BMW AG Annual Report 2006

FY2006 Annual Report · BMW AG

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Annual Report 2006

Rolls-Royce
Motor Cars Limited

Facts and figures 2006

BMW Group in figures

Report of the Supervisory Board

Group Management Report
A Review of the Financial Year
General Economic Environment
Review of operations
BMW Stock and Bonds in 2006
Disclosures pursuant to § 289 (4) and § 315 (4) HGB
Financial Analysis
– Group Internal Management System
– Earnings performance
– Financial position
– Net assets position
– Subsequent events report
– Value added statement
– Key performance figures
– Comments on Financial Statements of BMW AG
Risk Management
Outlook

Group Financial Statements
Group and sub-group Income Statements
Group and sub-group Balance Sheets
Group and sub-group Cash Flow Statements
Group Statement of Changes in Equity
Statement of Income and Expenses
recognised directly in Equity
Notes to the Group Financial Statements
– Accounting Principles and Policies
– Notes to the

Income Statement

– Notes to the Balance Sheet
– Other Disclosures
– Segment Information
Auditors’ Report

Corporate Governance
Members of the Supervisory Board
Members of the Board of Management
Corporate Governance in the BMW Group
Compensation Report (Sub-section of Management Report)
Directors’ Dealings
Shareholdings of members of the Board of
Management and the Supervisory Board
Declaration of the Board of Management and of
the Supervisory Board pursuant to §161 AktG

Other Information
BMW AG Principal Subsidiaries
BMW Group 10-year Comparison
BMW Group Locations
Glossary
Index
Contacts
Financial Calendar

10
10
12
15
38
41
43
43
44
46
48
50
50
53
54
58
62

65
65
66
68
70

71
72
72

79
86
104
111
115

116
116
119
120
121
124

124

125

126
126
128
130
132
136
138
139

BMW Group Revenues
in euro billion

BMW Group Capital expenditure
in euro million

5,000

4,500

4,000

3,500

3,000

2,500

*02

42.4

41.5

44.3

46.7

49.0

4,042

4,245

4,347

3,993

4,313

* reclassified after harmonisation of internal and external reporting systems

BMW Group Deliveries of automobiles
in thousand

BMW Group Profit before tax
in euro million

1,400

1,300

1,200

1,100

1,000

900

4,000

3,500

3,000

2,500

2,000

1,500

1,057.3

1,104.9

1,208.7

1,328.0

1,374.0

04
*

3,297

3,205

3,583

3,287

4,124

* adjusted for new accounting treatment of pension obligations

A portrait of the Company
Bayerische Motoren Werke G.m.b.H. came into
being in 1917, having been founded in 1916 as
“Bayerische Flugzeugwerke AG” (BFW); it became
a stock corporation (Aktiengesellschaft) in 1918.

Today, the BMW Group is one of the ten largest
car manufacturers in the world and possesses, with
its BMW, MINI and Rolls-Royce brands, three of the
strongest premium brands in the car industry. The
BMW Group also has a strong market position in the
motorcycle sector and operates successfully in the
area of financial services.

The BMW Group aims to generate profitable

growth and above-average returns by focusing on
the premium segments of the international auto-
mobile markets. With this in mind, a wide-ranging
product and market offensive was initiated back in
2001, which has resulted, over the past years, in
the BMW Group expanding its product range con-
siderably and strengthening its worldwide market
position. The BMW Group will continue in this vein
in the coming years.

BMW Group in figures

Vehicle production

BMW

MINI

Rolls-Royce

Motorcycles1]

Deliveries to customers

BMW

MINI

Rolls-Royce

Motorcycles 2]

2002

2003

2004

2005

2006

930,221

160,037

–

93,010

913,225

144,119

–

92,599

944,072

174,366

502

89,745

928,151

176,465

300

92,962

1,059,978

1,122,308

1,179,317

189,492

875

93,836

200,119

692

92,012

186,674

847

103,759

1,023,583

1,126,768

1,185,088

184,357

200,428

188,077

792

92,266

796

97,474

805

100,064

Workforce at end of year 3]

101,395

104,342

105,972

105,7984]

106,575

in euro million

2002

2003

2004

2005

2006

Revenues

Capital expenditure

Depreciation and amortisation

Operating cash flow 7]

Profit before tax

Net profit

42,4115]

41,525

44,335

46,656

48,999

4,042

2,143

4,553

3,297

2,020

4,245

2,370

4,970

3,205

1,947

4,347

2,672

6,157

3,5836]

2,2426]

3,993

3,025

6,184

3,287

2,239

4,313

3,272

5,373

4,124

2,874

Change
in %

5.1

– 6.7

22.4

12.8

5.2

– 6.2

1.1

2.7

0.7

Change
in %

5.0

8.0

8.2

– 13.1

25.5

28.4

1] excluding C1, total production of the C1 to 2002: 33,489 units, from 2006 including BMW G 650 X assembly by Piaggio S.p. A.
2] excluding C1, sales volume to 2003: 32,859 units
3] Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.
4] Including acquired entities, the comparable number of employees was 106,174 employees at 31 December 2005.
5] reclassified after harmonisation of internal and external reporting systems
6] adjusted for new accounting treatment of pension obligations
7] In its financial statements for 2005, the BMW Group brought the cash flow computation into line with standards normally applied on the financial markets. Since then,

the BMW Group discloses the figures for the cash flow from operating activities (operating cash flow), corresponding to the cash flow from Industrial Operations reported in
the cash flow statement.

04 Report of the Supervisory Board

Joachim Milberg
Chairman of the Supervisory Board

Ladies and Gentlemen,

Over the course of the financial year 2006, the most successful year ever recorded
in the history of the BMW Group, the Supervisory Board closely monitored the
company’s management with the aid of extensive written and oral reports pro-
vided by the Board of Management and continuously supported it in an advisory
capacity through regular discussions.

In a total of five meetings, the Supervisory Board considered the business and
financial position of the BMW Group, its risk analysis and risk management
systems, selected topics of strategic interest as well as the composition of the
Board of Management. The Board of Management also kept the Supervisory
Board informed of current business developments and matters of particular
significance, either at scheduled meetings or at other times when the need
arose.

Decisions concerning changes in the Board of Management stood at the fore-
front of the July 2006 Supervisory Board meeting.

Dr. Norbert Reithofer, at that stage the Board of Management member respon-
sible for Production, was named to succeed Dr. Helmut Panke as Chairman of
the Board of Management with effect from 1 September 2006.

In his capacity as Chairman of the Board of Management from 2002 to 2006,
Dr. Panke was responsible for leading the BMW Group to unprecedented suc-
cess and the positive image of the BMW Group was indelibly shaped by his
personality. On 31 August 2006, Dr. Panke left the Board of Management after
a total of 24 years in the service of the company, including six years of board
membership and a further four years as Chairman of the Board of Management.
He handed over the helm at a time where the BMW Group is able to present
itself in a position of both inward and outward strength. The Supervisory Board
would like to take this opportunity to express its great respect for, and apprecia-
tion of, this achievement.

Also at the Supervisory Board meeting in July 2006, Frank-Peter Arndt, at that
stage Head of the Dingolfing Plant, was appointed Board of Management mem-
ber with responsibility for Production with effect from 1 September 2006.

Prof. Dr. Burkhard Göschel, who had been responsible for Development and
Purchasing since 2000, left the Board of Management with effect from 31 Octo-
ber 2006. The Supervisory Board would like to thank Prof. Dr. Göschel for his
outstanding accomplishments in the service of the BMW Group (since 1978)
and as a member of the Board of Management (since 2000).

Dr. Klaus Draeger was appointed to succeed Prof. Dr. Göschel as member of
the Board of Management with effect from 1 November 2006. Dr. Draeger had
previously occupied the post of Head of Department with responsibility for the
Group’s large-size model series (the BMW 7, 6 and 5 Series).

Deliberations on the future strategic orientation of the BMW Group constituted
another key area of activity for the Supervisory Board during 2006. Based on writ-
ten and oral reports received from the Board of Management, the Supervisory
Board intensively considered the premium strategy, currently being followed by
the Board of Management, aimed at sustainable growth and long-term corpo-
rate appreciation in value. This strategic orientation is also the subject of a con-
tinuing exchange of views between the Chairman of the Supervisory Board on
the one side and the Chairman of the Board of Management on the other. The
Supervisory Board supports the strategy pursued by the Board of Management,
namely continuing the new model product initiative implemented over recent
years, remaining committed to the premium car and motorcycle markets and ex-
panding the BMW Group’s financial service activities.

The two boards also discussed the market opportunities available to the group,
especially in Asia, as well as other measures aimed at expanding the BMW Group’s
market presence. In this context, the members of the Supervisory Board were
shown the extended version of the BMW 5 Series Sedan, a vehicle specifically
designed for the Chinese market and on sale there since December 2006.

The Supervisory Board was also kept informed about the construction of a new
plant in India and the current progress of a new production and sales company
which is being set up for that market.

The Supervisory Board also followed with great interest the Board of Manage-
ment’s activities regarding the continuing expansion of the BMW Group’s pro-
duction network. The Supervisory Board obtained information about significant
areas of capital expenditure in 2006 which are aimed at reinforcing the under-
lying strength of the production network and, at the same time, creating the ba-
sis for further sales volume growth. Particularly noteworthy developments in
this respect have been the expansion of production capacities for the MINI in the
United Kingdom and modifications at the BMW Spartanburg plant in the USA for
the manufacture of the new BMW X5.

In the view of the Supervisory Board, the on-going efficiency improvement
measures implemented in all lines of business have further strengthened the
competitiveness of the BMW Group. The Supervisory Board was kept informed
by the Board of Management of the nature and the progress of measures taken
and their successful implementation.

06 Report of the Supervisory Board

The Supervisory Board used the business status reports prepared by the Board
of Management for each Supervisory meeting to keep abreast of business per-
formance, including that of the Financial Services and Motorcycles segments.
These business status reports also provided information about the situation of
competitors in the major markets, the fluctuation of the euro against the US dol-
lar and other important currencies, the BMW Group’s currency management
strategy and, in particular, its sales volume performance.

The Board of Management also informed the Supervisory Board of the progress
of the share buy-back programme and the decision to withdraw these shares
from circulation with a view to reducing the company’s outstanding share capital.
The Supervisory Board subsequently amended the wording of the Articles of
Incorporation to take account of the reduced share capital.

As a special topic, the Supervisory Board deliberated intensively in 2006 on the
Motorcycles segment, including a review of the renewal of production structures
at the Berlin plant and the Board of Management’s continued model range ex-
pansion, intended to attract new target groups.

The Supervisory Board discussed in detail with the Board of Management both
the annual budget for the financial year 2007 and the long-term business plan for
the BMW Group presented to it for authorisation. The long-term business plan
was approved as necessary.

During the financial year 2006, the Supervisory Board and the Board of Manage-
ment again discussed the subject of corporate governance in great detail and
issued a joint Declaration of Compliance with the German Corporate Governance
Code pursuant to §161 AktG. Having been satisfied that the Code’s recom-
mendations had been fulfilled in accordance with the previous Declaration of
Compliance (subject to a small number of exceptions stated therein), the Board
of Management and the Supervisory Board took the decision to fulfil all of the
recommendations contained in the revised version of the Code on 24 July
2006, with a single exception, namely that the discussion and regular review of
the structure of the compensation system of the Board of Management is per-
formed by the Personnel Committee. The Chairman of that committee informs
the members of the Supervisory Board at its next meeting.

In conjunction with the Disclosure of Management Board Compensation Act
(VorstOG), listed companies in Germany are now required to disclose details of
the remuneration of Board of Management members, analysed individually. In
advance of the Annual General Meeting in 2006, the two boards had decided
not to apply the option of proposing an exception to the Annual General Meeting
2006, but rather to comply with the legal requirements. BMW AG is thus required

to meet the disclosure requirements for the first time for the financial year 2006.
A detailed report on the amount and structure of the compensation of the
Board of Management and the Supervisory Board can be found in the Corporate
Governance Report.

The Supervisory Board also questioned the effectiveness of its own work and
perceives improvements in cooperation to be part of an on-going process.

The composition of the Presiding Board and the three committees of the Super-
visory Board (see page 116) again remained unchanged during the financial year
2006. The Chairman reported regularly at Supervisory Board meetings on the
status of committee work.

The focus of each of the four meetings held by the Presiding Board was to pre-
pare the plenum meetings, in particular the selection of special topics of report
and to hold preparatory discussions on the more complex topics with members
of the Board of Management. The Presiding Board also requested the new Chair-
man of the Board of Management to report on the main focuses of the group’s
future orientation. Information was also acquired about new legislation in Ger-
many, such as the Takeover Guidelines Implementation Act, affecting the duties
of the Supervisory Board.

The Audit Committee convened three times during the period under report. One
of these meetings served primarily to prepare for the Supervisory Board meeting
in spring 2006, the main purpose of which was to consider the drafts of the
Company and Group financial statements. Apart from scrutinising the drafts, the
Audit Committee also obtained a Declaration of Independence from the external
auditors and determined the areas of audit emphasis to be incorporated into the
audit engagement letter. The Audit Committee also enquired into the impact of
settling the exchangeable bond on shares in Rolls-Royce plc, London. A further
Audit Committee meeting was dedicated to the consideration of risk manage-
ment issues, including the evaluation of currency risks and anti-fraud management.
The Audit Committee also gathered information about forthcoming changes
in law, such as the new Transparency Guidelines Implementation Act that came
into force on 20 January 2007.

The main activity of the six meetings of the Personnel Committee in 2006 in-
volved the preparation of decisions relating to the composition of the Board
of Management, in particular determining the short-list of candidates for the
positions of Chairman of the Board of Management and other board positions.
The Personnel Committee also reviewed the appropriateness of the compen-
sation of the members of the Board of Management, in comparison with the
automotive industry and other DAX-listed companies, drafted resolutions re-

08 Report of the Supervisory Board

garding the employment contracts of Board of Management members and, in
a number of cases, approved the assumption of external mandates by Board
members.

The statutory Mediation Committee (§ 27 (3) of the German Co-Determination
Law) was not required to convene during the financial year 2006.

The Company and Group financial statements of Bayerische Motoren Werke
Aktiengesellschaft for the year ended 31 December 2006 and the combined
Company and Group Management Report were audited by KPMG Deutsche
Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft,
Munich, and given an unqualified audit opinion. First, the Audit Committee on
2 March 2007 and then, the Supervisory Board on 8 March 2007, examined and
considered the above-mentioned statements prepared by the Board of Manage-
ment. The external auditors were present at both meetings to report on the main
findings of their audit and to provide additional information. The long-form audit
reports of the external auditors were made available to all members of the Super-
visory Board. The Supervisory Board concurred with the results of the external
audit and approved the Company and Group Financial Statements of Bayerische
Motoren Werke Aktiengesellschaft for the financial year 2006 prepared by the
Board of Management. The Company financial statements are therefore adopted.

In accordance with the Takeover Guidelines Implementation Act that came into
force in mid-2006, the combined Company and Group management report also
contains additional information. Detailed disclosures, to which reference is
made here, are provided on pages 41 et seq. of the Annual Report. The principal
agreements to which BMW AG is party and which contain specific clauses that
are triggered in the event of a change of control or the acquisition of control
(e.g. as a consequence of a takeover bid) are disclosed there. Some of these
relate to cooperation or joint venture contracts with mutual change of control
clauses (i.e. which also confer rights on BMW AG) as well as specific financing
agreements with change of control clauses which take account of the legitimate
interests of the lender. The BMW Group has not concluded any compensation
agreements with members of the Board of Management or with employees for
situations involving a takeover offer.

The Board of Management’s proposal to use the unappropriated profit available
for distribution was reviewed by the Supervisory Board. The Supervisory Board
concurs with the proposal submitted by the Board of Management to pay a
dividend of euro 0.70 for each share of common stock entitled to receive a divi-

dend and to pay a dividend of euro 0.72 for each share of non-voting preferred
stock entitled to receive a dividend.

In accordance with the conclusion reached on the Supervisory Board’s examina-
tion, no objections were raised.

As announced in the previous year Annual Report, Mr. Volker Doppelfeld’s term
of office in the Supervisory Board came to an end of the close of the Annual
General Meeting on16 May 2006 after many years of highly distinguished service.
Having reached the age of retirement, Mr. Doppelfeld did not stand for re-
election. The Supervisory Board took the opportunity of paying tribute to
Mr. Doppelfeld in the presence of shareholders at the last Annual General Meeting.

Two further changes took place to the composition of the Supervisory Board
during or at the end of the financial year 2006. Heinz-Joachim Neubürger was
appointed member of the Supervisory Board at the Annual General Meeting on
16 May 2006. Werner Eisgruber took the decision, with the full understanding
of the Supervisory Board, to resign from his office as employee representative
on the Supervisory Board at the end of the financial year. The Supervisory Board
would like to thank Mr. Eisgruber for his trustworthy and excellent cooperation.
The premature departure of Mr. Eisgruber left the Supervisory Board incom-
plete. Stefan Schmid, Chairman of the Works Council at the Dingolfing plant,
was thereupon appointed to the Supervisory Board by court decision as employee
representative on 3 January 2007.

The Supervisory Board would like to thank the board members leaving office
and those still in office as well as all BMW Group employees for their concerted
performance and congratulate them on the success achieved in the financial
year 2006.

Munich, March 2007
The Supervisory Board

Yours,

Joachim Milberg
Chairman of the Supervisory Board

10 Group Management Report

Group Management Report
A Review of the Financial Year

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

and § 315 (4) HGB
43 Financial Analysis
43 – Internal Management System
44 – Earnings performance
46 – Financial position
48 – Net assets position
50 – Subsequent events report
50 – Value added statement
53 – Key performance figures
54 – Comments on BMW AG
58 Risk Management
62 Outlook

BMW Group reports the most successful year
in its corporate history
The BMW Group achieved record levels for sales
volume, revenues and earnings in 2006.The past year
has therefore been the most successful in the Group’s
corporate history. In spite of adverse effects from
foreign exchange and high raw material prices hold-
ing down the increase in reported results, the BMW
Group was able to achieve, and in some areas do
even better than the targets it had set itself for 2006.
Within the automobile line of business, the total

number of BMW, MINI and Rolls-Royce brand cars
sold increased by 3.5 % to a total of 1,373,970 vehi-
cles. The anticipated seasonal effect, caused by
base effects during the first half of the year and by
numerous model life-cycle factors over the course
of the year, was evident. This caused the sales
volume to increase significantly more sharply during
the first half of year than in the second half.

Within the motorcycles line of business, the
efficiency improvement measures initiated in 2005
started taking effect, bringing about the desired
improvement in competitiveness. For the first time
in its corporate history, more than 100,000 BMW
motorcycles were manufactured and sold in a single
year.

The financial services business remained on
growth course in 2006. On the one hand, higher
interest rates and the related increase in refinancing
costs had the expected adverse impact on reported
results. However, by optimising processes, expanding
the range of products and increasing regional cover-
age, it was possible to implement suitable measures
to counter the adverse impact.

Reconciliations to group profit were again in-
fluenced significantly by external factors in 2006, in
particular by the impact of the exchangeable bond
option relating to the BMW Group investment in
Rolls-Royce plc, London. In 2005, the bond had
given rise to fair value losses of euro 356 million. By
contrast, the exchangeable bond gave rise to an
accounting gain of euro 372 million in 2006, which
had a positive impact on reconciliations to group
profit and thus to the earnings of the BMW Group
for the year.

Sharp increase in earnings
Profit before tax surpassed the euro 4 billion level
for the first time in 2006. At euro 4,124 million, the
previous year’s figure was exceeded by 25.5 %. Even
excluding the impact of the exchangeable bond re-
lating to the BMW Group investment in Rolls-Royce

plc, London, profit before tax improved by 3.0 % com-
pared to the previous year.

The adverse effects from foreign exchange and
high raw material prices were felt most by the Auto-
mobiles segment. The segment profit, at euro
3,012 million, was nevertheless up by 1.2 % over
the previous year.

The profit before tax of the Motorcycles seg-
ment rose by 10.0 % to euro 66 million. The main
factors behind this positive development were the
process optimisation and efficiency improvement
measures initiated in the previous year.

Earnings of the Financial Services segment
continued to develop well on the back of unabated
growth. Segment profit before tax amounted to euro
685 million, surpassing the previous year’s figure by
13.2 %.

As a result of various positive tax factors, in
particular in Germany, the effective tax rate of the
BMW Group in 2006, at 30.3 %, was just below the
previous year’s level (31.9 %).

