement effect – related mainly to the invest-

ment in SGL Carbon SE, Wiesbaden, which was written

down on the basis of objective criteria.

Additions to participations relate primarily to the pur-

chase of available-for-sale marketable securities.

A break-down of the different classes of other investments

disclosed in the balance sheet and changes during the

year are shown in the analysis of changes in Group tan-

gible, intangible and investment assets in note 21.

The impairment loss of €ꢀ16 million on investments in

non-consolidated subsidiaries relates mainly to invest-

ments in dealerships.

If the Group’s share of the at-equity result of BMW

Brilliance Automotive Ltd., Shenyang, were reported as

Disposals of investments in subsidiaries result primarily part of the Automotive segment’s EBIT, the EBIT mar-

from the deconsolidation of the Husqvarna Group.

gin would increase by 0.6 percentage points to 10.0%.

26

Receivables from sales financing

Receivables from sales financing, totalling €ꢀ54,117 mil-

lion (2012: €ꢀ52,914 million), comprise €ꢀ40,841 million

customers and dealers and €ꢀ13

€ꢀ12 264 million) for finance leases. Finance leases are

analysed as follows:

,276 million (2012:

,

(

2012: €ꢀ40,650 million) for credit financing for retail

88

Group Financial StatementS

Income Statements

Statement of

in € million

31.12.2013

31.12.2012

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Gross investment in finance leases

due within one year

9

0

2

4

4,816

9,748

98

4,580

8,938

118

due between one and five years

due later than five years

9

6

Notes

9

6

Accounting Principles and

Policies

1

4,662

13,636

Present value of future minimum lease payments

due within one year

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

4,378

8,813

85

4,094

8,060

110

1

due between one and five years

due later than five years

61 Segment Information

3,276

12,264

Unrealised interest income

1,386

1,372

Contingent rents recognised as income (generally

relating to the distance driven) amounted to €ꢀ3 million

benefit of the lessor amounted to €ꢀ120 million (2012:

€ꢀ85 million).

(

2012: €ꢀ3 million). Write-downs on finance leases

amounting to €ꢀ159 million (2012: €ꢀ149 million) were

measured and recognised on the basis of specific credit

risks. Non-guaranteed residual values that fall to the

Receivables from sales financing include €ꢀ32,616 mil-

lion (2012: €ꢀ32,309 million) with a remaining term of

more than one year.

Allowance for impairment and credit risk

in € million

31.12.2013

31.12.2012

Gross carrying amount

Allowance for impairment

Net carrying amount

55,697

–1,580

54,117

54,593

–1,679

52,914

1

27 Group Financial StatementS

Allowances for impairment on receivables from sales financing developed as follows during the year under report:

2

013

Allowance for impairment recognised on a

Total

in € million

specific item basis

group basis

Balance at 1 January

1,268

194

411

104

–15

–19

481

1,679

298

Allocated/reversed

Utilised

–302

–61

–317

–80

Exchange rate impact and other changes

Balance at 31 December

1,099

1,580

2012

Allowance for impairment recognised on a

Total

in € million

specific item basis

group basis

*

Balance at 1 January

Allocated/reversed

Utilised

1,355

298

262

113

–21

57

1,617

411

–314

–71

–335

–14

Exchange rate impact and other changes

Balance at 31 December

1,268

411

1,679

*

Including entities consolidated for the first time during the financial year.

At the end of the reporting period, impairment allow-

due at the end of the reporting period amounted to

ances of €ꢀ481 million (2012: €ꢀ411 million) were recog-

€ꢀ13,331 million (2012: €ꢀ12,631 million). No impairment

nised on a group basis on gross receivables from sales losses were recognised for these balances.

financing totalling €ꢀ30,155 million (2012: €ꢀ30,813 mil-

lion). Impairment allowances of €ꢀ1,099 million (2012:

268 million) were recognised at 31 December 2013

on a specific item basis on gross receivables from sales

The estimated fair value of collateral received for re-

ceivables on which impairment losses were recognised

totalled €ꢀ23,689 million (2012: €ꢀ21,649 million) at the

€ꢀ1,

financing totalling €ꢀ12

lion).

,

211 million (2012: €ꢀ11

,

149 mil- end of the reporting period. This collateral related pri-

marily to vehicles. The carrying amount of assets held

as collateral and taken back as a result of payment de-

Receivables from sales financing which were not over-

fault amounted to €ꢀ30 million (2012: €ꢀ37 million).

27

Financial assets

Financial assets comprise:

in € million

31.12.2013

31.12.2012

Derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

4,013

3,060

32

2,992

2,655

44

222

234

825

835

Financial assets

8,152

6,760

thereof non-current

thereof current

2,593

5,559

2,148

4,612

The increase in derivative instruments was primarily

attributable to positive market price developments of

currency derivatives.

The rise in marketable securities and investment funds

mainly reflects an increase in the BMW Group’s strategic

liquidity reserve.

1

28

The amount by which the value of the investment funds

exceeds obligations for part-time working arrange-

ments (€ꢀ44 million; 2012: €ꢀ57 million) is reported under

Arrangement (CTA) and are therefore netted against

the corresponding settlement arrears for pre-retirement

part-time work arrangements.

“Other financial assets”. Investment funds are held to

secure these obligations. These funds are managed by

BMW Trust e.ꢀV., Munich, as part of a Contractual Trust

Marketable securities and investment funds relate to

available-for-sale financial assets and comprise:

in € million

31.12.2013

31.12.2012

Stocks

87

2,551

422

52

2,566

37

Fixed income securities

Other debt securities

Marketable securities and investment funds

3,060

2,655

The contracted maturities of debt securities are as follows:

in € million

31.12.2013

31.12.2012

Fixed income securities

due within three months

due later than three months

73

161

2,478

2,405

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Other debt securities

due within three months

due later than three months

Debt securities

422

–

37

–

90

92

94

2,973

2,603

96

Notes

96

Accounting Principles and

Policies

Allowance for impairment and credit risk

Receivables relating to credit card business comprise the following:

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

in € million

31.12.2013

31.12.2012

61 Segment Information

Gross carrying amount

Allowance for impairment

Net carrying amount

231

–9

247

–13

234

222

Allowances for impairment losses on receivables relating to credit card business developed as follows during the year

under report:

2

013

Allowance for impairment recognised on a

Total

in € million

specific item basis

group basis

Balance at 1January

13

6

–

13

6

Allocated/reversed

Utilised

–10

–

–10

–

Exchange rate impact and other changes

Balance at 31 December

9

2012

Allowance for impairment recognised on a

Total

in € million

specific item basis

group basis

Balance at 1January

18

8

–

18

8

Allocated/reversed

Utilised

–13

–

–13

–

Exchange rate impact and other changes

Balance at 31 December

13

1

29 Group Financial StatementS

2

8

9

Income tax assets

Income tax assets totalling €ꢀ

€ꢀ966 million) include claims amounting to €ꢀ530 mil-

lion (2012: €ꢀ638 million) which are expected to be

1

,

151 million (2012

:

settled after more than twelve months. Some of the

claims may be settled earlier than this depending on

the timing of proceedings.

2

Other assets

Other assets comprise:

*

in € million

31.12.2013

31.12.2012

Other taxes

867

779

796

738

Receivables from subsidiaries

Receivables from other companies in which an investment is held

Prepayments

999

676

1,074

706

1,043

555

Collateral receivables

Sundry other assets

794

659

Other assets

5,219

4,467

thereof non-current

thereof current

954

803

4,265

3,664

*

Receivables from subsidiaries include trade receivables Prepayments of €ꢀ1,074 million (2012 : €ꢀ1,043 million) re-

of €ꢀ102 million (2012: €ꢀ189 million) and financial re-

ceivables of €ꢀ677 million (2012: €ꢀ549 million). They in-

clude €ꢀ253 million (2012: €ꢀ178 million) with a remaining (2012 : €ꢀ588 million) have a maturity of less than one year.

term of more than one year.

late mainly to prepaid interest, insurance premiums and

commission paid to dealers. Prepayments of €ꢀ565 million

*

Collateral receivables comprise mainly customary collat-

Receivables from other companies in which an invest-

ment is held include €ꢀ911 million (2012: €ꢀ608 million)

due within one year.

eral (banking deposits) arising on the sale of receivables.

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

30

Inventories

Inventories comprise the following:

in € million

31.12.2013

31.12.2012

Raw materials and supplies

Work in progress, unbilled contracts

Finished goods and goods for resale

Inventories

843

850

786

827

7,892

9,585

8,112

9,725

At 31 December 2013, inventories measured at their

net realisable value amounted to €ꢀ592 million (2012:

to net realisable value amounting to €ꢀ28 million (2012:

€ꢀ21 million) were recognised in 2013. Reversals of write-

downs in the year under report amounted to €ꢀ4 million

(2012: €ꢀ– million).

€

ꢀ639 million) and are included in total inventories of

585 million (2012: €ꢀ 725 million). Write-downs

ꢀ

9

,

9,

1

30

31

Trade receivables

Trade receivables amounting in total to €ꢀ2,449 million (2012: €ꢀ2,543 million) include €ꢀ47 million due later than one

year (2012: €ꢀ46 million).

Allowance for impairment and credit risk

in € million

31.12.2013

31.12.2012

Gross carrying amount

Allowance for impairment

Net carrying amount

2,555

–106

2,654

–111

2,449

2,543

Allowances on trade receivables developed as following during the year under report:

2

013

Allowance for impairment recognised on a

Total

in € million

specific item basis

group basis

Balance at 1January

105

2

6

4

111

6

Allocated/reversed

Utilised

–8

–2

97

–

–8

Exchange rate impact and other changes

Balance at 31 December

–1

9

–3

106

88

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

2

012

Allowance for impairment recognised on a

Total

9

0

2

4

in € million

specific item basis

group basis

*

9

6

Notes

Balance at 1January

Allocated/reversed

Utilised

95

20

7

1

102

21

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

–6

–2

–

–8

Exchange rate impact and other changes

–4

1

Balance at 31 December

105

6

111

61 Segment Information

*

Including entities consolidated for the first time during the financial year.

Some trade receivables were overdue for which an impairment loss was not recognised. Overdue balances are

analysed into the following time windows:

in € million

31.12.2013

31.12.2012

1

3

6

9

–30 days overdue

1–60 days overdue

1–90 days overdue

1–120 days overdue

80

30

8

139

55

22

13

17

15

More than 120 days overdue

16

1

48

247

Receivables that are overdue by between one and

30 days do not normally result in bad debt losses since

the overdue nature of the receivables is primarily at-

tributable to the timing of receipts around the month-

end. In the case of trade receivables, collateral is

generally held in the form of vehicle documents and

bank guarantees so that the risk of bad debt loss is

extremely low.

32

Cash and cash equivalents

Cash and cash equivalents of €ꢀ7,664 million (2012: €ꢀ8,370 million) comprise cash on hand and at bank, all with an

original term of up to three months.

1

31 Group Financial StatementS

33

Assets held for sale and liabilities in conjunction

with assets held for sale

In the financial year 2012 the Board of Management of

BMWAG decided to realign the strategic direction of

In December 2012, BMW Group, Munich, and Pierer

Industrie AG, Wels, reached agreement with regard

the Motorcycles segment in view of the changing nature to the sale of Husqvarna Motorcycles S.r.l., Cassinetta

of motorcycle markets, demographic developments and di Biandronno, and Husqvarna Motorcycles NA LLC

,

stricter environmental requirements. The BMW Group

intends to broaden its product range, in particular in

the fields of urban mobility and e-mobility, in order to

open up future growth opportunities. In line with the

decision to focus on the BMW Motorrad brand, and

Wilmington, DE, to Pierer Industrie AG, Wels. Follow-

ing approval of the transaction by the Austrian Merger

Control Authorities, the Husqvarna Group was sold

on

6

March 2013 and is therefore no longer included in

million aris-

the Group reporting entity. A gain of €ꢀ4.8

considering the declining size of the relevant markets, it ing on deconsolidation of the Husqvarna Group was

was considered a sensible move to sell the Husqvarna

Motorcycles brand.

recognised for the Motorcycles segment in the first quar-

ter of 2013 (included in Other operating income).

34

Equity

Number of shares issued

Preferred stock

Common stock

2013

2

013

2012

Shares issued/in circulation at 1 January

53,994,217

266,152

582

53,571,372

422,905

60

601,995,196

Shares issued in conjunction with Employee Share Scheme

Less: shares repurchased and re-issued

–

Shares issued/in circulation at 31 December

54,259,787

53,994,217

601,995,196

At 31 December 2013 common stock issued by BMWAG

was divided, as at the end of the previous year, into

amounted to €ꢀ2.9 million at the end of the reporting

period. The Company is authorised to issue shares of

non-voting preferred stock amounting to nominal

601,995,196 shares of common stock with a par-value of

€ꢀ1. Preferred stock issued by BMWAG was divided into

€ꢀ5.0 million prior to 13 May 2014. The share premium

5

4,259,787 shares (2012: 53,994,217 shares) with a par-

of €ꢀ16.5 million arising on the share capital increase

value of €ꢀ1. Unlike the common stock, no voting rights

are attached to the preferred stock. All of the Compa-

ny’s stock is issued to bearer. Preferred stock bears an

additional dividend of €ꢀ0.02 per share.

was transferred to capital reserves.

Capital reserves

Capital reserves include premiums arising from the

issue of shares and totalled €ꢀ

1,990 million (2012:

In 2013, a total of 266

,

152 shares of preferred stock

€ꢀ1,973 million). The change related to the share capital

was sold to employees at a reduced price of €ꢀ43.79 per

share in conjunction with the Company’s Employee

Share Scheme. These shares are entitled to receive

dividends with effect from the financial year 2014.

increase in conjunction with the issue of shares of pre-

ferred stock to employees.

Revenue reserves

5

82 shares of preferred stock were bought back via the

Revenue reserves comprise the post-acquisition and

non-distributed earnings of consolidated companies. In

addition, remeasurements of the net defined benefit

liability for pension plans are also presented in revenue

stock exchange in conjunction with the Company’s

Employee Share Scheme.

Further information on share-based remuneration is pro- reserves along with positive and negative goodwill aris-

vided in note 19.

ing on the consolidation of Group companies prior to

1 December 1994. In previous years, revenue reserves

were reported in the Consolidated Statement of Changes

3

Issued share capital increased by €ꢀ0.3 million as a result

of the issue to employees of 265,570 shares of non-voting in Equity separately for pension obligations and for other

preferred stock. The Authorised Capital of BMWAG revenue reserves.

1

32

Revenue reserves increased during the financial year

013 to €ꢀ33 167 million. The opening balance of reve-

nue reserves increased as of 1 January 2013 by €ꢀ204 mil-

minority interest of €ꢀ26 million in the results for the

year (2012: €ꢀ26 million).

2

,

*

lion as a result of the adoption of revised IAS 19

.

Capital management disclosures

They were increased by the amount of the net profit at-

The BMW Group’s objectives when managing capital

are to safeguard the Group’s ability to continue as a

going concern in the long-term and to provide an ade-

quate return to shareholders.

tributable to shareholders of BMWAG amounting to

*

€

ꢀ

5

,

314 million (2012 : €ꢀ

5

,

085 million) and reduced by

the payment of the dividend for 2012 amounting

to €ꢀ 640 million (2011: €ꢀ 508 million). Revenue re-

1

,

1,

*

serves also increased by €ꢀ936 million (2012 : reduced

by €ꢀ1,376 million) as a result of remeasurements of the

net defined benefit liability for pension plans (net of

deferred tax recognised directly in equity).

The BMW Group manages the capital structure and

makes adjustments to it in the light of changes in

economic conditions and the risk profile of the under-

lying assets.

The unappropriated profit of BMWAG at 31 December

The BMW Group is not subject to any external mini-

mum equity capital requirements. Within the Finan-

cial Services segment, however, there are a num-

2

013 amounts to €ꢀ1,707 million and will be proposed

to the Annual General Meeting for distribution. This

amount includes €ꢀ141 million relating to preferred stock. ber of individual entities which are subject to equity

The amount proposed for distribution represents an

amount of €ꢀ2.62 per share of preferred stock and €ꢀ2.60

per share of common stock. The proposed distribution

must be authorised by the shareholders at the Annual

General Meeting of BMWAG. It is therefore not recog-

nised as a liability in the Group Financial Statements.

capital requirements set by regulatory banking

agencies.

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

In order to manage its capital structure, the BMW Group

uses various instruments including the amount of divi-

dends paid to shareholders and share buy-backs.

90

92

94

Accumulated other equity

Moreover, the BMW Group pro-actively manages debt

96

Notes

Accumulated other equity comprises all amounts recog- capital, determining levels of debt capital transactions

nised directly in equity resulting from the translation of with a target debt structure in mind. An important

the financial statements of foreign subsidiaries, the effects aspect of the selection of financial instruments is the

of recognising changes in the fair value of derivative objective to achieve matching maturities for the Group’s

financial instruments and marketable securities directly financing requirements. In order to reduce non-system-

9

6

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

in equity and the related deferred taxes recognised di-

rectly in equity.

atic risk, the BMW Group uses a variety of financial

instruments available on the world’s capital markets to

achieve optimal diversification.

Minority interests

Equity attributable to minority interests amounted to

€ꢀ188 million (2012: €ꢀ107 million). This includes a

The capital structure at the end of the reporting period

was as follows:

*

in € million

31.12.2013

31.12.2012

Equity attributable to shareholders of BMWAG

Proportion of total capital

35,455

33.5%

30,499

30.5%

Non-current financial liabilities

Current financial liabilities

Total financial liabilities

Proportion of total capital

Total capital

39,450

30,854

70,304

66.5%

105,759

39,095

30,412

69,507

69.5%

100,006

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

1

33 Group Financial StatementS

Equity attributable to shareholders of BMWAG in-

creased during the financial year by 3.0 percentage

points, mainly owing to the high net profit recorded

for the year.

A to A+ with stable outlook. This means that BMWAG

continues to enjoy the best ratings of all European car

manufacturers.

The improved rating and outlook reflects the financial

strength of the BMW Group.

In December 2013 the rating agency Standard & Poor’s

raised BMWAG’s long-term rating by one notch from

Company rating

Moody’s

Standard&Poor’s

Non-current financial liabilities

Current financial liabilities

Outlook

A2

P-1

A+

A-1

stable

With their current long-term ratings of A+ (Standard &

Poor’s) and A2 (Moody’s), the agencies continue to

confirm BMWAG’s robust creditworthiness for debt

with a term of more than one year. BMWAG’s credit-

worthiness for short-term debt is also classified by the

rating agencies as very good, thus enabling it to obtain

refinancing funds on competitive conditions.

35

Pension provisions

latter sometimes covered by accounting provisions. Pen-

sion commitments in Germany are mostly covered by

assets contributed to BMW Trust e.ꢀV. (CTA). The main

other countries with funded plans were the UK, the USA,

Switzerland, the Netherlands, Belgium, South Africa,

Japan and Norway.

Pension provisions are recognised as a result of com-

mitments to pay future vested pension benefits and

current pensions to present and former employees of

the BMW Group and their dependants. Depending on

the legal, economic and tax circumstances prevailing

in each country, various pension plans are used, based

generally on the length of service, salary and remu-

neration structure of the employees involved. Due to

similarity of nature, the obligations of BMW Group

companies in the USA and of BMW (South Africa)

In the case of externally funded plans, the defined bene-

fit obligation is offset against plan assets measured at

their fair value. Where the plan assets exceed the pension

obligations and the BMW Group has a right of reim-

bursement or a right to reduce future contributions, it

reports an asset (within “Other financial assets”) at

an amount equivalent to the present value of the future

economic benefits attached to the plan assets. If the

plan is externally funded, a liability is recognised under

pension provisions where the benefit obligation ex-

(

Pty) Ltd., Pretoria, for post-retirement medical care

are also accounted for as pension provisions in ac-

cordance with IAS 19.

Post-retirement benefit plans are classified as either

defined contribution or defined benefit plans. Under

defined contribution plans an enterprise pays fixed con- ceeds fund assets.

tributions into a separate entity or fund and does not

assume any other obligations. The total pension expense Remeasurements of the net liability arise from changes

for defined contribution plans of the BMW Group

amounted to €ꢀ51 million (2012: €ꢀ47 million). Employer

contributions paid to state pension insurance schemes

totalled €ꢀ470 million (2012: €ꢀ444 million).

in the present value of the defined benefit obligation,

the fair value of the plan assets or the asset ceiling. Rea-

sons for remeasurements include changes in financial

and demographic assumptions as well as changes in the

detailed composition of beneficiaries. Remeasurements

Under defined benefit plans the enterprise is required to are recognised immediately in “Other comprehensive

pay the benefits granted to present and past employees. income” and hence directly in equity (within revenue

Defined benefit plans may be funded or unfunded, the

reserves).

1

34

Past service cost arises where a BMW Group company

introduces a defined benefit plan or changes the bene-

fits payable under an existing plan. These costs are

of estimates and assumptions, which depend on the

economic situation in each particular country. The most

important assumptions applied by the BMW Group are

recognised immediately in the income statement. Simi- shown below. The following weighted average values

larly, gains and losses arising on the settlement of a

defined benefit plan are recognised immediately in the

income statement.

have been used for Germany, the United Kingdom and

other countries:

The defined benefit obligation is calculated on an actu-

arial basis. The actuarial computation requires the use

31 December

Germany

United Kingdom

Other

in %

2013

2012

2013

2012

2013

2012

Discount rate

3.50

2.00

3.00

2.18

4.40

3.32

4.25

2.31

4.46

0.05

3.82

0.09

Pension level trend

The following mortality tables are applied in countries, in which the BMW Group has significant defined benefit plans:

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Germany

United Kingdom S1PA tables weighted accordingly, and S1NA tables minus 2 years, both with a minimum long term annual improvement allowance

USA

RP2000 MortalityTable Projected with Scale AA

MortalityTable 2005 G issued by Prof. K. Heubeck (with invalidity rates reduced by 50%)

90

92

94

In Germany, the so-called “pension entitlement trend”

Festbetragstrend) also represents a significant actuar-

of restrictions due to caps and floors. For the purposes

of calculating the average rate, countries with pension

payments not linked to inflation or with one-off pay-

ments are also now included. The assumptions applied

in the previous year were adjusted accordingly.

96

Notes

(

96

Accounting Principles and

Policies

ial assumption for the purposes of determining bene-

fits payable at retirement and was left unchanged at

2.0%. The salary level trend is a less sensitive assump-

tion within the BMW Group. The calculation of the

pension level trend was reviewed in conjunction with

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

Based on the measurement principles contained in

the application of the revised IAS 19 and brought onto a IAS 19, the following balance sheet carrying amounts

standardised footing worldwide. In this context, the

assumption applied in the UK now also takes account

apply to the Group’s pension plans:

31 December

Germany

United Kingdom

Other

Total

*

2012

in € million

2013

2012

2013

2012

2013

2012

2013

Present value of defined benefit obligations

Fair value of plan assets

7,400

6,749

–

7,974

6,064

–

7,409

6,076

–

7,137

5,782

–

949

636

4

1,144 15,758 16,255

601 13,461 12,447

Effect of limiting net defined benefit asset to asset ceiling

Carrying amounts at 31December

4

651

1,910

1,333

1,355

317

547

2,301

3,812

thereof pension provision

thereof assets

652

–1

1,910

–

1,333

–

1,355

–

318

–1

548

–1

2,303

–2

3,813

–1

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

1

35 Group Financial StatementS

The decrease in defined benefit obligations results mainly benefit falls due, it is paid on the basis of the higher of

from the change in the discount rate used for the actu-

arial calculations in Germany and the USA. In the UK,

the positive impact arising from using a higher discount

rate was more than offset by the negative impact of

higher expected inflation levels. The maximum future

economic benefits relating to the asset ceiling will be

available in the form of reimbursements.

the value of the depot account or a guaranteed minimum

amount.

Defined benefit obligations also remain in Germany, for

which benefits are determined either by multiplying

a fixed amount by the number of years of service or on

the basis of an employee’s final salary. The defined

benefit plans have been closed to new entrants. With ef-

fect from 1 January 2014, new employees receive a de-

fined contribution entitlement with minimum rate of

return.

The provision for pension-like obligations for post-em-

ployment medical care in the USA and South Africa

*

amounts to €ꢀ45 million (2012 : €ꢀ113 million) and is

determined on a similar basis to the measurement of

pension obligations in accordance with IAS 19. The

medical care plan for pensioners in the USA was

amended in 2013. Instead of taking over costs, the US

entities will in future pay a subsidy, which the plan par-

ticipants can use to acquire supplementary insurance

coverage from external providers. As a consequence,

cost increases no longer have a direct impact on the ob-

ligation. In the case of South Africa, however, it was

assumed that costs would increase in the long term by

The assets of the German pension plans are adminis-

tered by BMW Trust e.ꢀV. (German registered association)

in accordance with a CTA. The representative bodies

of BMW Trust e.ꢀV. are the Board of Directors and the

Members’ General Meeting. BMW Trust e.ꢀV. currently

has seven members and three Board of Directors mem-

bers elected by the Members’ General Meeting. The

Board of Directors is responsible for BMW Trust e.ꢀV.’s

investments, drawing up and deciding on investment

guidelines as well as monitoring compliance with those

guidelines. The members of the association can be em-

ployees, senior executives and members of the Board of

Directors. An ordinary Members’ General Meeting takes

place once every calendar year, and deals with a range of

matters, including receiving and approving the associa-

tion’s annual report, ratifying the activities of the Board

of Directors and adopting changes to the association’s

statutes.

8.1% (2012: 7.5%) p.ꢀa. Income arising in connection

with obligations for post-employment medical care to-

*

talled €ꢀ40 million in the year under report (2012 : ex-

pense of €ꢀ12 million).

Numerous defined benefit plans are in place through-

out the BMW Group, the most significant of which are

described below.

*

Prior year figures have been adjusted in accordance with the revised version of

IAS 19, see note 7.

United Kingdom

Germany

In the United Kingdom, the BMW Group has defined

benefit plans, which are primarily employer-funded

combined with employee-funded components based on

the conversion of employee remuneration. These plans

are subject to statutory minimum recovery requirements.

Benefits paid in conjunction with these plans comprise

old-age retirement pensions as well as invalidity and

surviving dependants’ benefits. These defined benefit

plans have been closed to new entrants, who, with

effect from 1 January 2014, will be covered by a defined

contribution plan.

Both employer- and employee-funded benefit plans are

in place in Germany. Benefits paid in conjunction with

these plans comprise old-age retirement pensions as

well as invalidity and surviving dependants’ benefits.

The Deferred Remuneration Retirement Plan is an em-

ployee-financed defined contribution plan with a mini-

mum rate of return. The fact that the plan involves a

minimum rate of return means that it is classified as a

defined benefit plan. Employees have the option to

waive payment of certain remuneration components in

return for a future benefit. Any employer social security The pension plans are administered by BMW Pension

contributions saved are credited in the following year Trustees Limited and BMW (UK) Trustees Limited, both

to the individual’s benefits account. The converted remu- trustee companies which act independently of the

neration components and the social security contribu-

tions saved are invested on capital markets. When the

BMW Group. BMW (UK) Trustees Limited is represented

by 14 trustees and BMW Pension Trustees Limited by

1

36

five trustees. A minimum of one third of the trustees

must be elected by plan participants. The trustees rep-

resent the interests of plan participants and decide on

investment strategies and plan amendments. Recovery

contributions to the funds are determined in agreement

with the BMW Group.