The group net profit for 2006, at euro 2,874 mil-
lion, was also at a new high level. The previous year’s
figure was surpassed by 28.4 %.

Increased dividend proposed
The Board of Management and Supervisory Board
propose to the Annual General Meeting to use the
unappropriated profit available for distribution in
BMW AG amounting to euro 458 million, to pay a
dividend of euro 0.70 for each share of common
stock (2005: euro 0.64), an increase of 9.4 % over
the previous year and euro 0.72 for each share of
preferred stock, an increase of 9.1% over the pre-
vious year (2005: euro 0.66).

Revenues at new high level
The good sales volume performance and the con-
tinued strong growth of financial services business
resulted in a sharp increase in group revenues.
These rose in 2006 by 5.0 % to euro 48,999 million.
Excluding currency fluctuations, group revenues
would have increased by 5.5 %.

Revenues generated by the Automobiles seg-

ment grew by 4.2 % in 2006 to reach euro 47,767
million, therefore increasing marginally faster than
sales volume.

Revenues generated by the Motorcycles seg-

ment in 2006 were up by 3.4 % compared to the
previous year, reaching a total of euro 1,265 million.
The current product initiative again had a positive
impact on segment revenues.

BMW Group Revenues by region
in euro million

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

Rest of Europe

North America

Germany

Asia/Oceania

United Kingdom

Other markets

8,481

13,085

10,404

4,594

4,687

1,160

8,728

11,252

10,590

5,130

4,661

1,164

10,574

10,205

11,961

4,915

5,249

1,431

12,141

10,957

11,001

5,538

5,125

1,894

Rest of Europe
North America
Germany

Asia/Oceania
United Kingdom

Other markets

13,226

11,779

10,601

6,200

5,214

1,979

Revenues generated by the Financial Services

segment rose by17.8 % in 2006 to euro11,079 million.

Increased capital expenditure
In 2006, the BMW Group invested primarily in the
further expansion of its production and sales net-
works. Important areas of capital expenditure in-
cluded expansion of the MINI Production Triangle,
modification work at the BMW plant in Spartanburg,
refurbishment of the group’s headquarters and con-
struction of “BMW Welt”, the new brand experience
centre in Munich.

In 2006, the BMW Group invested euro 2,777

million in property, plant and equipment and other
intangible assets, 6.9 % more than in the previous
year. In addition to this, development expenditure

of euro 1,536 million (2005: euro 1,396 million;
+10.0 %) was recognised as assets in accordance
with IAS 38 so that total additions in 2006 amounted
to euro 4,313 million. Overall, total capital expendi-
ture of the BMW Group in 2006 was therefore up by
8.0 %.

As in the previous year, increased capitalised
development costs resulted from the higher volume
of series development projects carried out during
the year under report.The proportion of development
costs recognised as assets in 2006 was 47.9 %
(2005: 44.8 %).

The capital expenditure ratio in 2006 (i. e. the
ratio of capital expenditure to group revenues) in-
creased slightly in 2006 and stood at 8.8 % (2005:
8.6 %).

BMW Group Capital expenditure and operating cash flow
in euro million

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Capital expenditure

Operating cash flow

4,042

4,553

4,245

4,970

4,347

6,157*

3,993

6,184

4,313

5,373

* adjusted for new accounting treatment of pension obligations
In its financial statements for 2005, the BMW Group brought the cash flow computation into line with standards normally applied on the financial markets. Since then, the
BMW Group discloses the figures for the cash flow from operating activities (operating cash flow), corresponding to the cash flow from Industrial Operations reported in the
cash flow statement.

12 Group Management Report

General Economic Environment

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Business environment
Economic developments in 2006
The global economy grew strongly again in 2006.
For the most part, growth rates were even higher
than in the previous year despite the greater impact
of adverse factors. Higher interest rates worldwide
and further hikes in the price of crude oil and other
raw materials were the main reasons for higher
costs for businesses and the further reduction in
consumer buying power.

The US economy grew at a rate of 3.3 % in
2006. It was initially able to maintain its role as the
motor for the global economy but, since the sum-
mer, there has been a noticeable deceleration in the
pace of growth. Amongst other factors, the sharp
rise in interest rate levels slowed down the property
boom. By contrast, the unemployment situation
had improved by the end of the year. In general, pri-
vate consumption continued to provide momentum,
whereas investments were significantly down. Ex-
ports again failed to contribute to growth, with the
current account deficit refusing to shift from a level
of well over 6 % of gross domestic product.

In the euro region, gross domestic product grew

strongly by 2.7% in 2006, performing dynamically
again for the first time in years. The main factors
contributing to this development were continuing
high investment levels and rising private consumer
expenditure. Overall, however, despite the sharp
growth in exports, the current account for the euro
region was still negative. The improved performance
tailed off slightly towards the year-end.

forward into 2006 in the light of the value added tax
increase at the beginning of 2007. On top of that,
the construction industry was able to overcome the
crisis it has been facing ever since reunification and,
once again, make a positive contribution to growth.

The economies of new EU member states
again performed well in 2006. This was under-
pinned in all of the countries involved by very
dynamic export performances and robust domes-
tic economies.

In 2006, the Japanese economy grew at

about 2 %, matching the previous year’s growth
rate and confirming the end of a long weak phase.
The sources of growth in 2006 were well-balanced,
driven by both domestic and export factors; gradu-
ally, deflationary trends also appear to have been
overcome.

The emerging Asian countries again registered
the strongest growth rates in 2006. While the Indian
economy expanded by more than 8 %, the Chinese
gross domestic product again grew at a rate in ex-
cess of 10 %. South-East Asian economies grew
on average by approximately 5.5 %.

US dollar loses value over course of year
The US dollar again lost value against the euro over
the course of 2006. Compared to an exchange rate
of US dollar 1.18 to the euro at the beginning of the
year, the US currency slipped to a rate of over US
dollar 1.33 to the euro over the course of the year,
finishing at US dollar 1.32 to the euro and therefore
11.9 % weaker than at the beginning of the year.

The German economy grew by 2.5 % in 2006.

Although the British pound remained within its

In addition to the continuing boom in investments
and exports, after a considerable absence, consumer
expenditure edged up, to a large extent brought

longstanding range of GBP 0.70 and 0.67 to the
euro, it has shown signs of strengthening since the
middle of the year.

Exchange rates compared to the Euro
(Index: 31 December 2001 = 100)

170

160

150

140

130

120

110

100

US Dollar

Japanese Yen

British Pound

Source: Reuters

Oil price
Price per barrel of Brent Crude

Euro

US Dollar

Price in US Dollar

Price in Euro

Source: Reuters

The Japanese yen has significantly lost in
value since mid-2005, standing at Yen 157 to the
euro at the end of 2006. In view of the robust per-
formance of the Japanese economy, the end of
deflation and the fact that interest rates are again on
the rise, the Japanese currency is distinctly under-
valued.

Raw material prices: further increases over
course of 2006
Initially, oil prices continued to rise in 2006. This was
caused as much by persisting shortages in oil pro-
duction and processing capacities as by increased
demand for oil. After peaking in the summer at prices
in the region of US dollar 80 per barrel, oil prices
then decreased sharply, settling towards the year-
end, partly as a result of the slow-down in the rise
of demand, at approximately US dollar 60 per barrel.
On the steel market, the 2005 price reductions

were completely reversed. In fact, prices even
moved above the high levels seen at the beginning
of 2005.

Precious metals price trend
(Index: 31 December 2001 = 100)

The price of precious metals has been rising
for several years. During the first half of 2006, the
pace of increase accelerated even faster in some
cases. Market prices dipped a little during the sum-
mer months before stabilising at a high level towards
the end of the year. Despite the slowdown of the
global economy towards the end of 2006, demand
for commodities remained strong, even as an in-
vestment.

Steel price trend
(Index: January 2002 = 100)

180

170

160

150

140

130

120

110

100

Source: German Federal Statistical Agency

340

300

260

220

180

140

100

Palladium

Silver

Source: Reuters

Gold

Platinum

14 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Automobile markets in 2006
As in previous years, the demand for cars again
grew strongly in 2006. The premium segments
relevant for the BMW Group also expanded in 2006,
with the segment relevant for the BMW and MINI
brands growing by 2.8 % and 5.7% respectively.
This development was influenced once again by
dynamic growth in the emerging economies of Asia
and Latin America, whereas the traditional car mar-
kets (USA, Japan and Western Europe) recorded
zero or even negative growth.

The number of cars sold in the USA decreased
by approximately 2.6 % in 2006 to 16.5 million units
(light vehicles). Light trucks in particular experienced
a sharp volume drop as a consequence of the
sharp rise in fuel prices. The market share held by
US manufacturers declined once again in 2006.
The number of new registrations in Western

Europe climbed slightly to 14.6 million passenger
cars. This was mainly attributable to the sharp in-
crease recorded in Germany, which can be put down
to the effect of the value added tax increase from
the beginning of 2007. Overall, the German market
expanded by almost 4 %. Whilst Italy, and above all
the Benelux and Northern European countries de-
veloped positively, most other southern European
countries, in particular Portugal, saw volumes falling,
in some cases quite sharply. The number of cars
sold in the United Kingdom and France fell by almost
4 % and 3 % respectively, once again well below the
previous year’s figures.

In Eastern Europe, the automobile market was

once again able to register a small increase, ex-
panding by more than 2 % in 2006. The main factor
here was the stabilisation of the Polish market which,
due to the high volume of imported used cars, had
slumped in recent years. The Russian automobile
market continued to enjoy a strong upturn, growing
at a double-digit rate of 12 %.

The automobile markets in emerging Asian

economies again expanded rapidly in 2006. Strong
momentum came from the Chinese market, which
grew by more than a quarter. Sales in India again in-
creased more strongly, rising by approximately 17%.
South Korea was able to follow up the previous
year’s good performance with a similar growth rate
of 5 %. In Japan, the automobile market remained
out of line with the economic cycle. Despite the

good economic outlook, sales here contracted
by 2 %.

The growth rate in Latin America stabilised at a

high level. Automobile markets in this part of the
world benefited from the current robust economic
situation. The sales volume in both Argentina and
Brazil grew sharply.

Motorcycle markets in 2006
The motorcycle markets relevant for the BMW Group
again developed divergently in 2006. The 500 cc
plus motorcycles segment relevant for the BMW
Group grew by 8.6 % compared to one year earlier.
The USA, the world’s largest market for motorcycles,
recorded a 5.5 % increase in the 500 cc plus seg-
ment. In Germany, the BMW Group’s largest single
market, demand for motorcycles contracted for the
seventh year in succession. However, a decrease of
2.4% represented a significant slow-down in the trend.

In the rest of Europe, and in Southern Europe
in particular, motorcycle markets developed well. In
Italy, the 500 cc plus motorcycle market grew by
10.2 % and in Spain, the same market expanded by
a remarkable 45.5 %. After four years of consoli-
dation, the Japanese market for the motorcycle seg-
ment relevant to the BMW Group finally grew again,
picking up by 10.3 %.

Business environment for financial services
in 2006
Financial services business in 2006 was influenced
by an increase in interest rates on the money and
capital markets, particularly in the USA and the euro
region, and by the tighter monetary policies pursued
by the world’s main central banks. During 2006,
the US Federal Reserve Bank increased key lending
rates in small steps from 4.25 % to 5.25 %. The Euro-
pean Central Bank continued to pursue its policy of
tighter monetary control, increasing the key lending
rate over the course of the year by a total of 125 basis
points to 3.5 % at 31 December 2006. In addition,
the market for automobile-related financial services
is still characterised by intense competition. This
is particularly due to the fact that banks are now
focusing more on private consumer business and
because other manufacturer-related financial service
providers are also more willing to finance other
manufacturers’ brands.

Review of operations

New record car sales volume figure
In 2006, the BMW Group achieved a new record car
sales volume figure for its BMW, MINI and Rolls-Royce
brands. With 1,373,970 vehicles sold, the total sales
volume was 3.5 % higher than one year earlier.

The BMW brand’s contribution to this achieve-
ment was a sales volume of 1,185,088 units, 5.2 %
more than in the previous year. Due to restricted
availability caused by capacity extension measures
at the Oxford plant and preparations for the launch
of the second MINI generation, the sales volume
for the MINI brand fell by 6.2 % to 188,077 units in
2006. A total of 805 Rolls-Royce Phantom was
handed over to customers in the course of 2006,
1.1% more than in the previous year.

Sales volume increases in nearly all markets
The BMW Group sold 337,354 BMW, MINI and
Rolls-Royce automobiles in North America in 2006,
2.6 % above the previous year’s figure. 313,921
vehicles were sold in the USA, the BMW Group’s
largest single market, representing an increase of
2.1% compared to the previous year.

In Europe, where a sales volume of 816,829 units
was recorded, the BMW Group sold 1.7% more cars
than in 2005. In the two largest markets in Europe
(Germany and the United Kingdom), model life-cycle
factors relating to the BMW brand and restricted
availability of the MINI both had a major impact on
sales volumes. In Germany, the sales volume recorded
by the BMW Group fell by 2.8 % to 287,715 units.
In the United Kingdom, it edged down by 1.4 % to
154,069 units. The number of cars sold on the re-
maining major European markets either remained at,
or surpassed, the previous year’s level. In Italy, the

BMW Group Deliveries of automobiles* by region and market
in 1,000 units

BMW Group – key automobile markets 2006
as a percentage of sales volume

USA

Germany

United Kingdom

Italy

Spain

Japan

France

Other

22.8

20.9

25.0

11.2

7.0

4.6

3.8

4.5

BMW Group sold 96,462 units, 6.8 % more than in the
previous year. The total number of cars sold in Spain
(63,043 units), increased by 12.6 %. At 52,884 units,
the sales volume in France remained at a similar
level to the previous year (– 0.1%).

The BMW Group achieved its highest growth

rates in 2006 on the Asian markets. With 142,084
vehicles sold, the total sales volume was 13.0 %
higher than one year earlier. In Japan, the BMW
Group’s largest single market in Asia, the increase
was 5.6 %, with 62,115 units handed over to cus-
tomers. The Chinese markets (China, Hong Kong,
Taiwan) recorded the highest growth rate. 44,766
units were sold here, up by 35.4 % against the pre-
vious year’s figure.

The BMW brand remains the world’s most
successful premium car brand
With 1,185,088 units sold, the sales volume of
BMW brand cars in 2006 beat the previous year’s
high level by 5.2 %. This enabled the BMW brand
to recapture the top position at the head of the pre-
mium segment.

400

350

300

250

200

150

100

Rest of Europe

North America

Germany

United Kingdom

Asia

Other markets

261.6

273.2

258.2

120.9

89.3

54.2

* including Rolls-Royce from 2003 onwards

264.6

294.9

255.8

134.5

103.5

51.6

299.7

315.9

283.6

145.3

106.4

57.9

350.8

329.0

295.9

156.2

125.7

70.4

Rest of Europe
North America

Germany

United Kingdom
Asia

Other markets

375.0

337.4

287.7

154.1

142.1

77.7

16 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

The sales volume of the BMW 1 Series in 2006,
with 151,918 cars handed over to customers during
the year, was 1.6 % ahead of the previous year. The
revised BMW 1Series becomes available from March
onwards and will be followed by the new three-door
version from May onwards.

The number of BMW 3 Series vehicles delivered
to customers rose sharply in 2006. In total, 508,479
BMW 3 Series cars were sold, representing an in-
crease of 17.1% over the previous year. Since the
market introduction of the new BMW 3 Series Coupé
in September 2006, sales of this model have de-
veloped exceptionally well. 22,105 units were sold in
the fourth quarter 2006 alone, more than three
times the number of cars (+ 244.5 %) sold in the cor-
responding prior year quarter. Over the course of the
whole year, the sales volume of the BMW 3 Series
Coupé rose by 29.3 % to 41,185 units.

336,232 BMW 3 Series Sedan were delivered

to customers in 2006, 12.0 % more than one year
earlier. In its first full year on the markets, the sales
volume of the BMW 3 Series Touring took a 64.1%
leap to 105,483 deliveries. Due to model life-cycle
factors, the sales volume of the BMW 3 Series
Convertible fell by 20.3 % to 25,235 units. Demand
will be revived by the market introduction of the suc-
cessor model in March 2007.

The BMW 5 Series recorded a sales volume
of 232,193 units, edging up 1.7% compared to the
previous year. This includes 182,539 units (+ 2.7%)
of the BMW 5 Series Sedan and 49,654 units (– 2.0 %)
of the BMW 5 Series Touring. An extended version
of the BMW 5 Series has been developed specifi-
cally for the Chinese markets and has been available
there since December.

Sales of the BMW 6 Series were down by 6.0 %
to 21,947 units. The sales volume of the BMW 6 Se-

BMW brand cars in 2006 – analysis by series
as a percentage of total BMW brand sales volume

1 Series

3 Series

5 Series

6 Series

7 Series

42.9

12.8

2.6

6.4

9.6

4.2

1.9

19.6

ries Coupé decreased by 4.1% to 11,941 units, and
that of the BMW 6 Series Convertible by 8.1% to
10,006 units.

With 50,227 Sedans sold, the sales volume of

the BMW 7 Series reached the previous year’s level
(+ 0.3 %). The sales performance of the BMW 7
Series in China (Mainland) was particularly encour-
aging; with a sales volume of 7,522 units, this
model managed to achieve market leadership in
its segment.

The updated Sports Activity Vehicle BMW X3
has been available to customers since September.
Compared to the previous year, the sales volume of
the BMW X3 increased by 3.0 % in 2006 to a total
of 114,000 units.

Seven years on from the market introduction of

the first BMW X5, the second generation of this
highly successful model has been available since
November 2006, initially on the American market.
The fact that this model only became available so
late in the year meant that it has not yet had a great
impact on the annual sales volume. As a result of
model life-cycle factors, 75,321 units were sold in
2006, 25.8 % fewer than in the previous year. The
BMW X5 will become available in Europe from March
2007 onwards, which is expected to cause a sharp
increase in sales volume.

New models and model improvement meas-

ures made to the BMW Z4 had a positive impact on
sales volume. The updated BMW Z4 Roadster and
BMW Z4 M Roadster models have been available
on the markets since March and the new BMW Z4
Coupé and BMW Z4 M Coupé models since June.
In total, the sales volume of the various BMW Z4
models increased by 7.5 % in 2006 to 30,981 cars.

Proportion of cars with diesel engines
slightly higher
The proportion of diesel-powered BMW cars is
steadily increasing. Altogether 40 % of BMW cars
sold in 2006 were equipped with a diesel engine.
The percentages for 2005 and 2004 were 39 %
and 34 % respectively. In many European markets,
the number of diesel cars sold well exceeds the
number of petrol cars sold. The highest proportion
in Europe is in Portugal where 91% of all BMW
vehicles sold were diesel-driven. The proportion of
diesel-powered BMW cars is also very high in
France (90 %) and Italy (89 %). In absolute terms, the
highest numbers of BMW cars with diesel engines

The MINI brand continues to generate a very
high-value product mix. Including the convertible
versions, almost 44 % of customers opted for a MINI
Cooper, more than 30 % purchased the MINI model
with the most powerful engine (the MINI Cooper S)
and almost 26 % opted for the MINI One.

Rolls-Royce Phantom is segment leader
The Rolls-Royce Phantom remains the most
successful motor vehicle in its price segment.
Customers took delivery of 805 Phantom during
2006, 1.1% more than in the previous year.

Development of the Rolls-Royce Convertible,

which will be launched in 2007, is progressing in line
with schedule. The very first Phantom Drophead
Coupé, the name by which the new model will be
known, will be handed over to its new owner in July
2007.

In September 2006, Rolls-Royce Motor Cars

announced the development of a further model
series which, in terms of both size and price, will be
positioned below the Phantom.

Deliveries of BMW diesel automobiles
in 1,000 units and as a percentage of total volume

500

450

400

350

300

250

200

units

245.9

273.7

352.5

438.3

472.7

as a percentage of
total volume

are sold in Germany. 153,940 diesel-powered
BMW cars were sold in 2006, equivalent to 59 % of
the total sales volume on this market.

Prior to the Los Angeles Auto Show, the BMW
Group announced in November that it would also
be offering diesel-powered BMW brand cars from
2008 onwards to customers in the USA, resulting in
an even higher proportion of this type of car in the
overall fleet.

Second MINI generation continues success story
The second generation of the MINI has been available
on the markets since November 2006 in the form
of the MINI Cooper and MINI Cooper S versions and
is already setting new trends.

As a result of measures aimed at increasing the

MINI production capacity and preparations for the
launch of the second generation of the MINI, avail-
ability of MINI cars was restricted over the course of
the year. On a full year basis, the sales volume of the
MINI brand therefore dropped by 6.2 %, reaching
188,077 units.

MINI brand cars in 2006 – analysis by engine and model variant
as a percentage of total MINI brand sales volume

MINI Cooper

MINI Cooper S

MINI One (including One D)

MINI Cooper Convertible

MINI Cooper S Convertible

MINI One Convertible

34.5

22.3

3.7

8.2

9.4

21.8

18 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Car production volume at all-time high level
The BMW Group manufactured a total of 1,366,838
cars in 2006, 3.3 % above the previous year’s level
and thus an all-time high.

This includes 1,179,317 BMW brand cars, 5.1%

more than in the previous year. Capacity expansion
measures at the Oxford plant resulted in a reduc-
tion in the production volume of MINI brand cars.
186,674 units were manufactured in 2006, 6.7%
fewer than in the previous year. 847 Rolls-Royce
Phantom left the Rolls-Royce plant in Goodwood in
2006, 22.4 % more than one year earlier.

Production network underlines high level of
efficiency
In 2006, the BMW Group worldwide production
network once again demonstrated its high level of
efficiency by its handling of eleven production start-
ups. The planned daily production volume was
reached within an average period of three months
following production process changeover to a new
model, thus ensuring fast availability of new products
on the market.

The BMW 3 Series Sedan and Touring models

are both manufactured at the BMW Munich plant.
Due to high demand for the BMW 3 Series Touring,
which is manufactured exclusively in Munich, daily
production of this model was increased from 450 to
530 vehicles.

It is especially worth mentioning that the inte-
grated series production of a limited edition of the
BMW 320si (2,600 units) was also carried out at
the Munich plant during 2006. Based on this special
model, BMW Motorsport GmbH went on to develop
a powerful 275 bhp racing car for the FIA World
Touring Car Championship (WTCC). Andy Priaulx of
the BMW Team UK subsequently became touring
car world champion in this competition for the second
time in succession.

In addition the assembly of V-engines at the

BMW Munich plant was completely redesigned in
2006 with a view to optimising efficiency, added-
value and flexibility. The highly flexible assembly line
enables all types of V8 and V10 engines to be con-
structed within a single cycle, as and when required.
The pilot phase of this “Vflex” line began in October
2006 and series production is due to commence in
April 2007.

At the BMW plant in Dingolfing, the new axle
drive technology centre was commissioned in April
2006. This has further strengthened the BMW
Group’s position as leader in the field of innovative
chassis and powertrain components.

Automobile production of the BMW Group by plant in 2006
in 1,000 units

Dingolfing

Regensburg

Munich

Oxford

Leipzig

Spartanburg

Rosslyn

Goodwood

286.6

269.9

114.3

31.1
0.8
54.8

196.6

186.7

Shenyang (joint venture)

Contract production Magna Steyr

105.2

120.8

Furthermore, the BMW Dingolfing plant also

saw the production start of several new models
spread over the course of 2006. In May, the produc-
tion of parts sets for the BMW 5 Series extended
version began. This vehicle is being developed ex-
clusively for the Chinese market. Series production
of the BMW M6 Convertible commenced in Sep-
tember. Shortly after that, in October, production of
the BMW M5 started, equipped with a manual gear
shift to cater to the US market. Towards the end
of the year, the BMW Hydrogen 7 went into small
series production at the Dingolfing plant.

At the BMW Regensburg plant, a one-line pro-

duction system is used to manufacture vehicles
for all of the following models: the BMW 1 Series;
the Sedan, Coupé and Convertible models of
the BMW 3 Series; and the BMW M3 Coupé and
BMW M3 Convertible.

In 2006, the main focus of attention was placed
on production start-ups for the various BMW 3 Series
models. Series production of the new BMW 3 Series
Coupé began in June, and that of the new BMW 3
Series Convertible in December. For the first time
in the history of the BMW Group, a convertible fea-
turing a retractable hardtop is being manufactured in
Regensburg. Special engineering systems and testing
procedures have been put in place in this context.

In 2006, the BMW Regensburg plant celebrated

20 years of production and marked this historic
event by opening its doors to the public at an open
day held in the summer. Since production began in
1986, more than 3.5 million BMW brand vehicles
have come off the production line at the Regensburg
plant.

Following the series production start of the
BMW 3 Series at the BMW Leipzig plant, production
volumes increased continually during 2006. By the
end of the year, more than 600 vehicles were being
manufactured each day. Halfway through 2006, the

entire plant switched to two-shift operations. In
June, the 100,000th BMW 3 Series vehicle since
series production began rolled off the production
line at the BMW Leipzig plant.

At the BMW Spartanburg plant, series pro-
duction of several new models commenced during
2006. Production of the BMW Z4 Roadster and
BMW Z4 M Roadster started at the beginning of
the year, followed by the BMW Z4 Coupé and
BMW Z4 M Coupé in April. The first “second gen-
eration” BMW X5 came off the production line in
Spartanburg in October. In order to be able to react
even more flexibly to fluctuations in demand, the
production area was modified accordingly at the be-
ginning of the year. This involved changing the pre-
vious two-line production system to a single-line,
thus allowing the number of manufactured vehicles
of any particular model to be varied even more flexi-
bly and in line with market demand. In May, the paint
shop switched its entire energy supply to methane
gas obtained from a nearby waste disposal site, thus
helping the BMW Spartanburg plant to decrease its
carbon dioxide emissions by 53,593 tons in 2006.

Since production began in 1994, more than one
million BMW vehicles have been manufactured at the
BMW Spartanburg plant. The one-millionth BMW
brand car rolled off the production line in March 2006.
The BMW Rosslyn plant in South Africa re-

ceived a special accolade in 2006. For its excellent
accomplishments in the field of logistics, it was
presented the South African “Logistics Achievers
Award” by a jury of recognised logistics experts.
Almost 54,800 units of the BMW 3 Series Sedan
were manufactured at the BMW Rosslyn plant in
2006.

The BMW Landshut plant was again able to
present itself as a reliable manufacturing site for in-
novative vehicle components made of light alloy
casting and plastics, with the focus on intelligent
construction using lightweight materials. A com-
pletely new type of plastics technology was put to
use for the first time in 2006. Specialists at the
Landshut Innovation and Technology Centre (LITZ)
developed the material for the front thermoplastic
side panels of the BMW 3 Series Coupé and Con-
vertible, enabling them, as a standard process, to
run through the painting process with the entire body
frame in spite of the high temperatures involved in
the surface finishing process. This effectively cut
out a previously necessary step in the assembly se-
quence. In addition, the component plant set a new
record in the production of cardan shafts. More than
1.3 million units left the Landshut plant, destined

for BMW plants the world over. With a view to offering
independent apprenticeship training at the Landshut
plant, one of the main focuses of attention in 2006
was the start of construction of the Apprenticeship
and Further Training Centre, with a capital expendi-
ture sum in 2006 of approximately euro 3 million.

The Shenyang plant in Northern China is oper-
ated by the distribution and production joint venture,
BMW Brilliance Automotive Ltd. The first units of
the BMW 5 Series extended-version, which has been
exclusively developed for the Chinese market, were
manufactured there in September 2006. This plant
manufactures BMW 3 and BMW 5 Series cars.
The first revised BMW X3 vehicles came off
the production line at the plant of BMW cooperation
partner Magna Steyr Fahrzeugtechnik in Graz,
Austria, in August.

The largest engine manufacturing plant in the
BMW Group is located in Steyr, Austria. More than
703,000 engines were manufactured there in 2006,
of which more than 68 % were diesel engines. The
first part of an environmentally sustainable process
and waste water concept had been commissioned
in Steyr in 2005. By the end of 2006, the waste
water connection at the BMW plant in Steyr was
closed off: in other words, production at the Steyr
plant now operates without creating any waste water
whatsoever. Using an innovative combination of
technologies, the water used in the plant’s various
production processes is purified and fed back into
the production system. This saves the Steyr plant
30 million litres of water p.a., thereby helping to con-
serve the environment.

At the Hams Hall plant, engines are manufac-
tured for both the BMW and the MINI brands. A total
of 217,434 four-cylinder petrol engines were pro-
duced at the British plant in 2006. This included
25,157 units of the new MINI engine generation,
which has been developed in cooperation with PSA
Peugeot Citroën. The other 192,277 engines were
manufactured for BMW brand cars and supplied to
the various BMW plants in Leipzig, Munich, Regens-
burg, Spartanburg and Rosslyn as well as to the
BMW cooperation partner, Magna Steyr Fahrzeug-
technik, in Austria.

MINI Production Triangle started
The series production start for the new MINI also
heralds the beginning of a new cooperation net-
work of BMW Group plants in the United Kingdom.
The BMW Group has invested almost GBP 200 mil-
lion in the MINI Production Triangle with its plants
in Hams Hall, Oxford and Swindon. In the medium

20 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

BMW Group receives Excellence Award
On 7 November, the European Foundation for Quality
Management (EFQM) presented the Excellence
Award to the BMW Group. This award is presented
in recognition of outstanding management achieve-
ments relating to the promotion of competitiveness,
employee and customer satisfaction, social respon-
sibility and, last but not least, careful use of resources.

The Chassis and Powertrain Component Pro-

duction Unit, representing the company as a whole,
entered the competition for the Excellence Award.
More than 3,000 employees from the BMW sites in
Dingolfing, Berlin, Landshut and Munich took part.
The Excellence Award is presented to compa-

nies and organisations in Europe which have
achieved a leading position internationally, not only
as a result of their technical and business achieve-
ments, but primarily because of a sustainable busi-
ness strategy, showing at least three successive
years of proven practise. One important factor here
is the rigorous pursuit of stakeholder interests – for
customers and employees just as much for share-
holders, business partners or other interested par-
ties. The BMW Group’s strategic, customer-friendly
approach and its sustainable corporate culture
based on partnership were particularly acclaimed.

term, the maximum production capacity will be
boosted by 20 % to a total of 240,000 MINI brand
cars p.a. Once full production capacity has been
reached, the number of employees working within
the Production Triangle will increase from the cur-
rent figure of 6,350 to a workforce of approximately
6,800 employees.

At the Hams Hall plant, some GBP 30 million

have been invested in the manufacture of a new
family of petrol-driven engines to power the latest
MINI. When the full production capacity of the new
MINI has been reached, the total number of BMW
and MINI engines manufactured at the Hams Hall
plant will increase in the medium term from an origi-
nal figure of 180,000 to over 300,000 units p.a.
The workforce at the engine plant will increase ac-
cordingly from 750 to at least 1,000 employees.

More than GBP 100 million has been invested in

the Oxford plant, in order to increase the maximum
production capacity from a current figure of 200,000
units to 240,000 p.a. and to equip the chassis con-
struction, paint shop and the vehicle assembly areas
with state-of the-art process technology for the
manufacture of the new MINI. When full production
capacity has been reached here, this will lead to the
creation of 200 additional jobs, bringing the total
workforce at the Oxford plant up to 4,700 employees.
The BMW Group has invested around GBP 60

million in the Swindon plant for the production of
pressed parts and the pre-assembly of chassis com-
ponents. This plant, with around 1,100 employees,
has undergone a comprehensive programme of
modernisation over the last three years and now
works with up-to-date pressing and mating tech-
nology.

Two model variants of the Phantom manufac-
tured in Goodwood
At the Rolls-Royce plant in Goodwood, England,
two variants of the Phantom are currently being
manufactured. Alongside the Sedan, a special
extended-wheelbase version is also being manu-
factured in Goodwood. From summer 2007 onwards,
the new Rolls-Royce Convertible, the Phantom
Drophead Coupé, will be added as a third model.
The planned production volume of the Phantom
Drophead Coupé for 2007 is already covered by
customer orders.

New record sales of motorcycles
For the first time in its corporate history, the BMW
Group sold more than 100,000 BMW motorcycles
in a single financial year. With a sales volume of
100,064 motorcycles in 2006, the previous year’s
figure was topped by 2.7%.The R 1200 GS Adven-
ture and the new two-cylinder models of the F-Se-
ries, which have been available since March 2006,
contributed particularly to this positive development.

Markets still performing inconsistently
As in previous years, the BMW Group’s motorcycle
business reflects diverging market developments.
In Europe, sales of BMW motorcycles totalled

73,850 units, a 2.7% increase over the previous
year. Within this total, increased sales volumes were
registered in particular for the markets of Southern
Europe. A sharp increase was registered in Spain,
where, with 10,002 motorcycles sold in 2006, the
BMW Group achieved a new sales volume record,
surpassing the previous year’s figure by 25.0 %.
13,651 motorcycles were sold in Italy, 7.5 % more
than one year earlier. Sales volumes in Greece (1,338
units, +10.2 %) and Portugal (535 units, + 32.1%)
developed positively, even though each of these mar-
kets contracted as a whole.

meant that 2.5 % fewer customers took delivery of
motorcycles than in the previous year. In the United
Kingdom, where the number of motorcycles sold
decreased by 3.9 %* to 5,213 units, the performance
should be seen against the background of an overall
contracting market.

In the USA, the Motorcycles segment was
able to repeat its previous year’s performance. With
12,825 units sold, the sales volume here was mar-
ginally higher than in the previous year (+ 0.2 %).
Overall, the American motorcycles market de-
veloped positively in 2006. However, the Cruiser and
Supersport segments, in which the BMW Group
is not currently represented, showed the best per-
formance. The increase in the number of BMW
motorcycles sold in Central and South America
was very encouraging; the sales volume for these
markets was 2,740 units, up by 24.7% on the pre-
vious year.

In Japan, the BMW Group recorded sales volume

growth in 2006 following three years of declining
figures. 2,644 BMW motorcycles were sold there,
10.1% more than in the previous year.

The sale of BMW motorcycles also developed

positively in South Africa, with 21.4 % more units
sold than one year earlier (2,682 units).

By and large, the sales volume recorded for the

*Previous year’s figure adjusted: 5,425 units (excluding Ireland)

remaining European countries failed to reach the
previous year’s level. With a sales volume of 23,617
units, the BMW Group sold 1.9 % fewer motorcycles
in Germany than in the previous year, even though
some products were purchased during the final
months of 2006 to avoid the forthcoming increase
in value added tax. With a market share of 18.5 %,
the BMW Group was nevertheless able to defend
its position as market leader in Germany, where the
market has now been in decline for seven consecu-
tive years. In France, the sales volume of 7,701 units

R 1200 GS continues to be the BMW Group’s
best-selling motorcycle
In 2006, the BMW R 1200 GS again headed the
list of top-selling BMW motorcycles. Including
the Adventure version, 31,138 units of this large,
long-distance enduro were delivered to customers.
The Motorcycles segment has never before sold
as many units of one model in a single year.

Second on the sales volume list for 2006, with
13,384 units, came the R 1200 RT, a large long-dis-

BMW motorcycles delivered
in 1,000 units

BMW Group – key motorcycle markets 2006
as a percentage of sales volume

100

92.6

93.0

92.3

97.5

100.1

Deutschland

Italy

USA

Spain

France

United Kingdom

Other

23.6

13.6

12.8

10.0

27.1

7.7

5.2

exclusive HP (High Performance) range of the Motor-
cycles segment.

Motorcycle production well ahead of previous
year’s volume
For the first time in its corporate history, the BMW
Group manufactured more than 100,000 BMW mo-
torcycles in a single financial year. Of the 103,759
BMW motorcycles produced in 2006 (+12.8 % com-
pared to the previous year), 101,352 units were
manufactured at the BMW Berlin plant, also a new
record for that plant. Furthermore, since September
2006, BMW motorcycles for the new G 650 X
single-cylinder series are being manufactured by
Piaggio S.p.A. in Noale, Italy. During the year under
report, 2,407 units came off the production line
there.

22 Group Management Report

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10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

tance tourer, followed by the F 650 GS which, de-
spite nearing the end of its model-life cycle, never-
theless took third position. Including the Dakar
version, 12,511 units of this enduro were handed
over to customers.

Model initiative continued
The Motorcycles segment’s performance in 2006
was positively influenced by the continuation of its
model initiative. Two new BMW motorcycles – the
long-distance enduro R 1200 GS Adventure and
the sporty long-distance K 1200 GT Tourer – were
launched in the first quarter 2006, followed in the
second quarter by the R 1200 S Sport Boxer and
the new, sporty F 800 S. Following the market intro-
duction of the R 1200 R Roadster in September,
the whole range of the Boxer model series is now
available on the markets. The F 800 ST Sport Tourer,
designed more as a touring bike based on the
F 800 S, also followed in September. Alongside the
well-established single-cylinder, boxer and four-
cylinder models, these new motorcycles enhance
BMW’s motorcycle range within the highly competi-
tive middle class with an in-line twin engine.

The Motorcycles segment will again continue
its model initiative in 2007. The first new models to
come onto the market in 2007 were presented
back in October 2006 at the world’s largest motor-
cycle fair, INTERMOT, in Cologne.The BMW Group
presented a completely new single-cylinder model
range at that fair. The G 650 Xcountry Scrambler,
the G 650 Xchallenge Hard-Enduro and the
G 650 Xmoto Streetmoto are all based on the
same underlying technology, yet are each com-
pletely different in character. In addition, the K model
range has been expanded by the K 1200 R Sport
version, which is equipped with a sporty and
dynamic fairing. In addition, the HP2 Megamoto
(based on the HP2 Enduro) will compliment the

BMW motorcycles in 2006 – analysis by series
as a percentage of sales volume

R Series

F Series

K Series

60.3

18.6

21.1

Financial Services segment completes
successful year
The Financial Services segment continued to grow
profitably in 2006, again making an important con-
tribution to the overall performance of the BMW
Group. The business volume of the segment in bal-
ance sheet terms rose by 8.9 % to euro 44,010 mil-
lion. Adjusted for exchange rate impact, the increase
would have been as much as 14.4 %. At the year-
end, 2,270,528 lease and financing contracts were
in place with dealers and retail customers, equivalent
to a growth of 8.8 % in comparison with one year
earlier. The proportion of new cars of the BMW Group
leased or financed by the Financial Services seg-
ment was 42.4 %, 1.3 percentage points above the
proportion recorded in 2005.

Regional expansion continuing
The business activities of the Financial Services seg-
ment were further expanded over the course of 2006
with four new ventures based on cooperation agree-
ments in Bulgaria, Kuwait, Romania and Slovenia.
In addition, a newly founded unit started opera-
tions in Greece, offering financing services to retail
customers and dealers. In total, the Financial Ser-
vices segment looks after customers in more than
50 markets, either with its own companies or in
the form of ventures based on cooperation agree-
ments.

Retail customer business again up on the
previous year
Finance and leasing business with retail customers,
the segment’s largest line of business, was also ex-
panded in 2006. In total, new contracts were signed
with retail customers with the value of euro 24,449
million, representing a 4.0 % increase over the pre-
vious year. This corresponds to 916,005 new con-
tracts, or 5.7% more than in 2005. Approximately

63 % of these contracts related to new vehicles
manufactured by the BMW Group.

The increase in the number of new contracts
was attributable to credit financing (+ 7.3 %) and
leasing (+ 3.1%). At 31 December 2006, leases
accounted for 37.4 % of all new retail customer con-
tracts, roughly maintaining the level of the previous
year.

In the area of used car financing, the number

of new contracts increased by 3.1%. Most of these
were related to the credit financing of used BMW
and MINI brand cars.

The number of contracts in place with retail
customers at the year-end rose to 2,076,312 units,
9.3 % above the previous year’s figure. Growth was
recorded in all regions. The portfolio of retail cus-
tomer business contracts was up by 4.4 % in Ger-
many, by 15.1% in the remaining European markets
and by 10.7% for the markets in the Asia/Oceania/
Africa region. The largest proportion of the world-
wide contract portfolio again related to the Americas
region; the number of contracts there increased by
8.0 % to a total of 681,623 units.

Multiple-brand financing on growth course
The multiple-brand financing line of business con-
tinued to make good progress in 2006. In the mean-
time, credit financing and leasing are being marketed
under the brand name “Alphera” in as many as 21
countries, either via multiple-brand dealerships or
directly by group companies.

On the one hand, the year under report was
influenced by geographical expansion, including
within the USA. In addition, organisational structures
and IT systems were enhanced at the level of the
group’s national companies, thus laying the founda-
tion for further growth. Compared to the previous
year, new business grew by a very pleasing 17.8 %
in 2006 to more than 60,000 contracts.