Statutory minimum funding requirements apply to the

final salary pension plans. Plan participants are repre-

sented by a committee consisting of six members, which

is authorised to take all decisions pertaining to the rele-

vant pension plan, including plan structure, invest-

ments and selection of investment managers as well as

regular and recovery contributions to the plan. The

committee members are nominated by the management

of the relevant participating US entities. Plan committees

act in a fiduciary capacity and are subject to statutory

framework conditions.

USA

The BMW Group’s defined benefit plans in the USA are

primarily employer-funded and include final salary

pension plans and a post-retirement medical care plan.

Benefits paid in conjunction with these plans comprise

old-age retirement pensions, early retirement benefits,

surviving dependants’ benefits as well as post-retire-

ment medical care benefits.

The change in the net defined benefit liability for pen-

*

sion plans can be derived as follows:

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19,

see note 7.

Defined benefit

Plan assets

–12,447

Total

Limitation of

the net defined

benefit asset to

the asset ceiling

Net defined

benefit liability

in € million

obligation

88

Group Financial StatementS

Income Statements

Statement of

1

January 2013

16,255

3,808

4

3,812

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Expense/income

9

0

2

4

Current service cost

362

565

–53

2

–

362

127

–53

2

–

362

127

–53

2

Interest expense (+)/income (–)

Past service cost

–438

9

6

Notes

–

96

Accounting Principles and

Policies

Gains (–) or losses (+) arising from settlements

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Remeasurements

1

Gains (–) or losses (+) on plan assets, excluding

amounts included in interest income

–

4

–481

4

–

1

–

–481

4

61 Segment Information

Gains (–) or losses (+) arising from changes in

demographic assumptions

–

Gains (–) or losses (+) arising from changes in

financial assumptions

–818

–

–818

–

–818

1

Changes in the limitation of the net defined benefit

asset to the asset ceiling

Gains (–) or losses (+) arising from

experience adjustments

34

Transfers to fund

–

64

–509

–64

–509

–

–509

–

Employee contributions

Pensions and other benefits paid

Translation differences and other changes

–460

–197

324

–136

–43

–

–136

–44

154

–1

4

3

1 December 2013

15,758

–13,461

2,297

2,301

thereof pension provision

thereof assets

2,303

–2

1

37 Group Financial StatementS

Defined benefit

obligation

Plan assets

Total

Limitation of

the net defined

benefit asset to

the asset ceiling

Net defined

benefit liability

in € million

1

January 2012

13,030

2

–11,038

–

1,992

2

3

–

1,995

2

Effect of first-time consolidation

Expense/income

Current service cost

253

618

–3

–

253

90

–

253

90

Interest expense (+)/income (–)

Past service cost

–528

–

–3

Gains (–) or losses (+) arising from settlements

–1

Remeasurements

Gains (–) or losses (+) on plan assets, excluding

amounts included in interest income

–

128

–671

128

–

2

–

–671

128

Gains (–) or losses (+) arising from changes in

demographic assumptions

–

Gains (–) or losses (+) arising from changes in

financial assumptions

2,712

–

2,712

–

2,712

2

Changes in the limitation of the net defined benefit

asset to the asset ceiling

Gains (–) or losses (+) arising from

experience adjustments

–278

Transfers to fund

–

60

–313

–60

–313

–

–313

–

Employee contributions

Pensions and other benefits paid

Translation differences and other changes

–434

168

320

–114

11

–

–114

10

–157

–1

4

3

1 December 2012

16,255

–12,447

3,808

3,812

thereof pension provision

thereof assets

3,813

–1

Net interest expense on the net defined benefit liability

is presented within the financial result. All other com-

The level of the pension obligations differs depending

on the pension system applicable in each country.

ponents of pension expense are presented in the income Since the state pension system in the UK only provides

statement under costs by function.

a low fixed amount benefit, old-age retirement bene-

fits are largely organised in the form of company pen-

sions on the one hand and arrangements financed

Remeasurements on the obligations side gave rise to a

negative amount of €ꢀ780 million (2012: positive amount by the individual on the other. The pension benefits

of €ꢀ2,562 million) and related mainly to the higher dis-

count rates used in Germany and the USA.

in the UK therefore contain contributions made by the

employee.

1

38

The net defined benefit liability for pension plans in Germany, the UK and other countries changed as follows:

Germany

Defined benefit obligation

Plan assets

Net liability

in € million

2013

2012

2013

2012

2013

2012

1

January

7,974

483

–946

–

5,618

414

2,046

–

–6,064

–183

–174

–301

–42

–5,178

–247

–466

–153

–39

1,910

300

–1,120

–301

–

440

167

Expense/income

Remeasurements

1,580

–153

–

Payments to external funds

Employee contributions

Payments on account and pension payments

Other changes

42

39

–154

1

–143

–

15

19

–139

1

–124

–

31December

7,400

7,974

–6,749

–6,064

651

1,910

United Kingdom

Defined benefit obligation

Plan assets

Net liability

*

in € million

2013

2012

2013

2012

2013

2012

1

January

7,137

345

330

–

6,499

368

346

–

–5,782

–233

–305

–135

–18

–5,376

–260

–170

–93

1,355

112

25

1,123

108

176

–93

–

Expense/income

88

Group Financial StatementS

Income Statements

Statement of

Remeasurements

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Payments to external funds

Employee contributions

–135

–

90

92

94

18

17

–17

Payments on account and pension payments

Translation differences and other changes

31December

–261

–160

7,409

–269

176

7,137

269

280

8

11

128

–146

–5,782

–32

1,333

30

96

Notes

96

Accounting Principles and

Policies

–6,076

1,355

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

1

Other

61 Segment Information

Defined benefit

obligation

Plan assets

Effect of limiting the

net defined benefit

asset to the asset ceiling

Net liability

2012

*

in € million

2013

2012

2013

2012

2013

2012

2013

1

January

1,144

–

913

2

–601

–

–484

–

4

–

3

–

547

–

432

2

Effect of first-time consolidation

Expense/income

48

85

–22

–2

–21

–35

–67

–4

–

26

64

Remeasurements

–164

–

170

–

1

–

2

–165

–73

–

137

–67

–

Payments to external funds

Employee contributions

–73

–4

–

4

–

Payments on account and pension payments

Translation differences and other changes

–45

–38

949

–22

–8

40

21

–

–5

–1

26

–11

–601

–1

4

–1

4

–13

317

–20

547

31December

1.144

–636

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Depending on the cash flow profile and risk structure

of the pension obligations involved, pension plan

assets are invested in various investment classes. In

accordance with the requirements of revised IAS 19,

new investment classes were included in the break-

down of plan assets.

1

39 Group Financial StatementS

Plan assets in Germany, the UK and other countries comprised the following:

Components of plan assets

Germany

United Kingdom

Other

2013

Total

2013

*

in € million

2013

2012

2013

2012

Equity instruments

Debt instruments

1,718

4,143

2,987

1,156

–

1,462

3,905

3,030

875

–

1,030

3,333

3,160

173

3

1,055

3,079

2,901

178

3

133

263

243

20

19

43

–

137

251

231

20

6

2,881

7,739

6,390

1,349

22

2,654

7,235

6,162

1,073

9

thereof investment grade

thereof non-investment grade

Real estate

Money market funds

Absolute return funds

Other

89

65

113

21

191

21

37

–

245

293

–

21

–

26

19

1

2

27

21

Total with quoted market price

5,950

5,432

4,526

4,368

459

433

10,935

10,233

Debt instruments

177

–

170

–

310

136

174

570

–

423

383

40

12

9

19

3

499

322

177

733

2

612

556

56

thereof investment grade

thereof non-investment grade

Real estate

3

16

58

–

99

87

550

3

64

1

695

21

Cash and cash equivalents

Absolute return funds

Other

1

18

361

161

799

232

125

632

454

216

1,550

369

69

–

815

477

2,526

601

285

2,214

100

177

91

168

Total without quoted market price

1,414

31December

6,749

6,064

6,076

5,782

636

601

13,461

12,447

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Employer contributions to plan assets are expected to

amount to €ꢀ415 million in the coming year. Plan assets

of the BMW Group include own transferable financial

count in the actuarial assumptions applied. The finan-

cial risk of longer-than-assumed life expectancy is

hedged for the BMW Group’s largest pension plan in

instruments amounting to €ꢀ4 million (2012: €ꢀ2 million). the UK by means of a so-called “longevity hedge”.

The BMW Group is exposed to risks arising from defined In order to reduce currency exposures, a substantial

benefit plans on the one hand and defined contribution

plans with a minimum return guarantee on the other.

Pension obligations to employees under such plans are

measured on the basis of actuarial reports. Future pen-

sion payments are discounted by reference to market

yields on high quality corporate bonds. These yields are

subject to market fluctuation and influence the level

of pension obligations. Furthermore, changes in other

portion of plan assets are either invested in the same

currency as the underlying plan or hedged by means

of currency derivatives.

Pension fund assets are monitored continuously and

managed from a risk-and-yield perspective. Risk is

reduced by ensuring a broad spread of investments. In

this context, the BMW Group continuously monitors

actuarial parameters, such as expected rates of inflation, the degree of coverage of pension plans as well as ad-

also have an impact on pension obligations.

herence to the stipulated investment strategy.

A substantial portion of plan assets is invested in debt

instruments in order to minimise the effect of capital

market fluctuations on the net liability. The asset port-

folio also includes equity instruments, property and

alternative investments – asset classes capable of gener-

ating the higher rates of return necessary to cover risks

As part of the reporting procedures and for internal

management purposes, financial risks relating to the

pension plans are reported on using a deficit-value-at-

risk approach. The investment strategy is also subjected

to regular review together with investment consultants,

with the aim of ensuring that investments are structured

to coincide with the timing of pension payments and

(such as changes in mortality tables) not taken into ac-

1

40

the expected pattern of pension obligations. In their own

payments out of operations will be substantially re-

way, each of these measures helps to reduce fluctuations duced in the future, since most of the Group’s pension

in pension funding shortfalls.

obligations are settled out of the assets of pension

fundsꢀ/ꢀtrust fund arrangements.

Most of the BMW Group’s pension assets are adminis-

tered separately and kept legally segregated from com-

pany assets using trust fund arrangements. As a conse-

quence, the level of funds required to finance pension

The defined benefit obligation relates to current em-

ployees, former employees with vested benefits and

pensioners as follows:

31 December

Germany

United Kingdom

Other

*

in € million

2013

2012

2013

2012

2013

2012

Current employees

4,715

2,297

388

5,157

2,384

433

1,604

3,651

2,154

7,409

1,344

3,752

2,041

7,137

723

141

85

872

176

96

Pensioners

Former employees with vested benefits

Defined benefit obligation

7,400

7,974

949

1,144

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

The sensitivity analysis provided below shows the ex-

tent to which the defined benefit obligation would

have been affected by changes in the relevant assump-

tions that were reasonably possible at the end of the

reporting period, if the other assumptions used in the

calculation were kept constant. As permitted in

IAS 19 173(b), disclosures for the comparative period

are not provided. The defined benefit obligation

amounted to €ꢀ15 758 million at 31 December 2013

.

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

,

.

90

92

94

31 December 2013

Change in defined

benefit obligation

in € million

Change in defined

benefit obligation

in %

96

Notes

96

Accounting Principles and

Policies

Discount rate

increase of 0.75%

–2,028

2,528

506

–12.9

16.0

3.2

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

decrease of 0.75%

increase of 0.25%

decrease of 0.25%

increase of 1year

decrease of 1year

increase of 0.25%

decrease of 0.25%

Pension level trend

Average life expectancy

Pension entitlement trend

1

–479

510

–3.0

3.2

61 Segment Information

–514

101

–3.3

0.6

–97

–0.6

In the UK, the sensitivity analysis for the pension level

trend also takes account of restrictions due to caps and

floors.

The weighted duration of all pension obligations in Ger-

many, the UK and other countries (based on present values

of the defined benefit obligation) developed as follows:

3

1 December

Germany

2013

United Kingdom

Other

in years

2012

21.0

2013

18.3

2012

18.4

2013

14.9

2012

18.8

Weighted duration of all pension obligations

19.6

Statutory minimum funding and recovery requirements

apply in the UK and the USA which may have an effect

to measure the level of funding. In conjunction with

these valuations, funding plans are drawn up and the

on future amounts. Valuations are performed regularly amount of any special allocations determined.

1

41 Group Financial StatementS

36

Other provisions

Other provisions comprise the following items:

*

31.12.2012

in € million

31.12.2013

Total

thereof

Total

thereof

due within

one year

due within

one year

Obligations for personnel and social expenses

Obligations for ongoing operational expenses

Other obligations

1,697

3,468

2,018

7,183

1,299

1,076

1,036

3,411

1,611

3,177

1,899

6,687

1,198

924

1,124

3,246

Other provisions

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Provisions for obligations for personnel and social ex-

ranties and other guaranties offered by the BMW

penses comprise mainly performance-related remunera- Group. Depending on when claims are made, it is possi-

tion components, early retirement part-time working

arrangements and employee long-service awards. Obli-

gations for performance-related remuneration compo-

nents are normally settled in the following financial

year. Provisions for obligations for on-going operational

expenses relate primarily to warranty obligations and

ble that the BMW Group may be called upon to fulfil ob-

ligations over the whole period of the warranty or guar-

antee. Provisions for other obligations cover numerous

specific risks and obligations of uncertain timing and

amount, in particular for litigation and liability risks.

comprise both statutorily prescribed manufacturer war- Other provisions changed during the year as follows:

in € million

1.1. 2013^*Translation

differences

Additions Reversal of

discounting

Utilised

Reversed

31.12.2013

Obligations for personnel and social expenses

Obligations for ongoing operational expenses

Other obligations

1,616

3,181

1,879

6,676

–12

–117

–48

1,310

1,486

854

–

13

–8

5

–1,194

–1,010

–450

–23

–85

1,697

3,468

2,018

7,183

–209

–317

Other provisions

–177

3,650

–2,654

*

Prior year figures adjusted in accordance with the revised IAS 19, see note 7, and include mergers.

Income from the reversal of other provisions amounting to €ꢀ134 million (2012: €ꢀ129 million) is included in costs by

function in the income statement.

37

Income tax liabilities

Current income tax liabilities totalling €ꢀ

1

,

237 million

Current tax liabilities of €ꢀ

million) comprise €ꢀ197 million (2012: €ꢀ438 million)

for taxes payable and €ꢀ 040 million (2012: €ꢀ 044 mil-

lion) for tax provisions. Tax provisions totalling €ꢀ44

1,237 million (2012: €ꢀ1,482

(

2012: €ꢀ1,482 million) include obligations amounting

to €ꢀ823 million (2012: €ꢀ806 million) which are expected

to be settled after more than twelve months. Some of

1

,

1,

the liabilities may be settled earlier than this depending million were reversed in the year under report (2012

on the timing of proceedings. €ꢀ23 million).

:

1

42

38

Financial liabilities

Financial liabilities include all liabilities of the BMW

Group at the relevant balance sheet dates relating to

financing activities. Financial liabilities comprise the

following:

3

1 December 2013

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

Bonds

7,166

4,326

9,342

6,292

2,579

426

20,329

4,146

3,115

–

2,875

118

–

30,370

8,590

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

12,457

6,292

–

Asset backed financing transactions

Derivative instruments

Other

7,517

632

32

10,128

1,103

45

723

307

334

3,404

1,364

Financial liabilities

30,854

36,046

70,304

3

1 December 2012

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

Bonds

7,427

4,595

10,076

4,577

2,097

865

17,234

4,232

2,942

–

5,191

657

–

29,852

9,484

13,018

4,577

9,411

1,790

1,375

69,507

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

90

92

94

–

Asset backed financing transactions

Derivative instruments

Other

7,212

903

102

22

96

Notes

775

233

367

6,339

96

Accounting Principles and

Policies

Financial liabilities

30,412

32,756

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

The BMW Group uses various short-term and long-term Customer deposit liabilities arise in the BMW Group’s

1

refinancing instruments on money and capital markets

to finance its operations. This diversification enables it

to obtain attractive market conditions.

banks in Germany and the USA, both of which offer a

range of investment products.

61 Segment Information

Bonds comprise:

The main instruments used are corporate bonds, asset-

backed financing transactions, liabilities to banks and

liabilities from customer deposits (banking).

Issuer

Interest

Issue volume

in relevant currency

Weighted

average maturity

period (in years)

Weighted

average nominal

interest rate (in %)

(ISO-Code)

BMW Finance N.V., The Hague

variable

fixed

EUR 2,975 million

GBP 100 million

HKD 300 million

JPY 3,500 million

SEK 1,800 million

USD 605 million

AUD 600 million

CHF 300 million

EUR 13,494 million

GBP 1,050 million

HKD 836 million

JPY 15,000 million

NOK 6,400 million

NZD 100 million

2.2

1.0

3.0

2.0

1.7

3.5

6.0

6.4

6.0

3.0

3.1

3.0

0.5

0.7

1.3

0.8

1.4

0.6

4.9

1.8

3.2

3.0

2.0

0.4

3.7

4.8

fixed

1

43 Group Financial StatementS

Issuer

Interest

Issue volume

in relevant currency

Weighted

average maturity

period (in years)

Weighted

average nominal

interest rate (in %)

(ISO-Code)

BMW Finance N.V., The Hague

BMW (UK) Capital plc, Bracknell

fixed

SEK 1,000 million

CHF 500 million

GBP 300 million

EUR 305 million

GBP 300 million

SEK 1,000 million

USD 480 million

CHF 325 million

EUR 3,500 million

JPY 6,000 million

AUD 200 million

NOK 1,500 million

USD 1,295 million

EUR 150 million

USD 335 million

AUD 175 million

JPY 17,500 million

JPY 15,000 million

INR 8,000 million

CAD 1,975 million

JPY 38,000 million

KRW 220,000 million

3.0

5.0

8.0

2.3

1.0

2.2

4.0

7.0

5.6

2.0

3.2

3.0

7.4

2.3

3.0

2.0

3.0

3.6

3.7

4.6

4.1

3.8

2.1

5.0

0.3

0.5

0.9

0.2

3.6

3.1

0.3

4.0

2.4

3.8

0.5

0.8

6.5

0.4

0.3

10.1

2.5

0.6

3.6

fixed

BMW US Capital, LLC, Wilmington, DE

variable

fixed

BMW Australia Finance Ltd., Melbourne, Victoria

variable

fixed

Other

variable

fixed

The following details apply to the commercial paper:

Issuer

Issue volume

in relevant currency

Weighted

average maturity

period (in days)

Weighted

average nominal

interest rate (in %)

(ISO-Code)

BMW Finance N.V., The Hague

EUR 2,127 million

GBP 800 million

USD 779 million

EUR 300 million

USD 3,225 million

47.3

50.0

79.8

38.0

27.5

0.2

0.5

0.2

0.1

BMW Malta Finance Ltd., St. Julians

BMW US Capital, LLC, Wilmington, DE

39

Other liabilities

Other liabilities comprise the following items:

3

1 December 2013

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

Other taxes

729

60

1

11

15

3

745

74

Social security

Advance payments from customers

Deposits received

528

77

–

605

274

93

14

–

381

Payables to subsidiaries

Payables to other companies in which an investment is held

Deferred income

157

–

157

72

–

72

1,666

3,580

7,066

3,069

121

3,372

191

8

4,926

3,709

10,669

Other

Other liabilities

231

1

44

3

1 December 2012

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

Other taxes

697

46

1

23

15

7

713

76

Social security

Advance payments from customers

Deposits received

603

65

–

668

355

91

20

–

466

Payables to subsidiaries

Payables to other companies in which an investment is held

Deferred income

236

–

236

1

–

1

1,496

3,358

6,792

2,704

157

3,041

312

9

4,512

3,524

10,196

Other

Other liabilities

363

Deferred income comprises the following items:

in € million

31.12.2013

31.12.2012

Total

thereof

due within

one year

Total

thereof

due within

one year

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Deferred income from lease financing

Deferred income relating to service contracts

Grants

1,774

2,855

193

761

837

20

1,743

2,478

196

791

615

28

90

92

94

Other deferred income

104

48

95

62

Deferred income

4,926

1,666

4,512

1,496

96

Notes

96

Accounting Principles and

Policies

Deferred income relating to service contracts relates to

service and repair work to be provided under commit-

ments given at the time of the sale of a vehicle (multi-

component arrangements). Grants comprise primarily

public sector funds to promote regional structures and

which have been invested in the production plants in

Leipzig and Berlin. The grants are subject to holding

periods for the assets concerned of up to five years and

minimum employment figures. All conditions attached

to the grants were complied with at 31 December 2013.

In accordance with IAS 20, grant income is recognised

over the useful lives of the assets to which they relate.

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

40

Trade payables

3

1 December 2013

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

Trade payables

7,283

192

–

7,475

Total

31 December 2012

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

in € million

Trade payables

6,424

9

–

6,433

The total amount of financial liabilities, other liabilities and trade payables with a maturity later than five years

amounts to €ꢀ3,635 million (2012: €ꢀ6,702 million).

1

45 Group Financial StatementS

BMW Group

Notes to the Group Financial Statements

Other Disclosures

41

Contingent liabilities and other financial commitments

Contingent liabilities

No provisions were recognised for the following contingent liabilities (stated at estimated amounts), since an out-

flow of resources is not considered to be probable:

in € million

31.12.2013

31.12.2012

Guarantees

33

4

6

–

Performance guarantees

Other

39

76

60

66

Contingent liabilities

Contingent liabilities relate entirely to non-group

entities.

options. In 2013 an amount of €ꢀ320 million (2012: €ꢀ296

million) was recognised as an expense in conjunction

with operating leases. All of these amounts relate to

minimum lease payments.

Other financial commitments

In addition to liabilities, provisions and contingent lia-

bilities, the BMW Group also has other financial com-

mitments, primarily under lease contracts for land,

buildings, plant and machinery, tools, office and other

facilities. The leases run for periods of one to 45 years

and in some cases contain extension andꢀ/ꢀor purchase

The total of future minimum lease payments under non-

cancellable and other operating leases can be analysed

by maturity as follows:

in € million

31.12.2013

31.12.2012

Nominal total of future minimum lease payments

due within one year

335

852

320

805

due between one and five years

due later than five years

587

585

Other financial obligations

1,774

1,710

Other financial commitments include €ꢀ10 million (2012: Purchase commitments amounted to €ꢀ2,661 million

€

ꢀ19 million) in respect of obligations to non-consoli-

(2012: €ꢀ3,010 million) for property, plant and equip-

ment and €ꢀ446 million (2012: €ꢀ440 million) for intangi-

ble assets.

dated subsidiaries and €ꢀ1 million (2012: €ꢀ2 million) for

back-to-back operating leases.

1

46

42

Financial instruments

The carrying amounts and fair values of financial instruments are assigned to IAS 39 categories and cash funds

1

, 2

as follows:

3

1 December 2013

Cash funds

Loans

and receivables

Held-to-maturity

investments

in € million

Fair value

Carrying

Fair value

Carrying

Fair value

Carrying

amount

Assets

Other investments

–

Receivables from sales financing

Financial assets

55,536

54,117

Derivative instruments

Cash flow hedges

–

Fair value hedges

–

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

–

250

32

250

32

–

222

825

–

222

825

–

7,664

–

7,664

–

Cash and cash equivalents

Trade receivables

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

2,449

Other assets

90

92

94

Receivables from subsidiaries

–

779

–

Receivables from companies in which

an investment is held

–

999

382

999

382

–

96

Notes

Collateral receivables

–

96

Accounting Principles and

Policies

Other

172

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Total

7,664

61,646

60,227

1

31 December 2013

Cash funds

Loans

and receivables

Held-to-maturity

investments

in € million

61 Segment Information

Fair value

Carrying

amount

Fair value

Carrying

amount

Fair value

Carrying

amount

Liabilities

Financial liabilities

Bonds

–

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

–

Fair value hedges

Other derivative instruments

Other

Trade payables

Other liabilities

Payables to subsidiaries

–

Payables to other companies in which

an investment is held

–

Other

Total

1

2

3

4

The carrying amounts of cash flow and fair value hedges are allocated to the category “Held for trading” for the sake of clarity.

Based on the fact that maturities are generally short, it is assumed for some items that fair value corresponds to the carrying amount.

Carrying amount corresponds to market value.

Optimised system-based fair value measurement for items whose market value differs from their carrying amount.

1

47 Group Financial StatementS

Other liabilities

Available-

for-sale

Fair value

option

Held for

trading

Fair value

Carrying

amount

Carrying

amount

Carrying

amount

Carrying

3

amount

3

Assets

–

553

–

Other investments

Receivables from sales financing

Financial assets

Derivative instruments

Cash flow hedges

–

1,914

–

1,050

Fair value hedges

–

1,049

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

2,810

–

Cash and cash equivalents

Trade receivables

Other assets

–

Receivables from subsidiaries

Receivables from companies in which

an investment is held

–

324

–

Collateral receivables

–

Other

3,687

4,013

Total

Other liabilities

Available-

for-sale

Fair value

option

Held for

trading

4

Fair value

Carrying

amount

Carrying

amount

Carrying

amount

Carrying

3

amount

3

Liabilities

Financial liabilities

3

1

0,860

,671

2,471

,292

30,370

8,590

–

Bonds

8

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

12,457

6,292

6

0,173

10,128

–

317

321

465

–

Fair value hedges

–

Other derivative instruments

Other

1

,364

,475

1,364

7,475

7

–

Trade payables

Other liabilities

157

–

Payables to subsidiaries

Payables to other companies in which

an investment is held

7

2

72

4,126

–

4

,126

Other

8

1,661

81,031

1,103

Total

1

48

1, 2

3

1 December 2012

Cash funds

Loans

and receivables

Held-to-maturity

investments

in € million

Fair value

Carrying

Fair value

Carrying

Fair value

Carrying

amount

Assets

Other investments

–

Receivables from sales financing

Financial assets

54,374

52,914

Derivative instruments

Cash flow hedges

–

Fair value hedges

–

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

–

44

–

234

835

–

234

835

–

8,370

–

8,370

–

Cash and cash equivalents

Trade receivables

2,543

Other assets

Receivables from subsidiaries

–

738

–

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Receivables from companies in which

an investment is held

–

398

–

398

676

–

676

–

Collateral receivables

90

92

94

Other

–

205

Total

8,768

59,649

58,189

96

Notes

9

6

Accounting Principles and

Policies

3

1 December 2012

Cash funds

Loans

and receivables

Held-to-maturity

investments

in € million

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

Fair value

Carrying

amount

Fair value

Carrying

Fair value

Carrying

amount

1

amount

61 Segment Information

Liabilities

Financial liabilities

Bonds

–

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

–

Fair value hedges

Other derivative instruments

Other

Trade payables

Other liabilities

Payables to subsidiaries

–

Payables to other companies in which

an investment is held

–

Other

Total

1

2

3

The carrying amounts of cash flow and fair value hedges are allocated to the category “Held for trading” for the sake of clarity.

Based on the fact that maturities are generally short, it is assumed for some items that fair value corresponds to the carrying amount.

Carrying amount corresponds to market value.