Contract portfolio of BMW Group Financial Services
in 1,000 units

Contract portfolio retail customer financing of
BMW Group Financial Services 2006
as a percentage by region

2,400

2,200

2,000

1,800

1,600

1,400

1,200

America

Rest of Europe

Germany

Asia/Oceania/Africa

32.8

28.4

1,443

1,623

1,843

2,087

2,271

13.2

25.6

24 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Continued growth in the area of dealer
financing
The total volume of dealer financing contracts man-
aged by the Financial Services segment stabilised
at a high level in 2006. The total volume of dealer
financing at 31 December 2006 amounted to euro
7,246 million, with more than 194,000 contracts in
place at that date. This represents a volume in-
crease of 2.3 % compared to one year earlier. New
areas of growth were opened up during the year
under report by increasing geographical coverage
and by expanding the range of dealer financing
products offered to multiple-brand dealers. These
areas represent significant potential growth factors
for the future.

Fleet business remains on growth course
The BMW Group brand-neutral fleet business, which
offers its services on the markets under the name
Alphabet, operates in the fields of financing, full-
service leasing and fleet management.

Despite greater competition in this area, the
pace of growth achieved in the previous year was
maintained. In this vein, Alphabet achieved an im-
portant milestone in the second quarter of 2006,
topping the figure of 150,000 contracts. At the year-
end, 13 Alphabet companies were managing a total
portfolio of 179,884 contracts. This represents an
increase of 29.9 % over the year, with the previous
year’s level being surpassed in all markets.

In December 2006, the BMW Group signed a

contract to acquire LHS Leasing- und Handels-
gesellschaft mbH and DSL Fleetservices GmbH.
The acquisition is still subject to approval by the
EU antitrust authorities and had not been completed
by the reporting date. With the purchase of these
two companies, Alphabet would move into the top
ten companies of its kind in Europe and its portfolio
would grow to over 230,000 contracts.

Continued growth in the area of insurance
business
In addition to credit financing and lease contracts,
the Financial Services segment also operates as an
agent for motor vehicle, residual liability and other
vehicle-related insurance policies via cooperations
with local insurance companies. This service is now
being offered in more than 30 markets. In 2006,
several new products were brought onto the market
in a number of countries, including Switzerland,

Hungary and Russia. On top of this, the range of
products on offer in existing markets was also ex-
panded. The motor vehicle insurance line of busi-
ness continued to perform strongly in 2006, reflected
in a 17.1% increase in new business. At the end of
2006, the segment had a worldwide portfolio of
603,939 insurance contracts, a figure 39.8 % higher
than one year earlier.

Deposit business influenced by increased
competition
The Financial Services segment is currently engaged
in deposit business in Germany, the United Kingdom
and the USA (in the latter via brokers). Since the be-
ginning of 2006, the segment has been conducting
deposit business in the United Kingdom in con-
junction with a cooperation agreement with the
Newcastle Building Society.

The Financial Services segment derives great
benefit from the first-class credit ratings of its financ-
ing companies. In June 2006, for example, Moody’s
Investors Service issued an A1 and Prime-1 rating
to the BMW Bank of North America (USA) for its short-
term and long-term deposits, reflecting its above-
average profitability and solid capital resources.

In the face of greater competition, the segment’s

deposit volume worldwide was 9.6 % lower than
one year earlier, totalling euro 5,781 million at 31 De-
cember 2006. The total deposit volume includes
approximately euro 1,200 million of deposits bro-
kered by agents in the USA.

The objective of encouraging deposit cus-

tomers to move into more diversified forms of in-
vestment is successfully being realised with the help
of the tried and tested product combination of
“Save & Invest” as well as with the new savings mod-
el “Save & Plan”. This model allows wealth to be built
up on a long-term basis by regular savings which are
split between a savings account and a fund invest-
ment.

In the investment funds business, the range of

funds on offer was expanded by the addition of several
attractive investment funds over the course of the
year. Furthermore, Express Certificates were also
offered for the first time. Despite the overall positive
development of the stock markets, investors in Ger-
many withdrew funds, resulting in the net cash inflow
for investment funds in 2006 falling by 10.5 % to euro
84 million. By the year-end, the number of customer
deposit accounts had increased by 10.3 % to 30,011.

The credit card business continued to grow
strongly and was expanded further in 2006. At 31
December 2006, 339,824 customers owned a BMW
or MINI Card, 16.5 % more than at the end of 2005.

The BMW Card was introduced in the United
Arab Emirates and in Bahrain in June 2006 and was
already available in Australia, Germany, the United
Kingdom, Japan, New Zealand, Austria, Spain,
Thailand and the USA. As part of the expansion of
banking activities, the MINI Card has also been avail-
able since mid-2006 in the USA and the United
Kingdom (previously only in Germany and Japan).

Balanced risk situation
During the financial year 2006, the credit risk for
credit and lease financing activities was at a similar
level to the previous year. Bad debts increased
slightly by 4 basis points to 0.41%. The interest rate
risk is managed using a risk-return approach. Di-
versified value-at-risk, as measured by the Financial
Services segment to quantify the interest rate risk*,
decreased from euro 44.2 million to euro 34.9 million.

*based on a 99 % confidence level and a holding period of 10 days

Softlab: premium advice from a single provider
The Softlab Group operates in the IT consultancy
services market, working with its customers’ systems
along the whole value-added chain from process
consultancy, the implementation of tailored IT solu-
tions through to their operation. Strategic acquisi-
tions made by the Softlab Group in recent years have
contributed to this development. In 2006, it took
over F.A.S.T. Gesellschaft für angewandte Software-
technologie mbH, Munich, thus enabling it to
strengthen its market position, particularly in the
field of consulting.

Slight increase in workforce
The BMW Group’s workforce increased by 777 em-
ployees (+ 0.7%) during the financial year 2006 to
reach 106,575 employees at 31 December 2006.
Approximately 75 % of the workforce is employed in
Germany, where the number of employees remained
practically unchanged.

The employee fluctuation rate at BMW AG has

been low for many years, both in comparison with
other car manufacturers and other sectors.

The BMW Group recruits staff continuously on
a targeted basis in order to compensate for fluctua-
tion. In 2006, for example, in addition to more than
1,200 newly filled apprenticeship positions, 664 posts
were also advertised and filled externally.

Number of apprenticeship positions remains
at high level
1,207 young people commenced their training with
the BMW Group at the start of the training year. In
total, the BMW Group employed 4,359 apprentices
at the year-end, 2.4 % fewer than one year earlier.
The slight reduction was partly due to the earlier
final examination dates for some apprentices. These
vacated positions will not be replaced until the next
recruitment round. For this reason, the apprentice
ratio in Germany (i.e. the ratio of apprentices to the
total workforce) fell by 0.1 percentage points in 2006
to a level of 4.9 %.

Starter programmes for high school leavers and

university graduates are also in place to complement
the range of opportunities available to those about
to start their careers at the BMW Group.

Further training tailored to suit requirements
Both primary and further training of employees are
especially significant for a premium manufacturer
like the BMW Group in order to maintain high quality

BMW Group apprentices at 31 December

5,500

5,000

4,500

4,000

3,500

3,000

2,500

4,199

4,306

4,464

4,359

26 Group Management Report

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10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

BMW Group employees

Automobiles

Motorcycles

Financial Services

Other

thereof consultancy/software

BMW Group

unadjusted*

* Figure for end of previous year including acquired entities

31.12. 2006

31.12. 2005

Change
in %

98,505

98,260

2,782

3,478

1,810

1,743

2,838

3,093

1,607

1,541

106,575

105,798

106,174

0.2

– 2.0

12.4

12.6

13.1

0.7

0.4

standards for all processes. Training activities are
always planned and implemented in line with require-
ments. During the financial year 2006, the BMW
Group invested euro 184 million in primary and fur-
ther training for its employees, 5.2 % less than in
the previous year, whereby the reduction was attrib-
utable to a realignment of training measures.

High demand for international positions
The transfer of know-how across borders and net-
working at all levels are crucial factors for busi-
nesses with international operations such as the
BMW Group. As an example, specialists are moved
around between the individual production sites as
production start-ups commence for new models,
thus ensuring the same high quality during each
individual start-up. The sales companies located in
39 countries around the world also cooperate closely
with the corporate headquarters in Munich.

In 2006, more than 800 employees from
BMW AG were working at locations outside Germany.
The main target countries were the group’s busi-
ness locations in markets currently experiencing
dynamic growth, in particular North America, the

Employee fluctuation ratio BMW AG*
as a percentage of workforce

3.5

3.0

2.5

2.0

1.5

1.0

0.5

1.40

1.43

1.91

2.45

2.68

* Number of employees on unlimited employment contracts leaving the company

United Kingdom and Asia. Apart from this, approxi-
mately 200 employees from non-German locations
were working in Germany or at another international
location away from their home countries. In the case
of longer-term projects, employees remain abroad
for an average period of three years. This represents
a suitable time scale in which employees can pass
on process and technical know-how, receive further
training while abroad and, at the same time, gain in-
ternational experience which will stand them in good
stead during the subsequent course of their careers.
Apart from more than 1,000 employees who have
worked abroad for longer periods, more than 400
employees were called up for international duty on a
short-term basis.

Attractive employer
The BMW Group remains one of the most attractive
enterprises to work for. This was again confirmed
in 2006 by numerous studies and rankings. In the
study “Germany’s Most Popular Employers” (Tren-
dence), young academics from both the business
and engineering fields chose the BMW Group for
the fifth time in a row as the most popular employer.
At a European level, the BMW Group was also voted
the most popular employer by engineers in the
study “The European Student Barometer 2006”.
The good reputation of the BMW Group as an em-
ployer is an important factor in being able to attract
outstanding talent to work for it. This high level of
attractiveness as an employer is not only restricted
to external aspects; it is also reflected in the out-
come of the most recent employee survey from the
year 2005. 92.6 % of employees stated that they
were either satisfied or very satisfied with their work
at the BMW Group. Employee satisfaction was
measured on the basis of a total of 16 questions.

The outcome of the survey was that the high level
of satisfied employees (91.1%) registered in the
previous survey made in 2002, was once again sur-
passed.

Joint agreement for blue-collar and white-
collar staff
As part of the ERA (Entgelt Rahmenabkommen/
Remuneration Framework Agreement) collective
bargaining tariff agreement signed at the end of
2005, companies affiliated to the Bavarian metal and
electrical industry gave a commitment to implement
ERA within four years. This new collective bargaining
agreement creates a uniform remuneration system,
removing the outdated distinction between blue-
collar and white-collar staff. Under ERA, twelve re-
muneration groups and uniform performance evalua-
tion systems will apply for all of BMW AG’s German
sites, for which the metal and electrical industry
collective bargaining agreement is valid, as well as
for sites within the collective bargaining regions of
Saxony and Berlin (excluding sales branches).

A significant element of the arrangements, an-
chored in agreements between the General Works
Council and corporate management which go
beyond ERA, is the basic understanding that retire-
ment models will still be made available to employees
after 2009 (when state support of early retirement
part-time working arrangements in Germany is
expected to come to an end). In the light of demo-
graphic developments, company agreements of
this kind are becoming increasingly significant. In a
similar vein, a voluntary company agreement was
concluded concerning the BMW Additional Pension
(AVWL). On the basis of this agreement (as stipulated
in the collective bargaining tariff agreement), a
pension-related payment of euro 319.08 p.a. (euro
159.48 p.a. for apprentices) is to be transferred in
future to individual savings accounts for all employees
to whom the tariff agreement applies.

"Excellence in Human Resources" (EHR)
programme continued
Following the introduction of new IT core systems
and the employee portal “MyNetwork”, which is
currently used by approximately 80,000 employees,
the BMW Group is pushing ahead with the EHR pro-
gramme, with the aim of further increasing the effi-
ciency of activities related to human resources work.
Since the commencement of the project in 2005,
this has involved analysing and redesigning all major

processes and, where necessary, implementing ap-
propriate IT systems to support this. The objective
is to ensure that employees receive efficient service
and competent advice from members of the human
resources department and a swift response to their
enquiries. At the same time, it provides more sup-
port to management to deal with personnel-related
issues and find appropriate solutions to department-
specific problems.

The Human Resources department rolled out

new business processes at all German sites, includ-
ing providing access to the channels “Personnel
Direct” and “Personnel Management”. The objective
of the new business processes is to lend personnel
support to both employees and senior management
staff even more efficiently and directly and with an
even greater degree of expertise than before.The new
business model is constructed around the uniform
access channels mentioned above, each of which
clearly distinguishes between the range of tasks
relevant for senior management and employees.The
new business model allows the Human Resources
department to provide better quality information re-
garding personnel and strategic matters to the various
business departments that require such information.
It also allows enquiries from employees to be
processed more efficiently by applying standardised
processes and “bundling” certain topics for spe-
cialists. One further advantage of “Personnel
Direct” is that Human Resources department staff
can be reached under one single number through-
out Germany.

“Today for Tomorrow” project – taking a
pro-active approach to demographic realities
The ageing population in many industrial countries,
and in particular in Germany, also has an impact on
business as a whole as well as on each individual
company. Within an ageing society, companies which
are able to improve their workforce’s skills and then
put those skills and know-how to best use will be
at a distinct advantage. The BMW Group is imple-
menting this by means of an all-embracing project
which has been given the title “Today for Tomorrow”.
The objective is to exploit the continual demographic
change as an opportunity for the business.

The project’s five main areas of emphasis are:
– the creation of a working environment for the future
Workplaces are continuously improved in ergo-
nomic terms, in order to avoid physical strain and
damage as far as possible. In the production area,

28 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

this can, for example, be achieved by using rotary
sling technology and creating height-adjustable
workstations.

– health-care management and prevention

The BMW Group promotes the good health of its
workforce by installing fitness centres and making
fitness courses available at almost all of its produc-
tion sites, by encouraging health-care measures
for specific target groups and by providing exten-
sive medical facilities. In 2006, Health-Care Days
were held at both the Munich and the Leipzig
plants. The new concept behind this project is
to help to identify health risks, to put targeted fol-
low-up measures in place and to promote a bet-
ter awareness of good health. Some 8,000 em-
ployees participated in these health-care days
and plans are now underway to do the same at
other locations in 2007.

– training and expertise management

Lifetime learning has always had a big role to play
at the BMW Group. The company’s future know-
how requirements are quantified at an early stage
with the aid of qualitative personnel planning.
Work-based methods of learning, which closely
link material learned to occupational activities, will
be encouraged even more in the future. This so-
called “Project Camp” method of learning encour-
ages the transfer of know-how between young
employees on the one hand and experienced em-
ployees on the other, and actively gets the best
out of inter-generational learning.

– individual employee working lifetime models

The aim is to be in a position in which the BMW
Group can offer its employees retirement pro-
grammes which meet the needs of both employee
and employer. Financial scope has already been
created in this area by reallocating parts of the profit
share scheme.
– communication

Information should be communicated in such a
way as to make both senior management and
employees more aware of changes affecting
society and business. As part of the process of
encouraging each individual to take responsibility
for future provisions for health and retirement
needs, the BMW Group launched the electronic
portal “My Future Provision” on its intranet.

High standards for environmental protection
High environmental and quality standards are main-
tained at all BMW Group sites. This was borne out
once again in December 2006 when the certifica-
tion audit of the production function, in accordance
with DIN EN ISO 9001 and DIN EN ISO 14001 re-
spectively, was successfully concluded. The audit
was again conducted using a matrix approach, in
which each manufacturing site is audited on a three-
year cycle. Central functions of the production area
and control functions within the management system
are both subject to annual scrutiny. Furthermore, at
the beginning of 2006, system operations in the
Research and Innovation Centre were successfully
validated in accordance with the European Eco-
Management and Audit Scheme, EMAS II. Specialist
external auditors (the German TÜV organisation)
confirmed a very high standard in terms of quality
and environmental performance, highlighting several
processes as exemplary.

The BMW Group follows a concept of preventa-

tive environmental protection and is committed to
the efficient management of resources. This is evi-
dent from a number of key figures. Over the last ten
years, for example, energy consumption has been
reduced by more than 26 % and CO2 emissions by
approximately 24 %. Apart from using natural gas,
district-wide heating and combined heat and power
generation technologies, a number of innovative
energy projects which have been implemented at the
various BMW Group sites are also making a signifi-
cant contribution to this reduction. The use of the
groundwater cooling system enables the BMW Group
to air-condition parts of the Research and Innovation
Centre using near-surface groundwater from drains
for the underground railway. This reduces CO2
emissions by approximately 5,000 tons a year. This
groundwater cooling project was awarded the
Bavarian Energy Prize in May 2006.

The BMW Spartanburg plant in the USA meets

more than half of its energy requirements through
the use of methane gas obtained from a nearby waste
landfill site. This helped to reduce CO2 emissions
by 53,593 tons in 2006. The U.S. Environmental
Protection Agency (EPA) honoured the BMW Spar-
tanburg plant and system supplier Dürr with the
“Energy Partner of the Year”award.

A further contribution towards reducing energy
usage is an integrated painting process used at the
MINI plant in Oxford. This process, which was intro-
duced in May 2006, reduces the number of coats

of paint necessary from four to three. The primer
coat application and oven stage has now been
integrated into one of two newly developed base
coats. This also enabled the use of solvents per
vehicle to be reduced by 1.4 % compared with the
previous year. Through innovative use of water-
based and powder-based clear coating technologies,
the BMW Group has been able to reduce emissions
of solvents by more than 50 % over the last ten years.

During the last five years, the BMW Group has

also succeeded in significantly reducing the amount
of waste water created. Since 1996, the amount of
processing water required per manufactured vehicle
has gone down by 47%, partly as a result of the
continuous development of circulation systems at
all BMW Group sites. The BMW engine plant in
Steyr reached a major milestone in the area of effi-
cient waste water treatment and circulation systems
at the end of 2006. Using an innovative combination
of membrane technologies, the water used in the
plant’s production processes is purified and fed
back into the production system. This made it
possible to close off the production’s waste water
connection at the end of 2006. The use of this tech-
nology will lead to a saving of 30 million litres of
water p.a. in the future.

Implementation of the EU End-of-Life Vehicles
Directive
Over the last few years, a network of recovery centres
for end-of-life vehicles has been set up in the coun-
tries of the European Union. Since 1 January 2007,
customers in the EU have been able to return their
BMW, MINI or Rolls-Royce vehicles to these recovery
centres to be recycled free of charge. During 2006,
the number of recovery centres taking back BMW
Group end-of-life vehicles increased by 23 %. The
establishment of a comprehensive recovery and
recycling infrastructure in the Eastern European EU

countries involved considerable efforts because of
the short space of time between implementation of
regulations into national law and having to demon-
strate that a comprehensive network was in place.
This is also due to the fact that the necessary re-
cycling infrastructure had previously been extremely
limited.

All BMW Group vehicles are already optimised

at the development phase with a view to sub-
sequent recycling. For example, all components
through which liquids will flow are designed in such
a way that operating liquids, such as oil, fuel, brake
fluid and coolant can be emptied quickly and easily.
All pyrotechnical components within the vehicle
(airbags, seat belt tensioners, safety battery termi-
nals, etc.) are designed so that they can be released
by means of a central connector, thus simplifying
the recycling process and saving time. Moreover,
many components built into BMW Group vehicles
are made with materials derived from recycled parts.
This saves valuable resources and conserves the
environment.

Environment-friendly transportation solutions
The BMW Group’s environmental care activities
also cover logistics. The aim is to reduce the volume
of pollutants which are emitted along the entire
chain, from the procurement of materials, supply
lines between locations, right up to the final delivery
of the vehicle to the customer. The BMW Group
therefore focuses on more ecologically sound trans-
portation methods, such as ship and rail. In 2006,
for example, 32 % of over-land transportation was
accomplished by rail, thereby maintaining the high
level attained in 2005.

Logistics experts within the BMW Group are
also working on a project to reduce the use of wax or
adhesive foils currently employed to protect the
outside surfaces of vehicles. In total, approximately

Volatile organic compounds (VOC) per unit produced
(kg /unit)

Process effluent per manufactured car
(m3/unit)

3.25

3.00

2.75

2.50

2.25

2.00

1.00

0.90

0.80

0.70

0.60

0.50

3.23

2.88

2.26

2.07

2.04

0.92

0.98

0.83

0.76

0.67

* Variance to reported figures from previous years due to larger basis of data

30 Group Management Report

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15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

53 % of vehicles were delivered without protection
in 2006, compared with 42 % in the previous year.
The detrimental impact of protecting outside surfaces
was therefore significantly reduced.

The BMW Group long-term energy strategy –
innovation for lower fuel consumption
The BMW Group supports the Kyoto targets and
has been working intensively for years to reduce its
fleet’s fuel consumption. The energy strategy pur-
sued by the BMW Group is sub-divided into three
steps. In the short and medium term, the fuel con-
sumption of vehicles will be reduced by new, highly
efficient engine generations, active aerodynamics,
the use of innovative lightweight materials and intel-
ligent energy management within the vehicle. For
the BMW Group, all of these activities fall under the
concept of BMW EfficientDynamics. In the medium
term, the BMW Group is working on achieving addi-
tional consumption benefits through various meas-
ures such as increasing the electrification of the
drivetrain and hybridisation. From the BMW Group’s
perspective, the most sustainable technology in
the long-term is the use of hydrogen in the combus-
tion engine, since hydrogen can be produced from
various regenerative energy sources with practically
no CO2 emission. In November 2006, the BMW
Group presented the BMW Hydrogen 7, based on
the BMW 7 Series, the first hydrogen-powered vehi-
cle to be offered in the premium segment.

Good progress made towards reducing fleet
consumption
In recent years the BMW Group has made good
progress in reducing the fuel consumption level of
its fleet. In accordance with the agreement made
by the German Automobile Industry (VDA) to reduce
fleet consumption by 25 % in the period from 1990
to 2005, the BMW Group has contributed significantly

to this commitment by reducing its fleet consump-
tion by almost 30 %. The BMW Group is also making
an active contribution towards fulfilling the voluntary
commitment given by the European Automobile
Manufacturers (ACEA) to the EU Commission. This
voluntary commitment envisages a 25 % reduction
in CO2 emissions over the period 1995 to 2008. This
means that the European fleet average for passenger
cars should be reduced to 140 gram per kilometre
driven by the year 2008.

The extent to which engineers within the BMW
Group have achieved fuel consumption reductions
in recent years can be demonstrated by a com-
parison of the enterprise’s best-selling models, the
BMW 3 Series and the BMW 5 Series, over four
model cycles.

The new BMW 525i requires 33 % less fuel

than the BMW 525i from the model year 1982.
The toxicity of emissions has been reduced by 95 %
over the period. At the same time, the BMW 525i
from the model year 2007 with 160 kW generates
approximately 45 % more power than the equivalent
model from 1982. These substantial improvements
were achieved despite the fact that much higher
level of safety and comfort requirements now in
place make the new BMW 525i 16 % heavier than
the equivalent model from 1982.

There has also been a significant reduction in

fuel consumption for the BMW 3 Series Sedan
when compared over four generations. Compared to
the fuel consumption of the BMW 320i from the
model year 1983, the consumption level of the cur-
rent BMW 320i is almost 23 % lower.

EfficientDynamics
Through its EfficientDynamics concept, the BMW
Group is continually generating fuel consumption
reductions with the aim of offering the most efficient
vehicle in each relevant premium segment. Measures

Energy consumed per unit produced
in MWh

CO2 emissions per unit produced
in tons

3.75

3.50

3.25

3.00

2.75

2.50

1.15

1.10

1.05

1.00

0.95

0.90

3.21

2.94

2.90

0.98

1.00

0.94

0.99

0.94

*Variance to reported figures from previous years due to larger basis of data

* The increase is attributable to a change in the energy mix.
** Variance to reported figures from previous years due to larger basis of data

Efficiency improvement of the BMW 525i1]
(Index = BMW 525i model year 1982, compared with the BMW 525i available from spring 2007)

Difference in %

–100

– 75

– 50

– 25

+ 25

+ 50

+ 75

+100

Power

Torque

Weight 2]

Drag

Exhaust gas emissions 3]

– 95

Fuel consumption 4]

– 18

– 33

+ 45

+ 26

+ 16

BMW 525i (1982)

BMW 525i (2007)

110 kW

215 Nm

1,365 kg

0.74 m2

ECE R15-04

11.1 l /100 km

160 kW

270 Nm

1,585 kg

0.61 m2

EU 4

7.4 l /100 km

1] Sedan, manual transmission (1982: five-gear economy transmission)
here have been adjusted to the new measurement method valid in the EU (unladen weight including 75 kg for driver and luggage).
exhaust gas emissions (CO, HC, NOx) by 90 – 95 %, in line with the currently valid Euro-4 norm.
using the DIN-1/3-Mix method (until 1996). The value shown here has been adjusted to the currently valid New European Driving Cycle.

4] Combined EU fuel consumption. In 1982, consumption was calculated

3] Reduction of statutorily restricted

2] In 1982, weight was given as a DIN (= German Industry Norm) unladen weight. The values shown

Efficiency improvement of the BMW 320i1]
(Index = BMW 320i model year 1983, compared with the BMW 320i)

Difference in %

–100

– 75

– 50

– 25

+ 25

+ 50

+ 75

+100

Power

Torque

Weight 2]

Drag

Exhaust gas emissions 3]

– 95

Fuel consumption 4]

– 19

– 23

+ 20

+ 18

+ 28

BMW 320i (1983)

BMW 320i (2006)

92 kW

170 Nm

1,125 kg

0.73 m2

ECE R15-04

9.6 l /100 km

110 kW

200 Nm

1,435 kg

0.59 m2

EU 4

7.4 l /100 km

1] Sedan, manual transmission.
in the EU (unladen weight including 75 kg for driver and luggage).
currently valid Euro-4 norm.
adjusted to the currently valid New European Driving Cycle.

2] In 1982, weight was given as a DIN unladen weight. The values shown here have been adjusted to the new measurement method valid

3] Reduction of statutorily restricted exhaust gas emissions (CO, HC, NOx) by 90 – 95 %, in line with the

4] Combined EU fuel consumption. Consumption was measured until 1996 using the DIN-1/3-Mix method. The value shown here has been

Efficiency improvement of the BMW 118i revised model 1]
(Index = BMW 118i model year 2004, compared with the 118i available from spring 2007)

Difference in %

–100

– 75

– 50

– 25

+ 25

+ 50

+ 75

+100

Power

Torque

Weight

Drag

Exhaust gas emissions

Fuel consumption 2]

+ 10

+ 5

+ 2

– 3

– 19

1] manual transmission

2] Combined EU fuel consumption

BMW 118i (2004)

BMW 118i (2007)

95 kW

180 Nm

1,325 kg

0.65 m2

EU 4

105 kW

190 Nm

1,350 kg

0.63 m2

EU 4

7.3 l /100 km

5.9 l /100 km

Fuel consumption of BMW Group cars according to VDA commitment
(Index: 1990 = 100; Basis: fleet consumption of newly registered cars in Germany measured on the basis of the New European Driving Cycle in accordance with
the VDA commitment for passenger/estate cars*)

100

100.0

97.5

90.9

89.3

85.8

83.7

86.3

87.3

85.6

82.1

79.6

77.3

74.3

74.0

70.7

69.4

* The adoption of the uniform VDA computation method for the various DIN-1/3-Mix measurement methods (used up to 1996) and the New European Driving Cycle (used from
1997 onwards) gives rise to minor discrepancies compared to earlier BMW Group Annual Reports.

32 Group Management Report

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12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

taken to improve EfficientDynamics contribute to
further reductions in fuel consumption and vehicle
emissions, simultaneously enhancing both dynamics
and performance. BMW Group’s engineers consider
all potential areas for optimising a vehicle, including
improved aerodynamics, more efficient engine tech-
nologies, lightweight construction through to a com-
prehensive system of energy and heat management
within the vehicle. The BMW Group endeavours to
make any new fuel consumption reducing technolo-
gies available to as many customers as possible, as
soon as possible. This is seen as the only way to
achieve ecological progress for the fleet as a whole.
The new “High Precision Injection” petrol injection
technology gives the BMW Group the world’s first
jet-guided direct fuel injection system suitable for
large-scale serial production and actually provides a
practical solution for reducing consumption using
a lean operation approach in ways which other tech-
nologies have been unable to exploit. In spring 2007,
this technology will be introduced to the four-cylin-
der Otto engines of the BMW 1 Series and the six-
cylinder Otto engines of the BMW 5 Series.

In addition, the BMW Group will successively
introduce the Auto Start/Stop Function feature to
their range of models, starting with the BMW 1 Se-
ries. This innovation automatically switches off the
engine as soon as the vehicle stops moving and
starts it again extremely quickly as soon as the driver
wishes to continue the journey. This technology can
help to save a great deal of fuel, especially in urban
stop-and-go driving conditions.

The Brake Energy Regeneration system will

also increase efficiency. Beginning in spring 2007,
this technology will be included in all BMW 1 Series
and 5 Series vehicles and will then be successively
integrated into an increasing number of other models
as they come onto the market. Electrical energy is
then only produced for the vehicle’s on-board elec-
trical system during the engine’s run-over and braking
phases. The Brake Energy Regeneration system
offers two practical benefits. Firstly, it reduces fuel
consumption significantly. Secondly, the driver bene-
fits directly from the fact that the alternator is decou-
pled during load phases. Since no electricity is pro-
duced during this phase, more thrust is available to
the driver when accelerating. This not only makes
the vehicle more economical to run, but also gives a
more dynamic drive.

The optimum shift point was made ready for

series production in 2006 and, from spring 2007
onwards, will also be successively introduced into
volume models. The engine’s electronics system
calculates the optimum moment to change gear in
terms of fuel economy, dependent of the actual
driving situation. A shift point indicator on the instru-
ment panel – an illuminated arrow symbol which also
indicates the optimum gear to change to – prompts
the driver to change gear at the ideal moment.

The potential offered by these EfficientDynamics

measures is evident when looking at the fuel con-
sumption figures of the revised BMW 1 Series, which
will become available on the markets from spring
2007 onwards. Improved fuel economy in the new
BMW 1 Series models is achieved by the use of
new lean operation engines and the Auto Start /
Stop function. This saves around 14% of fuel in
the 120i and around 19 % in the 118i. The revised
models of the 118d and 120d diesel-engine vehicles
also require around 15 % less fuel than their prede-
cessors. In this way, the BMW Group is making a
significant contribution to lowering fleet fuel con-
sumption within the context of the voluntary ACEA
commitment.

Electrification of the powertrain continues to
make progress
The BMW Group is also working on a hybrid version
of the powertrain for its high-performance models.
In cooperation with General Motors and Daimler-
Chrysler, the BMW Group is working on the develop-
ment of a “Two-Mode” hybrid drive-system capable
of reducing fuel consumption by up to 20 %. The
new system offers for the first time an increase in
efficiency and performance, both for urban driving
and on highways.

A “Two-Mode” hybrid drive system of this type

was presented by the cooperation partners at the
Engine Symposium in Vienna in April 2006. This is
a fully integrated combination of electric motors and
a fixed-ratio transmission system.

General Motors, DaimlerChrysler and the BMW

Group are developing this hybrid system with a
view to reducing the volume of power transmitted
through the less efficient electrical section of the
system. This makes it possible to use smaller electric
motors, thereby reducing power loss in the drive
system.

The new concept will be used initially in rear-

wheel drive vehicles. The objective of this partner-
ship is the joint development of the key technical
components for hybrid vehicles of the future. As a
consequence of these cooperation arrangements,
the BMW Group expects to minimise series develop-
ment times considerably, achieve higher market
maturity, larger volumes and faster market entry. In
spite of the close cooperation in creating a common
hybrid module, this solution still leaves enough
scope to take into account the specific design con-
cept applicable to each relevant brand.

Hydrogen 7 – the first series-developed vehicle
with a hydrogen combustion engine
In the long term, the BMW Group is working to-
wards hydrogen as the fuel source of the future.
The BMW Group presented the BMW Hydrogen 7
in November 2006 in Berlin, the world’s first hydro-
gen-driven luxury Sedan. This vehicle is practically
emission-free and suitable for everyday use. The
new model, based on the BMW 760Li, represents
a milestone en route to a new era of sustainable
mobility. The BMW Hydrogen 7 is powered by
a combustion engine capable of running on both
hydrogen and petrol. This vehicle has gone through
the entire series development process and is the
result of a clearly-defined strategy, which already
enables the BMW Group to put tomorrow’s hydro-
gen technology to use in today’s vehicles. In addi-
tion, the new technology will be able to benefit from
the whole range of efficiency improvement meas-
ures right up to the full hybrid version.

The BMW Hydrogen 7 is capable of covering
over 200 kilometres powered by hydrogen and a
further 500 kilometres in the conventional petrol
mode. The BMW Hydrogen 7 holds approximately
eight kilograms of liquid hydrogen and its conven-
tional petrol tank has a capacity of 74 litres.

The introduction of the BMW Hydrogen 7 by
the BMW Group will create momentum to increase
hydrogen supply coverage. At the same time, the
BMW Group calls on the relevant networking partners
in the fields of politics, science, research and busi-
ness to build up infrastructures and promote tech-
nologies related to hydrogen as an energy source.

Research and development expenditure
increased
At the end of 2006, the BMW Group’s worldwide
research and development network consisted of
ten locations in five countries with a total of approxi-
mately 9,400 employees.

Research and development expenses totalled
euro 3,208 million in 2006, 3.0 % higher than in the
previous year. The research and development ex-
penditure ratio was 6.5 %.

Leading position amongst premium
manufacturers
The leading position of the BMW Group amongst
premium manufacturers in the area of technology
and innovation was again underlined in 2006 by the
numerous international awards it received.

In February, the BMW Group was presented

with the “Design Award of the Federal Republic of
Germany” for the BMW 6 Series Coupé and Con-
vertible models. This is the highest official German
design award and is presented by the German
Design Council under the auspices of the Federal
Ministry for Business and Technology. Companies
and individuals do not apply for the design award;
they are nominated by the economics ministries of
the various federal states or by the Federal Ministry
for Economic Affairs. The prerequisite is that a
product must already have won a national or inter-
national award. A maximum of 25 products are
presented with awards.

In April, the BMW 3 Series was voted the “World

Car of the Year”. Under the “World Car of the Year
Award” programme, a panel of 46 international auto-
motive journalists adjudicate the most important
new models on the basis of 20 criteria, including
styling, performance, handling, comfort and utility.
The award was presented during the New York
International Auto Show.

For the first time in the history of the “Engine of

the Year Award”, an engine achieved the unusual
feat of being voted engine of the year for two years
in succession, namely the V-10 High Performance
engine used in the BMW M5/M6. The BMW Group’s
engines won awards in no less than five categories:
– the V10-5.0 litre engine (BMW M5 and BMW M6):

Best Engine 2006

– the V10-5.0 litre engine (BMW M5 and BMW M6):

Best Performance Engine 2006

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41 Disclosures pursuant to § 289 (4)

slow speeds and in traffic jams, but also ensuring
more comfort and safety in flowing traffic conditions.
The system will become available in BMW brand

cars during the course of 2007.

New dynamic driving simulator
In July 2006, the BMW Group’s new dynamic driving
simulator was commissioned, a further step for-
ward towards improving development and testing in
realistic conditions. This driving simulator enables
specialists to create test conditions that had pre-
viously only been possible with real cars on testing
grounds. In terms of the efficiency of development
work, it is essential that functionality, reliability and
the handling of innovative systems, such as driver
assist systems, can be fully tested at an early stage
in the development process. The driving simulator
therefore allows the timing of the practice test for
new systems to be brought forward. Being able to
carry out development work under laboratory con-
ditions brings significant benefits compared to a real
test drive. Every situation can be recreated as often
as necessary, thus enhancing the validity of statis-
tically evaluated results.

– the V10-5.0 litre engine (BMW M5 and BMW M6):

Winner in the 4.0 plus litre category

– the 3.2 litre straight six cylinder engine (BMW M3,
BMW Z4 M Roadster and Z4 M Coupé): Winner
in the 3.0 to 4.0 litre category

– the 3.0 litre twin turbo diesel engine (BMW 535d):

Winner in the 2.5 to 3.0 litre category

In November, ten days even before its official market
launch, the new MINI won one of the most presti-
gious international car awards, the Golden Steering
Wheel 2006. An international panel of 25 jurors
comprising motor sports personalities, automobile
experts and well-known car drivers tested the vehi-
cles for two days and adjudicated them in 15 cate-
gories. In its class, the new MINI came out as winner
in seven of the 15 categories.

New absorber facilities built to test electro-
magnetic tolerance
In October 2006, new facilities to test electromag-
netic tolerance were commissioned at the BMW
Group’s Research and Innovation Centre (FIZ) in
Munich. For the first time, this test equipment en-
ables specialists to simulate the interaction of elec-
tronic systems and assist functions under realistic
driving conditions in order to ensure their reliable
functioning. In this context, engineers have to take
into account the fact that these systems create
electromagnetic fields of varying strengths which,
under given circumstances, can interact with or be
affected by electromagnetic fields from outside
the car. All incidences of interference are analysed
punctiliously in order to rule out malfunctions.

The new test complex, unique in this configura-

tion in the automobile industry, is also equipped
with roller testing facilities and computer-controlled
moveable dummies. It therefore allows the activation
of driving stability systems at exactly defined speeds
and the impact of other driver assist systems to be
simulated.

Driver assist systems make for the perfect drive
The BMW Group presented in July 2006 the Active
Cruise Control system with Stop & Go function at
one of its innovation days. This is an assist system
conceived first and foremost for driving on motor-
ways and fast roads. It covers a range of speeds
from 180 km/h down to zero. Active Cruise Control
with Stop & Go function accelerates and slows
down the car fully automatically, thus relieving the
driver not only in long convoy driving conditions, at

Purchasing structures influenced by model
life-cycles
In 2006, the BMW Group purchased approximately
one half of its bought-in parts in Germany. Across
the rest of Western Europe, the purchase volume
changed in line with production volumes within
the BMW Group. Due to the sales growth of the
BMW 3 Series, the volume of parts bought in from
Central and Eastern Europe increased correspond-
ingly. This was largely attributable to the fact that
suppliers for these model series are located to an
increasing extent in newly acceded countries within
the European Union. The NAFTA market is used
primarily to purchase parts for cars manufactured at
the BMW Spartanburg plant. The production line
change and the BMW X5 model change caused the
purchase volume in this region to fall. The volume
of parts bought in from South America was mainly
attributable to the lower production volume of the
MINI at the Oxford plant, brought about by capacity
expansion measures.

Situation on the commodity markets remains
tense
The high price levels on the raw material markets
once again represented a major challenge for the
group’s purchasing departments in 2006. Signifi-
cantly higher costs had to be paid for supplies of
steel, plastic, aluminium and copper.

The annual average market price of aluminium,

copper and plastic went up in 2006 by 34%, 76 %
and 13 % respectively. Only in the case of steel did
the annual average market price in 2006 remain at
its 2005 level.

The price of industrial raw materials went up by
31% in US dollar terms and by 30 % in euro terms.
The price of non-precious metals increased by 56 %
in US dollar terms and by 55 % in euro terms. Energy
supplies saw a price increase of 21% and 22 % in
US dollar and euro terms respectively.

In the case of precious metals (rhodium, palla-

dium, platinum), purchase price hedges reduced the
impact for the BMW Group of extreme market price
rises. Compared to the previous year, the price of
precious metals relevant for the BMW Group went up
in 2006 by rates of between 27% and 116 %.

Measures were put in place in the area of raw

materials to ensure that additional costs were fairly
spread over the entire added-value chain, with the
BMW Group also bearing its share of the cost. Al-
though the purchase price predictions of various

Regional mix of BMW Group purchase volumes 2006
in %, basis: production material

Germany

Rest of Western Europe

Central and Eastern Europe

NAFTA

Africa

Asia /Australia

South America

1
3
3

institutes have indicated, since the year-end, that
the commodity markets may have eased somewhat,
it is likely that high price levels will persist in 2007.

Purchasing centres help to enhance innovative
strength
The BMW Group’s international network of pur-
chasing centres is committed to the process of
opening up new procurement markets. Focus has
been sharpened in particular on the so-called
“emerging markets”. By realising cost benefits in
these markets, the BMW Group can generate a
positive impact on purchase prices, thus improving
its competitiveness. By analogy to the way that the
BMW Group’s competitiveness is being improved,
suppliers are also encouraged to take better advan-
tage of the cost benefits available on emerging mar-
kets and to modify their process chains accordingly.
At the same time, measures must be put in place to
ensure that stipulated quality and availability levels
are constantly maintained.