1

49 Group Financial StatementS

Other liabilities

Available-

for-sale

Fair value

option

Held for

trading

Fair value

Carrying

amount

Carrying

amount

Carrying

amount

Carrying

3

amount

3

Assets

–

548

–

Other investments

Receivables from sales financing

Financial assets

Derivative instruments

Cash flow hedges

–

925

–

1,457

Fair value hedges

–

610

–

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

2,655

–

Cash and cash equivalents

Trade receivables

–

Other assets

–

Receivables from subsidiaries

Receivables from companies in which

an investment is held

–

157

–

Collateral receivables

–

Other

3,360

2,992

Total

Other liabilities

Available-

for-sale

Fair value

option

Held for

trading

Fair value

Carrying

amount

Carrying

amount

Carrying

amount

Carrying

3

amount

3

Liabilities

Financial liabilities

2

9,966

,484

3,098

29,852

9,484

13,018

4,577

9,411

–

Bonds

9

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

1

4

,577

,369

9

–

701

320

769

–

Fair value hedges

–

Other derivative instruments

Other

1

,375

,433

1,375

6,433

6

–

Trade payables

Other liabilities

236

–

Payables to subsidiaries

Payables to other companies in which

an investment is held

1

4,084

–

4

,084

Other

7

8,623

78,471

1,790

Total

1

50

Fair value measurement of financial instruments

appropriate measurement methods, e.ꢀg. discounted cash

flow models. In the latter case, amounts were discounted

at 31 December 2013 on the basis of the following in-

terest rates:

The fair values shown are computed using market in-

formation available at the balance sheet date, on the

basis of prices quoted by the contract partners or using

ISO Code

in %

EUR

USD

GBP

JPY

CNY

Interest rate for six months

Interest rate for one year

Interest rate for five years

Interest rate for ten years

0.28

0.40

1.27

2.22

0.26

0.31

1.77

3.17

0.54

0.71

2.17

3.09

0.20

0.21

0.40

0.95

5.66

5.80

5.86

Interest rates taken from interest rate curves were ad-

justed, where necessary, to take account of the credit

quality and risk of the underlying financial instrument.

default risk and that of counterparties is taken into

account in the form of credit default swap (CDS) con-

tracts which have matching terms and which can be

observed on the market.

Derivative financial instruments are measured at their

fair value. The fair values of derivative financial instru- Financial instruments measured at fair value are allo-

ments are determined using measurement models, as

a consequence of which there is a risk that the amounts

calculated could differ from realisable market prices on

disposal. Observable financial market price spreads

are taken into account in the measurement of derivative

financial instruments. The methodology for collating

data used in the fair values computation model was re-

fined during the second quarter of 2013, particularly

with respect to the way interest rate curves are employed

and the use of additional market data (tenor and cur-

rency basis spreads), thus helping to minimise differ-

cated to different measurement levels in accordance with

IFRS 13. This includes financial instruments that are

1. measured at their fair values in an active market for

identical financial instruments (Level 1),

2. measured at their fair values in an active market for

comparable financial instruments or using measure-

ment models whose main input factors are based on

observable market data (Level 2) or

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

96

Notes

96

Accounting Principles and

Policies

3. using input factors not based on observable market

data (Level 3).

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

ences between the carrying amounts of the instruments The following table shows the amounts allocated to

and the amounts that can be realised on the financial each measurement level at the end of the reporting

markets on their disposal. In addition, the Group’s own period:

61 Segment Information

3

1 December 2013

Level hierarchy in accordance with IFRS 13

in € million

Level 1

Level 2

Level 3

Marketable securities, investment fund shares and collateral assets – available-for-sale

Other investments – available-for-sale

Derivative instruments (assets)

Cash flow hedges

3,134

379

–

1,914

1,050

1,049

–

Fair value hedges

Other derivative instruments

Derivative instruments (liabilities)

Cash flow hedges

–

317

321

465

–

Fair value hedges

Other derivative instruments

1

51 Group Financial StatementS

31 December 2012

Level hierarchy in accordance with IFRS 13

in € million

Level 1

Level 2

Level 3

Marketable securities, investment fund shares and collateral assets – available-for-sale

Other investments – available-for-sale

Derivative instruments (assets)

Cash flow hedges

2,812

391

–

925

1,457

610

–

Fair value hedges

Other derivative instruments

Derivative instruments (liabilities)

Cash flow hedges

–

701

320

769

–

Fair value hedges

Other derivative instruments

Other investments (available-for-sale) amounting to

poses, this was achieved using the discounted cash flow

€

ꢀ174 million (2012: €ꢀ157 million) are measured at amor- method and taking account of the BMW Group’s own

tised cost since quoted market prices are not available

or cannot be determined reliably. These are therefore

not included in the level hierarchy shown above. In ad-

dition, other investments amounting to €ꢀ379 million

default risk; for this reason, the fair values calculated

can be allocated to Level 2.

Offsetting of financial instruments

(

2012: €ꢀ391 million) are measured at fair value since

In the BMW Group, financial assets and liabilities re-

lating to derivative financial instruments would

normally be required to be offset. No offsetting takes

place for accounting purposes, however, since the

necessary criteria are not met. Since legally enforce-

able master netting agreements or similar contracts

are in place, actual offsetting would be possible in

principle, for instance in the case of insolvency. Off-

quoted market prices are available. These items are in-

cluded in Level 1.

As in the previous year, there were no reclassifications

within the level hierarchy during the financial year

2

013.

In situations where a fair value was required to be meas- setting would have the following impact on the carry-

ured for a financial instrument only for disclosure pur-

ing amounts of derivatives:

in € million

31.12.2013

31.12.2012

Reported on

assets side

Reported on

equity and

Reported on

assets side

equity and

liabilities side

Balance sheet amounts as reported

4,013

–710

1,103

–710

393

2,992

–1,004

1,988

1,790

–1,004

786

Gross amount of derivatives which can be offset in case of insolvency

Net amount after offsetting

3,303

1

52

Gains and losses on financial instruments

The following table shows the net gains and losses arising for each of the categories of financial instrument defined

by IAS 39:

in € million

2013

2012

Held for trading

Gains/losses from the use of derivative instruments

Available-for-sale

Gains and losses on sale and fair value measurement of marketable securities held for sale

including investments in subsidiaries and participations measured at cost)

571

–278

(

–57

10

–145

5

Net income from participations and investments

Accumulated other equity

Balance at 1January

108

27

–61

169

40

Total change during the year

thereof recognised in the income statement during the period under report

Balance at 31December

–40

135

108

Loans and receivables

Impairment losses/reversals of impairment losses

Other income/expenses

–310

126

–440

–61

Other liabilities

Income/expenses

–235

–115

88

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

9

0

2

4

Gainsꢀ/ꢀlosses from the use of derivatives relate pri-

marily to fair value gains or losses arising on stand-alone

derivatives.

The disclosure of interest income resulting from the un-

winding of interest on future expected receipts would

normally only be relevant for the BMW Group where

assets have been discounted as part of the process of

determining impairment losses. However, as a result of

the assumption that most of the income that is subse-

quently recovered is received within one year and the

fact that the impact is not material, the BMW Group

does not discount assets for the purposes of determin-

ing impairment losses.

9

6

Notes

96

Accounting Principles and

Policies

Net interest income from interest rate and interest

rateꢀ/ꢀcurrency swaps amounted to €ꢀ126 million (2012:

€ꢀ111 million).

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

Impairment losses of €ꢀ73 million (2012: €ꢀ166 million)

on available-for-sale marketable securities, for which

fair value changes were previously recognised directly

in equity, were recognised as expenses in 2013. Re-

versals of impairment losses on marketable securities

amounting to €ꢀ70 million (2012: €ꢀ– million) were rec-

ognised directly in equity.

Cash flow hedges

The effect of cash flow hedges on accumulated other

equity was as follows:

in € million

2013

2012

Balance at 1January

202

934

–750

952

532

202

Total changes during the year

thereof reclassified to the income statement

Balance at 31 December

–179

1,136

Fair value gains and losses recognised on derivatives

and recorded initially in accumulated other equity are

impact arose primarily as a result of changes in sales

forecasts in foreign currencies. Gains attributable to the

reclassified to cost of sales when the derivatives mature. ineffective portion of hedging instruments amounting to

ꢀ8 million were recognised in “Financial Result” (2012:

No gainsꢀ/ꢀlosses were recognised in “Financial Result” in €ꢀ– million). No gainsꢀ/ꢀlosses were recognised in 2013 in

€

2

013 in connection with forecasting errors and the re-

connection with forecasting errors relating to cash flow

hedges for commodities (2012: negative impact of €ꢀ8 mil-

lion). However, losses attributable to the ineffective por-

sulting over-hedging of currency exposures (2012: net

positive amount of €ꢀ1 million). In the previous year, the

1

53 Group Financial StatementS

tion of commodity hedges amounting to €ꢀ8 million (2012: coming 13 months. The income statement impact of the

gain of €ꢀ67million) were recognised in “Financial Result”. hedged cash flows will be recognised as a general rule in

the same periods over which the relevant interest rates

At 31 December 2013 the BMW Group held derivative

financial instruments (mainly option and forward cur-

rency contracts) with terms of up to 60 months (2012:

are fixed. It is not expected that any net gains or net

losses, recognised in equity at the end of the reporting

period, will be reclassified to the income statement in

the coming financial year (2012: €ꢀ– million).

7

2 months), as a general rule in order to hedge cur-

rency risks attached to future transactions. These de-

rivative instruments are intended to hedge forecast

sales denominated in a foreign currency over the com-

ing 60 months. The income statement impact of the

hedged cash flows will be recognised as a general rule

in the same periods in which external revenues are

recognised. It is expected that €ꢀ162 million of net gains,

recognised in equity at the end of the reporting pe-

riod, will be reclassified to the income statement (2012:

At 31 December 2013 the BMW Group held derivative

financial instruments (mostly commodity swaps) with

terms of up to 60 months (2012: 60 months) to hedge

raw materials price risks attached to future transactions

over the coming 60 months. The income statement im-

pact of the hedged cash flows will be recognised as a

general rule in the same period in which the derivative

instruments mature. It is expected that €ꢀ60 million of net

losses, recognised in equity at the end of the reporting

period, will be reclassified to the income statement in the

coming financial year (2012: net gains of €ꢀ5 million).

€

ꢀ26 million).

At 31 December 2013 the BMW Group held derivative

financial instruments (mostly interest rate swaps) with

terms of up to 13 months (2012: 25 months) to hedge in- Fair value hedges

terest rate risks. These derivative instruments are in-

tended to hedge interest-rate risks arising on financial

instruments with variable interest payments over the

The following table shows gains and losses on hedging

instruments and hedged items which are deemed to be

part of a fair value hedge relationship:

in € million

31.12.2013

31.12.2012

Gains/losses on hedging instruments designated as part of a fair value hedge relationship

Gains/loss from hedged items

–525

503

127

–140

–13

Ineffectiveness of fair value hedges

–22

The difference between the gainsꢀ/ꢀlosses on hedging

instruments (mostly interest rate swaps) and the results

recognised on hedged items represents the ineffective

portion of fair value hedges.

In the case of performance relationships underlying

non-derivative financial instruments, collateral will be

required, information on the credit-standing of the

counterparty obtained or historical data based on the

existing business relationship (i.ꢀe. payment patterns to

date) reviewed in order to minimise the credit risk, all

Fair value hedges are mainly used to hedge the market

prices of bonds, other financial liabilities and receivables depending on the nature and amount of the exposure

from sales financing.

that the BMW Group is proposing to enter into.

Bad debt risk

Within the financial services business, the financed

items (e.ꢀg. vehicles, equipment and property) in the re-

tail customer and dealer lines of business serve as first-

ranking collateral with a recoverable value. Security is

Notwithstanding the existence of collateral accepted,

the carrying amounts of financial assets generally take

account of the maximum credit risk arising from the

possibility that the counterparties will not be able to fulfil also put up by customers in the form of collateral asset

their contractual obligations. The maximum credit risk pledges, asset assignment and first-ranking mortgages,

for irrevocable credit commitments relating to credit card supplemented where appropriate by warranties and

business amounts to €ꢀ943 million (2012: €ꢀ969 million). guarantees. If an item previously accepted as collateral

The equivalent figure for dealer financing is €ꢀ19,856 mil- is acquired, it undergoes a multi-stage process of repos-

lion (2012: €ꢀ18,157 million). session and disposal in accordance with the legal situa-

1

54

tion prevailing in the relevant market. The assets in-

volved are generally vehicles which can be converted

into cash at any time via the dealer organisation.

The credit risk relating to derivative financial instruments

is minimised by the fact that the Group only enters into

such contracts with parties of first-class credit standing.

The general credit risk on derivative financial instru-

ments utilised by the BMW Group is therefore not con-

sidered to be significant.

Impairment losses are recorded as soon as credit risks

are identified on individual financial assets, using a

methodology specifically designed by the BMW Group.

More detailed information regarding this methodology

A concentration of credit risk with particular borrowers

is provided in the section on accounting policies (note 5). or groups of borrowers has not been identified in con-

junction with financial instruments.

Creditworthiness testing is an important aspect of the

BMW Group’s credit risk management. Every borrower’s Further disclosures relating to credit risk – in particu-

creditworthiness is tested for all credit financing and lease lar with regard to the amounts of impairment losses

contracts entered into by the BMW Group. In the case

of retail customers, creditworthiness is assessed using vali- the relevant categories of receivables in notes 26

recognised – are provided in the explanatory notes to

27

,

dated scoring systems integrated into the purchasing

process. In the area of dealer financing, creditworthiness

is assessed by means of ongoing credit monitoring and

an internal rating system that takes account not only of

and 31

.

Liquidity risk

The following table shows the maturity structure of ex-

the tangible situation of the borrower but also of qualita- pected contractual cash flows (undiscounted) for finan-

tive factors such as past reliability in business relations.

cial liabilities:

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

3

1 December 2013

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

90

92

94

Bonds

–7,933

–4,686

–9,405

–6,294

–2,814

–426

–21,434

–4,328

–3,243

–

–3,043

–126

–

–32,410

–9,140

–12,648

–6,294

–10,460

–1,165

96

Notes

Liabilities to banks

96

Accounting Principles and

Policies

Liabilities from customer deposits (banking)

Commercial paper

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

–

Asset backed financing transactions

Derivative instruments

Trade payables

–7,614

–659

–32

–80

–

1

61 Segment Information

–7,283

–210

–195

–

7,478

–938

Other financial liabilities

Total

–361

–367

–3,648

–39,051

–37,834

–80,533

3

1 December 2012

Maturity

within

one year

Maturity

between one

and five years

Maturity

later than

five years

Total

in € million

Bonds

–8,482

–4,866

–10,139

–4,578

–2,170

–1,146

–6,424

–86

–18,375

–4,469

–3,028

–

–5,071

–678

–

–31,928

–10,013

–13,167

–4,578

–9,653

–2,232

–6,433

–758

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

–

Asset backed financing transactions

Derivative instruments

Trade payables

–7,346

–1,085

–9

–137

–1

–

*

Other financial liabilities

–248

–424

–6,311

Total

–37,891

–34,560

–78,762

*

Previous year’s figures adjusted.

The cash flows shown comprise principal repayments

and the related interest. The amounts disclosed for de-

that have a negative fair value at the balance sheet date.

At 31 December 2013 irrevocable credit commitments

rivatives comprise only cash flows relating to derivatives to dealers which had not been called upon at the end of

1

55 Group Financial StatementS

the reporting period amounted to €ꢀ6,760 million (2012:

ꢀ6,044 million).

maining after netting. Financial instruments are only

used to hedge underlying positions or forecast trans-

actions.

€

Solvency is assured at all times by managing and moni-

toring the liquidity situation on the basis of a rolling

cash flow forecast. The resulting funding requirements

are secured by a variety of instruments placed on the

world’s financial markets. The objective is to minimise

risk by matching maturities for the Group’s financing

requirements within the framework of the target debt

structure. The BMW Group has good access to capital

markets as a result of its solid financial position and a

diversified refinancing strategy. This is underpinned

by the longstanding long- and short-term ratings issued

by Moody’s and Standard & Poor’s.

The scope of permitted transactions, responsibilities,

financial reporting procedures and control mechanisms

used for financial instruments are set out in internal

guidelines. This includes, above all, a clear separation

of duties between trading and processing. Currency,

interest rate and raw materials price risks of the BMW

Group are managed at a corporate level.

Further information is provided in the “Report on out-

look, risks and opportunities” section of the Combined

Management Report.

Short-term liquidity is managed primarily by issuing

money market instruments (commercial paper). In

this area too, competitive refinancing conditions can

be achieved thanks to Moody’s and Standard & Poor’s

short-term ratings of P-1 and A-1 respectively.

Currency risk

As an enterprise with worldwide operations, business

is conducted in a variety of currencies, from which cur-

rency risks arise. Since a significant portion of Group

revenues is generated outside the euro currency region

and the procurement of production material and fund-

ing is also organised on a worldwide basis, the currency

risk is an extremely important factor for Group earnings.

Also reducing liquidity risk, additional secured and

unsecured lines of credit are in place with first-class in-

ternational banks, including a syndicated credit line

totalling €ꢀ

6

billion (2012: €ꢀ

6

billion). Intra-group cash

At 31 December 2013 derivative financial instruments,

mostly in the form of option and forward currency con-

tracts, were in place to hedge the main currencies.

flow fluctuations are evened out by the use of daily

cash pooling arrangements.

Market risks

A description of the management of this risk is pro-

vided in the Combined Management Report. The BMW

Group measures currency risk using a cash-flow-at-risk

model.

The principal market risks to which the BMW Group is

exposed are currency risk, interest rate risk and raw

materials price risk.

Protection against such risks is provided in the first

instance through natural hedging which arises when the

values of non-derivative financial instruments have

matching maturities and amounts (netting). Derivative

financial instruments are used to reduce the risk re-

The starting point for analysing currency risk with this

model is the identification of forecast foreign currency

transactions or “exposures”. At the end of the reporting

period, the principal exposures for the relevant coming

year were as follows:

in € million

31.12.2013

31.12.2012

Euro/Chinese Renminbi

Euro/US Dollar

10,691

4,401

3,852

1,738

1,469

8,429

5,311

3,206

1,638

1,585

Euro/British Pound

Euro/Russian Rouble

Euro/Japanese Yen

In the next stage, these exposures are compared to all

hedges that are in place. The net cash flow surplus

represents an uncovered risk position. The cash-flow-at-

risk approach involves allocating the impact of potential

1

56

exchange rate fluctuations to operating cash flows on

the basis of probability distributions. Volatilities and

correlations serve as input factors to assess the rele-

vant probability distributions.

taken into account when the risks are aggregated, thus

reducing the overall risk.

The following table shows the potential negative impact

for the BMW Group – measured on the basis of the

cash-flow-at-risk approach – attributable to unfavourable

changes in exchange rates. The impact for the principal

currencies, in each case for the following financial year,

is as follows:

The potential negative impact on earnings is computed

for each currency for the following financial year on the

basis of current market prices and exposures to a con-

fidence level of 95% and a holding period of up to one

year. Correlations between the various currencies are

in € million

31.12.2013

31.12.2012

Euro/Chinese Renminbi

Euro/US Dollar

197

65

246

163

65

Euro/British Pound

Euro/Russian Rouble

Euro/Japanese Yen

80

109

44

69

15

Currency risk for the BMW Group is concentrated on

the currencies referred to above.

These risks arise when funds with differing fixed-rate

periods or differing terms are borrowed and invested.

All items subject to, or bearing, interest are exposed

to interest rate risk. Interest rate risks can affect either

side of the balance sheet.

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Interest rate risk

90

92

94

The BMW Group’s financial management system in-

volves the use of standard financial instruments such

as short-term deposits, investments in variable and

fixed-income securities as well as securities funds. The

BMW Group is therefore exposed to risks resulting

from changes in interest rates.

The fair values of the Group’s interest rate portfolios for

the five main currencies were as follows at the end of

the reporting period:

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

in € million

31.12.2013

31.12.2012

61 Segment Information

Euro

14,265

11,931

3,960

1,787

189

12,736

10,489

3,814

1,179

435

US Dollar

British Pound

Chinese Renminbi

Japanese Yen

Interest rate risks can be managed by the use of interest

rate derivatives. The interest rate contracts used for

hedging purposes comprise mainly swaps which are ac-

counted for on the basis of whether they are designated

value-at-risk approach for internal reporting purposes

and to manage interest rate risks. This is based on a

state-of-the-art historical simulation, in which the po-

tential future fair value losses of the interest rate port-

as a fair value hedge or as a cash flow hedge. A description folios are compared across the Group with expected

of the management of interest rate risks is provided in

the Combined Management Report.

amounts measured on the basis of a holding period of

250 days and a confidence level of 99 98%. Aggrega-

.

tion of these results creates a risk reduction effect due

to correlations between the various portfolios.

As stated there, the BMW Group applies a group-wide

1

57 Group Financial StatementS

In the following table the potential volumes of fair value the interest rate relevant positions of the BMW Group

fluctuations – measured on the basis of the value-at-

risk approach – are compared with the expected value for

for the five main currencies:

in € million

31.12.2013

31.12.2012

Euro

214

246

62

269

271

44

US Dollar

British Pound

Chinese Renminbi

Japanese Yen

11

17

6

12

Raw materials price risk

The first step in the analysis of the raw materials price

risk is to determine the volume of planned purchases of

The BMW Group is exposed to the risk of price fluctua-

tions for raw materials. A description of the management raw materials (and components containing those raw

of these risks is provided in the Combined Management materials). These amounts, which represent the gross

Report.

exposure, were as follows at each reporting date for the

following financial year:

in € million

31.12.2013

31.12.2012

Raw materials price exposures

4,550

3,370

In the next stage, these exposures are compared to all

hedges that are in place. The net cash flow surplus rep-

resents an uncovered risk position. The cash-flow-at-

posure to a confidence level of 95% and a holding

period of up to one year. Correlations between the

various categories of raw materials are taken into

risk approach involves allocating the impact of potential account when the risks are aggregated, thus reducing

raw materials fluctuations to operating cash flows on

the basis of probability distributions. Volatilities and

correlations serve as input factors to assess the relevant

probability distributions.

the overall risk.

The following table shows the potential negative impact

for the BMW Group – measured on the basis of the cash-

flow-at-risk approach – attributable to fluctuations in

prices across all categories of raw materials. The risk at

each reporting date for the following financial year was

The potential negative impact on earnings is computed

for each raw material category for the following finan-

cial year on the basis of current market prices and ex- as follows:

in € million

31.12.2013

405

31.12.2012

350

Cash flow at risk

Other risks

period. A description of the management of this risk is

provided in the Combined Management Report. Infor-

mation regarding the residual value risk from operating

leases is provided in the section on accounting policies

A further exposure relates to the residual value risk on

vehicles returned to the BMW Group at the end of lease

contracts. The risk in this context was not material to

the Group in the past andꢀ/ꢀor at the end of the reporting in note 5.

43

Explanatory notes to the cash flow statements

Cash and cash equivalents included in the cash flow

The cash flow statements show how the cash and cash

equivalents of the BMW Group and of the Automotive

and Financial Services segments have changed in the

course of the year as a result of cash inflows and cash

outflows. In accordance with IAS 7 (Statement of Cash

Flows), cash flows are classified into cash flows from

operating, investing and financing activities.

statement comprise cash in hand, cheques, and cash at

bank, to the extent that they are available within three

months from the end of the reporting period and are

subject to an insignificant risk of changes in value.

The cash flows from investing and financing activities

are based on actual payments and receipts. By contrast,

1

58

the cash flow from operating activities is derived in-

directly from the net profit for the year. Under this

method, changes in assets and liabilities relating to op-

erating activities are adjusted for currency translation

effects and changes in the composition of the Group.

The changes in balance sheet positions shown in the

cash flow statement do not therefore agree directly with

the amounts shown in the Group and segment balance

sheets.

cash flows from operating activities in accordance with

IAS 7.31 and IAS 7.35. Interest paid is presented on a

separate line within cash flows from financing activities.

Dividends received in the financial year 2013 amounted

to €ꢀ4 million (2012: €ꢀ4 million).

The presentation of cash flows from financing activities

has been changed in the Group Financial Statements

for the year ended 31 December 2013. Previously,

changes in financial liabilities were offset on a single

line in the Cash Flow Statement. Following the change,

Cash inflows and outflows relating to operating leases,

where the BMW Group is the lessor, are aggregated and cash inflows and outflows for non-current other finan-

shown on the line “Change in leased products” within

cash flows from operating activities.

cial liabilities are shown separately. The change in cur-

rent other financial liabilities is also shown separately.

The previous year’s figures were restated in the inter-

est of comparability. Non-current other financial lia-

bilities resulted in the previous year in a cash inflow

The net change in receivables from sales financing

(including finance leases, where the BMW Group is the

lessor) is also reported within cash flows from operating of €ꢀ7,427 million for new debt raised and a cash out-

activities.

flow of €ꢀ5,498 million for repayments. The change in

current other financial liabilities was a net cash inflow

Income taxes paid and interest received are classified as of €ꢀ230 million.

88

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

9

0

2

4

44 Related party relationships

sidiaries, joint ventures and associated companies as

well as with members of the Board of Management and

Supervisory Board of BMWAG.

In accordance with IAS 24 (Related Party Disclosures),

related individuals or entities which have the ability to

control the BMW Group or which are controlled by the

BMW Group, must be disclosed unless such parties are

9

6

Notes

96

Accounting Principles and

Policies

The BMW Group maintains normal business relation-

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

not already included in the Group Financial Statements ships with non-consolidated subsidiaries. Transactions

of BMWAG as consolidated companies. Control is de-

fined as ownership of more than one half of the voting

power of BMWAG or the power to direct, by statute or

agreement, the financial and operating policies of the

management of the BMW Group.

with these companies are small in scale, arise in the

normal course of business and are conducted on the

basis of arm’s length principles.

1

61 Segment Information

Transactions of BMW Group companies with the

joint venture BMW Brilliance Automotive Ltd., Shen-

yang, all arise in the normal course of business and

are conducted on the basis of arm’s length principles.

Group companies sold goods and services to BMW

Brilliance Automotive Ltd., Shenyang, during 2013

In addition, the disclosure requirements of IAS 24 also

cover transactions with associated companies, joint

ventures and individuals that have the ability to exercise

significant influence over the financial and operating

policies of the BMW Group. This also includes close rela- for an amount of €ꢀ3,588 million (2012: €ꢀ2,962 million).

tives and intermediary entities. Significant influence

over the financial and operating policies of the BMW

Group is presumed when a party holds 20% or more of

the voting power of BMWAG. In addition, the require-

ments contained in IAS 24 relating to key management

personnel and close members of their families or inter-

mediary entities are also applied. In the case of the

BMW Group, this applies to members of the Board of

Management and Supervisory Board.

At 31 December 2013, receivables of Group compa-

nies from BMW Brilliance Automotive Ltd., Shenyang,

totalled €ꢀ898 million (2012: €ꢀ608 million). Payables

of Group companies to BMW Brilliance Automotive

Ltd., Shenyang, amounted to €ꢀ66 million (2012

:

€ꢀ– million). Group companies received goods and

services from BMW Brilliance Automotive Ltd.,

Shenyang, in 2013 for an amount of €ꢀ31 million (2012:

€ꢀ26 million).

In the financial year 2013, the disclosure requirements

contained in IAS 24 affect the BMW Group with regard

to business relationships with non-consolidated sub-

All relationships of BMW Group entities with the joint

ventures SGL Automotive Carbon Fibers Verwaltungs

GmbH, Munich, SGL Automotive Carbon Fibers GmbH

1

59 Group Financial StatementS

&

Co. KG, Munich, and SGL Automotive Carbon Fibers

GmbH, Dresden. Cooperation arrangements within

the field of electromobility have been in place between

BMWAG and Solarwatt GmbH, Dresden, since the

second quarter 2013. The focus of this collaboration is

on providing complete photovoltaic solutions for roof-

top systems and carports to BMW i customers. Solarwatt

LLC, Dover, DE, arise in the normal course of business.

All transactions with these entities were conducted

on the basis of arm’s length principles. At 31 December

2

013 receivables of Group companies for loans dis-

bursed to the joint ventures amounted to €ꢀ101 million

(2012: €ꢀ68 million). Realised interest income earned on GmbH leased vehicles from the BMW Group in 2013.

these intragroup loans amounted to €ꢀ

3

million (2012:

The service, cooperation and lease contracts referred to

€

ꢀ2 million). Goods and services received by Group com- above are not material for the BMW Group. They all

panies from the joint ventures during the period under

report totalled €ꢀ36 million (2012: €ꢀ9 million). Payables

of Group companies to the joint ventures at the end

of the reporting period amounted to €ꢀ6 million (2012:

arise in the normal course of business and are conducted

on the basis of arm’s length principles.

Susanne Klatten is a shareholder and member of the

Supervisory Board of BMWAG and also a shareholder

and Deputy Chairman of the Supervisory Board of

Altana AG, Wesel. Altana AG, Wesel, acquired vehicles

from the BMW Group during the financial year 2013,

mostly in the form of lease contracts. These contracts

are not material for the BMW Group, arise in the course

of ordinary activities and are made, without exception,

on the basis of arm’s length principles.

€

ꢀ1 million).

All relationships of BMW Group entities with the joint

ventures DriveNow GmbH & Co. KG, Munich, and

DriveNow Verwaltungs GmbH, Munich, are conducted

on the basis of arm’s length principles. Transactions

with these entities arise in the normal course of business

and are small in scale.

The BMW Group maintains normal business relation-

ships with associated companies. Transactions with

these companies are small in scale, arise in the normal

course of business and are conducted on the basis of

arm’s length principles.

Apart from the transactions referred to above, compa-

nies of the BMW Group did not enter into any contracts

with members of the Board of Management or Super-

visory Board of BMWAG. The same applies to close mem-

bers of the families of those persons.

Stefan Quandt is a shareholder and Deputy Chairman BMW Trust e.ꢀV., Munich, administers assets on a trustee

of the Supervisory Board of BMWAG. He is also the sole basis to secure obligations relating to pensions and

shareholder and Chairman of the Supervisory Board

of DELTON AG, Bad Homburg v.d.H., which, via its

subsidiaries, performed logistic-related services for the

BMW Group during the financial year 2013. In addition,

companies of the DELTON Group acquired vehicles

from the BMW Group on the basis of arm’s length prin-

ciples, mostly in the form of leasing contracts. Stefan

Quandt is also the majority shareholder of Solarwatt

pre-retirement part-time work arrangements in Germany

and is therefore a related party of the BMW Group in

accordance with IAS 24. This entity, which is a regis-

tered association (eingetragener Verein) under German

law, does not have any assets of its own. It did not have

any income or expenses during the period under re-

port. BMWAG bears expenses on a minor scale and ren-

ders services on behalf of BMW Trust e.ꢀV., Munich.

4

5

6

Declaration with respect to the Corporate

Governance Code

The Board of Management and the Supervisory Board of produced in the Annual Report 2013 of the BMW Group

Bayerische Motoren Werke Aktiengesellschaft have is- and is also available to shareholders on the BMW Group

to §161 of the German Stock Corporation Act. It is re-

sued the prescribed Declaration of Compliance pursuant website at www.bmwgroup.comꢀ/ꢀir.

4

Shareholdings of members of the Board of Management

and Supervisory Board

The members of the Supervisory Board of BMWAG hold and 11.55% (2012: 11.55%) to Susanne Klatten, Munich.

in total 27.62% (2012: 27.63%) of the issued common

and preferred stock shares, of which 16 07% (2012

6.08%) relates to Stefan Quandt, Bad Homburg v.d.H.

As at the end of the previous financial year, shareholdings

of members of the BMWAG Board of Management ac-

count, in total, for less than 1% of issued shares.

.

:

1

60

47

Compensation of members of the Board of Management

and Supervisory Board

The total compensation of the current members of

the Board of Management and the Supervisory Board

of BMWAG amounted to €ꢀ40.6 million (2012: €ꢀ36.4 mil-

lion) and comprised the following:

in € million

2013

2012

Short-term employment benefits

Post-employment benefits

Compensation

38.4

2.2

35.2

1.2

40.6

36.4

The total compensation of the current Board of Manage- covered by pension provisions amounting to €ꢀ58.0 mil-

ment members for 2013 amounted to €ꢀ34

.

5

million

lion (2012: €ꢀ61.2 million), computed in accordance with

(2012: €ꢀ31.4 million). This comprised fixed components

IAS 19.

of €ꢀ7.9 million (2012: €ꢀ7.5 million), variable compo-

nents of €ꢀ25.9 million (2012: €ꢀ23.2 million) and a share-

based compensation component totalling €ꢀ0.7 million

The compensation of the members of the Supervisory

Board for the financial year 2013 amounted to €ꢀ4.6 mil-

2012: €ꢀ0.7 million). lion (2012: €ꢀ4.5 million). This comprised fixed compo-

nents of €ꢀ2.0 million (2012: €ꢀ1.6 million) and variable

In addition, an expense of €ꢀ2.2 million (2012: €ꢀ1.2 mil- components of €ꢀ2.6 million (2012: €ꢀ2.9 million).

(

lion) was recognised for current members of the Board

of Management for the period after the end of their em- The compensation systems for members of the Super-

8

Group Financial StatementS

Income Statements

Statement of

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

ployment relationship. This relates to the expense for

allocations to pension provisions. Pension obligations

to current members of the Board of Management are

covered by pension provisions amounting to €ꢀ24.8 mil-

lion (2012: €ꢀ29.4 million), computed in accordance with

IAS 19 (Employee Benefits).

visory Board do not include any stock options, value

appreciation rights comparable to stock options or any

other stock-based compensation components. Apart

from vehicle lease contracts entered into on customary

market conditions, no advances or loans were granted

to members of the Board of Management and the Super-

visory Board, nor were any contingent liabilities entered

into on their behalf.

90

92

94

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

The remuneration of former members of the Board

of Management and their dependants amounted to

1

61 Segment Information

€

ꢀ4.7 million (2012: €ꢀ3.8 million).

Further details about the remuneration of current mem-

bers of the Board of Management and the Supervisory

Board can be found in the Compensation Report, which

is part of the Combined Management Report.

Pension obligations to former members of the Board of

Management and their surviving dependants are fully

48

Application of exemptions pursuant to §264 (3) and

§

264b HGB

A number of companies and incorporated partnerships

as defined by §264a HGB) which are consolidated

In addition, the following entities apply the exemption

available in §264 (3) and §264b HGB with regard to

(

subsidiaries of BMWAG and for which the Group Finan- publication:

cial Statements of BMWAG represent exempting con-

solidated financial statements, apply the exemptions

available in §264 (3) and §264b HGB with regard to the

drawing up of a management report. The exemptions

have been applied by:

– Bavaria Wirtschaftsagentur GmbH, Munich

– Alphabet International GmbH, Munich

– BMW Hams Hall Motoren GmbH, Munich

– BMW M GmbH Gesellschaft für individuelle

Automobile, Munich

–

Bavaria Wirtschaftsagentur GmbH, Munich

BMW Fahrzeugtechnik GmbH, Eisenach

BMW Hams Hall Motoren GmbH, Munich

BMW M GmbH Gesellschaft für individuelle

Automobile, Munich

– BMW INTEC Beteiligungs GmbH, Munich

– BMW Verwaltungs GmbH, Munich

– Rolls-Royce Motor Cars GmbH, Munich

–

Rolls-Royce Motor Cars GmbH, Munich

1

61 Group Financial StatementS

BMW Group

Notes to the Group Financial Statements

Segment Information

49

Explanatory notes to segment information

Information on reportable segments

Internal management and reporting

For the purposes of presenting segment information,

the activities of the BMW Group are divided into oper-

ating segments in accordance with IFRS 8 (Operating

Segments). Operating segments are identified on the

same basis that is used internally to manage and report

on performance and takes account of the organisa-

tional structure of the BMW Group based on the various

products and services of the reportable segments.

Segment information is prepared in conformity with

the accounting policies adopted for preparing and

presenting the Group Financial Statements. The only

exception to this general principle is the treatment of

inter-segment warranties, the earnings impact of which

is allocated to the Automotive and Financial Services

segments on the basis used internally to manage the

business. Inter-segment receivables and payables, pro-

visions, income, expenses and profits are eliminated in

the column “Eliminations”. Inter-segment sales take

The activities of the BMW Group are broken down into

the operating segments Automotive, Motorcycles, Finan- place at arm’s length prices.

cial Services and Other Entities.

The role of “chief operating decision maker” with respect

The Automotive segment develops, manufactures, as-

sembles and sells cars and off-road vehicles, under the

brands BMW, MINI and Rolls-Royce as well as spare

parts and accessories. BMW and MINI brand products

are sold in Germany through branches of BMWAG

and by independent, authorised dealers. Sales outside

Germany are handled primarily by subsidiary compa-

nies and, in a number of markets, by independent im-

port companies. Rolls-Royce brand vehicles are sold

in the USA, China and Russia via subsidiary companies

and elsewhere by independent, authorised dealers.

to resource allocation and performance assessment of

the reportable segment is embodied in the full Board of

Management. In order to assist the decision-taking pro-

cess, various measures of segment performance as well

as segment assets have been set for the various operating

segments.

The performance of the Automotive and Motorcycles

segments is managed on the basis of return on capital

employed (RoCE). The measure of segment results used

is therefore profit before financial result. Capital em-

ployed is the corresponding measure of segment assets

The BMW Motorcycles segment develops, manufactures, used to determine how to allocate resources and com-

assembles and sells motorcycles as well as spare parts

and accessories.

prises all current and non-current operational assets after

deduction of liabilities used operationally which are not

subject to interest (e.ꢀg. trade payables).

The principal lines of business of the Financial Services

segment are car leasing, fleet business, retail customer

The performance of the Financial Services segment is

and dealer financing, customer deposit business and in- measured on the basis of return on equity (RoE), with

surance activities.

profit before tax therefore representing the most im-

portant measure of segment earnings. For this reason

Holding and Group financing companies are included in the measure of segment assets in the Financial Services

the Other Entities segment. This segment also includes

operating companies – BMW Services Ltd., Bracknell,

segment corresponds to net assets, defined as total as-

sets less total liabilities.

BMW

Reisebüro GmbH, Munich, and MITEC Mikroelektronik

Mikrotechnik Informatik GmbH, Dingolfing – which are assessed on the basis of profit or loss before tax. The

(UK) Investments Ltd., Bracknell, Bavaria Lloyd

T

he performance of the Other Entities segment is

not allocated to one of the other segments.

corresponding measure of segment assets used to

manage the Other Entities segment is total assets less

Eliminations comprise the effects of eliminating business tax receivables and investments.

relationships between the operating segments.

1

62

Segment information by operating segment is as follows:

Segment information by operating segment

Automotive

2012

Motorcycles

2012

*

in € million

2013

External revenues

Inter-segment revenues

Total revenues

56,285

14,344

70,629

57,499

12,709

70,208

1,495

9

1,478

12

1,504

1,490

Segment result

6,657

6,635

3,655

7,599

5,325

3,437

79

85

65

9

125

69

Capital expenditure on non-current assets

Depreciation and amortisation on non-current assets

Automotive

Motorcycles

*

in € million

31.12.2013

10,265

31.12.2012

31.12.2013

488

31.12.2012

405

88

Group Financial StatementS

Income Statements

Statement of

Segment assets

10,991

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

90

92

94

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

96

Notes

96

Accounting Principles and

Policies

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

1

61 Segment Information

1

63 Group Financial StatementS

Financial

Services

Other Entities

Reconciliation to

Group figures

Group

*

2012

2

013

2012

2013

2012

2013

2012

2013

1

8,276

,598

9,874

17,869

1,681

2

4

6

2

3

5

–

–15,955

–

–14,405

76,058

–

76,848

–

External revenues

Inter-segment revenues

Total revenues

1

19,550

76,058

76,848

1

,639

7,484

,021

1,561

15,988

6,112

164

3

–

–626

–4,325

–3,787

–1,369

–2,901

–1,838

7,913

19,879

6,954

7,803

18,537

7,780

Segment result

1

–

Capital expenditure on non-current assets

Depreciation and amortisation on non-current assets

7

Financial

Services

Other Entities

Reconciliation to

Group figures

Group

*

31.12.2012

131,835

3

1.12.2013

31.12.2012

31.12.2013

54,250

31.12.2012

50,685

31.12.2013

31.12.2012

31.12.2013

138,368

8

,407

7,633

64,958

62,121

Segment assets

1

64

*

The segment result of the Motorcycles segment in the

previous year was negatively impacted by an impair-

ment loss of €ꢀ13 million on property, plant and equip-

ment in accordance with IFRS 5 and by an expense of

amounting to €ꢀ1,279 million (2012 : €ꢀ1,499 million). As

in the previous year, the result from equity accounted

investments did not have any impact on the segment

result of the Other Entities segment. The segment result

is stated after an impairment loss on other investments

amounting to €ꢀ7 million (2012: €ꢀ7 million).

€

ꢀ57 million for an allocation to provisions at 31 Decem-

ber 2012.

Interest and similar income of the Financial Services

As in the previous year, segment assets of the Other

Entities segment do not contain any investments ac-

counted for using the equity method.

segment is included in segment result and totalled

*

€

ꢀ5 million (2012 : €ꢀ1 million). Interest and similar ex-

penses of the Financial Services segment amounted

*

to €ꢀ7 million (2012 : €ꢀ5 million). Financial Services

The information disclosed for capital expenditure and

depreciation and amortisation relates to non-current

property, plant and equipment, intangible assets and

leased products.

segment result was negatively impacted by impair-

ment losses totalling €ꢀ139 million recognised on

leased products.

The Other Entities segment result includes interest

Segment figures can be reconciled to the corresponding

Group figures as follows:

*

and similar income amounting to €ꢀ1,340 million (2012 :

542 million) and interest and similar expenses

€ꢀ1,

*

in € million

2013

2012

88

Group Financial StatementS

Income Statements

Statement of

Reconciliation of segment result

Comprehensive Income

Balance Sheets

Cash Flow Statements

Group Statement of Changes in

Equity

Total for reportable segments

8,539

–99

9,172

–432

–937

7,803

9

0

2

4

Financial result of Automotive segment and Motorcycles segment

Elimination of inter-segment items

Group profit before tax

–527

7,913

9

6

Notes

96

Accounting Principles and

Policies

Reconciliation of capital expenditure on non-current assets

Total for reportable segments

1

14 Notes to the Income Statement

21 Notes to the Statement

of Comprehensive Income

22 Notes to the Balance Sheet

45 Other Disclosures

24,204

–4,325

19,879

21,438

–2,901

18,537

1

Elimination of inter-segment items

Total Group capital expenditure on non-current assets

61 Segment Information

Reconciliation of depreciation and amortisation on non-current assets

Total for reportable segments

10,741

–3,787

6,954

9,618

–1,838

7,780

Elimination of inter-segment items

Total Group depreciation and amortisation on non-current assets

*

in € million

31.12.2013

31.12. 2012

Reconciliation of segment assets

Total for reportable segments

73,410

5,989

69,714

6,065

Non-operating assets – Other Entities segment

Operating liabilities – Financial Services segment

Interest-bearing assets – Automotive and Motorcycles segments

Liabilities of Automotive and Motorcycles segments not subject to interest

Elimination of inter-segment items

83,923

37,364

24,411

–86,729

138,368

81,064

36,321

21,943

–83,272

131,835

Total Group assets

*

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

1

65 Group Financial StatementS

In the case of information by geographical region, ex-

ternal sales are based on the location of the customer’s

registered office. Revenues with major customers were

current assets relates to property, plant and equipment,

intangible assets and leased products. The reconciling

item disclosed for non-current assets relates to leased

not material overall. The information disclosed for non- products.

Information by region

External

revenues

Non-current

assets

in € million

2013

2012

2013

2012

Germany

USA

11,796

12,691

15,348

22,552

3,103

10,568

–

12,186

13,447

14,448

22,971

2,824

25,309

12,867

21

22,954

11,195

15

China

Rest of Europe

Rest of the Americas

Other

10,651

1,668

1,025

–4,335

47,206

9,887

1,548

1,137

–3,720

43,016

10,972

–

Eliminations

Group

76,058

76,848

Munich, 20 February 2014

Bayerische Motoren Werke

Aktiengesellschaft

The Board of Management

Dr.-Ing. Dr.-Ing. E.h. Norbert Reithofer

Milagros Caiña Carreiro-Andree

Dr.-Ing. Klaus Draeger

Dr.-Ing. Herbert Diess

Dr. Friedrich Eichiner

Harald Krüger

Dr. Ian Robertson (HonDSc)

Peter Schwarzenbauer

1

66

Statement on corporate Governance

Good corporate governance – acting in accordance with In accordance with the requirements of the German

the principles of responsible management aimed at in-

creasing the value of the business on a sustainable basis – ploy more than 20,000 people, the Supervisory Board

is an essential requirement for the BMW Group em- of BMWAG is required to comprise ten shareholder

bracing all areas of the business. Corporate culture within representatives elected at the Annual General Meeting

Co-determination Act for companies that generally em-

the BMW Group is founded on transparent reporting

and internal communication, a policy of corporate

governance aimed at the interests of stakeholders, fair

and open dealings between the Board of Management,

the Supervisory Board and employees and compliance

with the law. The Board of Management reports in this

declaration, also on behalf of the Supervisory Board,

(Supervisory Board members representing equity or

shareholders) and ten employees elected in accordance

with the provisions of the Co-determination Act (Super-

visory Board members representing employees). The

ten Supervisory Board members representing employees

comprise seven Company employees, including one

executive staff representative, and three members elected

on important aspects of corporate governance pursuant following nomination by unions.

to §289ꢀa HGB and section 3.10 of the German Corporate

Governance Code (GCGC).

The close interaction between the Board of Management

and the Supervisory Board in the interests of the enter-

prise as described above is also known as a “two-tier

board structure”.

Information on the Company’s Governing Constitution

The designation “BMW Group” comprises Bayerische

Motoren Werke Aktiengesellschaft (BMWAG) and its

group entities. BMWAG is a stock corporation (Aktien-

gesellschaft) based on the German Stock Corporation

Act (Aktiengesetz) and has its registered office in

Munich, Germany. It has three representative bodies:

the Annual General Meeting, the Supervisory Board

and the Board of Management. The duties and authori-

ties of those bodies derive from the Stock Corporation

Declaration of Compliance and the BMW Group

Corporate Governance Code

Management and supervisory boards of companies listed

in Germany are required by law (§161 German Stock

Corporation Act) to report once a year whether the offi-

cially published and relevant recommendations issued

by the “German Government Corporate Governance

Code Commission”, as valid at the date of the declara-

tion, have been, and are being, complied with. Com-

panies affected are also required to state which of the

recommendations of the Code have not been or are not

being applied, stating the reason or reasons. The full

text of the declaration, together with explanatory com-

ments, is shown on the following page of this Annual

Report.

Act and the Articles of Incorporation of BMWAG

.

Shareholders, as the owners of the business, exercise

their rights at the Annual General Meeting. The Annual

General Meeting also provides an opportunity to

shareholders to engage in dialogue with the Board of

Management and the Supervisory Board. The Annual

General Meeting decides in particular on the utilisation

of unappropriated profit, the ratification of the acts

of the members of the Board of Management and of the

Supervisory Board, the appointment of the external

auditor, changes to the Articles of Incorporation, speci-

fied capital measures and elects the shareholders’ re-

presentatives to the Supervisory Board. The Board of

Management manages the enterprise under its own

responsibility. Within this framework, it is monitored

and advised by the Supervisory Board. The Supervisory

Board appoints the members of the Board of Manage-

ment and can, at any time, revoke an appointment if

there is an important reason. The Board of Management

keeps the Supervisory Board informed of all signifi-

166 Statement on

corporate Governance

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

The Board of Management and the Supervisory Board

approved the Group’s own Corporate Governance Code

based on the GCGC in previous years in order to pro-

vide interested parties with a comprehensive and stand-

alone document covering the corporate governance

practices applied by the BMW Group. A coordinator

responsible for all corporate governance issues reports

directly and on a regular basis to the Board of Manage-

ment and Supervisory Board.

167 Declaration of the Board of

Management and of the

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

1

80 Compliance in the BMW Group

85 Compensation Report

The Corporate Governance Code for the BMW Group,

cant matters regularly, promptly and comprehensively, together with the Declaration of Compliance, Articles

following the principles of conscientious and faithful

accountability and in accordance with prevailing law

of Incorporation and other information, can be viewed

andꢀ/ꢀor downloaded from the BMW Group’s website at

and the reporting duties allocated to it by the Supervisory www.bmwgroup.com/ir under the menu items “Corpo-

Board. The Board of Management requires the approval

of the Supervisory Board for certain major transactions.

The Supervisory Board is not, however, authorised to

undertake management measures itself.

rate Facts” and “Corporate Governance”.

1

67 Statement on corporate Governance

Declaration by the Board of Management and the

Supervisory Board of Bayerische Motoren Werke

Aktiengesellschaft with respect to the Recommendations

of the “Government Commission on the German

Corporate Governance Code” in accordance with §161

German Stock Corporation Act

The Board of Management and the Supervisory Board

of Bayerische Motoren Werke Aktiengesellschaft

(“BMWAG”) declare the following regarding the recom-

mendations of the “Government Commission on the

German Corporate Governance Code”:

1. Since filing the last declaration of 14 May 2013,

BMWAG has complied with all of the recommen-

dations officially published on 15 June 2012 in

the Federal Gazette (Code version of 15 May 2012).

2

. BMWAG will in future comply with all of the recom-

mendations officially published on 10 June 2013 in

the Federal Gazette (Code version of 13 May 2013) as

of the date when they apply.

Munich, December 2013

Bayerische Motoren Werke

Aktiengesellschaft

On behalf of the

Supervisory Board

Board of Management

Prof. Dr.-Ing. Dr. h.c.

Dr.-Ing. E.h. Joachim Milberg

Chairman

Dr.-Ing. Dr.-Ing. E.h.

Norbert Reithofer

Chairman

1

68

Members of the Board of Management

Dr.-Ing. Dr.-Ing.E.h. Norbert Reithofer (born 1956)

Dr. Friedrich Eichiner (born 1955)

Chairman

Finance

Mandates

Henkel AG & Co. KGaA

Allianz Deutschland AG

FESTO Aktiengesellschaft

(since 30.07.2013)

Frank-Peter Arndt (born 1956)

BMW Brilliance Automotive Ltd. (Deputy Chairman)

FESTO Management Aktiengesellschaft

(since 30.07.2013)

(until 31.03.2013)

Production

Mandates

BMW Motoren GmbH (Chairman)

(until 31.03.2013)

Harald Krüger (born 1965)

TÜV Süd AG

BMW (South Africa) (Pty) Ltd. (Chairman)

MINI, Motorcycles, Rolls-Royce,

Aftersales BMW Group (until 31.03.2013)

Production (since 01.04.2013)

(until 31.03.2013)

Leipziger Messe GmbH

Mandates

Rolls-Royce Motor Cars Limited (Chairman)

(until 31.03.2013)

Milagros Caiña Carreiro-Andree (born 1962)

Human Resources, Industrial Relations Director

BMW (South Africa) (Pty) Ltd. (Chairman)

(since 01.04.2013)

BMW Motoren GmbH (since 01.04.2013)

(Chairman since 07.06.2013)

Dr.-Ing. Herbert Diess (born 1958)

Development

Dr. Ian Robertson (HonDSc) (born 1958)

Sales and Marketing BMW,

Dr.-Ing. Klaus Draeger (born 1956)

Sales Channels BMW Group

Purchasing and Supplier Network

Mandates

Dyson James Group Limited

Peter Schwarzenbauer (born 1959)

(

since 01.04.2013)

1

66 Statement on

corporate Governance

MINI, Motorcycles, Rolls-Royce,

Aftersales BMW Group

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

Mandates

167 Declaration of the Board of

Management and of the

Rolls-Royce Motor Cars Limited (Chairman)

Supervisory Board pursuant to

(since 01.04.2013)

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

General Counsel:

Dr. Dieter Löchelt

1

80 Compliance in the BMW Group

85 Compensation Report

Membership of other statutory supervisory boards.

Membership of equivalent national or foreign boards of business enterprises.

1

69 Statement on corporate Governance

Members of the Supervisory Board

1

Prof. Dr.-Ing. Dr.h.c. Dr.-Ing. E.h.

Joachim Milberg (born 1943)

Chairman

Stefan Schmid (born 1965)

Deputy Chairman

Chairman of the Works Council, Dingolfing

Former Chairman of the Board of

Management of BMWAG

Member of the Presiding Board, Personnel Committee,

Audit Committee and Mediation Committee

Chairman of the Presiding Board, Personnel Committee

and Nomination Committee; member of Audit Committee

and the Mediation Committee

Dr. jur. Karl-Ludwig Kley (born 1951)

Deputy Chairman

Mandates

Bertelsmann Management SE (Deputy Chairman)

Bertelsmann SE & Co. KGaA (Deputy Chairman)

FESTO Aktiengesellschaft (Chairman until 19.04.2013)

Chairman of the Executive Management of

Merck KGaA

(

Deputy Chairman since 19.04.2013)

Chairman of the Audit Committee and Independent

Finance Expert; member of the Presiding Board,

Personnel Committee and Nomination Committee

Deere & Company

FESTO Management Aktiengesellschaft (Chairman

until 19.04.2013) (Deputy Chairman since 19.04.2013)

Mandates

Bertelsmann Management SE

Bertelsmann SE & Co. KGaA

Deutsche Lufthansa Aktiengesellschaft

(since 07.05.2013)

1

Manfred Schoch (born 1955)

Deputy Chairman

Chairman of the European and

General Works Council

Industrial Engineer

1. FC Köln GmbH & Co. KGaA (Chairman)

(until 30.06.2013)

2

Member of the Presiding Board, Personnel Committee,

Audit Committee and Mediation Committee

Bertin Eichler (born 1952)

Former Executive Member of the

Executive Board of IG Metall

Mandates

Stefan Quandt (born 1966)

Deputy Chairman

Entrepreneur

BGAG Beteiligungsgesellschaft der

Gewerkschaften GmbH (Chairman)

Luitpoldhütte AG (since 03.12.2013)

ThyssenKrupp AG (Deputy Chairman)

(until 17.01.2014)

Member of the Presiding Board, Personnel Committee,

Audit Committee, Nomination Committee and Mediation

Committee

Mandates

DELTON AG (Chairman)

AQTON SE (Chairman)

DataCard Corp.

1

Employee representatives (company employees).

Employee representatives (union representatives).

Employee representative (member of senior management).

2

3

Membership of other statutory supervisory boards.

Membership of equivalent national or foreign boards of business enterprises.

1

70

Franz Haniel (born 1955)

Engineer, MBA

Prof. Dr. rer. pol. Renate Köcher (born 1952)

Director of Institut für Demoskopie Allensbach

Gesellschaft zum Studium der öffentlichen

Meinung mbH

Mandates

DELTON AG (Deputy Chairman)

Franz Haniel & Cie. GmbH (Chairman)

Heraeus Holding GmbH

Metro AG (Chairman)

secunet Security Networks AG

Giesecke & Devrient GmbH

TBG Limited

Mandates

Allianz SE

Infineon Technologies AG

Nestlé Deutschland AG

Robert Bosch GmbH

Dr.h.c. Robert W. Lane (born 1949)

Former Chairman and Chief Executive Officer of

Deere & Company

Prof. Dr. rer. nat. Dr.h.c. Reinhard Hüttl (born 1957)

Chairman of the Executive Board of

Helmholtz-Zentrum Potsdam Deutsches

GeoForschungsZentrum – GFZ

Mandates

General Electric Company

Northern Trust Corporation

Verizon Communications Inc.