The BMW Group’s purchasing centres are part
of the innovation management process. They inves-
tigate whether the innovative technical solutions
offered by the supply markets meet the requirements
of the BMW Group’s product profile and assess
whether they can make a contribution to the product
creation process. This is an essential factor helping
to enhance the BMW Group’s innovative strength.

Supplier management further optimised
As a manufacturer of premium vehicles, the BMW
Group also attaches great importance to the effi-
ciency of its suppliers. Using a range of targeted
measures, the BMW Group was again able to improve
its supplier management systems in 2006.

The BMW Group fosters relationships with its

suppliers at an early point in the creative process in

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38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

order to elucidate potential topics of innovation. The
technical and commercial feasibility of new ideas is
then jointly evaluated. The BMW Group also involves
its large system suppliers in the initial phase of the
development process for new products. At supplier
workshops, also held early on in the creative process,
joint solutions are worked on to reduce manufac-
turing costs and optimise technical issues, such as
vehicle weight reduction.

The growing complexity and inter-connectivity

of modern vehicles increases the responsibility of
suppliers within the supply chain. The BMW Group
encourages its suppliers to be aware of this respon-
sibility, particularly in the area of quality manage-
ment using web-based quality planning tools and
further training.

An electronic standard has been put in place to
monitor the core processes involved in working to-
gether with suppliers. Inquiries, purchase orders and
specific supply requests for series and test compo-
nents are sent electronically via EDI (Electronic Data
Interchange) or the internet. The same channels can
also be used to obtain information on parts origin,
materials balance details regarding recycling require-
ments or change management information.

As part of the process of increasing the level of
responsibility that suppliers are expected to assume
for quality, the BMW Group also provides real-time
data to its suppliers. Data regarding supply quality
from all plants can be retrieved, as can information
concerning customer complaints and warranty costs.

High ecological and social standards expected
of suppliers
The BMW Group also expects its suppliers to ad-
here to high social and ecological standards. The
BMW Group’s national and international purchasing
guidelines also stipulate social and ecological stan-
dards.

Surveys are regularly made about how suppliers

comply with, and implement, those standards. This
data is recorded in the BMW Group’s supplier data-
base. In 2006, the BMW Group, together with its
suppliers, successfully implemented all current re-
quirements stipulated by the EU End-of-Life Vehicle
Directive with regard to prohibited materials.

Sales network expanded further
In 2006, the main challenge for the BMW Group
in terms of sales and marketing activities was the
strengthening of its global sales network.

The BMW Group continued to expand its pres-

ence, especially in developing markets. The Group
also invested in its established markets by strength-
ening its sales organisation in these areas. Although
the Group’s highest growth rates were achieved
in emerging markets, the market triad of Western
Europe, the USA and Japan still generates around
85 % of the BMW Group’s total sales volume.

In 2006, the BMW Group continued its prepara-

tions for entering the Indian market. The new sales
company in Delhi started operations on 1 January
2007. The official opening of the new BMW Group
plant in the southern Indian city of Chennai is
planned for March.

The BMW Group also opened its own sales
organisations in the Czech Republic and Slovakia
with effect from 1 July 2006 and in Slovenia with
effect from 1 January 2007. This is all part of a Group
strategy to assume direct market responsibility in
all EU countries within Central and Eastern Europe.
At a dealership level too, the BMW Group pressed

ahead with its engagement in new markets. The
number of dealerships in China was increased to
61 in 2006, representing a rise of approximately
one third compared to one year earlier. The first
steps were also taken to create a dealership net-
work in India.

In the established markets, by contrast, activities

aimed at strengthening the quality of the existing
sales organisation dominated. Here too, the main
focus was on retail sales. In the final analysis, nine
out of ten BMW and MINI customers purchase their
vehicles at one of over 3,000 BMW or 1,500 MINI
dealerships around the world.

It is essential for the overall success of the

BMW Group that dealerships are given support in
the development of common business interests.
Measures taken in this respect in 2006 included
continued implementation of the Customer Relation-
ship Management Programme and the Used Vehi-
cle Programme as well as investments in training
centres for dealers, such as in the United Kingdom,

tivities were already fully aimed towards the Americas
Cup 2007 in Valencia.

Altogether, great consideration was given to

communicating the BMW brand in view of the
changing ways customers use various media and
this has been reflected in a number of innovative of-
fers tailored to suit these new media. One example
is the internet campaign for the new BMW X5 with
a version of the BMW website optimised for portable
electronic devices, including BMW audio and video
podcasts about the automobile trade fairs in Detroit,
Geneva and Tokyo or with free downloads of BMW
audio book thrillers.

In 2006, marketing activities for the MINI brand

were wholly directed towards the market launch
of the new MINI. The integrated launch campaign
under the motto “Incredibly MINI. The new MINI”
not only introduced the new models, but also high-
lighted attitudes and lifestyles associated with
the MINI brand using unconventional activities and
formats – coupled with a dash of the typical humour
also associated with the MINI.

Italy or Mexico. The availability of spare parts was
also greatly improved in a number of countries, such
as South Africa or Malaysia.

In addition to external dealerships, the BMW
Group also has a network of 36 branches around the
world that, in many markets, serve as a source of
reference.

The Rolls-Royce dealership network was further

expanded and now comprises 74 sales partners
worldwide.

Investment in strong brands
Apart from the substance and emotionality of its
products, the BMW Group also benefits from the
strength of its various brands. To this end, it con-
tinues to invest substantial sums on precise meas-
ures to improve their profile.

With consideration to the separate market
positioning of the BMW und MINI brands, the BMW
Group selected two new creative partners in 2006 –
Media Arts Lab for the BMW brand and Plantage
for the MINI brand. From 2007 onwards, these two
agencies will not only work on the German market,
but also on the development of launch and brand
campaigns that can be rolled out internationally.

In 2006, various innovative marketing campaigns

contributed towards the strengthening of the BMW
brand. One example of this is the current worldwide
“Expertise Campaign” and another is the “Company
of Ideas” campaign used in the USA, BMW’s largest
market. The “Expertise Campaign” explains various
BMW technological advances in an unconventional
and humorous way, such as the workings of the
xDrive four-wheel-drive system, demonstratively
using a jumping jack toy figure. The “Company of
Ideas” advertisements make general allusions to
the idea of independence and the company’s ability
to innovate.

In the field of sports marketing, the BMW brand

entered into new territory with the “F1 Pit Lane
Park”, presenting a “Hands-On Formula 1” pit lane
accessible to all visitors over a series of five race
weekends. The BMW Group’s involvement with golf
was expanded in the form of a partnership with the
PGA Tour and Western Golf Association to create
the “BMW Championship”. In the area of sailing, ac-

38 Group Management Report

BMW Stock and Bonds in 2006

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Weak dollar unable to dampen stock market
mood
The renewed weakening of the US dollar against
the euro and the persistently high price level of
key commodities determined the mood on the
stock markets in 2006. In 2005, the US dollar had
strengthened by 13 % against the euro; over the
course of 2006 it weakened again. Compared to
the exchange rate at the beginning of the year, the
US currency lost 11.9 % in value against the euro,
moving in a range of US dollar 1.18 –1.33 to the euro
during the year under report and reaching its lowest
level of US dollar 1.33 to the euro on 5 December.

The situation on the commodity markets eased
towards the end of 2006, but only after experiencing
strong fluctuations during the year. For example,
one barrel of Brent Crude cost US dollar 58.51 at
the end of the year, whereas in August the price
had been in the region of US dollar 80. In fact, com-
pared to the beginning of the year, the price of this
raw material – which is crucial for the automobile in-
dustry – went down by 5.4 %.

Despite the deterioration in exchange rates
affecting export-orientated companies in the euro
region, the stock markets nevertheless saw some
sharp rises.

Compared to its level at the beginning of the
year, the EURO STOXX 50 rose by almost 15.1%
during the period under report. The leading German
stock index, the DAX, improved by as much as 21.9 %.
The Prime Automobile sector index also performed
well within this favourable market environment,
closing at 569.56 points and thus gaining 25.7%
compared to one year earlier.

BMW common stock closed on 29 December

2006, the final day of trading for the year, at euro
43.51, 17% ahead of its January price. The increase

in value registered in recent years therefore con-
tinued, albeit with a small amount of volatility.

By contrast, BMW preferred stock once again

outperformed the overall market, closing on 29 De-
cember at a price of euro 43.52. During the year
under report, BMW preferred stock therefore gained
34.3 % in value.

Programme to buy back shares of common
stock
At the Annual General Meeting of BMW AG on
12 May 2005, the shareholders authorised the
Board of Management to acquire up to a maximum
of 10 % of the share capital in place at the date of
the resolution and to withdraw these shares from
circulation without any further resolution by the
Annual General Meeting.

In conjunction with this authorisation, 3 % of
the share capital was acquired. This involved the ac-
quisition of 20,232,722 shares of BMW common
stock at an average stock exchange price of euro
37.47. The shares were withdrawn from circulation
in accordance with the resolution of the Board of
Management taken on 21 February 2006. At the
Annual General Meeting of BMW AG held on 16 May
2006, the Board of Management was again autho-
rised to acquire shares of common and/or preferred
stock via the stock exchange, up to a maximum of
10 % of the share capital in place at the date of the
resolution. This authorisation replaces the previously
valid one and expires on 15 November 2007.

Buy-back of shares of preferred stock for
employee stock plan
Since 1989, employees have been able to participate
in the success of the Company through the acqui-
sition of below-market priced shares of preferred

Development of BMW stock compared to stock exchange indices
(Index: 29.12.1996 = 100)

450

400

350

300

250

200

150

100

BMW preferred stock

BMW common stock

Prime Automobile

DAX

stock. In the meantime, this instrument of employee
participation has spanned a timeframe of more
than 30 years. This successful programme will be
continued in 2007. As notified in the Federal
Gazette on 21 December 2006, up to 800,000
shares will be acquired during the course of 2007
for the purpose of issue to employees. As in the
past, the buy-back will be executed under the
leadership of a number of securities houses or
banks, which are able to determine the timing of
individual buy-backs independently of, and un-
influenced by, BMW AG.

Successful bond issues
In order to refinance the unabated high rate of growth
of the Financial Services segment, the BMW Group
increased its issuing activities with bonds and asset-
backed-security transactions (ABS) during 2006.
These issues were made by the group’s relevant
financing companies. The American capital market
was used primarily via ABS transactions and money
market instruments such as Commercial Paper.
In 2006, a benchmark bond of euro 1 billion
was placed on the European capital market. Bonds
were also issued in British pounds, US dollars and
Swiss francs.

The BMW Group was able to benefit from the

favourable conditions prevailing on the lending mar-
kets. Issue activities were aided by the BMW Group’s
policy of keeping the markets well informed and by
the above-average good ratings that the group en-
joys. As in previous years, financial terms and con-
ditions were particularly attractive in the euro region.
The bonds were highly sought after by institutional
and private investors alike. The strength of the
BMW Group’s three authentic premium brands is
therefore reflected in the global capital markets.

Scope of information for investors and analysts
continuously expanded
The continuous improvement in the quality of com-
munication with the financial markets was well ap-
preciated by market participants. In 2006, the BMW
Group’s investor relations team was judged to be
the best in the sector, winning first place in the Extel
Survey, published in summer 2006. Readers of the
investor magazine “Börse Online” judged the in-
vestor relations work of the BMW Group to be the
best of any DAX 30 company.

The internet plays a key role in the process of

communicating financial information. Within this
context, the on-going development of the BMW
Group’s investor relations website is of major sig-
nificance (www.bmwgroup.com/ir). Apart from finan-
cial publications and other important information
for shareholders, since 2005 it has been possible,
for example, to listen to quarterly conferences in
the form of audio podcasts. This service was widely
used during the period under report.

Increasing importance of sustainability as
analysis criterion for the stock markets
Business sustainability aspects are becoming in-
creasingly important as an element of the BMW
Group’s capital market work. In addition to regular
capital market discussions focused on Socially
Responsible Investment (SRI), the BMW Group also
held SRI Roadshows in both London and Paris.

In September 2006, the BMW Group was again

included as sector leader in the Dow Jones Sus-
tainability Indexes. The BMW Group is therefore the
only enterprise in the sector to have been included
in this important group of indices for sustainable
investment for the eighth time in succession. For
the last five years, it has also been a member of the

Development in the value of a BMW stock investment in euro thousand
Investment of euro 10,000 at 1.1.1997, including dividends and proceeds from subscription rights, values at end of year

euro thousand

12.9

15.6

19.0

22.0

25.4

18.8

24.3

22.3

25.4

29.8

40 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

relevant FTSE4Good index group. For the second
time in succession, the BMW Group was judged by
the Carbon Disclosure Project to be “Best in Class in
2006” for its strategy in the face of climate change.
The BMW Group is now included in the Climate

Leadership Index. The Carbon Disclosure Project
is an initiative started by institutional investors evalu-
ating companies on the basis of how they face up
to the challenges of climate change.

BMW stock

2006

2005

2004

2003

2002

Common stock

Number of shares in 1,000

Shares bought back at the reporting date

Stock exchange price in euro1]

Year-end closing price

High

Low

Preferred stock

Number of shares in 1,000

Stock exchange price in euro1]

Year-end closing price

High

Low

601,995

–

622,228

13,488

622,228

–

43.51

46.47

35.52

37.05

39.97

32.04

33.20

37.44

31.78

36.75

38.40

21.12

28.92

47.60

27.97

52,196

51,468

43.52

45.91

31.80

33.00

33.98

24.48

24.80

26.20

22.86

24.65

26.25

14.86

18.60

31.99

18.17

2006

2005

20045]

2003

2002

0.70 2]

0.72 2]

4.38

4.40

8.21

29.24

0.64

0.66

3.33

3.35

9.17

0.62

0.64

3.33

3.35

9.13

0.58

0.60

2.89

2.91

7.37

0.52

0.54

3.00

3.02

6.76

25.17

24.52

23.95

20.59

Key data per share in euro

Dividend

Common stock

Preferred stock

Earnings per share of common stock3]

Earnings per share of preferred stock4]

Cash flow 6]

Equity

1] Xetra closing prices
2] proposed by management
3] annual average weighted amount
4] stock weighted according to dividend entitlements
5] adjusted for new accounting treatment of pension obligations
6] calculated on the basis of operating cash flow

Disclosures pursuant to § 289 (4) and § 315 (4) HGB

The Company’s share capital, totalling euro
654,191,358 is, pursuant to Article 4 (1) of the Articles
of Incorporation (status: 9 March 2006) sub-divided
into 601,995,196 shares of common stock and
52,196,162 non-voting shares of preferred stock,
each with a par value of euro 1. The shares are issued
to bearer.

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
the Company’s unappropriated profit. Accordingly,
the unappropriated profit is required to be appropri-
ated in the following order:
a) subsequent payment of any arrears on dividends
on non-voting preferred shares in the order of
accruement,

b) payment of an additional dividend of euro 0.02 per
euro 1 par value on non-voting preferred shares
and

c) uniform payment of any other dividends on com-
mon and preferred shares, provided the share-
holders do not resolve otherwise at the Annual
General Meeting.

The right of shareholders to have their shares issued
in individual share certificates is excluded.

Shareholders are only entitled to participate at

the Annual General Meeting and exercise their voting
rights if, prior to the meeting, they have given notice
(in the written form specified by §126b of the Ger-
man Civil Code), either in German or English, of their

intention to participate at the meeting. Shareholders
are also required to provide evidence of their entitle-
ment to participate and exercise their voting rights
at the Annual General Meeting. For this purpose,
documentary evidence of the shareholding, issued
by the custodian bank (in the written form specified
by §126b BGB), in either German or English, is re-
quired. Votes may also be exercised by proxy. The
Company may determine that proxy authorisations
may be granted electronically or by telefax, and may
stipulate the specific rules for granting proxy authori-
sations (see Article 17 of the Articles of Incorpora-
tion). The chairperson may determine a reasonable
time limit with respect to the right of shareholders
to raise questions and speak (Article 19 (2) of the
Articles of Incorporation).

The voting power attached to each share corre-

sponds to its par value. Each euro 1 of par value of
share capital represented in a vote is entitled to one
vote (Article 18 (1) of the Articles of Incorporation).
The Company’s shares of preferred stock are
non-voting. They only confer voting rights in excep-
tional cases stipulated by law.

The Company’s Board of Management is not
aware of any other restrictions relating to voting rights
or the transfer of shares.

Based on the information available to the Com-

pany, the following direct or indirect holdings ex-
ceeding 10 % of the voting rights were held at the
date stated:

Johanna Quandt GmbH & Co. KG für Automobilwerte

Johanna Quandt

Susanne Klatten GmbH & Co. KG für Automobilwerte

Susanne Klatten

Stefan Quandt GmbH & Co. KG für Automobilwerte

Stefan Quandt

* confirmed by notifications as at 20 January 2007.

Direct share of
voting rights (%)

Indirect share of
voting rights (%)

Date

15.4

1.3

11.5

1.0

16.1

1.3

15.4

11.5

16.1

1. 4. 2002*

1. 4. 2002

1. 4. 2002*

The shareholdings disclosed above may have

changed subsequent to the stated date, if these
changes were not required to be reported to the Com-
pany. 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 mandatory notification rules.

The appointment and removal of members of
the Board of Management are based on the rules
contained in § 84 and § 85 AktG. In accordance with
Article 7 of the Articles of Incorporation, the Board

of Management consists of two or more members.
The Supervisory Board determines the number of
the members of the Board of Management. It is
responsible for appointing members to the Board of
Management and for revoking appointments. It also
designates one of the members as the Chairman of
the Board of Management.

Amendments to the Articles of Incorporation
must comply with §179 et seq. AktG. All amendments
must be resolved by the shareholders at the Annual
General Meeting (§119 (1) no. 5, §179 (1) AktG). The

42 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Supervisory Board is authorised to approve amend-
ments to the Articles of Incorporation which only
affect its wording (Article 14 no. 3 of the Articles of
Incorporation). Resolutions are passed at the Annual
General Meeting by simple majority of shares unless
otherwise explicitly required by binding provisions
of law (§ 20 of the Articles of Incorporation).

There is no authorised or conditional capital at

the reporting date.

In accordance with the resolution passed at the
Annual General Meeting on 16 May 2006, the Board
of Management is authorised, up to 15 November
2007 and subject to the price limits stipulated in the
resolution, to acquire common and/or non-voting
preferred shares via the stock exchange, up to a
maximum of 10 % of the share capital in place at the
date of the resolution.

The Board of Management is also authorised,

without any further resolution by the Annual General
Meeting, to withdraw from circulation the treasury
shares (common and/or non-voting preferred
shares) acquired in accordance with the authorisa-
tion described above.

Furthermore, the Board of Management is
authorised to buy back shares and sell bought-back
shares in situations specified in §71 AktG.

The BMW AG is party to the following significant
agreements which contain special provisions for the
event of a change of control or the acquisition of
control which could arise, for example, from a take-
over offer:
– An agreement, concluded with an international

consortium of banks relating to a syndicated credit
line (which was not being utilised at the balance
sheet date), entitles the lending banks to give ex-
traordinary notice to terminate the credit line
(such that all outstanding amounts, including in-
terest, would fall due immediately) if one or more
parties jointly acquire direct or indirect control of
BMW AG. The term “control” is defined as the
acquisition of more than 50 % of the share capital
of BMW AG, 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 produc-
tion of a new family of small (1 to 1.6 litre) petrol-
driven engines entitles each of the cooperation
partners to give extraordinary notification of termi-
nation in the event of a competitor acquiring
control over the other contractual party and if any
concerns of the other contractual party concern-

ing the impact of the change of control on the co-
operation arrangements are not allayed during the
subsequent discussion process.

– Under the terms of a contractual agreement with
DaimlerChrysler and General Motors, BMW AG
acquires intellectual property rights in conjunc-
tion with a cooperation for the development of a
hybrid propulsion system. The cooperation can
be terminated with immediate effect by either
party if a change of control occurs with respect to
any other contractual party or an affiliate of an-
other contractual party. Examples of a change of
control are the acquisition of beneficial owner-
ship of securities which confer the majority of
voting power or the acquisition of beneficial own-
ership of securities which confer 20 % of the
voting power provided that within 18 months a
majority of the shareholder-elected members of
the Supervisory Board are the nominees of the
new beneficial owner as well as certain merger
transactions and the transfer of all or substantially
all of the assets involved in the performance of
the cooperation agreement.

– BMW AG acts as the guarantor for all of the obli-
gations 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 ac-
quired by a third party or the other party is merged
with another legal entity. The termination 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.