University Professor

Prof. Dr. rer. nat. Dr.-Ing. E.h.

2

Henning Kagermann (born 1947)

President of acatech – Deutsche Akademie der

Technikwissenschaften e.V.

Horst Lischka (born 1963)

General Representative of IG Metall Munich

Mandates

KraussMaffei GmbH

MAN Truck & Bus AG

Deutsche Bank AG

Deutsche Post AG

Franz Haniel & Cie GmbH

Münchener Rückversicherungs-Gesellschaft

Aktiengesellschaft in München

Nokia Corporation

1

Willibald Löw (born 1956)

Chairman of the Works Council, Landshut

Wipro Limited

Wolfgang Mayrhuber (born 1947)

Chairman of the Supervisory Board of

Deutsche Lufthansa Aktiengesellschaft

1

66 Statement on

corporate Governance

Susanne Klatten (born 1962)

Entrepreneur

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

Mandates

Deutsche Lufthansa Aktiengesellschaft (Chairman)

(since 07.05.2013)

Infineon Technologies AG (Chairman)

Lufthansa Technik Aktiengesellschaft

(until 30.06.2013)

Münchener Rückversicherungs-Gesellschaft

Aktiengesellschaft in München

Austrian Airlines AG (until 27.06.2013)

HEICO Corporation

Österreichische Luftverkehrs-Holding-GmbH (Chairman)

(until 27.06.2013)

167 Declaration of the Board of

Management and of the

Member of the Nomination Committee

Mandates

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

ALTANA AG (Deputy Chairman)

SGL Carbon SE (Chairman since 30.04.2013)

UnternehmerTUM GmbH (Chairman)

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

1

80 Compliance in the BMW Group

85 Compensation Report

UBS AG (until 02.05.2013)

1

Employee representatives (company employees).

Employee representatives (union representatives).

Employee representative (member of senior management).

2

3

Membership of other statutory supervisory boards.

Membership of equivalent national or foreign boards of business enterprises.

1

71 Statement on corporate Governance

1

Dr. Dominique Mohabeer (born 1963)

Member of the Works Council, Munich

1

Brigitte Rödig (born 1963)

(since 10.07.2013)

Member of the Works Council, Dingolfing

1

Maria Schmidt (born 1954)

(until 30.06.2013)

Member of the Works Council, Dingolfing

3

Dr. Markus Schramm (born 1963)

(since 01.04.2013)

Head of Development Aftersales

Business Management and

Mobility Services BMW Group

2

Jürgen Wechsler (born 1955)

Regional Head of IG Metall Bavaria

Mandates

Schaeffler AG (Deputy Chairman)

1

Werner Zierer (born 1959)

Chairman of the Works Council, Regensburg

3

Oliver Zipse (born 1964)

(until 31.03.2013)

Head of Corporate Planning and Product Strategy

1

72

Composition and work procedures of the Board of

Management of BMWAG and its committees

also takes decisions at a basic policy level relating to

the Group’s automobile product strategies and product

The Board of Management governs the enterprise under projects inasmuch as these are relevant for all brands.

its own responsibility, acting in the interests of the BMW

Group with the aim of achieving sustainable growth

in value. The interests of shareholders, employees and

other stakeholders are also taken into account in the

pursuit of this aim.

The Board of Management and its committees may, as

required and depending on the subject matters being

discussed, invite non-voting advisers to participate at

meetings.

Terms of reference approved by the Board of Manage-

ment contain a planned allocation of divisional respon-

sibilities between the individual board members. These

terms of reference also incorporate the principle that

the full Board of Management bears joint responsibility

for all matters of particular importance and scope. In

addition, members of the Board of Management man-

age the relevant portfolio of duties under their responsi-

bility, whereby case-by-case rules can be put in place

for cross-divisional projects. Board members continually

provide the Chairman of the Board of Management

with all information regarding major transactions and

developments within their area of responsibility. The

Chairman of the Board of Management coordinates

cross-divisional matters with the overall targets and plans

of the BMW Group, involving other board members to

the extent that divisions within their area of responsi-

bility are affected.

The Board of Management determines the strategic

orientation of the enterprise, agrees upon it with the

Supervisory Board and ensures its implementation.

The Board of Management is responsible for ensuring

that all provisions of law and internal regulations are

complied with. Further details about compliance within

the BMW Group can be found in the “Corporate

Governance” section of the Annual Report. The Board

of Management is also responsible for ensuring that

appropriate risk management and risk controlling sys-

tems are in place throughout the Group.

During their period of employment for BMWAG, mem-

bers of the Board of Management are bound by a com-

prehensive non-competition clause. They are required

to act in the enterprise’s best interests and may not

pursue personal interests in their decisions or take ad-

vantage of business opportunities intended for the

enterprise. They may only undertake ancillary activities,

in particular supervisory board mandates outside

the BMW Group, with the approval of the Supervisory

Board’s Personnel Committee. Each member of the

Board of Management of BMWAG is obliged to disclose

conflicts of interest to the Supervisory Board without

delay and inform the other members of the Board of

Management accordingly.

The Board of Management takes its decisions at meetings

generally held on a weekly basis which are convened,

coordinated and headed by the Chairman of the Board

of Management. At the request of the Chairman, de-

cisions can also be taken outside of board meetings if

none of the board members object to this procedure. A

meeting is quorate if all Board of Management members

are invited to the meeting in good time. Members unable

to attend any meeting are entitled to vote in writing,

by fax or by telephone. Votes cast by phone must be sub-

sequently confirmed in writing. Except in urgent cases,

matters relating to a division for which the responsible

board member is not present will only be discussed and

decided upon with that member’s consent.

166 Statement on

corporate Governance

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Following the appointment of a new member to the

Board of Management, the BMW Corporate Governance

Officer informs the new member of the framework

conditions under which the board member’s duties are

to be carried out – in particular those enshrined in the

BMW Group’s Corporate Governance Code – as well

as the duty to cooperate when a transaction or event

triggers reporting requirements or requires the approval

of the Supervisory Board.

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

Unless stipulated otherwise by law or in BMWAG’s

statutes, the Board of Management makes decisions on

the basis of a simple majority of votes cast at meetings.

Outside of board meetings, decisions are taken on

the basis of a simple majority of board members. In the

1

80 Compliance in the BMW Group

85 Compensation Report

The Board of Management consults and takes decisions

as a collegiate body in meetings of the Board of Manage- event of a tied vote, the Chairman of the Board of

ment, the Sustainability Board, the Operations Com-

mittee and the Committee for Executive Management

Matters. At its meetings, the Board of Management

defines the overall framework for business strategies

and the use of resources, takes decisions regarding the

implementation of strategies and deals with issues of

particular importance to the BMW Group. The full board

Management has the casting vote. Any changes to the

board’s terms of reference must be passed unanimously.

A board meeting may only be held if more than half of

the board members are present.

In the event that the Chairman of the Board of Manage-

ment is not present or is unable to attend a meeting, the

1

73 Statement on corporate Governance

Member of the Board responsible for Finances will

represent him.

management positions). This committee has, on the

one hand, an advisory and preparatory role (e.ꢀg.

making suggestions for promotions to the two remu-

neration groups below board level and preparing

Minutes are taken of all meetings and the Board of

Management’s resolutions and signed by the Chairman. decisions to be taken at board meetings with regard

Decisions taken by the Board of Management are

binding for all employees.

to human resources principles with the emphasis on

executive management issues) and a decision-taking

function on the other (e.ꢀg. deciding on appointments

to senior management positions and promotions to

higher remuneration groups or the wording of human

resources principles decided on by the full board).

The Committee has two members who are entitled to

vote at meetings, namely the Chairman of the Board

of Management (who also chairs the meetings) and

The rules relating to meetings and resolutions taken

by the full Board of Management are also applicable for

its committees.

Members of the Board of Management not represented

in a committee are provided with the agendas and

minutes of committee meetings. Committee matters are the board member responsible for Human Resources.

dealt with in full board meetings if the committee con-

siders it necessary or at the request of a member of the

Board of Management.

The Head of Human Resources, Personnel Network

and Human Resources International and the Head of

Human Resources Executive Management also partici-

pate in an advisory function. At the request of the

A secretariat for Board of Management matters has been Chairman, resolutions may also be passed outside of

established to assist the Chairman and other board

members with the preparation and follow-up work con-

nected with board meetings.

committee meetings by casting votes in writing, by

fax or by telephone if the other member entitled to

vote does not object immediately. As a general rule,

between five and ten meetings are held each year.

At meetings of the Operations Committee (generally held

three times a month), decisions are reached in connec-

tion with automobile product projects, based on the

strategic orientation and decision framework stipulated

at Board of Management meetings. The Operations

Committee comprises the Board of Management mem-

ber responsible for Development (who also chairs the

The Board of Management is represented by its Chair-

man in its dealings with the Supervisory Board. The

Chairman of the Board of Management maintains

regular contact with the Chairman of the Supervisory

Board and keeps him informed of all important mat-

ters. The Supervisory Board has passed a resolution

meetings), together with the board members responsible specifying the information and reporting duties of the

for the following areas: Purchases and Supplier Network; Board of Management. As a general rule, in the case

Production; Sales and Marketing BMW, Sales Channels of reports required by dint of law, the Board of Manage-

BMW Group; and MINI, Motorcycles, Rolls-Royce,

Aftersales BMW Group. If the committee chairman is

not present or unable to attend a meeting, the Member

of the Board responsible for Production represents

him. Resolutions taken at meetings of the Operations

Committee are made online.

ment submits its reports to the Supervisory Board in

writing. To the extent possible, documents required as

a basis for taking decisions are sent to the members of

the Supervisory Board in good time before the relevant

meeting. Regarding transactions of fundamental im-

portance, the Supervisory Board has stipulated specific

transactions which require the approval of the Super-

visory Board. Whenever necessary, the Chairman of

the Board of Management obtains the approval of the

Supervisory Board and ensures that reporting duties

to the Supervisory Board are complied with. In order

The full board usually convenes twice a year in its func-

tion as Sustainability Board in order to define strategy

with regard to sustainability and decide upon measures

to implement that strategy. The Head of Group Com-

munication and the Group Representative for Sustain- to fulfil these tasks, the Chairman is supported by all

ability and Environmental Protection participate in

these meetings in an advisory capacity.

members of the Board of Management. The fundamen-

tal principle followed when reporting to the Supervi-

sory Board is that the latter should be kept informed

regularly, without delay and comprehensively of all

significant matters relating to planning, business per-

formance, risk exposures, risk management and com-

pliance, as well as any major variances between actual

and budgeted figures.

The Board’s Committee for Executive Management

Matters deals with enterprise-wide issues affecting ex-

ecutive managers of the BMW Group, either in their

entirety or individually (such as the executive manage-

ment structure, potential candidates for executive

management, nominations for or promotions to senior

1

74

Composition and work procedures of the Supervisory

Board of BMWAG and its committees

BMWAG’s Supervisory Board, comprising ten share-

holder representatives (elected by the Annual General

Meeting) and ten employee representatives (elected

representatives and employee representatives prepare the

Supervisory Board meetings separately and, if necessary,

together with members of the Board of Management.

Members of the Supervisory Board are in particular le-

gally bound to maintain confidentiality with respect to

by employees in accordance with the German Co-deter- any confidential reports they receive and any confiden-

mination Act), has the task of advising and supervising

the Board of Management in its governance of the

BMW Group. It is involved in all decisions of fundamen-

tal importance for the BMW Group. The Supervisory

Board appoints the members of the Board of Manage-

ment and decides upon the level of compensation

they are to receive. The Supervisory Board can revoke

appointments for important reasons.

tial discussions in which they partake.

The Chairman of the Supervisory Board coordinates

work within the Supervisory Board, chairs its meet-

ings, handles the external affairs of the Supervisory

Board and represents it in its dealings with the Board

of Management.

The Supervisory Board is quorate if all members have

been invited to the meeting and at least half of its

members participate in the vote on a particular resolu-

Together with the Personnel Committee and the Board

of Management, the Supervisory Board ensures that

long-term successor planning is in place. In their assess- tion. A resolution relating to an agenda item not in-

ment of candidates for a post on the Board of Manage- cluded in the invitation is only valid if none of the mem-

ment, the underlying criteria applied by the Supervisory bers of the Supervisory Board who were not present

Board for determining the suitability of candidates are

their expertise in the relevant area of board responsi-

bility, outstanding leadership qualities, a proven track

at the meeting object to the resolution and a minimum

of two-thirds of the members are present.

record and an understanding of the BMW Group’s busi- As a basic rule, resolutions are passed by the Super-

ness. The Supervisory Board takes diversity into ac- visory Board by simple majority. The German Co-deter-

count when assessing, on balance, which individual will mination Act contains specific requirements with regard

best complement the Board of Management as a repre-

sentative body of the Company. “Diversity” in the con-

text of the decision process is understood by the Super-

visory Board to encompass different, complementary

individual profiles, work and life experiences, at both a

national and international level, as well as appropriate

representation of both genders. The Supervisory Board

strives to ensure appropriate female representation

on the Board of Management. The Board of Management

reports accordingly to the Personnel Committee – at

regular intervals and, on request, prior to personnel

to majority voting and technical procedures, particu-

larly with regard to the appointment and revocation of

appointment of management board members and the

election of a supervisory board chairman or deputy

chairman. In the event of a tied vote in the Supervisory

Board, the Chairman of the Supervisory Board has

two votes in a renewed vote, even if this also results in

a tied vote.

1

66 Statement on

corporate Governance

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

In practice, resolutions are taken by the Supervisory

Board and its committees at the relevant meetings. A

167 Declaration of the Board of

Management and of the

Supervisory Board pursuant to

decisions being taken by the Supervisory Board – on the Supervisory Board member who is not present at a

§

161AktG

proportion of, and changes in, management positions

held by women, in particular below senior executive

level and at uppermost management level. When actu-

ally selecting an individual for a post on the Board of

Management, the Supervisory Board decides in the best the Chairman of the Supervisory Board. The Chairman

interests of the Company and after taking account of all

relevant circumstances.

meeting can have hisꢀ/ꢀher vote cast by another Super-

visory Board member if an appropriate request has

been made in writing, by fax or in electronic form. This

rule also applies to the casting of the second vote by

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

of the Supervisory Board can also accept the retrospec-

tive casting of votes by any members not present at a

meeting if this is done within the time limit previously

set. In special cases, resolutions may also be taken

outside of meetings, i.ꢀe. in writing, by fax or by elec-

tronic means. Minutes are taken of each meeting and

79 Information on Corporate

Governance Practices

180 Compliance in the BMW Group

85 Compensation Report

1

The Supervisory Board holds a minimum of two meet-

ings in each of the first and second six-month periods of

the calendar year. Normally, five plenary meetings are

held per calendar year. One meeting each year is planned any resolutions made are signed by the Chairman of

to cover a number of days and is used, among other

things, to enable an in-depth exchange on strategic and

the Supervisory Board.

technological matters. The main emphases of meetings in After its meetings, the Supervisory Board is generally

the period under report are described in the Report of provided information on new vehicle models in the

the Supervisory Board. As a general rule, the shareholder form of a short presentation.

1

75 Statement on corporate Governance

Following the election of a new Supervisory Board mem- the tasks assigned to them. The Company provides

ber, the BMW Corporate Governance Officer informs

the new member of the principal issues affecting his or

her duties – in particular those enshrined in the BMW

Group Corporate Governance Code – including the

duty to cooperate when a transaction or event triggers

reporting requirements or is subject to the approval of

the Supervisory Board.

appropriate assistance to members of the Supervisory

Board in this respect.

The ability of the Supervisory Board to supervise and

advise the Board of Management independently is also

assisted by the fact that the Supervisory Board is required,

based on its own assessment, to have an appropriate

number of independent members. Prof. Dr.-Ing. Dr. h. c.

Dr.-Ing. E. h. Joachim Milberg is the only person on the

Supervisory Board to have previously served on the

Board of Management, of which he ceased to be a mem-

ber in 2002. Supervisory Board members do not exercise

directorships or similar positions or undertake advisory

All members of the Supervisory Board of BMWAG are

required to ensure that they have sufficient time to

perform their mandate. If members of the Supervisory

Board of BMWAG are also members of the management

board of a listed company, they may not accept more

than a total of three mandates on non-BMW Group super- tasks for important competitors of the BMW Group.

visory boards of listed companies or in other bodies

with comparable requirements.

Taking into account the specific circumstances of the

BMW Group and the number of board members, the

Supervisory Board has set up a Presiding Board and

four committees, namely the Personnel Committee, the

Audit Committee, the Nomination Committee and

the Mediation Committee (see “Overview of Supervisory

Board Committees, Meetings”). Such committees serve

to raise the efficiency of the Supervisory Board’s work

and facilitate the handling of complex issues. The estab-

lishment and function of a mediation committee is pre-

scribed by law. The person chairing a committee reports

The Supervisory Board examines the efficiency of its

activities on a regular basis. Joint discussions are also

held at plenum meetings, prepared on the basis of a

questionnaire previously devised by and distributed to

the members of the Supervisory Board. The Chairman

of the Supervisory Board is open to suggestions for

improvement at all times.

Each member of the Supervisory Board of BMWAG is

bound to act in the enterprise’s best interests. Members in detail on its work at each plenum meeting.

of the Supervisory Board may not pursue personal in-

terests in their decisions or take advantage of business

The composition of the Presiding Board and the various

opportunities intended for the benefit of the enterprise. committees is based on legal requirements, BMWAG’s

Articles of Incorporation, terms of reference and corpo-

Members of the Supervisory Board are obliged to in-

rate governance principles. The expertise and technical

form the full Supervisory Board of any conflicts of inter- skills of its members are also taken into account.

est which may result from a consultant or directorship

function with clients, suppliers, lenders or other busi-

According to the relevant terms of reference, the Chair-

ness partners, enabling the Supervisory Board to report man of the Supervisory Board is, in this capacity, auto-

to the shareholders at the Annual General Meeting on

how it has dealt with such issues. Material conflicts of

interest and those which are not merely temporary in

nature result in the termination of the mandate of the

relevant Supervisory Board member.

matically a member of the Presiding Board, the Personnel

Committee and the Nomination Committee, and also

chairs these committees.

The number of meetings held by the Presiding Board

and the committees depends on current requirements.

With regard to nominations for the election of members The Presiding Board, the Personnel Committee and

of the Supervisory Board, care is taken that the Super-

visory Board in its entirety has the required knowledge,

skills and expert experience to perform its tasks in a

proper manner.

the Audit Committee normally hold several meetings in

the course of the year (see “Overview of Supervisory

Board Committees, Meetings” for details of the number

of meetings held in the period under report).

The Supervisory Board has set out specific targets for its In line with the terms of reference for the activities of

own composition (see section “Composition targets for

the Supervisory Board”).

the plenum, the Supervisory Board has also set terms of

reference for the Presiding Board and the various com-

mittees. The committees are only quorate if all members

are present. Resolutions taken by the committees are

passed by simple majority unless stipulated otherwise

by law. Minutes are also taken at the meetings and for

The members of the Supervisory Board are responsible

for undertaking appropriate basic and further training

measures such as that may be necessary to carry out

1

76

the resolutions of the committees and the Presiding

Board, and signed by the person chairing the particular

meeting. This person also represents the committee in

any dealings it may have with the Board of Management

or third parties.

party transactions), as well as other activities of mem-

bers of the Board of Management, including the accept-

ance of non-BMW Group supervisory board mandates.

The Audit Committee deals in particular with issues

relating to the supervision of the financial reporting

Members of the Supervisory Board may not delegate their process, the effectiveness of the internal control system,

duties. The Supervisory Board, the Presiding Board the risk management system, internal audit arrange-

and committees may call on experts and other suitably ments and compliance. It also monitors the external

informed persons to attend meetings to give advice on

specific matters.

audit, auditor independence and any additional work

performed by the external auditor. It prepares the pro-

posal for the election of the external auditor at the An-

nual General Meeting, makes a recommendation re-

The Supervisory Board, the Presiding Board and the

committees also meet without the Board of Management garding the election of the external auditor, issues the

if necessary.

audit engagement letter and agrees on points of audit

focus as well as the auditor’s fee. The Audit Committee

prepares the Supervisory Board’s resolution relating

to the Company and Group Financial Statements and

discusses interim reports with the Board of Manage-

ment before publication. The Audit Committee also

decides on the Supervisory Board’s agreement to use

BMWAG ensures that the Supervisory Board and its

committees are sufficiently equipped to carry out their

duties. This includes the services provided by a cen-

tralised secretariat to support the chairmen in coordi-

nating the work of the Supervisory Board.

the Authorised Capital 2009 (Article 4 no.5 of the

In accordance with the relevant terms of reference, the

Presiding Board comprises the Chairman of the Super-

visory Board and board deputies. The Presiding Board

prepares Supervisory Board meetings to the extent that

the subject matter to be discussed does not fall within

the remit of a committee. This includes, for example,

preparing the annual Declaration of Compliance with

Articles of Incorporation) and on amendments to the

Articles of Incorporation which only affect its wording.

In line with the recommendations of the German Cor-

porate Governance Code, the Chairman of the Audit

Committee is independent and not a former Chairman

of the Board of Management and has specific know-how

the German Corporate Governance Code and the Super- and experience in applying financial reporting stand-

visory Board’s efficiency examination.

ards and internal control procedures. He also fulfils the

requirements of being an independent financial expert

as defined by §100 (5) and §107 (4) AktG.

The Personnel Committee prepares the decisions of the

Supervisory Board with regard to the appointment and

revocation of appointment of members of the Board

of Management and, together with the full Supervisory

166 Statement on

corporate Governance

(

Part of ManagementReport)

The Nomination Committee is charged with the task

of finding suitable candidates for election to the Super-

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Board and the Board of Management, ensures that long- visory Board (as shareholder representatives) and for

Supervisory Board pursuant to

term successor planning is in place. The Personnel

Committee also prepares the decisions of the Super-

visory Board with regard to the Board of Management’s

compensation and the Supervisory Board’s regular

review of the Board of Management’s compensation

system. In conjunction with the resolutions taken by

the Supervisory Board regarding the compensation of

the Board of Management, the Personnel Committee

is responsible for drawing up, amending and revoking

serviceꢀ/ꢀemployment contracts or, when necessary,

other relevant contracts with members of the Board of

Management. In specified cases, the Personnel Com-

mittee also has the authority to give the necessary ap-

proval for a particular transaction (instead of the Super-

visory Board). This includes loans to members of the

Board of Management or Supervisory Board, specified

contracts with members of the Supervisory Board (in

inclusion in the Supervisory Board’s proposals for elec-

tion at the Annual General Meeting. In line with the

recommendations of the German Corporate Governance

Code, the Nomination Committee comprises only share-

holder representatives.

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

80 Compliance in the BMW Group

85 Compensation Report

The establishment and composition of a mediation

committee are required by the German Co-determina-

tion Act. The Mediation Committee has the task of

making proposals to the Supervisory Board if a resolu-

tion for the appointment of a member of the Board of

Management has not been carried by the necessary

two-thirds majority of members’ votes. In accordance

with statutory requirements, the Mediation Commit-

tee comprises the Chairman and the Deputy Chairman

of the Supervisory Board and one member each se-

lected by shareholder representatives and employee

1

each case taking account of the consequences of related representatives.

1

77 Statement on corporate Governance

Overview of Supervisory Board Committees, Meetings

Principal duties,

Members

Number

Average

basis for activities

of meetings attendance

2013

Presiding Board

1

–

preparation of Supervisory Board meetings to the extent that the subject mat- Joachim Milberg

4

95%

ter to be discussed does not fall within the remit of a committee

Manfred Schoch

Stefan Quandt

Stefan Schmid

–

activities based on terms of reference

Karl-Ludwig Kley

Personnel Committee

1

–

preparation of decisions relating to the appointment and revocation of appoint- Joachim Milberg

4

ment of members of the Board of Management, the compensation and the

regular review of the Board of Management’s compensation system

Manfred Schoch

Stefan Quandt

Stefan Schmid

Karl-Ludwig Kley

–

conclusion, amendment and revocation of employment contracts (in conjunc-

tion with the resolutions taken by the Supervisory Board regarding the com-

pensation of the Board of Management) and other contracts with members of

the Board of Management

–

decisions relating to the approval of ancillary activities of Board of Management

members, including acceptance of non-BMW Group supervisory mandates as

well as the approval of transactions requiring Supervisory Board approval by dint

of law (e.g. loans to Board of Management or Supervisory Board members)

set up in accordance with the recommendation contained in the German

Corporate Governance Code, activities based on terms of reference

Audit Committee

1, 2

–

supervision of the financial reporting process, effectiveness of the internal

control system, risk management system, internal audit arrangements and

compliance

Karl-Ludwig Kley

Joachim Milberg

Manfred Schoch

Stefan Quandt

Stefan Schmid

4

plus

3 telephone

conferences

94%

–

supervision of external audit, in particular auditor independence and addi-

tional work performed by external auditor

preparation of proposals for election of external auditor at Annual General Meet-

ing, engagement of external auditor and compliance of audit engagement, de-

termination of areas of audit emphasis and fee agreements with external auditor

–

preparation of Supervisory Board’s resolution on Company and Group Finan-

cial Statements

–

discussion of interim reports with Board of Management prior to publication

decision on approval for utilisation of Authorised Capital 2009

amendments to Articles of Incorporation only affecting wording

establishment in accordance with the recommendation contained in the

German Corporate Governance Code, activities based on terms of reference

Nomination Committee

1

–

identification of suitable candidates (male/female) as shareholder representa- Joachim Milberg

2

87.5%

tives on the Supervisory Board to be put forward for inclusion in the Super-

visory Board’s proposals for election at the Annual General Meeting

Susanne Klatten

Karl-Ludwig Kley

Stefan Quandt

–

establishment in accordance with the recommendation contained in the

German Corporate Governance Code, activities based on terms of reference

(In line with the recommendations of the

German Corporate Governance Code,

the Nomination Committee comprises

only shareholder representatives.)

Mediation Committee

–

proposal to Supervisory Board if resolution for appointment of Board of

Management member has not been carried by the necessary two-thirds

majority of Supervisory Board members’ votes

Joachim Milberg

Manfred Schoch

Stefan Quandt

Stefan Schmid

–

committee required by law

(

In accordance with statutory require-

ments, the Mediation Committee

comprises the Chairman and Deputy

Chairman of the Supervisory Board and

one member each selected by share-

holder representatives and employee

representatives.)

1

2

Chair.

Independent financial expert within the meaning of §100 (5) AktG and §107 (4) AktG.

1

78

Composition objectives of the Supervisory Board

The Supervisory Board must be composed in such a

way that its members as a group possess the knowledge,

skills and experience required to properly complete its

tasks. To this end, the Supervisory Board has formally

specified the following concrete objectives regarding

its composition, taking into account the recommenda-

tions contained in the German Corporate Governance

Code:

maintain the current proportion of 20% female repre-

sentation. The Supervisory Board believes it is the

joint responsibility of all persons and groupings

participating in the nomination and election process

to ensure that the Supervisory Board comprises an

appropriate number of qualified women.

– At least twelve of the 20 members of the Supervisory

Board should be independent members within the

meaning of section 5.4.2 of the German Corporate

–

At least four of the members of the Supervisory

Board should have international experience or spe-

cialist knowledge with regard to one or more of the

non-German markets important to the Company.

If possible, the Supervisory Board should include

seven members who have acquired in-depth knowl-

edge and experience from within the enterprise.

The Supervisory Board should not, however, include

more than two former members of the Board of

Management.

At least three of the shareholder representatives in

the Supervisory Board should be entrepreneurs or

persons who have already gained experience in the

management or supervision of another medium or

large-sized company.

Ideally, three members of the Supervisory Board

should be figures from the worlds of business, science

or research who have gained experience in areas

relevant to the BMW Group, e.ꢀg. chemistry, energy

supply, information technology, or who have acquired

specialist knowledge in subjects relevant for the fu-

ture of the BMW Group, e.ꢀg. customer requirements,

mobility, resources and sustainability.

When seeking suitably qualified individuals for the

Supervisory Board whose specialist skills and leader-

ship qualities are most likely to strengthen the Board

as a whole, consideration should also be given to

diversity. When preparing nominations, the extent

to which the work of the Supervisory Board would

benefit from diversified professional and personal

backgrounds (including international aspects) and

from an appropriate representation of both genders

should also be taken into account. In view of the

proportion of women in the workforce at 31 Decem-

Governance Code, including at least six members

representing the Company’s shareholders. Two inde-

pendent members in the Supervisory Board should

have expert knowledge of accounting or auditing.

– No persons carrying out directorship functions or ad-

visory tasks for important competitors of the BMW

Group may belong to the Supervisory Board. In com-

pliance with prevailing legislation, the members of

the Supervisory Board will strive to ensure that no

persons will be nominated for election with whom

serious conflicts of interest could arise (other than

temporarily) due to other activities and functions car-

ried out by them outside the BMW Group; this in-

cludes in particular advisory activities or directorships

with customers, suppliers, creditors or other business

partners.

–

As a general rule, the age limit for membership of

the Supervisory Board should be set at 70 years. In

exceptional cases, members may be allowed to remain

on the Board up until the end of the Annual General

Meeting following their 73rd birthday in order to

fulfil legal requirements or to facilitate smooth succes-

sion in the case of persons with key roles or specialist

qualifications.

–

166 Statement on

corporate Governance

(

Part of ManagementReport)

The time schedule set by the Supervisory Board for

achieving the above-mentioned composition targets is

the Annual General Meeting in 2015, by which time

elections will have taken place for all positions on the

Supervisory Board. Future proposals for nomination

made by the Supervisory Board at the Annual General

Meeting – insofar as they apply to shareholder Super-

visory Board members – should take account of these

objectives in such a way that they can be achieved with

the support of the appropriate resolutions at the An-

nual General Meeting. The Annual General Meeting is

not bound by nominations for election proposed by the

Supervisory Board. The freedom of employees to vote

for the employee members of the Supervisory Board is

also protected. Under the procedural rules stipulated

by the German Co-Determination Act, the Supervisory

Board does not have the right to nominate employee

representatives for election. The objectives which the

Supervisory Board has set itself with regard to its compo-

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

80 Compliance in the BMW Group

85 Compensation Report

ber 2013 (BMWAG: 14.5%; BMW Group 17.4%),

the Supervisory Board is of the opinion that a pro-

portion of three female members out of a total of

1

20 members (15%) is satisfactory as far as gender mix

is concerned, but that the inclusion of at least four

female members (20%) is desirable. The Supervisory

Board therefore considers it appropriate that op-

portunities available in conjunction with selec-

tion procedures through to the end of the ordinary

Annual General Meeting in 2015 should be used to

1

79 Statement on corporate Governance

sition are therefore not intended to be instructions to

those entitled to vote or restrictions on their freedom

to vote. More to the point, they reflect the compo-

sition which the current Supervisory Board believes

should be striven for in future by those entitled to

nominate and elect board members, in view of the

advisory and supervisory needs of BMWAG’s Super-

visory Board.

fore see change as an opportunity – adaptability is essen-

tial to be able to capitalise on it.

Frankness

As we strive to find the best solution, it is each em-

ployee’s duty to express any opposing opinions they

may have. The solutions we agree upon will then be

consistently implemented by all those involved.

In the Supervisory Board’s opinion, its own composition Respect, trust, fairness

at 31 December 2013 fulfils the composition objectives

We treat each other with respect. Leadership is based on

detailed above. Brief curricula vitae of the current mem- mutual trust. Trust is rooted in fairness and reliability.

bers of the Supervisory Board can be found on the Com-

pany’s website at www.bmwgroup.com.

Employees

People make companies. Our employees are the strong-

est factor in our success, which means our personnel

decisions will be among the most important we ever

make.

Information on corporate governance practices

applied beyond mandatory requirements

Core principles

Within the BMW Group, the Board of Management, the

Supervisory Board and the employees base their actions Leading by example

on twelve core principles which are the cornerstone of

the success of the BMW Group:

Every manager must lead by example.

Sustainability

Customer focus

In our view, sustainability constitutes a lasting con-

tribution to the success of the Company. This is the

basis upon which we assume ecological and social

responsibility.

The success of our Company is determined by our cus-

tomers. They are at the heart of everything we do.

The results of all our activities must be valued in terms

of the benefits they will generate for our customers.

Society

Peak performance

Social responsibility is an integral part of our corporate

self-image.

We aim to be the best – a challenge to which all of us

must rise. Each and every employee must be prepared

to deliver peak performance. We strive to be among

the elite, but without being arrogant. It is the Company

and its products that count – and nothing else.

Independence

We secure the corporate independence of the BMW

Group through sustained profitable growth.

Responsibility

The core principles are also available at www.bmw-

Every BMW Group employee has the personal responsi- group.com under the menu items “Responsibility” and

bility for the Company’s success. When working in a

team, each employee must assume personal responsibility

for his or her actions. We are fully aware that we are

working to achieve the Company’s goals. For this reason,

we work together in the best interests of the Company.

“Employees”.

Social responsibility towards employees and along

the supplier chain

The BMW Group stands by its social responsibilities. Our

corporate culture combines the drive for success with

a willingness to be open, trustworthy and transparent.

We are well aware of our responsibility towards society.

Our models for sustainable social responsibility towards

employees and for ensuring compliance with inter-

national social standards are based on various inter-

nationally recognised guidelines. The BMW Group is

committed to adhering to the OECD’s guidelines for

multinational companies and the contents of the ICC

Business Charter for Sustainable Development. Details

Effectiveness

The only results that count for the Company are those

which have a sustainable impact. In assessing leader-

ship, we must consider the effectiveness of performance

on results.

Adaptability

In order to ensure our long-term success we must adapt

to new challenges with speed and flexibility. We there-

1

80

of the contents of these guidelines and other rele-

vant information can be found at www.oecd.org and

www.iccwbo.org. The Board of Management signed the

United Nations Global Compact in 2001 and, in 2005,

together with employee representatives, issued a “Joint

Declaration on Human Rights and Working Conditions

in the BMW Group”. This Joint Declaration was recon-

firmed in 2010. With the signature of these documents,

we have given our commitment to abide worldwide

ecological and social standards it sets and strives con-

tinually to improve the efficiency of processes, measures

and activities.

Sustainability criteria play an integral part in all as-

pects of our purchasing terms and conditions as well

as for the purposes of evaluating suppliers. Potential

suppliers must submit a full disclosure when com-

pleting BMW’s modularly structured sustainability

by internationally recognised human rights and with the questionnaire, an inherent component of the accept-

fundamental working standards of the International ance procedure for potential new suppliers. The

Labour Organization (ILO). The most important of these BMW Group expects suppliers to ensure that the BMW

are freedom of employment, the prohibition of discrimi- Group’s sustainability criteria are also adhered to by

nation, the freedom of association and the right to col-

lective bargaining, the prohibition of child labour, the

right to appropriate remuneration, regulated working

sub-suppliers. Purchasing terms and conditions and

other information relating to purchasing can be found

in the publicly available section of the BMW Group

times and compliance with work and safety regulations. Partner Portal at https:ꢀ/ꢀ/ꢀb2b.bmw.com.

The complete text of the UN Global Compact and the

recommendations of the ILO and other relevant infor-

mation can be found at www.unglobalcompact.org and

www.ilo.org. The Joint Declaration on Human Rights

We foster close relations with our suppliers, providing

encouragement and practical assistance to those inter-

ested in wishing to make progress in the area of sustain-

and Working Conditions in the BMW Group can be found ability.

at www.bmwgroup.com under the menu item “Respon-

sibility” (Servicesꢀ/ꢀdownloadsꢀ/ꢀtopics: “Employees and

Compliance in the BMW Group

Society”).

Responsible and lawful conduct is fundamental to the

success of the BMW Group. This approach is an integral

part of our corporate culture and is the reason why cus-

tomers, shareholders, business partners and the general

public place their trust in us. The Board of Management

and the employees of the BMW Group are obliged to

act responsibly and in compliance with applicable laws

and regulations.

Further information regarding employees is provided

in the “Personnel” section of the Combined Manage-

ment Report.

It goes without saying that the BMW Group abides by

these fundamental principles and rights worldwide.

Employees have therefore been sensitised to this issue

since 2005 by means of regular internal communica-

tions and further training on recent developments in

this area. Two dedicated helplines – the “Human Rights

Contact” and the “BMW Group SpeakUP Line” – are

available to employees wishing to raise queries or com-

plaints relating to human rights issues. The UN Guiding

Principles provide a framework for critical reflection

and continuous improvement in our endeavours to

ensure that human rights are respected throughout the

organisation.

166 Statement on

corporate Governance

This principle has been embedded in BMW’s internal

rules of conduct for many years. In order to protect

itself systematically against compliance-related and

reputational risks, the Board of Management created

a Compliance Committee several years ago, mandated

to establish a worldwide Compliance Management

System throughout the BMW Group.

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

80 Compliance in the BMW Group

85 Compensation Report

The BMW Group Compliance Committee comprises

the heads of the following departments: Legal Affairs,

Corporate and Governmental Affairs, Corporate

Audit, Organisational Development and Corporate

Human Resources. It manages and monitors activi-

ties necessary to avoid non-compliance with the law

(Legal Compliance). These activities include training,

Activities can only be sustainable, however, if they

encompass the entire value-added chain. That is why

the BMW Group not only makes high demands of itself

but also expects its suppliers and partners to meet the

1

81 Statement on corporate Governance

information and communication measures, com-

pliance controls and following up cases of non-com-

pliance.

The Chairman of the BMW Group Compliance Com-

mittee keeps the Audit Committee of the Supervisory

Board informed on the current status of compliance

activities within the BMW Group, both on a regular and

The BMW Group Compliance Committee reports regu- a case-by-case basis as the need arises.

larly to the Board of Management on all compliance-re-

lated issues, including the progress made in developing

the BMW Group Compliance Organisation, details of

investigations performed, known infringements of the

law, sanctions imposed and correctiveꢀ/ꢀpreventative

The Board of Management keeps track of and analyses

compliance-related developments and trends on the

basis of the Group’s compliance reporting and input

from the BMW Group Compliance Committee. Measures

measures implemented. The decisions taken by the BMW to improve the Compliance Management System are in-

Group Compliance Committee are drafted in concept,

and implemented operationally, by the BMW Group

Compliance Committee Office. The BMW Group Com-

itiated on the basis of identified requirements.

A coordinated set of instruments and measures are

pliance Committee Office comprises ten employees and employed to ensure that the BMW Group, its repre-

is allocated in organisational terms to the Chairman of

the Board of Management.

sentative bodies, its managers and its staff act in a law-

ful manner. Particular emphasis has been placed on

compliance with antitrust legislation and the avoidance

of corruption risks. Compliance measures are supple-

mented by a whole range of internal policies, guidelines

and instructions, which in part reflect applicable legisla-

tion. The BMW Group Policy “Corruption Prevention”

deserves particular mention: this document deals with

lawful handling of gifts and benefits and defines appro-

priate assessment criteria and approval procedures for

specified actions.

BMW Group Compliance Organisation

Supervisory Board BMWAG

Annual

Report

Board of Management BMWAG

Annual

Report

BMW Group Compliance Committee

BMW Group Compliance Committee Office

Compliance measures are determined and prioritised

on the basis of a group-wide compliance risk assessment

covering all 276 business units and functions worldwide

within the BMW Group. The assessment of compliance

risks is updated annually. Measures are realised with

the aid of a regionally structured compliance manage-

ment team covering all parts of the BMW Group and

overseeing more than 170 Compliance Responsibles.

Annual

Compliance

Reporting

Compliance Operations Network

of all BMW Group

Compliance Responsibles

Compliance Risk

Analysis

Legal Compliance

Code and Regulations

The various elements of the BMW Group Compliance

Organisation are shown in the diagram on the left and

are applicable for all BMW Group entities worldwide.

To the extent that additional compliance requirements

apply to individual countries or specific lines of busi-

ness, these are covered by supplementary compliance

measures.

Compliance

Investigations

and Controls

Compliance

Communication

Compliance

Instruments and

Measures of

the BMW Group

Compliance

Reporting

Compliance

Trainings

The BMW Group Legal Compliance Code is the corner-

stone of the Group’s Compliance Organisation, spelling

out the Board of Management’s acknowledgement of

the fact that compliance is a joint responsibility (“Tone

Compliance

Contact and

SpeakUP Line

Compliance

Governance and

Processes

1

82

from the Top”). This document, which explains the

significance of legal compliance and provides an over-

view of the various areas relevant for the BMW Group,

is available both as a printed brochure and to download

in German and English. In addition, translations into

eleven other languages are available (Dutch, French,

2013. A total of 2,300 employees have already completed

this training. The relevant divisions also introduced

further measures and processes in 2013 to make em-

ployees who participate in meetings with competitors

sufficiently aware of anti-trust risks.

Italian, Japanese, Korean, Mandarin, Polish, Portuguese, Additional Compliance Market Coachings have also

Russian, Spanish and Thai).

been implemented in local markets since late 2012.

These multi-day classroom seminars strengthen the

understanding of compliance in selected units and

enhance cooperation between the central BMW Group

Compliance Committee Office and decentralised

compliance offices. In 2013, market coaching was per-

formed for Financial Services and national sales

companies in Argentina, Brazil, China, Mexico and

Singapore.

Managers in particular bear a high degree of responsi-

bility and must set a good example in the process of

preventing infringements. Managers throughout the

BMW Group accept this principle by signing a written

declaration, in which they also undertake to inform

staff working for them of the content and significance

of the Legal Compliance Code and to make staff aware

of legal risks. Managers must, at regular intervals and

on their own initiative, check compliance with the law

and communicate regularly with staff on this issue.

Any indication of non-compliance with the law must

be rigorously investigated.

In order to avoid legal risks, all members of staff are

expected to discuss compliance matters with their

managers and with the relevant departments within

the BMW Group, in particular Legal Affairs, Corporate

Audit and Corporate Security. The BMW Group Com-

pliance Contact serves as a further point of contact for

both employees and non-employees for any questions

regarding compliance.

More than 20,300 managers and staff worldwide have

received training in compliance basics since the intro-

duction of the BMW Group Compliance Organisation.

The training material is available on an Internet-based

training platform in German and English and includes

a final test. Successful participation in the training

programme, which is documented by a certificate, is

mandatory for all BMW Group managers. Appro-

priate processes are in place to ensure that all newly

recruited managers and promoted staff undergo com-

pliance training. In this way, the BMW Group ensures

full training coverage for its managers in compliance

matters.

Employees also have the opportunity to submit infor-

mation – anonymously and confidentially – via the

BMW Group SpeakUP Line about possible breaches of

the law within the Company. The BMW Group SpeakUP

Line is available in a total of 34 languages and can be

reached via local toll-free numbers in all countries in

which BMW Group employees carry out activities.

166 Statement on

corporate Governance

(

Part of ManagementReport)

Compliance-related queries and concerns are docu-

mented and followed up by the BMW Group Com-

pliance Committee Office using an electronic Case

Management System. If necessary, Corporate Audit,

Corporate Security, the Works Council and Legal

Affairs may be called upon to assist in the investigation

process.

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

In addition to this basic training, in-depth training is

also provided to certain groups of staff on specific

compliance issues. This includes a training programme

(Compliance Advanced – Competition and Antitrust

Law), which was expanded in 2013 and is aimed at em-

ployees who come into contact with antitrust-related

issues as a result of their functions within sales, pur-

chasing, production or development. Anti-trust law

training has also been mandatory for all BMWAG em-

ployees delegated to work abroad since the start of

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

Through the group-wide reporting system, Compliance

Responsibles throughout the BMW Group report on

compliance-relevant issues to the Compliance Commit-

tee on a regular basis, and, if necessary, on an ad hoc

180 Compliance in the BMW Group

185 Compensation Report

1

83 Statement on corporate Governance

basis. This includes reporting on the compliance status

of the relevant entities, on identified legal risks and

incidences of non-compliance as well as on correctiveꢀ/ꢀ

preventative measures implemented.

In the same way that the BMW Group is committed to

lawful and responsible conduct, it also expects no less

from its business partners. During 2012 the BMW Group

developed a new Business Relations Compliance pro-

gramme aimed at ensuring the reliability of its business

Compliance with and implementation of the Legal Com- relations. Relevant business partners are checked and

pliance Code are audited regularly by Corporate Audit

and subjected to control checks by Corporate Security

evaluated with a view to identifying potential compliance

risks. These procedures are particularly relevant for

and the BMW Group Compliance Committee Office. As relations with sales partners and service providers, such

part of its regular activities, Corporate Audit carries out as agencies and consultants. Depending on the results

on-site audits. The BMW Group Compliance Committee of the evaluation, appropriate measures – such as com-

also engages Corporate Audit to perform compliance- munication measures, training and possible monitor-

specific checks. In addition, sample checks (BMW Group ing – are implemented to manage compliance risks. The

Compliance Spot Checks) specifically designed to iden-

tify potential corruption risks are carried out. In 2013,

three Compliance Spot Checks were performed in

Business Relations Compliance programme has already

been launched in 12 units since 2012 and, over the com-

ing years, will be rolled out successively throughout the

different units. Compliance control activities are coordi- BMW Group’s worldwide sales organisation. In 2013,

nated by the BMW Group Panel Compliance Controls.

Any necessary follow-up measures are organised by the

BMW Group Compliance Committee Office.

the company also began introducing compliance clauses

to protect contractual relationships into dealer and im-

porter contracts.

It is essential that employees are aware of and comply

with applicable legal regulations. The BMW Group

does not tolerate violations of the law by its employees.

Compliance is also an important factor in terms of safe-

guarding the future of the BMW Group’s workforce.

With this in mind, the Board of Management and the

Culpable violations of the law result in employment-con- national and international employee representative

tract sanctions and may involve personal liability con-

sequences for the employee involved.

bodies of the BMW Group have agreed on a binding set

of Joint Principles for Lawful Conduct. In doing so, all

parties involved gave a commitment to the principles

contained in the BMW Group Legal Compliance Code

and to trustful cooperation in all matters relating to

To avoid this, BMW Group employees are kept fully in-

formed of the instruments and measures used by the

Compliance Organisation via various internal channels. compliance. Employee representatives are therefore reg-

The central means of communication is the Compliance

website within the BMW Group’s intranet, where em-

ployees can find compliance-related information and

have access to training materials in both German and

English. The website contains a special service area

where various practical tools and aids are made available

to employees, which help them deal with typical com-

pliance-related matters. BMW Group employees also

ularly involved in the process of developing compliance

measures within the BMW Group.

In the interest of investor protection and to ensure that

the BMW Group complies with regulations relating to

potential insider information, as early as 1994 the Board

of Management appointed an Ad Hoc Committee, con-

sisting of representatives of various specialist depart-

have access on the website to an electronically supported ments, whose members examine the relevance of issues

approval process for invitations in connection with busi- for ad hoc disclosure purposes. All persons working on

ness partners. The results of the group-wide employee

survey in 2013 showed that, thanks to extensive com-

munications activities, BMW Group employees have an

excellent understanding of the topic of compliance and

its significance to the Company.

behalf of the company who have access to insider infor-

mation in accordance with existing rules have been, and

continue to be, included in a corresponding, regularly

updated list and informed of the duties arising from in-

sider rules.

1

84

Reportable securities transactions

“Directors Dealings”)

Pursuant to §15ꢀa of the German Securities Trading Act

investment amount as a net subsidyꢀ. Once the four-

year holding period requirement has been fulfilled, the

participants receive – for each three shares of common

(

(WpHG), members of the Board of Management and the stock held and at the Company’s option – one further

Supervisory Board and any persons related to those mem- share of common stock or the equivalent amount in cash.

bers are required to give notice to BMWAG and the

Federal Agency for the Supervision of Financial Services Under the terms of the Employee Share Scheme, em-

of transactions with BMW stock or related financial in-

struments if the total sum of such transactions reaches

or exceeds an amount of €ꢀ5,000 during any given calen-

dar year. No securities transactions pursuant to §15ꢀa

WpHG were notified to the Company during the 2013

financial year.

ployees were able in 2013 to acquire packages of be-

tween five and 13 shares of non-voting preferred stock

with a discount of €ꢀ19.23 (2012: €ꢀ12.50) per share

compared to the market price (average closing price in

Xetra trading during the period from 7 November to

13 November 2013: €ꢀ63.02). All employees of BMWAG

and its wholly owned German subsidiaries (if agreed

Shareholdings of members of the Board of Management to by the directors of those entities) were entitled to

and the Supervisory Board participate in the scheme. Employees were required to

The members of the Supervisory Board of BMWAG hold have been in an uninterrupted employment relation-

in total 27.62% of the Company’s shares of common

and preferred stock (2012: 27.63%), of which 16.07%

ship with BMWAG or the relevant subsidiary for at least

one year at the date on which the allocation for the

year was announced. Shares of preferred stock acquired

in conjunction with the Employee Share Scheme are

subject to a vesting period of four years, starting from

(2012: 16.08%) relates to Stefan Quandt, Bad Homburg

v.d.H. and 11.55% (2012: 11.55%) to Susanne Klatten,

Munich. The shareholding of the members of the Board

of Management totals less than 1% of the issued shares.

1

January of the year in which the employees acquired

the shares. A total of 266,152 (2012: 422,905) shares of

preferred stock were acquired by employees under the

scheme in 2013; 265,570 (2012: 422,845) of these shares

were drawn from the Authorised Capital 2009, the re-

mainder were bought back via the stock exchange.

Every year the Board of Management of BMWAG de-

cides whether the scheme is to be continued. Further in-

formation is provided in notes 19 and 34 to the Group

Financial Statements.

Share-based remuneration schemes for employees

and Board of Management members

Three share-based remuneration schemes were in

place at BMWAG during the year under report, namely

the Employee Share Scheme (under which entitled

employees of BMWAG have been able to participate in

the enterprise’s success since 1989 in the form of non-

voting shares of preferred stock) and two share-based

remuneration schemes for Board of Management mem-

bers and for department heads (relating to shares of

common stock). The share-based remuneration scheme

for Board of Management members is described in de-

tail in the Compensation Report (see also the Com-

pensation Report and note 19 to the Group Financial

Statements).

166 Statement on

corporate Governance

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

80 Compliance in the BMW Group

85 Compensation Report

The share-based remuneration scheme for qualifying

department heads, introduced with effect for financial

years beginning after 1 January 2012, is closely based

on the scheme for Board of Management members and

is aimed at rewarding a long-term, entrepreneurial ap-

proach to running the business on a sustainable basis.

1

Under the terms of this scheme, participants give a

commitment to invest an amount equivalent to 20% of

their performance-based bonus in BMW common stock

and to hold the shares so acquired for four years. In

return for this commitment, BMWAG pays 100% of the

1

85 Statement on corporate Governance

Compensation Report

performance. Targets and other parameters may not be

changed retrospectively.

The following section describes the principles relating

to the compensation of the Board of Management and

the stipulations set out in the statutes relating to the

compensation of the Supervisory Board. In addition to

discussing the compensation system, the components

of compensation are also disclosed in absolute figures.

Furthermore, the compensation of each member of the

Board of Management and the Supervisory Board for

the financial year 2013 is disclosed by individual and

analysed into components.

The Supervisory Board reviews the appropriateness of

the compensation system annually. The Personnel

Committee also makes use of remuneration studies.

The Supervisory Board reviews the appropriateness of

the compensation system in horizontal terms by com-

paring compensation paid by DAX companies and in

vertical terms by comparing board compensation with

the salaries of executive managers and with the average

salaries of employees of BMWAG in Germany, in both

cases in terms of level and changes over time. Recom-

mendations made by an independent external remu-

neration expert and suggestions made by investors and

analysts are also considered in the consultative process.

1

. Board of Management compensation

Responsibilities

The Supervisory Board is responsible for determining

and regularly reviewing the Board of Management’s

compensation. The Personnel Committee plays a pre-

paratory role in this process.

Compensation system, compensation components

The compensation of the Board of Management comprises

both fixed and variable remuneration as well as a share-

Principles of compensation

The compensation system for the Board of Management based component. Retirement and surviving dependants’

at BMWAG is designed to encourage a management

approach focused on sustainable development. One im-

benefit entitlements are also in place.

portant principle applied when designing remuneration Fixed compensation

systems at BMW is that of consistency at different levels. Fixed remuneration consists of a base salary (paid

In other words, compensation systems for the Board

of Management, senior management and employees of

monthly) and other remuneration elements. Other re-

muneration elements comprise mainly the use of Com-

BMWAG should all have a similar structure and contain pany and lease cars as well as the payment of insurance

similar components. The Supervisory Board carries out

regular checks to ensure that all Board of Management

compensation components are appropriate, both indi-

premiums, contributions towards security systems and

an annual medical check-up. Members of the Board of

Management are also entitled to purchase vehicles and

vidually and in total, and do not encourage the Board of other services of the BMW Group at conditions that also

Management to take inappropriate risks for the BMW

Group. At the same time, the compensation model used

for the Board of Management should be attractive in

the context of the competitive environment for highly

qualified executives.

apply in each relevant case for employees.

The basic remuneration of members of the Board of

Management is unchanged from the previous year,

namely €ꢀ750,000 p.a. for a board member during the

first period of office, €ꢀ900,000 p.a. for a board member

from the second period or fourth year of office onwards

and €ꢀ1,500,000 p.a. for the Chairman of the Board of

Management.

The compensation of members of the Board of Manage-

ment is determined by the full Supervisory Board on

the basis of performance criteria and after taking into

account any remuneration received from Group com-

panies. The principal performance criteria are the na-

ture of the tasks allocated to each member of the Board

of Management, the economic situation and the per-

formance and future prospects of the BMW Group. The

Supervisory Board sets demanding and relevant pa-

rameters as the basis for variable compensation. It also

takes care to ensure that variable components based

on multi-year assessment criteria take account of both

positive and negative developments and that the package

as a whole encourages a long-term approach to business

Variable remuneration

The variable remuneration of Board of Management

members comprises variable cash remuneration on the

one hand and a share-based remuneration component

on the other.

Variable cash remuneration, in particular bonuses

Variable cash remuneration consists of a cash bonus

and share-based remuneration component equivalent

to 20% of a board member’s total bonus after taxes,

1

86

which the board member is required to invest in BMWAG termining the corporate earnings-related variable com-

common stock. Taxes and social insurance relating

to the share-based remuneration are also borne by the

Company. In substantiated cases, the Supervisory

Board also has the option of paying an additional spe-

cial bonus.

pensation components of all managers and staff of

BMWAG.