– Regarding the trading of derivative financial instru-
ments, framework agreements are in place with
financial institutions and banks (ISDA Master
Agreements), each of which contain extraordinary
rights of termination, which trigger the immediate
settlement of all current transactions, in the event
that the creditworthiness of the respective con-
tractual party is materially weaker following the di-
rect or indirect acquisition of the beneficial owner-
ship of equity securities having the power to elect
a majority of the Supervisory Board of a contrac-
tual party or any other ownership interest enabling
the acquirer to exercise control of a contractual
party or a merger or transfer of assets.

The BMW Group has not concluded any compen-
sation agreements with members of the Board of
Management or with employees for situations in-
volving a take-over offer.

Analysis of the Group Financial Statements

Group internal management system
The underlying long-term objective of the group’s
internal management system is to increase the value
of the BMW Group as a whole. The targets set for
the Automobiles, Motorcycles and Financial Services
segments all stem from this objective. Within the Au-
tomobiles and Motorcycles segments, this approach
is put into practise for specific product, process and
structure-related projects. By contrast, the Financial
Services segment is primarily concerned with the
cash flows resulting from its credit and lease portfolio.

Minimum rate of return derived from cost of
capital
The cornerstone of the value-added management
of the BMW Group is the entity-specific minimum
rate of return, derived from capital market data, and
based on the weighted average cost of capital:

Cost of equity capital x market value of equity capital

Market value of equity and debt capital

WACC =

Cost of debt capital x market value of debt capital

Market value of equity and debt capital

The cost of equity capital is measured using the
Capital Asset Pricing Model (CAPM). The cost of
debt capital is partly based on the average interest
rate paid for long-term external debt and partly on
the interest rate applicable for pension obligations.

the task is to manage each individual project over
time. This involves the continual monitoring of
projects as well as determining and implementing
measures necessary to achieve the defined targets.
The project decision and related project selec-
tion are therefore important aspects of value-based
management. Net present values (NPVs) and rates of
return are computed as part of the decision-making
process. This involves computing the present value
of cash flows and the internal project rate of return
(or model rate of return in the case of vehicle projects)
expected to be generated by a project decision and
comparing them with the minimum rate of return
derived from capital market data.

Using this method, the amount by which a project

will contribute to the total value of the segment
(i. e. the project’s added-value) can be documented
when the project decision is taken. Targets and per-
formance are each controlled using target NPVs and
individual cash flow-related parameters which have
an impact on those values.

The NPV of a project programme is computed
by aggregating the amounts for all projects and dis-
counting them back to a specific date. This value
serves as the main target for the Automobiles and
Motorcycles segments. The business value of each
segment is then computed by deducting the market
value of debt capital. For both of these segments,
the objective is to increase business value, as com-
puted above, on a continuous basis.

Value management in the context of project
control
The strategies set for each segment (and also the
ensuing project decisions) give rise to the areas of
strategic emphasis which are then implemented at
a functional level. The overall project development
process becomes more targeted as a result of the
closer link between the strategies defined for each
segment and the objectives defined for specific
projects. Once a project decision has been reached,

Return on capital used to measure value on
a periodic basis
The management of product projects and product
programmes described above is subject to basic
conditions which result from periodic planning. The
aim here is to monitor and manage periodic tar-
gets on a long-term basis. Periodic performance is
managed in the light of defined accounting policies
and external financial reporting requirements. The
BMW Group primarily uses profit before tax and

Key performance indicators
in %

Return on Capital Employed

Automobiles

Motorcycles

Return on Assets

Financial Services

BMW Group

* adjusted for new accounting treatment of pension obligations

2006

2005

2004*

2003

2002

21.7

17.7

1.4

6.3

23.2

17.8

1.3

5.6

25.4

10.4

1.4

6.5

23.8

16.7

1.4

6.6

30.1

22.3

1.4

7.6

44 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

segment-specific rates of return as the key indicator
figures by which it manages operating performance.
For example, return on capital employed is used

as the main performance indicator for the Automo-
biles and Motorcycles segments. Return on sales
is also used as a performance indicator. The return
on assets is used for the group as a whole. In addition
to the return on assets, the Financial Services seg-
ment also manages its business using risk-based
performance indicators (e.g. Value at Risk).

ROCE =

Profit before financial result

Capital employed

ROA Group =

Profit before interest expense and taxes

Balance sheet total

ROA Financial Services =

Profit before tax

Net operating assets

Long-term creation of value
The overall target set for earnings is continuous
growth for which the group’s minimum rate of return
is used as the relevant performance indicator. These
periodic targets are supplementary to project and
programme targets.

In order to implement this comprehensive target

and management system, whilst at the same time
satisfying periodic reporting and accounting require-
ments, the model analyses show for each project
decision reached the impact of cash flows on the
NPV and on the model rate of return as well as the
impact on periodic earnings. This approach enables
the BMW Group to analyse the effect of each project-
based decision on business value (quantified in
terms of the NPV of the project programme) as well
as on annual earnings and rates of return. “Multi-
project planning” data gleaned from these proce-
dures allows on-going comparison between dynamic
multi-period targets and periodic performance.

Earnings performance
The BMW Group recorded a net profit of euro 2,874
million (2005: euro 2,239 million) for the financial
year 2006. The post-tax return on sales was 5.9 %
(2005: 4.8 %). The group therefore generated earn-
ings per share of common stock of euro 4.38 and
earnings per share of preferred stock of euro 4.40.

Group revenues rose by 5.0 % compared to the
previous year. Adjusted for exchange rate factors,
group revenues would have increased by 5.5 % or
euro 2,574 million. Revenues from the sale of BMW,
MINI and Rolls-Royce brand cars went up by 1.9 %,
Revenues from motorcycles business grew by 3.1%.
Revenues from financial services business climbed
by 19.0 % due to higher business volumes. Revenues
from other activities of the Group totalled euro 193
million and related mainly to the softlab Group. The
comparable figure for the previous year was euro
119 million.

Revenue trends varied from region to region.
Whereas group revenues decreased in Germany by
3.6 %, they increased in the rest of Europe by 6.8 %.
Revenues generated in the Americas region rose
by 6.7%. For the Africa, Asia and Oceania regions,
they grew in total by 11.6 %, mainly on the back of
marked sales volumes increases in specific Asian
markets.

Group cost of sales increased at a slightly lower

rate than revenues. The impact of additional costs
anticipated by the BMW Group since the beginning
of 2006 – namely the effect of unfavourable ex-
change rates and higher raw material prices – were
offset by efficiency improvements and an improved
product mix. Despite the adverse factors stated
above, gross profit increased in absolute terms by
6.3 %, giving a gross profit percentage of 23.1%
(2005: 22.9 %). The gross profit percentage for both
Industrial operations and Financial operations was
0.6 percentage points lower than in the previous
year. Information about the composition of the sub-
groups is provided in Note [1].

Sales and administrative costs increased by

4.4 % due to the higher business volume; the in-
crease was, however, lower than the increase in
revenues. They represented 10.1% of revenues,
0.1 percentage points lower on a year-to-year com-
parison.

Research and development costs were 3.2 %

higher than in 2005, and represented 5.2 % of
revenues (2005: 5.3 %). Research and development
costs include amortisation of capitalised develop-
ment costs amounting to euro 872 million (2005:
euro 745 million). Total research and development
costs amounted to euro 3,208 million (2005: euro
3,115 million). This figure comprises research costs,
development costs not recognised as assets and

– New car and motorcycles sales volume records
– Group and segment earnings above previous year’s level
– Adverse external factors hold down reported earnings,

qualitative key performance figures nevertheless positive
– Settlement of Rolls-Royce exchangeable bond has one-off

impact on earnings

– Capital expenditure reaches new high level

Group Income Statement

in euro million

Revenues

Cost of sales

Gross profit

Sales and administrative costs

Research and development costs

Other operating income and expenses

Profit before financial result

Result from equity accounted investments

Other financial result

Financial result

Profit before tax

Income taxes

Net profit

1.1. to
31.12. 2006

1.1. to
31.12. 2005

48,999

– 37,660

11,339

46,656

– 35,992

10,664

– 4,972

– 2,544

227

4,050

– 25

4,124

– 1,250

2,874

– 4,762

– 2,464

355

3,793

– 520

– 506

3,287

– 1,048

2,239

capitalised development costs. The research and
development expenditure ratio for 2006 was 6.5 %
(2005: 6.7%).

Depreciation and amortisation of property, plant
and equipment and intangible assets included in cost
of sales, sales and administrative costs and research
and development costs totalled euro 3,272 million
(2005: euro 3,025 million).

The positive net amount from other operating
income and expenses went down by 36.1% com-
pared to the previous year. Other operating income
decreased primarily as a result of lower income from
the reversal of provisions. In the previous year, a
provision relating to the Rover disengagement had
been reversed. Other operating expenses increased
by euro 28 million or 5.7%.

The profit before financial result was up by euro

257million or 6.8 % against the previous year, there-
fore reaching a new high level.

The financial result improved by euro 580 million.

This includes the one-off gain of euro 386 million
arising on the partial settlement of the exchangeable
bond on Rolls-Royce plc, London shares.This gain is
reported mostly in “Sundry other financial result” and
the remainder in “Net interest result”. A fair value loss
of euro 14 million was recognised on the remaining

exchangeable bond option obligation relating to the
BMW Group’s investment in Rolls-Royce plc, London,
and is also included in the line item “Sundry other
financial result”. In the previous year, fair value meas-
urement had resulted in a loss of euro 356 million.
Fair value losses on other derivative financial instru-
ments had a negative impact on “Sundry other finan-
cial result”. The net result from using the equity
method decreased by euro 39 million, primarily as
a result of an impairment loss recognised on TRITEC
Motors Ltda., Campo Largo. The net positive result
from investments was up by euro 4 million. Net
interest expense decreased by euro 41 million. The
net negative amount resulting from unwinding the
discounting on pension obligations and recognising
income for the expected return on pension plan
assets decreased by 6.5 % on a year-on-year basis.
In the light of the financial result performance

described above, the group profit before tax im-
proved by 25.5 % compared to the previous year.
The pre-tax return on sales was 8.4 % (2005: 7.0 %).
Excluding the impact of the gain arising on the par-
tial settlement of the exchangeable bond on shares
in Rolls-Royce plc, London, and the fair market loss
arising on the option obligation, the profit before tax
improved by 3.0 % to euro 3,752 million.

46 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

The group net profit was up by euro 635 million
or 28.4 % against the previous year. The marginally
lower effective tax rate was attributable to the fact
that the gain recognised on the partial settlement
of the exchangeable bond on shares in Rolls-Royce
plc, London, was tax-exempt. In accordance with the
provisions of § 37 (5) of the German Corporation Tax
Act, tax reimbursement receivables of euro 123 mil-
lion have been recognised as an asset on the basis
of their present value.

The Automobiles segment recorded a 3.5 %

increase in sales volume and a 4.2 % increase in
revenues, with product mix shifts having a positive
impact on revenues. Segment profit increased by
only 1.2 % to euro 3,012 million due to the effect of
adverse external factors.

Motorcycles segment revenues increased by
3.4 %, whilst segment profit improved by 10.0 %.
Efficiency improvement programmes in particular
contributed to improved profitability in this seg-
ment.

The Financial Services segment again expanded

its business successfully in 2006, enabling seg-
ment profit to be improved by 13.2 % compared to
the previous year.

Reconciliations to the Group profit in 2006 are

positive (2005: negative) mainly as a result of the
gain arising on the partial settlement of the exchange-
able bond on shares in Rolls-Royce plc, London.

Financial position
The group cash flow statement shows the sources
and applications of cash flows for the financial
years 2006 and 2005, classified into cash flows
from operating, investing and financing activities.

Cash flows from operating activities are deter-
mined indirectly starting with the group net profit.
By contrast, cash flows from investing and financial
activities are based on actual payments and re-
ceipts. Cash and cash equivalents in the cash flow
statement correspond to the amount disclosed in
the balance sheet.

Revenues by segment

in euro million

Automobiles

Motorcycles

Financial Services

Reconciliations

Group

Profit before tax by segment

in euro million

Automobiles

Motorcycles

Financial Services

Reconciliations

Group

1.1. to
31.12. 2006

1.1. to
31.12. 2005

47,767

1,265

11,079

– 11,112

48,999

45,861

1,223

9,408

– 9,836

46,656

1.1. to
31.12. 2006

1.1. to
31.12. 2005

3,012

685

361

4,124

2,976

605

– 354

3,287

Change in cash and cash equivalents
in euro million

12,000

11,000

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

– 1,000

– 2,000

Cash and cash
equivalents
31.12. 2005

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. 2006

1,621

+ 9,980

– 13,670

+ 3,323

+ 82

1,336

Operating activities of the BMW Group generated

a positive cash flow of euro 9,980 million in 2006,
down by euro 711 million or 6.7% compared to one
year earlier. Changes in net current assets during
2006 resulted in a net cash outflow of euro 49 million
(2005: net inflow of euro 923 million). The net cash
outflow was due to the higher level of inventories.
The cash outflow for investing activities

amounted to euro 13,670 million and was therefore
euro 1,707 million higher than in 2005. The marked
increase in cash outflow for investing activities was
due, on the one hand, to increased capital expendi-
ture in 2006 and, on the other, to the receipt, in 2005,
of the final sales price instalment of euro 1,000 million
from the sale of Land Rover. Capital expenditure on
intangible assets and property, plant and equipment
resulted in the cash outflow for investing activities
increasing by euro 438 million compared to the pre-
vious year. The cash outflow for net investments in
financial services activities also rose steeply and was
euro 505 million higher than in the previous year.

Financing activities in 2006 generated a posi-

tive cash flow of euro 3,323 million (2005: euro
699 million). Cash inflows from the issue of bonds

totalled euro 6,876 million (2005: euro 5,819 million),
whilst cash outflows to repay bonds totalled euro
4,491 million (2005: euro 3,432 million). The dividend
payment made during the financial year 2006 was
euro 419 million. The share buy-back programme
involved a cash outflow in 2006 of euro 253 million.

73.0 % (2005: 89.4 %) of the cash outflow for

investing activities was covered by the cash inflow
from operating activities.

The cash flow statement for Industrial opera-

tions shows that the cash inflow from operating
activities exceeded the cash outflow for investing
activities by 21.6 % (2005: 150.7%). By contrast, the
cash flow statement for Financial operations shows
that, due to the high level of capital expenditure on
leased products and receivables from sales financing,
the cash inflow from operating activities did not cover
the cash outflow for investing activities. The short
fall was 50.2 % (2005: 52.5 %).

After adjustment for the effects of exchange-

rate fluctuations and changes in the composition of
the BMW Group which resulted in a positive amount
of euro 82 million (2005: euro 66 million), the various
cash flows resulted in a decrease in cash and cash

48 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

equivalents of euro 285 million (2005: decrease of
euro 507 million).

Net interest-bearing assets relating to Industrial

operations (including receivables from the financial
operations sub-group) amounted to euro 5,385 mil-
lion at 31 December 2006, an increase of euro 508
million compared to one year earlier. Net interest-
bearing assets relating to Industrial operations com-
prise cash and cash equivalents (euro 1,235 million),
marketable securities relating to Industrial operations
(euro 1,993 million) and receivables from Financial
operations (euro 4,276 million) less financial liabili-
ties relating to Industrial operations. Excluding inter-
est and currency derivatives, the latter amounted to
euro 2,119 million.

Net assets position
The group balance sheet total increased by euro
4,491 million or 6.0 % to euro 79,057 million. Cur-
rency effects, largely attributable to a weaker US
dollar, held down the increase in the balance sheet
total in 2006. Adjusted for changes in exchange
rates, the balance sheet total would have increased
by 10.0 % or euro 7,162 million. The main factors
behind the increase on the assets side were the in-
creased level of leased products (+19.9 %), financial
assets (+19.8 %), intangible assets (+15.7%) and
receivables from sales financing (+ 4.5 %). On the
equity and liabilities side of the balance sheet, the
main increases related to equity (+12.7%) and finan-
cial liabilities (+ 5.2 %).

Intangible assets increased by 15.7% to euro
5,312 million. Within intangible assets, capitalised
development costs went up by 16.0 % to euro
4,810 million. Development costs recognised as as-
sets during the year under report amounted to euro
1,536 million (+10.0 %), equivalent to a capitalisa-
tion ratio of 47.9 % (2005: 44.8 %). As in the previous
year, increased capitalised development costs re-
sulted from the higher number of projects in the
series development phase. Amortisation on intangi-
ble assets totalled euro 872 million (+17.0 %).

The carrying amount of property, plant and
equipment increased by 1.8 % to euro 11,285 mil-
lion. The bulk of capital expenditure related to further
expansion of the worldwide production and sales
networks. Capital expenditure on property, plant and
equipment was euro 2,656 million, 10.3 % more
than in the previous year. Important areas of capital
expenditure included expansion of the Oxford and
Spartanburg plants. Depreciation on property, plant
and equipment totalled euro 2,313 million (+4.6 %).
Balances brought forward for subsidiaries being
consolidated for the first time amounted to euro
22 million. Capital expenditure on intangible assets
and property, plant and equipment totalled euro
4,313 million (+ 8.0 %), which, as in the previous
year, was financed fully out of cash flow. Capital
expenditure as a percentage of revenues was 8.8 %
(2005: 8.6 %).

As a result of the growth of business, the total

carrying amount of leased products increased
sharply by 19.9 % to euro 13,642 million. Adjusted
for changes in exchange rates, leased products
would have risen by 29.9 %.

The carrying amount of other investments de-
creased by 66.0 % to euro 401 million, mainly as a
result of the partial settlement of the exchangeable
bond on shares in Rolls-Royce plc, London. The
market value of the remaining investment is now
euro 99 million above its historical cost. Fair value
gains or losses on the shares are recognised directly
in other accumulated equity.

Receivables from sales financing were up by

4.5 % to euro 30,368 million due to the higher
business volume. Of this amount, customer and
dealer financing accounted for euro 23,038 million
(+ 3.3 %) and finance leases accounted for euro
7,330 million (+ 8.6 %).

Inventories increased by euro 267 million
(+4.1%) to euro 6,794 million, mainly as a result of
the inclusion of new sales companies in the group
reporting entity. Trade receivables went up by 5.8 %
compared to 31 December 2005.

Balance sheet structure Group
in euro billion

Non-current assets

64 %

24 %

64 %

23 %

Equity

39 %

40 %

Non-current provisions and liabilities

Current assets

36 %

38 %

36 %

Current provisions and liabilities

of which cash and cash equivalents
and marketable securities

2 %

2006

2005

2006

Balance sheet structure industrial operations
in euro billion

Non-current assets

51%

41%

Equity

55 %

39 %

Current assets

49 %

45 %

35 %

31%

Non-current provisions and liabilities

28 %

26 %

Current provisions and liabilities

of which cash and cash equivalents
and marketable securities

3 %

4 %

2006

2005

2006

50 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Financial assets increased by 19.8 % to euro
3,950 million, mainly as a result of higher fair values
of derivative financial instruments.

Liquid funds fell by 8.8 % to euro 3,370 million.

Whereas marketable securities were roughly at
the previous year’s level, cash and cash equivalents
decreased by euro 285 million compared to one
year earlier.

On the equity and liabilities side of the balance
sheet, equity grew by 12.7% to euro 19,130 million.
The profit for the year attributable to shareholders
of BMW AG increased equity by euro 2,868 million.
Fair value changes recognised directly in other accu-
mulated equity reduced equity by euro 43 million
(2005: reduction of euro 875 million). This was the
result of translation differences and the fair value
measurement of financial instruments and available-
for-sale securities. In addition, the increase in dis-
count factors applied in Germany and the United
Kingdom in 2006 gave rise to actuarial gains totalling
euro 515 million. In the previous year, actuarial losses
of euro 736 million had been recognised as a result
of lower interest rates. The dividend payment for
the financial year 2005 and the buy-back of shares
in the first quarter 2006 reduced equity by a further
euro 672 million. Minority interest amounted to
euro 4 million. Overall, the equity ratio of the BMW
Group improved by 1.4 percentage points to
24.2 %.

The equity ratio for Industrial operations was
40.6 % compared to 39.1% at the end of the pre-
vious year. The equity ratio for Financial operations
remained at 10.4 %.

The amount recognised in the balance sheet
for pension obligations decreased by 4.5 % to euro
5,017 million. Following the change in accounting
policy for pension obligations in the previous year,
the amount reported under pension provisions cor-
responds to the full defined benefit obligation (DBO).
In the case of pension plans with fund assets, the
fair value of fund assets is offset against the defined
benefit obligation. The decrease in pension obliga-
tions was attributable principally to the fact that
higher discount factors were applied in Germany
and the United Kingdom.