The personal performance-related bonus is derived by

multiplying the target amount set for each member of

the Board of Management by a performance factor. The

Supervisory Board sets the performance factor on the

basis of its assessment of the contribution of the rele-

vant Board of Management member to sustainable and

long-term oriented business development. In setting

the factor, consideration is given equally to personal

performance and decisions taken in previous forecast-

The bonus is made up of two components, each equally

weighted, namely a corporate earnings-related bonus

and a personal performance-related bonus. The target

bonus (100%) for a Board of Management member, for

both components of variable compensation, totals

€ꢀ1.5 million p.a., rising to €ꢀ1.75 million p.a. with effect

from the second term of appointment or the fourth year ing periods, key decisions affecting the future develop-

in office. The equivalent figure for the Chairman of the

Board of Management is €ꢀ3 million p.a. The amount of

ment of the business and the effectiveness of measures

taken in response to changing external conditions as

bonus is capped for all Board of Management members. well as other activities aimed at safeguarding the future

For the financial year 2013, the upper limits were 250%

of the relevant target bonus. For financial years com-

viability of the business to the extent not included di-

rectly in the basis of measurement. Performance factor

mencing after 1 January 2014, the upper limits are 200% criteria include innovation (economic and ecological,

of the relevant target bonus.

e.ꢀg. reduction of carbon emissions), customer focus,

ability to adapt, leadership accomplishments, contribu-

tions to the Company’s attractiveness as an employer,

progress in implementing the diversity concept and ac-

tivities that foster corporate social responsibility. The

The corporate earnings-related bonus is based on the

BMW Group’s net profit and post-tax return on sales

(

which are combined in a single earnings factor) and

the level of the dividend (common stock). The corporate target bonus and the key figures used to determine the

earnings-related bonus is derived by multiplying the

target amount fixed for each member of the Board of

corporate earnings-related bonus are fixed in advance

for a period of three financial years, during which time

Management by the earnings factor and by the dividend they may not be amended retrospectively.

factor. In exceptional circumstances, for instance when

there have been major acquisitions or disposals, the

Supervisory Board may adjust the level of the corporate

earnings-related bonus.

Share-based remuneration programme

The compensation system includes a share-based remu-

neration programme, in which the level of share-based

remuneration is based on the amount of the bonus paid.

The system is aimed at creating further long-term incen-

tives to encourage sustainable governance.

1

66 Statement on

corporate Governance

(

Part of ManagementReport)

An earnings and dividend factor of

rise to an earnings-based bonus of €ꢀ

1

.

00 would give

166 Information on the Company’s

Governing Constitution

0.75 million for

167 Declaration of the Board of

Management and of the

the financial year 2013 for a member of the Board of

Management during the first period of office and one

of €ꢀ0.875 million during the second term of appoint-

ment or from the fourth year in office. The equivalent

bonus for the Chairman of the Board of Management is

Supervisory Board pursuant to

This programme envisages a share-based remuneration

component equivalent to 20% of the board member’s

total bonus after taxes, which the board member is re-

quired to invest in BMWAG common stock. Taxes and

social insurance relating to the share-based remunera-

tion component are also borne by the Company. As a

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

€

ꢀ1.5 million. The earnings factor is 1.00 in the event of

a Group net profit of €ꢀ3.1 billion and a post-tax return

on sales of 5.6%. The dividend factor is 1.00 in the event general rule, the shares must be held for a minimum of

that the dividend paid on the shares of common stock four years. As part of a matching plan, the Board of

is between 101 and 110 cents. If the Group net profit is Management members will, at the end of the holding

below €ꢀ1 billion or if the post-tax return on sales is less period, receive from the Company either one additional

than %, the earnings factor for the financial year 2013 share of common stock or an equivalent cash amount

79 Information on Corporate

Governance Practices

180 Compliance in the BMW Group

185 Compensation Report

2

would be zero. In this case, no corporate earnings-re-

lated bonus would be paid. Based on the principle of

for three shares of common stock held, to be decided at

the discretion of the Company (share-based remunera-

consistency at all levels, this rule is also applicable in de- tion componentꢀ/ꢀmatching component), unless the

1

87 Statement on corporate Governance

employment relationship was ended before expiry of

the agreed contractual period (except where caused by

death or invalidity). Special rules apply in the case of

death or invalidity of a Board of Management member

before fulfilment of the holding period.

bination of a one-off payment and a proportionately

reduced lifelong monthly pension). Pensions are paid

to former members of the Board of Management who

have either reached the statutory retirement age for the

state pension scheme in Germany or, if their mandate

had terminated earlier and had not been extended, to

members who have either reached the age of 60 or are

permanently unable to work, or who have entered into

early retirement in accordance with a special arrange-

ment. In addition, following the death of a retired board

member who has elected to receive a lifelong pension,

60% of that amount is paid as a lifelong widow’s pension.

Pensions are increased annually by an amount of at

least 1%.

Retirement and surviving dependants’ benefits

The provision of retirement and surviving dependants’

benefits for Board of Management members was

changed to a defined contribution system with a guar-

anteed minimum return with effect from 1 January

2

010. However, given the fact that board members ap-

pointed for the first time prior to 1 January 2010 had

a legal right to receive the benefits already promised to

them, these board members were given the option to

choose between the previous system and the new one.

The amount of the retirement pension to be paid is de-

termined on the basis of the amount accrued in each

board member’s individual pension savings account.

In the event of the termination of mandate, Board of

Management members appointed for the first time prior The amount on this account arises from annual contri-

to 1 January 2010 are entitled to receive certain defined butions paid in plus interest earned depending on the

benefits in accordance with the old pension scheme rules. type of investment.

Pensions are paid to former members of the Board of

Management who have either reached the age of 65 or,

if their mandate was terminated earlier and not ex-

tended, to members who have either reached the age of

Depending on the length of membership in the Board

of Management and previous activities, the annual con-

tribution to be paid amounts to between €350,000 and

€400,000 (2012: €300,000) for each member of the Board

of Management and €700,000 (2012: €525,000) for the

Chairman of the Board of Management. The contribu-

tions are credited, along with interest earned, to the per-

sonal savings accounts of board members in monthly

amounts. The guaranteed minimum rate of return p.a.

corresponds to the maximum interest rate used to

calculate insurance reserves for life insurance policies

(guaranteed interest on life insurance policies). A Board

of Management member entering office at 50 years of

age and serving as member of the Board of Manage-

6

0 or who are unable to work due to ill health or acci-

dent, or who have entered into early retirement in ac-

cordance with a special arrangement. The amount of the

pension is unchanged from the previous year and com-

prises a basic monthly amount of €ꢀ10,000 or €ꢀ15,000

(

Chairman of the Board of Management) plus a fixed

amount. The fixed amount is made up of approximately

ꢀ75 for each year of service in the Company before be-

€

coming a member of the Board of Management plus

between €ꢀ400 and €ꢀ600 for each full year of service on

the board (up to a maximum of 15 years). Pension pay-

ments are adjusted by analogy to the rules applicable for ment to the age of 60 can reckon on a retirement savings

the adjustment of civil servants’ pensions: the pensions

of members of the Board of Management are adjusted

capital of €4.2 million.

when the civil servants remuneration level B6 (excluding In the case of invalidity or death, a minimum contribu-

allowances) is increased by more than 5% or in accord-

ance with the Company Pension Act.

tion of the potential annual contributions will be paid

until the person concerned would have reached the age

of 60.

When a mandate is terminated, the new defined con-

tribution system provides entitlements which can be

paid either (a) in the case of death or invalidity as a one-

off amount or over a maximum of ten years or (b) on

retirement – depending on the wish of the ex-board

member concerned – in the form of a lifelong monthly

pension, as a one-off amount, in a maximum of ten

annual instalments, or in a combined form (e.ꢀg. a com-

Contributions falling due under the defined contribution

scheme are paid into an external fund in conjunction

with a trust model that is also used to fund pension ob-

ligations to employees.

Income earned on an employed or a self-employed

basis up to the age of 63 is offset against the pension

1

88

Overview of compensation system and compensation components

Component

Parameter/measurement base

Salary p.a.

Member of the Board of Management:

–

€0.75 million (first term of appointment)

€0.90 million (from second term of appointment onwards or fourth year in office)

Chairman of the Board of Management:

€1.50 million

–

Variable compensation

Bonus

Target bonuses p.a. (if target is 100% achieved):

–

€1.50 million (first term of appointment)

€1.75 million (from second term of appointment onwards or fourth year in office)

€3.00 million (Chairman of the Board of Management)

Upper limit: 250% (until 31December 2013)

a) Corporate earnings-related bonus

– Quantitative criteria fixed in advance for a period of three financial years

– Formula: 50% of target bonus x earnings factor x dividend factor (common stock)

– The earnings factor is derived from the Group net profit and the Group post-tax return

on sales

(corresponds to 50% of target bonus if target is 100%

achieved)

b) Performance-related bonus

– Primarily qualitative criteria, expressed in terms of a performance factor aimed at

measuring the board members’ contribution to sustainable and long-term performance

and the future viability of the business

(corresponds to 50% of target bonus if target is 100%

achieved)

–

Formula: 50% of target bonus x performance factor

Criteria for the performance factor also include: innovation (economic and ecological,

e.g. reduction of CO emissions), customer orientation, ability to adapt, leadership ac-

2

complishments and attractiveness as employer, progress in implementing the diversity

concept and activities that foster corporate social responsibility

Special bonus payments

May be paid in justified circumstances on an appropriate basis, contractual basis, no

entitlement

Share-based remuneration programme

a) Cash remuneration component

– Requirement for Board of Management members to each invest an amount equivalent

to 20% of their total bonus (after tax) in BMWAG common stock

–

Earmarked cash remuneration equivalent to the amount required to be invested in

BMWAG shares, plus taxes and social insurance contributions

b) Share-based remuneration component

– Once the four-year holding period requirement is fulfilled, Board of Management

members receive for each three common stock shares held either – at the Company’s

option – one further share of common stock or the equivalent amount in cash, unless

the employment relationship was ended before expiry of the agreed contractual period

(matching component)

(except where caused by death or invalidity).

Other remuneration

Contractual agreement, main points: use of company cars, insurance premiums,

contributions towards security systems, medical check-up

Compensation entitlements on termination of contract, compensation entitlements in event of change of control or takeover bid

No contractual entitlements

166 Statement on

corporate Governance

Retirement and surviving dependants’ benefits

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

Model

Principal features

1

67 Declaration of the Board of

Management and of the

a) Defined benefits

Pension of €120,000 (Chairman: €180,000) p.a. plus fixed amounts based on length of

Company and board service

(only applies to board members appointed for the first

Supervisory Board pursuant to

time before 1 January 2010; based on legal right to

receive the benefits already promised to them, this group

of persons is entitled to opt between (a) and (b))

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

b) Defined contribution system with guaranteed minimum

rate of return

Pension based on amounts credited to individual savings accounts for contributions paid

and interest earned, various forms of disbursement

Pension contributions p.a.:

Member of the Board of Management: €350,000–€400,000

Chairman of the Board of Management: €700,000

Remuneration caps

1

80 Compliance in the BMW Group

85 Compensation Report

*

Total

since 1 January 2014 in € p.a.

Bonus

Share-based remuneration programme

Possible

Cash remuneration

for share acquisition

Monetary value

of matching

component

special bonus

Member of the Board of Management

in the first term of appointment

3,000,000

700,000

1,000,000

4,925,000

Member of the Board of Management

in the second term of appointment

or from fourth year in office

3,500,000

6,000,000

800,000

1,200,000

1,500,000

5,500,000

9,850,000

Chairman of the Board of Management

1,400,000

*

Including basic remuneration, other fixed remuneration elements and pension contribution. The overall cap is lower than the sum of the maximum amounts for each of the

individual components.

1

89 Statement on corporate Governance

entitlement. In addition, certain circumstances have

been specified, in the event of which the Company no

longer has any obligation to pay benefits. In such

cases, no transitional payments will be made, either.

caps for all variable remuneration components and for

the remuneration of Board of Management members

in total. The caps are shown in the overview of the com-

pensation system and compensation components.

Board of Management members who retire immediately Compensation of the Board of Management for the

after their service on the board and who draw a retire-

ment pension are entitled to purchase vehicles and

financial year 2013 (2012) (total)

The total compensation of the current members of the

other services of the BMW Group at conditions that also Board of Management of BMWAG for the financial year

apply in each relevant case for pensioners and to lease

BMW Group vehicles in accordance with the guidelines

applicable to senior heads of departments.

2013 amounted to €ꢀ34.5 million (2012: €ꢀ31.4 million),

of which €ꢀ7.9 million (2012: €ꢀ7.5 million) relates to fixed

components (including other remuneration). Variable

components amounted to €ꢀ25.9 million (2012: €ꢀ23.2 mil-

lion) and share-based remuneration components to

€ꢀ0.7 million (2012: €ꢀ0.7 million).

Termination benefits on premature termination of

board activities, benefits paid by third parties

In connection with the premature termination of

Mr Arndt’s activities on the Board of Management with

effect from 31 March 2013 due to health reasons, it

was decided to continue his contract of employment

through to its scheduled end on 31 August 2014 and to

honour all fixed remuneration components, i.ꢀe. basic

remuneration of €ꢀ900,000 p.a. on a pro rata basis and

other fixed remuneration elements contained in the

contract of employment, including company car usage

and pension contributions, also on a pro rata basis.

Accordingly, for the period from April to December

In addition, an expense of €ꢀ4.3 million (2012: €ꢀ1.2 mil-

lion) was recognised in the financial year 2013 for cur-

rent members of the Board of Management, including

Mr Arndt, for the period after the end of their service

relationship. This relates to the expense for allocations

to pension provisions and for benefits relating to the ter-

mination of activity of a Board of Management member.

in € million

2013

2012

Amount Proportion

in %

Amount Proportion

in %

2

013, Mr Arndt received pro rata basic remuneration

of €ꢀ675,000 and other remuneration amounting to

ꢀ24,197. No entitlement to variable remuneration arose

Fixed compensation

7.9

22.9

75.1

7.5

23.9

73.9

€

Variable cash

compensation

for the period between the premature termination of

board mandate and contract expiry. This does not apply,

however, to entitlements already earned in relation to

the matching component payable in conjunction with

the share-based remuneration scheme (subject to ful-

filment of the stipulated holding period requirement).

In view of the agreed curtailment of contractual retire-

ment benefits, and in settlement of all other contrac-

tual entitlements arising from Mr Arndt’s service

contract, the Company gave a commitment to make a

25.9

23.2

Share-based compen-

*

sation component

0.7

2.0

0.7

2.2

Total compensation

34.5

100.0

31.4

100.0

*

Matching component; provisional number or provisional monetary value calculated at

grant date (date on which the entitlement became binding in law). The final number

of matching shares is determined in each case when the requirement to invest in

BMWAG common stock has been fulfilled.

The amount paid to former members of the Board

one-off payment of €ꢀ800,000 on contract expiry in 2014. of Management and their dependants for the financial

year 2013 was €ꢀ4.7 million (2012: €ꢀ3.8 million). The

Apart from this, there are no contractual commitments

to pay compensation if a board member’s mandate is

figure for 2013 includes continued payment of the fixed

remuneration of Mr Arndt after leaving the Board of

terminated prematurely. Similarly, there are no commit- Management amounting to €ꢀ699,197. Pension obliga-

ments to pay compensation for premature termination

in the event of a change of control or a takeover offer.

No members of the Board of Management received any

payments or benefits from third parties in 2013 on

account of their activities as members of the Board of

Management of BMWAG.

tions to former members of the Board of Management,

including Mr Arndt, and their surviving dependants

are fully covered by pension provisions amounting to

€ꢀ58.0 million (2012: €ꢀ61.2 million), computed in accord-

ance with IAS 19.

Remuneration caps

In 2013, and with effect for financial years beginning

after 1 January 2014, the Supervisory Board stipulated

1

90

Compensation of the individual members of the Board of Management for the financial year 2013 (2012)

in € or

number of

matching shares

Fixed compensation

Other

Variable

cash com-

pensation

Share-based

compensation

component

(matching

Com-

pensation

Total

Expense for

share-based 31.12.2013 for

compensation

component

in year under

report in

Provision at

Basic

share-based

remuneration

component in

accordance

with HGB

compen- compen-

Total

1

sation

component)

Number Monetary

value

accordance with

HGB and IFRS

2

and IFRS

Norbert Reithofer 1,500,000

119,232

1,619,232

5,270,400

1,886

143,204

7,032,836

122,700

219,970

(1,500,000) (112,835) (1,612,835)

(4,881,600)

(2,495) (132,634)

(6,627,069)

(75,826)

(97,269)

Frank-Peter

Arndt

225,000

(900,000)

10,434

(27,336)

235,434

(927,336)

640,500

(2,847,600)

0

875,934

(3,852,284)

69,008

(70,099)

157,864

(88,856)

3

(1,455)

(77,348)

Milagros Caiña

Carreiro-Andree

750,000

(375,000)

98,213

(11,526)

848,213

(386,526)

2,635,200

(1,220,400)

1,012

(514)

76,841

(35,569)

3,560,254

(1,642,495)

49,469

(6,248)

55,717

(6,248)

Herbert Diess

Klaus Draeger

Friedrich Eichiner

Harald Krüger

Ian Robertson

Peter

900,000

900,000)

19,210

(22,007)

919,210

(922,007)

3,074,400

(2,847,600)

1,181

(1,563)

89,673

(83,089)

4,083,283

(3,852,696)

91,437

(55,238)

162,052

(70,615)

(

900,000

900,000)

26,374

(22,948)

926,374

(922,948)

3,074,400

(2,847,600)

1,181

(1,563)

89,673

(83,089)

4,090,447

(3,853,637)

125,097

(71,283)

215,602

(90,505)

900,000

900,000)

24,225

(27,366)

924,225

(927,366)

3,074,400

(2,847,600)

1,181

(1,563)

89,673

(83,089)

4,088,298

(3,858,055)

104,017

(61,522)

182,455

(78,437)

900,000

900,000)

18,588

(19,036)

918,588

(919,036)

3,074,400

(2,847,600)

1,100

(1,455)

83,523

(77,348)

4,076,511

(3,843,984)

60,843

(37,608)

108,375

(47,532)

900,000

900,000)

14,401

(14,881)

914,401

(914,881)

3,074,400

(2,847,600)

1,181

(1,563)

89,673

(83,089)

4,078,474

(3,845,570)

79,152

(48,583)

141,210

(62,058)

562,500

13,424

575,924

1,976,400

812

(–)

57,603

2,609,927

10,380

4

Schwarzenbauer

(–)

Total

7,537,500 344,101 7,881,601 25,894,500

7,275,000) (257,935) (7,532,935) (23,187,600)

9,534 719,863 34,495,964

712,103

1,253,625

(

(12,171) (655,255) (31,375,790)

(426,407)

(541,520)

1

Provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is

determined in each case when the requirement to invest in BMWAG common stock has been fulfilled. See note 19 to the Group Financial Statements for a description of the

accounting treatment of the share-based compensation component.

Monetary value calculated on the basis of the closing price of BMW common stock in the XETRA trading system on 31 December 2013 (€85.22) (fair value at reporting date).

Member of the Board of Management until 31 March 2013.

2

3

4

Member of the Board of Management since 1 April 2013.

166 Statement on

corporate Governance

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

180 Compliance in the BMW Group

185 Compensation Report

1

91 Statement on corporate Governance

Pension benefits of the individual members of the Board of Management

in €

Service cost

Present value of

pension obligations

defined benefit plans),

in accordance

Present value of

pension obligations

(defined benefit plans),

in accordance

1

IFRS

HGB

(

2

with IFRS

with HGB

Norbert Reithofer

Milagros Caiña Carreiro-Andree

Herbert Diess

313,038

217,462)

233,100

(204,520)

7,234,887

(7,770,956)

6,036,606

(5,263,483)

(

369,827

150,000)

372,277

(168,361)

555,847

(169,119)

555,190

(168,608)

211,774

145,829)

407,705

(260,723)

3,294,607

(3,459,608)

3,062,183

(2,407,993)

Klaus Draeger

162,426

114,531)

407,482

(227,386)

4,086,628

(4,357,273)

3,694,976

(3,078,164)

Friedrich Eichiner

Harald Krüger

174,279

127,028)

407,482

(183,671)

4,683,637

(4,443,313)

3,827,095

(3,203,857)

143,734

358,325

2,648,384

2,516,021

(88,004)

(346,582)

(2,911,534)

(1,934,608)

Ian Robertson

395,507

274,357

2,025,994

1,771,848

(281,416)

(283,003)

(1,872,190)

(1,274,502)

3

Peter Schwarzenbauer

262,500

289,681

289,308

(–)

4

Total

2,033,085

2,723,228

24,819,665

21,753,227

(1,233,039)

(1,947,143)

(29,374,854)

(20,589,637)

5

Frank-Peter Arndt

149,808

307,482

4,153,128

3,783,361

(108,769)

(272,897)

(4,390,861)

(3,258,422)

1

Service cost differs due to the different valuation bases used to measure pension obligations for HGB purposes (expected settlement amount) and for IFRS purposes

present value of the defined benefit obligation).

Based on legal right to receive the benefits already promised to them, Board of Management members appointed for the first time prior to 1 January 2010 were given

the option of choosing between the old and new models at the time the Company changed from a defined benefit to a defined contribution system.

Member of the Board of Management since 1 April 2013. The pension expense for Peter Schwarzenbauer in the financial year 2013 corresponds to the defined contribution

amount.

(

2

3

4

5

The previous year’s figures include amounts relating to Frank-Peter Arndt.

Member of the Board of Management until 31 March 2013.

2

. Supervisory Board compensation

Compensation principles, compensation components

The Supervisory Board of BMWAG receives a fixed

compensation component as well as a corporate per-

Responsibilities, regulation pursuant to Articles

of Incorporation

The compensation of the Supervisory Board is specified formance-related compensation component which is

by resolution of the shareholders at the Annual General oriented toward sustainable growth, based on a multi-

Meeting or in the Articles of Incorporation. The com-

pensation regulation valid for the financial year 2013

was resolved by shareholders at the Annual General

Meeting on 14 May 2013 and is set out in Article 15 of

BMWAG’s Articles of Incorporation, which can be

viewed andꢀ/ꢀor downloaded at www.bmwgroup.com\ir

year assessment. The corporate performance-related

component is based on average earnings per share of

common stock for the remuneration year and the two

preceding financial years.

These two interacting components are intended to

under the menu items “Corporate Facts” and “Corporate ensure that the compensation of Supervisory Board

Governance”. members is commensurate overall in relation to the

1

92

tasks performed and the Company’s financial condition amount and each member of a committee receives one

and also takes account of business performance over

several years.

and a half times the amount of the remuneration of a

Supervisory Board member. If a member of the Super-

visory Board exercises more than one of the functions

referred to above, the compensation is measured only

on the basis of the function which is remunerated with

the highest amount.

In accordance with the rule contained in BMWAG’s

Articles of Incorporation since the beginning of the 2013

financial year, each member of the Supervisory Board

receives, in addition to the reimbursement of reasonable

expenses, a fixed amount of €70,000 (payable at the end In addition, each member of the Supervisory Board re-

of the year) as well as a corporate performance-related

compensation of €170 for each full €ꢀ0.01 by which the

average amount of (basic) earnings per share (EPS) of

common stock reported in the Group Financial State-

ments for the remuneration year and the two preceding

ceives an attendance fee of €ꢀ2,000 for each full meeting

of the Supervisory Board (Plenum) which the member

has attended (payable at the end of the financial year).

Attendance at more than one meeting on the same day

is not remunerated separately.

financial years exceeds a minimum amount of €ꢀ2.00

payable after the Annual General Meeting held in

the following year). An upper limit corresponding to

twice the amount of the fixed compensation (€140,000)

is in place for the corporate performance-related com-

pensation.

(

The Company also reimburses to each member of the

Supervisory Board reasonable expenses and any value-

added tax arising on the member’s remuneration. The

amounts disclosed below are net amounts.

In order to be able to perform his duties, the Chairman

of the Supervisory Board is provided with secretariat

and chauffeur services.

With this combination of fixed compensation elements

and a corporate performance-related compensation

component oriented toward sustainable growth, the

compensation structure in place for BMWAG’s Super-

visory Board complies with the recommendation on

supervisory board compensation contained in section

Compensation of the Supervisory Board for the

financial year 2013 (total)

In accordance with §15 of the Articles of Incorporation,

the compensation of the Supervisory Board for activities

during the financial year 2013 amounted to €ꢀ4.6 million

5.4.6 paragraph 2 sentence 2 of the German Corporate

Governance Code (version dated 13 May 2013).

(2012: €ꢀ4.5 million). This comprises fixed compensation

The German Corporate Governance Code also recom-

of €ꢀ2.0 million (2012: €ꢀ1.6 million) and variable compen-

mends in section 5.4.6 paragraph 1 sentence 2 that the sation of €ꢀ2.6 million (2012: €ꢀ2.9 million).

exercising of chair and deputy chair positions in the

Supervisory Board as well as the chair and membership

of committees should also be considered when deter-

mining the level of compensation.

1

66 Statement on

corporate Governance

in € million

2013

2012

(

Part of ManagementReport)

Amount Proportion

in %

Amount Proportion

in %

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Fixed compensation

Variable compensation

Total compensation

2.0

2.6

4.6

43.5

56.5

1.6

2.9

4.5

35.6

64.4

Supervisory Board pursuant to

Accordingly, the Articles of Incorporation of BMWAG

stipulate that the Chairman of the Supervisory Board

receives three times the amount and each Deputy

Chairman shall receive twice the amount of the remu-

neration of a Supervisory Board member. Provided the

relevant committee convened for meetings on at least

three days during the financial year, each chairman of

the Supervisory Board’s committees receives twice the

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

79 Information on Corporate

Governance Practices

100.0

Supervisory Board members did not receive any further

compensation or benefits from the BMW Group for

advisory and agency services personally rendered.

1

80 Compliance in the BMW Group

185 Compensation Report

1

93 Statement on corporate Governance

Compensation of the individual members of the Supervisory Board for the financial year 2013 (2012)

in €

Fixed compensation

Attendance fee

Variable

Total

compensation

Joachim Milberg (Chairman)

210,000

10,000

294,270

514,270

(

165,000)

(10,000)

(330,000)

(505,000)

1

Manfred Schoch (Deputy Chairman)

Stefan Quandt (Deputy Chairman)

140,000

110,000)

10,000

(10,000)

196,180

(220,000)

346,180

(340,000)

140,000

110,000)

10,000

(10,000)

196,180

(220,000)

346,180

(340,000)

1

Stefan Schmid (Deputy Chairman)

140,000

110,000)

10,000

(10,000)

196,180

(220,000)

346,180

(340,000)

Karl-Ludwig Kley (Deputy Chairman)

140,000

110,000)

8,000

(8,000)

196,180

(220,000)

344,180

(338,000)

1

Bertin Eichler

70,000

10,000

98,090

178,090

(

55,000)

(10,000)

(110,000)

(175,000)

Franz Haniel

70,000

55,000)

10,000

(10,000)

98,090

(110,000)

178,090

(175,000)

Reinhard Hüttl

Henning Kagermann

Susanne Klatten

Renate Köcher

Robert W. Lane

70,000

55,000)

10,000

(10,000)

98,090

(110,000)

178,090

(175,000)

70,000

55,000)

10,000

(10,000)

98,090

(110,000)

178,090

(175,000)

70,000

55,000)

10,000

(8,000)

98,090

(110,000)

178,090

(173,000)

70,000

55,000)

10,000

(8,000)

98,090

(110,000)

178,090

(173,000)

70,000

55,000)

10,000

(6,000)

98,090

(110,000)

178,090

(171,000)

1

Horst Lischka

70,000

55,000)

10,000

(10,000)

98,090

(110,000)

178,090

(175,000)

1

Willibald Löw

70,000

55,000)

10,000

(10,000)

98,090

(110,000)

178,090

(175,000)

Wolfgang Mayrhuber

70,000

55,000)

8,000

(8,000)

98,090

(110,000)

176,090

(173,000)

1

Dominique Mohabeer

70,000

32,158)

10,000

(6,000)

98,090

(64,317)

178,090

(102,475)

1, 2

Brigitte Rödig

33,370

6,000

46,761

86,131

(–)

1, 3

Maria Schmidt

34,712

4,000

48,642

87,354

(55,000)

(8,000)

(110,000)

(173,000)

4

Markus Schramm

52,740

8,000

73,903

134,643

(–)

1

Jürgen Wechsler

70,000

6,000

98,090

174,090

(55,000)

(10,000)

(110,000)

(175,000)

1

Werner Zierer

70,000

10,000

98,090

178,090

(55,000)

(10,000)

(110,000)

(175,000)

5

Oliver Zipse

17,260

2,000

24,187

43,447

(

9,167)

1,818,082

1,430,000)

(2,000)

(18,333)

(29,500)

6

Total

192,000

2,547,653

4,557,735

(

(186,000)

(2,860,000)

(4,476,000)

1

These employee representatives have – in line with the guidelines of the Deutsche Gewerkschaftsbund – requested that their remuneration be paid into the

Hans-Böckler-Foundation.

2

3

4

5

6

Member of the Supervisory Board since 10 July 2013.

Member of the Supervisory Board until 30 June 2013.

Member of the Supervisory Board since 1 April 2013.

Member of the Supervisory Board until 31 March 2013.

Figures for the previous year include the remuneration of members of the Supervisory Board who left office during the financial year 2012.

3

. Other

granted by the Company to members of the Board of

Management and the Supervisory Board, nor were any

contingent liabilities entered into on their behalf.

Apart from vehicle lease contracts entered into on cus-

tomary market conditions, no advances or loans were

1

94

Responsibility Statement by the Company’s Legal Representatives

Statement pursuant to §37y No.1 of the Securities

Trading Act (WpHG) in conjunction with §297 (2)

sentence 4 and §315 (1) sentence 6 of the German

Commercial Code (HGB)

“

To the best of our knowledge, and in accordance with

the applicable reporting principles, the Consolidated

Financial Statements give a true and fair view of the

assets, liabilities, financial position and profit of the

Group, and the Group Management Report includes

a fair review of the development and performance of

the business and the position of the Group, together

with a description of the principal opportunities and

risks associated with the expected development of the

Group.”

Munich, 20 February 2014

Bayerische Motoren Werke

Aktiengesellschaft

The Board of Management

Dr.-Ing. Dr.-Ing. E.h. Norbert Reithofer

Milagros Caiña Carreiro-Andree

Dr.-Ing. Klaus Draeger

Harald Krüger

Dr.-Ing. Herbert Diess

1

66 Statement on

Corporate GovernanCe

(

Part of ManagementReport)

166 Information on the Company’s

Governing Constitution

167 Declaration of the Board of

Management and of the

Dr. Friedrich Eichiner

Supervisory Board pursuant to

§

161AktG

1

68 Members of the Board of

Management

69 Members of the Supervisory

Board

72 Work Procedures of the

Board of Management

74 Work Procedures of the

Supervisory Board

Dr. Ian Robertson (HonDSc)

79 Information on Corporate

Governance Practices

1

80 Compliance in the BMW Group

85 Compensation Report

Peter Schwarzenbauer

1

95 Statement on corporate Governance

BMW Group

Auditor’s Report

We have audited the consolidated financial statements

prepared by Bayerische Motoren Werke Aktiengesell-

schaft, comprising the income statement for group and

statement of comprehensive income for group, the

balance sheet for group, cash flow statement for group,

group statement of changes in equity and the notes to

the group financial statements and its report on the

the business activities and the economic and legal

environment of the Group and expectations as to possi-

ble misstatements are taken into account in the deter-

mination of audit procedures. The effectiveness of the

accounting-related internal control system and the evi-

dence supporting the disclosures in the consolidated

financial statements and in the Group Management

position of the Company and the Group for the business Report are examined primarily on a test basis within the

year from 1 January to 31 December 2013. The prepara- framework of the audit. The audit also includes assess-

tion of the consolidated financial statements and Group ing the annual financial statements of those entities

Management Report in accordance with IFRSs, as

adopted by the EU, and the additional requirements of

German commercial law pursuant to §315ꢀa (1) HGB

included in consolidation, the determination of entities

to be included in consolidation, the accounting and

consolidation principles used and significant estimates

made by the management, as well as evaluating the

(Handelsgesetzbuch “German Commercial Code”) are

the responsibility of the parent company’s management. overall presentation of the consolidated financial state-

Our responsibility is to express an opinion on the con- ments and Group Management Report. We believe that

solidated financial statements and on the Group Manage- our audit provides a reasonable basis for our opinion.

ment Report based on our audit.

Our audit has not led to any reservations.

We conducted our audit of the consolidated financial

statements in accordance with §317 HGB and German

generally accepted standards for the audit of financial

In our opinion, based on the findings of our audit, the

consolidated financial statements comply with IFRSs,

statements promulgated by the Institut der Wirtschafts- as adopted by the EU, the additional requirements of

prüfer (Institute of Public Auditors in Germany) (IDW).

Those standards require that we plan and perform the

audit such that misstatements materially affecting the

presentation of the net assets, financial position and

German commercial law pursuant to §315ꢀa (1) HGB and

give a true and fair view of the net assets, financial

position and results of operations of the Group in ac-

cordance with these requirements. The Group Manage-

results of operations in the consolidated financial state- ment Report is consistent with the consolidated finan-

ments in accordance with the applicable financial report- cial statements and as a whole provides a suitable

ing framework and in the Group Management Report

are detected with reasonable assurance. Knowledge of

view of the Group’s position and suitably presents the

opportunities and risks of future development.

Munich, 5 March 2014

KPMG AG

Wirtschaftsprüfungsgesellschaft

Pastor

Huber-Straßer

Wirtschaftsprüfer

Wirtschaftsprüferin

1

96

other inFormation

BMW Group Ten-year Comparison

2

013

2012

2011

2010

Sales volume

Automobiles

units

1,963,798

115,215

1,845,186

106,358

1,668,982

104,286

1,461,166

98,047

2

Motorcycles

Production volume

Automobiles

units

2,006,366

110,127

1,861,826

113,811

1,738,160

110,360

1,481,253

99,236

2

Motorcycles

Financial Services

Contract portfolio

contracts

€ million

4,130,002

84,347

3,846,364

80,974

3,592,093

75,245

3,190,353

66,233

3

Business volume (based on balance sheet carrying amounts)

Income Statement

Revenues

€ million

%

76,058

20.1

76,848

20.2

68,821

21.1

60,477

18.1

4

Gross profit margin Group

5

Profit before financial result

Profit before tax

€ million

%

7,986

7,913

10.4

8,275

7,803

10.2

8,018

7,383

10.7

5,111

4,853

8.0

Return on sales (earnings before tax/revenues)

Income taxes

5

€ million

%

2,573

32.5

2,692

34.5

2,476

33.5

1,610

33.1

Effective tax rate

Net profit for the year

€ million

5,340

5,111

4,907

3,243

Balance Sheet

5

Non-current assets

Current assets

€ million

%

86,194

52,174

35,643

25.8

81,305

50,530

30,606

23.2

74,425

49,004

27,103

22.0

67,013

43,151

23,930

21.7

Equity

Equity ratio Group

Non-current provisions and liabilities

Current provisions and liabilities

Balance sheet total

€ million

52,682

50,043

138,368

52,834

48,395

131,835

49,113

47,213

123,429

46,100

40,134

110,164

Cash Flow Statement

Cash and cash equivalents at balance sheet date

€ million

%

7,664

9,450

6,687

8.8

8,370

9,167

5,240

6.8

7,776

8,110

3,692

5.4

7,432

8,149

3,263

5.4

6

7

Operating cash flow

Capital expenditure

Capital expenditure ratio (capital expenditure/revenues)

Personnel

8

Workforce at the end of year

110,351

89,895

105,876

89,161

100,306

84,887

95,453

83,141

5

Personnel cost per employee

€

Dividend

Dividend total

€ million

€

1,707

1,640

1,508

852

Dividend per share of common stock/preferred stock

2.60/2.62

2.50/2.52

2.30/2.32

1.30/1.32

1

Adjusted for the new accounting treatment of pension obligations.

Excluding Husqvarna, sales volume up to 2013: 59,776 units; production up to 2013: 59,426 units.

2

3

4

5

6

Amount computed on the basis of balance sheet figures: until 2007 from the Group balance sheet, from 2008 onwards from the Financial Services segment balance sheet.

Research and development expenses included in cost of sales with the effect from 2008.

Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.

Figures are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from

operating activities of the Automotive segment.

Adjusted for reclassifications as described in note 42 of the Financial Statements 2012.

Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.

Adjustment to dividend due to buy-back of treasury shares.

1

2

96 other inFormation

96 BMW Group Ten-year Comparison

98 BMW Group Locations

00 Glossary

7

8

9

02 Index

03 Index of Graphs

04 Financial Calendar

05 Contacts

1

97 other inFormation

1

2009

2008

2007

2006

2005

2004

Sales volume

1

3

,286,310

1,435,876

101,685

1,500,678

102,467

1,373,970

100,064

1,327,992

97,474

1,208,732

92,266

Automobiles

2

87,306

Motorcycles

Production volume

,258,417

2,631

1,439,918

104,220

1,541,503

104,396

1,366,838

103,759

1,323,119

92,012

1,250,345

93,836

Automobiles

2

8

Motorcycles

Financial Services

,085,946

3,031,935

60,653

2,629,949

51,257

2,270,528

44,010

2,087,368

40,428

1,843,399

32,556

Contract portfolio

3

61,202

Business volume (based on balance sheet carrying amounts)

Income Statement

5

0,681

53,197

11.4

921

351

0.7

56,018

21.8

48,999

23.1

46,656

22.9

44,335

23.2

Revenues

4

10.5

Gross profit margin Group

289

4,212

3,873

6.9

4,050

4,124

8.4

3,793

3,287

7.0

3,774

3,583

8.1

Profit before financial result

Profit before tax

413

0.8

Return on sales (earnings before tax/revenues)

Income taxes

203

21

739

1,250

30.3

1,048

31.9

1,341

37.4

49.2

6.0

19.1

Effective tax rate

210

330

3,134

2,874

2,239

2,242

Net profit for the year

Balance Sheet

6

3

1

2,009

9,944

9,915

62,416

38,670

20,273

20.1

56,619

32,378

21,744

24.4

50,514

28,543

19,130

24.2

47,556

27,010

16,973

22.8

40,822

26,812

16,534

24.4

Non-current assets

Current assets

Equity

19.5

Equity ratio Group

4

5,119

6,919

41,526

39,287

101,086

33,469

33,784

88,997

31,372

28,555

79,057

29,509

28,084

74,566

26,517

24,583

67,634

Non-current provisions and liabilities

Current provisions and liabilities

Balance sheet total

3

1

01,953

Cash Flow Statement

7

4

3

,767

,921

,471

7,454

4,471

4,204

7.9

2,393

6,246

4,267

7.6

1,336

5,373

4,313

8.8

1,621

6,184

3,993

8.6

2,128

6,157

4,347

9.8

Cash and cash equivalents at balance sheet date

6

Operating cash flow

Capital expenditure

6.8

Capital expenditure ratio (capital expenditure/revenues)

Personnel

8

9

6,230

2,349

100,041

75,612

107,539

76,704

106,575

76,621

105,798

75,238

105,972

73,241

Workforce at the end of year

7

Personnel cost per employee

Dividend

9

197

694

458

419

Dividend total

0.30/0.32

1.06/1.08

0.70/0.72

0.64/0.66

0.62/0.64

Dividend per share of common stock/preferred stock

1

98

BMW Group

Locations

—

S

—

P

—

S

—

R

S

—

R

—

R

—

R

—

P

—

A

—

S

—

S

—

A

—

A

—

P

—

S

—

S

—

H

Headquarters

The BMW Group is present in the world markets with

8 production and assembly plants, 42 sales subsidiaries

and a research and development network.

2

—

R

Research and Development

BMW Group Research and Innovation Centre (FIZ),

Munich, Germany

BMW Group Research and Technology, Munich,

Germany

BMW Car IT, Munich, Germany

BMW Innovation and Technology Centre, Landshut,

Germany

BMW Diesel Competence Centre, Steyr, Austria

BMW Group Designworks, Newbury Park, USA

BMW GroupTechnology Office USA, Mountain View,

USA

1

2

96 other inFormation

96 BMW Group Ten-year Comparison

98 BMW Group Locations

00 Glossary

BMW Group Engineering and Emission Test Center,

Oxnard, USA

BMW Group ConnectedDrive Lab China, Shanghai,

China

BMW Group Engineering China, Beijing, China

BMW Group Engineering Japan, Tokyo, Japan

BMW Group Engineering USA, Woodcliff Lake, USA

02 Index

03 Index of Graphs

04 Financial Calendar

05 Contacts

1

99 other inFormation

—

S

—

S

—

S

—

P

—

R — S

— S

— R

—

A

—

S

— S

—

S

—

R

—

S

—

P — P

P

— S

—

P

—

P

— S

—

S

—

S

P

—

S

— P

—

S

—

S

—

S

—

P — P — S

— R — P — C

R

—

A

—

P

— P — R

—

H — P

—

S

— S

—

S

—

S

— S

—

A

—

S

—

S

—

S

—

A

—

S

— S

—

S

—

S

—

S

—

S

—

S

—

S

—

P

Production

— C Contract production

Magna Steyr Fahrzeugtechnik, Austria

— S Sales subsidiary markets/Locations Financial Services

Berlin plant

Dingolfing plant

Eisenach plant

Goodwood plant, GB (headquarters of

Rolls-Royce Motor Cars Limited)

Hams Hall plant, GB

Argentina

Australia

Austria

Ireland

Italy

Japan

South Korea

Spain

Sweden

Switzerland

Thailand

USA

— A Assembly plants

Belgium

Brazil

Bulgaria

Luxembourg

Malaysia

Malta

*

CKD production Cairo, Egypt

Landshut plant

Leipzig plant

Munich plant

Oxford plant, GB

CKD production Chennai, India

CKD production Jakarta, Indonesia

CKD production Kaliningrad, Russia

CKD production Kulim, Malaysia

CKD production Manaus, Brazil

CKD production Rayong, Thailand

China

Canada

Czech Republic

Denmark

Finland

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Romania

Russia

Singapore

Slovakia

*

Regensburg plant

Rosslyn plant, South Africa

BMW Brilliance Automotive Ltd., Shenyang,

China (joint venture with Brilliance China

Automotive Holdings – 3 plants)

Spartanburg plant, USA

Steyr plant, Austria

France

*

Germany

Great Britain

Greece

Hungary

India

*

Slovenia

South Africa

*

Swindon plant, GB

Indonesia

Sales locations only.

Wackersdorf plant

BMW – SGL joint venture (2 plants)

2

00

Glossary

CFRP

DJSI World

Abbreviation for carbon-fibre reinforced polymer. CFRP Abbreviation for “Dow Jones Sustainability Index World”.

is a composite material, consisting of carbon-fibres sur-

rounded by a plastic matrix (resin). On a comparative

basis, CFRP is approximately 50% lighter than steel and

A family of indexes created by Dow Jones and the Swiss

investment agency SAM Sustainability Group for com-

panies with strategies based on a sustainability concept.

The BMW Group has been one of the leading companies

in the DJSI since 1999.

3

0% lighter than aluminium.

Combined heat and power

Combined heat and power (CHP) or cogeneration is

the simultaneous conversion of energy sources into

electricity and useful heating. In comparison to separate

generation of electricity in conventional power plants,

energy is converted more efficiently and with greater

flexibility. As a result, this technology helps to reduce

EBIT

Abbreviation for “Earnings Before Interest and Taxes”.

The profit before income taxes, minority interest and

financial result.

EBITDA

CO emissions

.

Abbreviation for “Earnings Before Interest, Taxes, Depre-

ciation and Amortisation”. The profit before income

taxes, minority interest, financial result and depreciation/

amortisation.

2

Common stock

Stock with voting rights (cf. preferred stock).

Connected Drive

Effectiveness

Under the term Connected Drive, the BMW Group

already unites a unique portfolio of innovative features

that enhance comfort, raise infotainment to new levels

and significantly boost safety in BMW Group vehicles.

The degree to which offsetting changes in fair value or

cash flows attributable to a hedged risk are achieved by

the hedging instrument.

Efficient Dynamics

Cost of materials

Comprises all expenditure to purchase raw materials

and supplies.

The aim of Efficient Dynamics is to reduce consumption

and emissions whilst simultaneously increasing dynamics

and performance. This involves a holistic approach to

achieving optimum automobile potential, ranging from

efficient engine technologies and lightweight construc-

DAX

Abbreviation for “Deutscher Aktienindex”, the German tion to comprehensive energy and heat management

Stock Index. The index is based on the weighted market inside the vehicle.

prices of the 30 largest German stock corporations (by stock

market capitalisation).

Equity ratio

The proportion of equity (= subscribed capital, reserves,

accumulated other equity and minority interest) to the

balance sheet total.

Deferred taxes

Accounting for deferred taxes is a method of allocating

tax expense to the appropriate accounting period.

Free cash flow

Derivatives

Free cash flow corresponds to the cash inflow from oper-

ating activities of the Automotive segment less the cash

Financial products, whose measurement is derived

principally from market price, market price fluctuations outflow for investing activities of the Automotive seg-

and expected market price changes of the underlying

ment adjusted for net investment in marketable securities.

instrument (e.ꢀꢀg. indices, stocks or bonds).

Gross margin

Gross profit as a percentage of revenues.

1

2

96 other inFormation

96 BMW Group Ten-year Comparison

98 BMW Group Locations

00 Glossary

02 Index

03 Index of Graphs

04 Financial Calendar

05 Contacts

2

01 other inFormation

IFRSs

financial position and results of operations, and which

could endanger the continued existence of the Company.

This applies in particular to transactions involving risk,

errors in accounting or financial reporting and violations

of legal requirements. The Board of Management is

required to set up an appropriate system, to document

that system and monitor it regularly with the aid of the

internal audit department.

International Financial Reporting Standards, intended

to ensure global comparability of financial reporting

and consistent presentation of financial statements.

The IFRSs are issued by the International Accounting

Standards Board and include the International

Accounting Standards (IASs), which are still valid.

Indicator for water consumption

The indicators for water consumption refer to the pro-

Sales locations

duction sites of the BMW Group. The water consumption Sales locations include separate legal entities, non-sepa-

includes the process water input for the production

as well as the general water consumption, e.ꢀg. for sani-

tation facilities.

rate entities and regional offices. In addition, 105 markets

are serviced by 97 importers.

Subsidiaries

Operating cash flow

Cash inflow from the operating activities of the Auto-

motive segment.

Subsidiaries are those enterprises which, either directly

or indirectly, are under the uniform control of the

management of BMWAG or in which BMWAG, either

directly or indirectly

Preferred stock

– holds the majority of the voting rights

Stock which receives a higher dividend than common

stock, but without voting rights.

– has the right to appoint or remove the majority of the

members of the Board of Management or equivalent

governing body, and in which BMWAG is at the same

time (directly or indirectly) a shareholder

– has control (directly or indirectly) over another enter-

prise on the basis of a control agreement or a provision

in the statutes of that enterprise.

Production network

The BMW Group production network consists world-

wide of 17 plants, seven assembly plants and one con-

tract production plant. Within this network, the plants

supply one another with systems and components

and are all characterised by a high level of productivity,

agility and flexibility.

Supplier relationship management

Supplier relationship management (SRM) uses focused

procurement strategies to organise networked supplier

relationships, optimise processes for supplier qualifica-

tion and selection, ensure the application of uniform

Rating

Standardised evaluation of a company’s credit standing

which is widely accepted on the global capital markets. standards throughout the Group and create efficient

Ratings are published by independent rating agencies, sourcing and procurement processes along the whole value

e. ꢀꢀg . Standard&Poor’s or Moody’s, based on their analysis added chain.

of a company.

Sustainability

Return on sales

Sustainability, or sustainable development, gives equal

Pre-tax: Profit before tax as a percentage of revenues.

Post-tax: Profit as a percentage of revenues.

consideration to ecological, social and economic develop-

ment. In 1987 the United Nations “World Commission

on Environment and Development” defined sustainable

development as development that meets the needs of

Risk management

An integral component of all business processes. Following the present without compromising the ability of future

enactment of the German Law on Control and Trans-

parency within Businesses (KonTraG), all companies

listed on a stock exchange in Germany are required to

set up a risk management system. The purpose of this

system is to identify risks at an early stage which could

have a significant adverse effect on the assets, liabilities,

generations to meet their own needs. The economic

relevance of corporate sustainability to the BMW Group

is evident in three areas: resources, reputation and risk.

2

02

Index

A

G

Accounting policies

99 et seq.

29 et seq.

Group tangible, intangible and investment

Apprentices

42

assets

122 et seq.

Automotive segment

I

B

Income statement

47, 88 et seq., 114 et seq.

Balance sheet structure

54

Income taxes

Intangible assets

48, 103, 116 et seq., 141

48, 50, 54, 100, 124

Bonds

52 et seq., 142 et seq.

Inventories

53, 55, 60, 103 et seq., 129

C

Investments accounted for using the equity method

Capital expenditure

4, 48, 50 et seq.

and other investments

101, 125

Cash and cash equivalents

04, 130

Cash flow

50 et seq., 53 et seq.,

1

K

4, 50 et seq., 92 et seq.,175 et seq.

Key data per share

86

Cash flow statement

CFRP 32, 38, 40, 44

50 et seq., 92 et seq., 157 et seq.

L

CO emissions

Compensation Report

28, 44 et seq., 66, 70

Lease business

Leased products

36 et seq.

125

2

185 et seq.

Compliance

180 et seq.

Locations

198 et seq.

Connected Drive

38

Consolidated companies entity

Consolidation principles 98

97 et seq.

M

Mandates of members of the Board of

Management 168

Mandates of members of the Supervisory

Board 169 et seq.

Contingent liabilities

Corporate Governance

145

166 et seq.

Cost of materials

56 et seq.

Cost of sales

48, 99, 114

Marketable securities

Motorcycles segment

102, 127 et seq.

35

D

Dealer organisation/dealerships

Declaration with respect to the Corporate Governance

Code 167

Dividend

19, 41

N

Net profit

New financial reporting rules

4, 47 et seq.

110 et seq.

86, 119

Dow Jones Sustainability Index World

44

O

Other financial result

Other investments

116

125 et seq.

E

Earnings per share

Efficient Dynamics

99, 119

38

Other operating income and expenses

Other provisions 141

63 et seq.

115

Employees

42 et seq.

Outlook

Equity 53 et seq., 131 et seq.

Exchange rates

25, 64, 98, 155 et seq.

P

Pension provisions

Performance indicators

62, 65 et seq.

55, 61, 104, 133 et seq.

F

20 et seq., 27 et seq., 59,

Financial assets

Financial instruments

Financial liabilities

53, 103, 127 et seq.

102 et seq., 146 et seq.

51 et seq., 55 et seq., 104,

Personnel costs

Production 32 et seq.

Production network 32 et seq.

Profit before financial result 4, 47 et seq.

Profit before tax 4, 27 et seq., 48 et seq., 65

Property, plant and equipment 48, 50, 53 et seq.,

00, 124

Purchasing

119

1

42 et seq.

Financial result

Financial Services segment

Fleet emissions 27 et seq., 45, 66

48 et seq., 59, 116

36 et seq.

1

2

96 other inFormation

96 BMW Group Ten-year Comparison

98 BMW Group Locations

00 Glossary

40

02 Index

03 Index of Graphs

04 Financial Calendar

05 Contacts

2

03 other inFormation

Index of Graphs

R

Finances

Rating

52, 74 et seq., 87, 133

BMW Group in figures

Value drivers 20

Exchange rates compared to the euro

3 et seq.

Receivables from sales financing

3 et seq., 102 et seq., 126

Related party relationships

50 et seq.,

5

24

158 et seq.

185 et seq.

Oil price trend

25

Remuneration system

Steel price trend

25

Report of the Supervisory Board

6 et seq.

Precious metals price trend

BMW Group new vehicles financed by

Financial Services segment 36

26

Research and development

23, 38 et seq.

Result from equity accounted investments

115

Return on sales

Revenue reserves

20 et seq., 47 et seq.

131 et seq.

Contract portfolio of Financial Services segment

Contract portfolio retail customer financing of

36

Revenues

Risks report

28, 47 et seq., 59, 66, 99, 114

68 et seq.

Financial Services segment

Development of credit loss ratio 37

Regional mix of purchase volumes

37

40

S

Change in cash and cash equivalents

Financial liabilities 52

Balance sheet structure – Automotive segment

Balance sheet structure – Group 54

BMW Group value added 57

50

Selling and administrative expenses

Sales volume 3, 27, 29 et seq., 65 et seq.

Segment information 161 et seq.

Shareholdings of members of the Board of

Management and the Supervisory Board

114

54

159

88, 121

Risk management in the BMW Group

68

Statement of Comprehensive Income

Stock 85 et seq.

Production and sales volume

Sustainability

44 et seq.

BMW Group – key automobile markets

BMW Group sales volume by region

29

T

MINI brand cars – analysis by model variant

Vehicle production by plant 32

BMW Group – key motorcycle markets

31

Tangible, intangible and investment

assets 100 et seq., 122 et seq.

35

Trade payables

Trade receivables

55, 61, 144

50 et seq., 53 et seq., 102 et seq.,

BMW sales volume of motorcycles

35

1

26 et seq.

Workforce

BMW Group apprentices at 31December

42

43

Employee attrition rate at BMWAG

43

Proportion of non-tariff female employees

Environment

CO emissions per vehicle produced

45

2

Energy consumed per vehicle produced

45

Process wastewater per vehicle produced

Water consumption per vehicle produced

45

Volatile organic compounds per vehicle produced

46

Waste for disposal per vehicle produced

46

Stock

Development of BMW stock

85

Compliance

BMWGroup Compliance Organisation

181

This version of the Annual Report is a translation

from the German version. Only the original German

version is binding.

2

04

Financial Calendar

Annual Accounts Press Conference

Analyst and Investor Conference

Quarterly Report to 31 March 2014

Annual General Meeting

19 March 2014

20 March 2014

6 May 2014

15 May 2014

Quarterly Report to 30 June 2014

Quarterly Report to 30 September 2014

5 August 2014

4 November 2014

Annual Report 2014

18 March 2015

19 March 2015

6 May 2015

Annual Accounts Press Conference

Analyst and Investor Conference

Quarterly Report to 31 March 2015

Annual General Meeting

13 May 2015

Quarterly Report to 30 June 2015

Quarterly Report to 30 September 2015

4 August 2015

3 November 2015

1

2

96 other inFormation

96 BMW Group Ten-year Comparison

98 BMW Group Locations

00 Glossary

02 Index

03 Index of Graphs

04 Financial Calendar

05 Contacts

2

05 Other InfOrmatIOn

Contacts

Business and Finance Press

Telephone

+49 89 382-2 45 44

49 89 382-2 41 18

+

Fax

+49 89 382-2 44 18

E-mail

presse@bmwgroup.com

Investor Relations

Telephone

+49 89 382-2 42 72

+

49 89 382-2 53 87

Fax

E-mail

+49 89 382-1 46 61

ir@bmwgroup.com

The BMW Group on the Internet

Further information about the BMW Group is available online at www.bmwgroup.com.

Investor Relations information is available directly at www.bmwgroup.com/ir. Information

about the various BMW Group brands is available at www.bmw.com, www.mini.com

and www.rolls-roycemotorcars.com

Scan the QR code to go directly to the online Annual Report for tablets.

www.annual-report2013.bmwgroup.com

A FURTHER CONTRIBUTION TOWARDS PRESERVING RESOURCES

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