Other provisions decreased by 6.3 % to euro

5,536 million, mainly due to lower obligations for
on-going operational expenses. The main factor
here was the reduction in warranty provisions. Pro-
visions for other obligations were also lower. By con-
trast, personnel-related obligations increased by
euro 138 million.

Deferred tax liabilities increased by 9.4 % to
euro 2,758 million, primarily as a result of the higher
level of capitalised development costs.

Financial liabilities increased by 5.2 % to euro
36,456 million. Within financial liabilities, bonds in-
creased by 8.3 % to euro 16,420 million, mainly as
a result of the higher volume of the medium term
note programme. Liabilities to banks and obligations
under asset-backed financing transactions were
also up, whereas liabilities from customer deposits
(banking) were down by 9.6 %.

Trade payables amounted to euro 3,737 million

and were thus 5.4% higher than one year earlier.

Other liabilities totalling euro 5,856 million were
up by 11.8 %. This was mainly attributable to the in-
crease in other taxes and in deferred income relating
to service and repair agreements.

Compensation Report
The compensation of the Board of Management
comprises fixed and variable remuneration compo-
nents. In addition, benefits are also payable at the
end of members’ mandates, primarily in the form of
pension benefits. Further details, including an analy-
sis of remuneration by individual, are disclosed in
the Compensation Report which can be found in
the “Corporate Governance” section of the Annual
Report on pages 121 to 124. The Compensation
Report is a sub-section of the Management Report.

Subsequent events report
No events have occurred after the balance sheet date
which could have a major impact on the earnings
performance, financial position and nets assets of
the BMW Group.

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 ex-
penses are treated as bought-in costs in the value
added calculation. 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 treats depreciation as a com-
ponent of value added which, in the allocation state-
ment, is treated as internal financing.

Net value added by the BMW Group in 2006

increased by 8.8 % to euro 13,585 million. The
increase in comparison to the previous year was
attributable primarily to the higher level of revenues.
The increase in gross valued added, at 10.8 %, was
even more pronounced since it is not affected by
depreciation and amortisation, which are higher
than in the previous year.

The bulk of the net value added (54.9 %) is

applied to employees. The amount applied to
providers of finance increased to 12.0 %. The govern-
ment /public sector also accounted for 12.0 % (in-
cluding deferred taxes). The proportion of net value
added applied to shareholders, at 3.4 %, was similar
to the previous year’s level. The remaining propor-
tion of net value added (17.7%) will be retained in
the Group to finance future operations. In absolute
terms, this amount increased by 32.4 %.

52 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

BMW Group value added statement

in euro million

Work performed

Revenues

Financial income

Other income

Total Group output

Cost of materials

Other expenses

Bought-in costs

Gross value added

Depreciation and amortisation

Net value added

Applied to:

Employees

Providers of finance

Government /public sector

Shareholders

Group

Minority interest

Net value added

* adjustment to dividends due to acquisition of treasury shares

BMW Group value added 2006
in %

Net value added

Cost of materials

Depreciation and amortisation

Other expenses

2006

2006
in %

2005

2005
in %

Change
in %

48,999

393

744

97.7

0.8

1.5

50,136

100.0

26,598

5,037

31,635

18,501

4,916

13,585

7,448

1,627

1,636

458

2,410

53.1

10.0

63.1

36.9

9.8

27.1

54.9

12.0

3.4

17.7

–

46,656

– 188

844

47,312

25,694

4,925

30,619

16,693

4,207

12,486

7,306

1,351

1,590

419*

1,820*

–

98.6

– 0.4

1.8

100.0

54.3

10.4

64.7

35.3

8.9

26.4

58.5

10.9

12.7

3.3

14.6

–

13,585

100.0

12,486

100.0

6.0

3.3

10.8

8.8

1.9

20.4

2.9

9.3

32.4

–

8.8

9.8

10.0

54.9 %

Employees

27.1

53.1

12.0 %
12.0 %
3.4 %
17.7%

Providers of finance
Government/public sector
Shareholders
Group

2006

2005

23.1

14.9

8.3

8.4

5.9

24.3

16.9

24.2

40.6

10.4

22.9

14.6

8.1

7.0

4.8

19.9

13.5

22.8

39.1

10.4

115.3

108.2

6.3

1.4

21.7

17.7

5.6

1.3

23.2

17 .8

Key performance figures

Gross Margin

EBITDA Margin

EBIT Margin

Pre-tax return on sales

Post-tax return on sales

Pre-tax return on equity

Post-tax return on equity

Equity ratio – Group

Industrial operations

Financial operations

Coverage of intangible assets, property, plant and equipment by equity

Return on Assets

BMW Group

Financial Services

Return on Capital Employed

Automobiles

Motorcycles

Cash inflow from operating activities

euro million

9,980

10,691

Cash outflow from investing activities

euro million

13,670

11,963

Coverage of cash outflow from investing activities by cash inflow from operating activities

73.0

89.4

Net financial assets of industrial operations

euro million

5,385

4,877

54 Group Management Report

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10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

totalled euro 1,324 million (2005: euro 1,472 million).
This represents a decrease of 10.1% and was mainly
due to completion of structural investment at the
Leipzig plant. Depreciation and amortisation amounted
to euro 1,765 million.

By 17 February 2006, a total of 20,232,722
shares of common stock had been bought back via
the stock exchange at a total acquisition cost of
euro 758 million, and withdrawn from circulation in
accordance with the resolution taken by the Board
of Manangement on 21 February 2006. Of the total
number of shares withdrawn, 13,488,480 shares,
with an acquisition cost of euro 506 million, had al-
ready been held by BMW AG at 31 December 2005.
Equity decreased by the amount of the buy-back
value of the shares withdrawn from circulation. The
equity ratio fell from 25.8% to 23.4%. Long-term
external capital (registered profit-sharing certificates,
pension provisions, the liability to the BMW Unter-
stützungsvereins e.V. and liabilities due after one
year) increased marginally (+1.3 %) to euro 4.8 billion.
As in previous years, the cash inflow from
BMW AG’s operating activities was used to finance
subsidiaries.

Comments on the Financial Statements of
BMW AG
Whereas the Group financial statements are drawn
up in accordance with IFRSs issued by the IASB, the
financial statements of BMW AG are drawn up in
accordance with the provisions of the German Com-
mercial Code (HGB). Where it is permitted and con-
sidered sensible, the principles and policies of IFRSs
are also applied in the individual company financial
statements.The pension provision in the individual
company financial statements, for example, is also
determined in accordance with IAS 19 and the full
defined benefit obligation recognised. In numerous
other cases, however, the accounting principles and
policies in the individual company financial state-
ments of BMW AG differ from those applied in the
Group financial statements. The main differences
relate to the recognition of intangible assets, depre-
ciation and amortisation methods, the measurement
of inventories and provisions as well as the treat-
ment of financial assets.

BMW AG develops, manufactures and sells cars

and motorcycles manufactured by itself and for-
eign subsidiaries. These vehicles are sold through
the Company’s own branches, independent dealers,
subsidiaries and importers. The number of cars
manufactured at German and foreign plants in 2006
rose by 3.3 % to 1,366,838 units. At 31 December
2006, BMW AG had 76,156 employees, 380 fewer
than one year earlier. Wage earners account for
approximately 53 % of the workforce.

In 2006, revenues were 1.5 % higher than in the

previous year. Sales to foreign group sales compa-
nies accounted for euro 30.8 billion, or approximately
73 % of the total revenues of euro 42.4 billion. Cost
of sales remained at approximately the same level as
in 2005, and therefore went up at a slightly slower
rate than revenues. The gross profit, at euro 6.1 bil-
lion, was 11.6 % higher than in the previous year.

Adverse currency factors relating to the US

dollar and Japanese yen, alongside continued in-
tense competition on the automobile markets and
increases in raw material prices, all had a negative
impact on BMW AG’s earnings. By contrast, the in-
crease in the interest rate used to measure pension
provisions (from 4.25 % to 4.40 %) and the dis-
counted tax reimbursement resulting from a change
in German law with regard to the corporation tax
credit, had a positive effect.

In the financial year 2006, capital expenditure on
intangible assets and property, plant and equipment

BMW AG
Balance Sheet at 31 December in euro million

Assets

Intangible assets

Property, plant and equipment

Investments

Tangible, intangible and investment assets

Inventories

Trade receivables

Receivables from subsidiaries

Other receivables and other assets

Marketable securities

Cash and cash equivalents

Current assets

Prepayments

Equity and liabilities

Subscribed capital

Nominal value of shares acquired for withdrawal from circulation

Issued capital

Capital reserves

Revenue reserves

Unappropriated profit available for distribution

Equity

Registered profit-sharing certificates

Special untaxed reserve for emission rights granted free of charge

Pension provisions

Other provisions

Provisions

Liabilities to banks

Trade payables

Liabilities to subsidiaries

Other liabilities

Liabilities

Deferred income

2006

2005

5,268

4,823

5,717

4,774

10,171

10,577

2,866

2,764

1,075

4,478

693

1,583

106

10,801

1,054

2,751

558

1,488

518

9,133

21,045

19,802

654

1,991

1,818

458

4,921

4,347

6,131

674

– 13

661

1,971

2,052

424

5,108

–

4,174

6,447

10,478

10,621

607

2,046

1,618

1,313

5,584

500

1,858

941

710

4,009

21,045

19,802

56 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

BMW AG
Income Statement in euro million

Revenues

Cost of sales

Gross profit

Sales costs

Administrative costs

Research and development costs

Other operating income and expenses

Result on investments

Net interest result

Profit from ordinary activities

Income taxes

Other taxes

Net profit

Profit carried over from previous year

Transfer to revenue reserves

Unappropriated profit available for distribution

2006

2005

42,417

– 36,364

6,053

– 2,560

– 917

– 2,966

41,801

– 36,379

5,422

– 2,731

– 904

– 2,917

654

304

– 8

560

– 60

– 15

485

– 31

458

893

647

– 23

387

– 13

424

–

424

Revenues generated with car rental companies

involving a repurchase commitment are derecog-
nised. Based on the draft Pronouncement issued
on 1 July 2004 by the German Institute of Public
Accountants (IDW) relating to the “Specific Issues in
connection with Transfer of Ownership and Profit

Realisation in accordance with HGB” (IDW ERS HFA
13), the vehicles involved are presented within cur-
rent assets, measured at amortised cost, since
economic ownership has not been transferred to the
car rental companies.

KPMG Deutsche Treuhand-Gesellschaft Aktienge-
sellschaft Wirtschaftsprüfungsgesellschaft, Munich
has issued an unqualified audit opinion on the finan-
cial statements of BMW AG, of which the balance
sheet and the income statement are presented here.
The BMW AG Financial Statements and Manage-
ment Report for the financial year 2006 will be sub-
mitted to the operator of the electronic version of
the German Federal Gazette and can be obtained via
the Company Register website.These financial state-
ments are available from BMW AG, 80788 Munich,
Germany.

58 Group Management Report

Risk Management

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

Risk management in the BMW Group
As a globally operating enterprise, the BMW Group
is confronted with numerous risks. At the same
time, opportunities can arise from changing circum-
stances, which the BMW Group endeavours to an-
ticipate and exploit to improve its competitive position.
Business risks are only consciously entered into
when it is considered that the value of the business
can be increased and the potential outcome can
be controlled. The Board of Management and Super-
visory Board are regularly informed about risks
which could have a significant impact on business
development.

In order to identify, evaluate and document the
main risks, the BMW Group uses a comprehensive
risk management system which involves the following
processes:
– Business decisions are reached after in-depth

project analyses, including detailed information
concerning potential risks and opportunities, have
been taken into consideration. In addition, as part
of the long-term planning strategy and short-
term forecasting procedures, the risks and oppor-
tunities attached to specific business activities
are evaluated and used as the basis for setting
targets and implementing appropriate risk-miti-
gation measures.

– The Group reporting system keeps all decision-
makers fully informed and up-to-date about per-
formance against targets and highlights changes
affecting the market and competitors. By con-
tinuous monitoring of critical success factors,
variances are identified at an early stage, thus
allowing appropriate counter-measures to be im-
plemented.

– Overall risk management is supervised by the

corporate controlling department and is reviewed
for its appropriateness and effectiveness by exter-
nal auditors and by the Group’s internal audit de-
partment. Throughout the BMW Group, a network
of risk managers is in place, regularly carrying
out risk reviews to identify and analyse significant
risks. The results of the reviews are summarised
in a separate risk report which is then presented
to the Board of Management.

– By regularly sharing experiences with other com-
panies, the BMW Group ensures that innovative
ideas and approaches flow into the risk manage-
ment system and that operational risk management
is subjected to continual improvement.

At present, no risks have been identified which could
threaten the existence of the Group or which could
have a materially adverse impact on the net assets,
financial position or results of operations of the Group.
However, risks can never be entirely ruled out.

In the course of its business activities, the BMW

Group is exposed to various types of risk:

Risks relating to the general economic
environment
– As a result of its global activities, the BMW Group
is affected by global economic factors such as
changes in currency parities and changes on the
financial markets. The US dollar is particularly
important for the development of group revenues
and earnings and represents the main single
source of risk within the BMW Group’s foreign
currency portfolio. Exchange rate fluctuations of
the British pound and the Japanese yen in relation
to the euro can also have a material impact on
earnings. Based on group forecasts, these three
currencies account for some 80 % of the foreign
currency exposure of the BMW Group.
The BMW Group manages currency risks at both
a strategic and an operating level.
From a strategic point of view, i.e. in the medium
and long-term, the BMW Group endeavours to
manage foreign exchange risks by “natural hedg-
ing”, in other words by increasing the volume of
purchases denominated in foreign currency or
increasing the volume of local production. Cur-
rency risks are hedged in the short and medium
term on the financial markets. Hedging transac-
tions are entered into only with financial partners
of first-class credit standing. The nature and
scope of such measures are set out in guidelines
applicable throughout the BMW Group. A cash-
flow-at-risk model and scenario analyses are
used to measure exchange rate risks. These in-
struments are also used as part of the process of
currency management for the purpose of taking
business decisions.

– Changes in the international commodity markets

also have an impact on the business development
of the BMW Group. In order to safeguard the sup-
ply of production materials and to minimise the
cost risk, the commodity markets relevant for the
BMW Group are closely monitored. The market price
trend of precious metals such as platinum, palla-
dium and rhodium, for which appropriate hedging

strategies are decided upon by the Raw Materials
Committee, is also important in this context.
– Changes in the price of crude oil, which is an im-
portant basic material in the manufacture of com-
ponents, have an indirect impact on production
costs. As a manufacturing enterprise, the BMW
Group is also affected by changes in energy
prices, caused by both market factors and tax
legislation.

– Cyclical economic volatility also entails an ele-
ment of risk for future business development.
Unforeseeable interventionist economic policies
can also impair the BMW Group’s performance
in specific markets. The BMW Group anticipates
these risks by monitoring the markets in detail
and using early warning indicators. Risk is also
spread due to the worldwide nature of the BMW
Group’s activities. At the same time, determined
engagement in new markets and segments with
both existing and new products creates significant
opportunities for the BMW Group to strengthen
its competitive position.

– An escalation of political tensions, terrorist activi-
ties or possible pandemics could have a negative
impact on the economic situation, the interna-
tional capital markets and hence the business de-
velopment of the BMW Group.

Specific industry risks
– Changes in fuel prices, which may be either mar-
ket-induced or due to governmental tax policies,
and the increasingly stringent requirements to
reduce fleet fuel consumption as well as CO2 and
NOX emissions, all continue to place high de-
mands on the BMW Group’s engine and product
development.

– The statutory regulations for CO2 emissions tar-
geted by the European Commission could have
a materially adverse effect on the business de-
velopment of the Automobiles segment and con-
sequently on the group’s earnings performance.

Operating risks
– Risks arising from business interruption and loss
of production are insured up to economically rea-
sonable levels. The BMW Group’s extremely flexi-
ble production network and working time models
also help to reduce operating risks.

– Close cooperation between manufacturers and

suppliers is usual in the automotive sector, and

although this provides economic benefits, it also
creates a certain degree of mutual dependence.
Some suppliers have become very important for
the production activities of the BMW Group. De-
livery delays, cancellations, strikes or poor quality
can lead to production stoppages and thus have
a negative impact on profitability. The Group miti-
gates these risks by employing extensive proce-
dures for selecting, monitoring and handling sup-
pliers. Before selection, for example, both the
technical competence and the financial strength
of potential suppliers are appraised. A compre-
hensive Supplier Relationship Management sys-
tem, which also takes account of social and eco-
logical aspects, helps to reduce risk exposure.

Risks relating to the provision of financial
services
– As a consequence of the growth of lease busi-

ness, the BMW Group faces an increased residual
value risk on the vehicles which are returned to
the Group at the end of lease contracts. Changes
in the residual values of BMW Group vehicles on
the used car markets are therefore constantly
monitored and forecasted. The overall risk posi-
tion is measured each quarter by comparing fore-
casted market values and contractual values ac-
cording to model and market.
Provisions and write-downs on leased-out cars
are recognised in the balance sheet to cover all
identified risks. This risk is also reduced by meas-
ures such as active life-cycle management and
management of used car markets at an interna-
tional level, both of which have a stabilising effect
on the residual values of BMW Group vehicles.
– Operating risks relating to the provision of finan-
cial services are managed by the BMW Group by
means of a process which records and measures
risks and incorporates specific measures to avoid
risk. In this way, the BMW Group minimises the
risk of losses which could arise as a result of
inappropriate or failed internal procedures and
systems, human error or external factors. This
includes measures to ensure that operations can
be continued at an appropriate level in the event
of impairment caused by external factors.

– The BMW Group mitigates liquidity and interest
rate change risks by matching maturities and
employing derivative financial instruments. The
liquidity situation is monitored continually by

60 Group Management Report

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

means of a rolling cash flow forecast. As part of a
value-based interest rate management system,
interest rate risks are measured and limited using
a value-at-risk approach. The risk-return ratio is
tested continuously using simulated computations.
In addition, sensitivity analyses are prepared
to measure the potential impact of interest rate
changes on earnings.

– In order to avoid currency risks, financing and lease
business is refinanced, as a general rule, in the
currency of the relevant market.

– A major part of financing and lease business with-
in the Financial Services segment is refinanced
on the capital markets. As a result of its good
credit standing, reflected in the long-standing
first-class short-term ratings issued by Moody’s
(P-1) and Standard & Poor’s (A-1), the BMW Group
is able to obtain competitive conditions. The long-
term ratings for the BMW Group published by
Standard & Poor’s and Moody’s in September2005
remain valid, enabling the BMW Group to obtain
competitive conditions. Moody’s issued an A1
rating and Standard & Poor’s an A+ rating, both
with stable outlook.

– Various methods and systems such as credit-

rating and scoring are in place to manage credit
risk, partly in the light of Basle II requirements.
Depending on the credit volume applied for and
the credit risk rating of the party involved, financing
applications for international dealers, importers
and fleet customers are presented to the local,
regional or corporate credit committees for ap-
proval. A two-step credit application process helps
to reduce the risk of default affecting the Group’s
worldwide financial services operations. This
process, which is based on clear and binding
credit risk rules applicable throughout the group,
also specifies the maximum amounts of un-
secured credit volumes permitted (“unsecured
risks”). The dual control principle applies world-
wide and is rigorously implemented. In another
measure to reduce risk, the BMW Group is con-
tinuously making efforts to standardise its credit-
decision processes and the quality of those
processes on a worldwide basis, and to ensure
that uniform rating systems are in place. Close
contact to borrowers, a thorough knowledge of
the vehicle products sold, local credit checks and
on-going measurement of collateral all make a
vital contribution towards avoiding losses, particu-

larly in the case of lower rating categories. On top
of this, the dynamic global credit markets will con-
tinue to supply highly flexible instruments to miti-
gate risk (e.g. securitisation, coverage using credit
derivatives, credit syndication).
For retail customer financing purposes, the BMW
Group uses validated scorecards in order to reach
credit decisions more quickly and to monitor risk.
Criteria such as arrears and bad debt ratios are
analysed monthly and used to actively manage
the credit portfolio and to improve portfolio quality.

Legal risks
– The BMW Group is not involved in any court or

arbitration proceedings which could have a sig-
nificant impact on the economic position of the
Group.

– Like all enterprises, the BMW Group is exposed

to the risk of warranty claims. Adequate provisions
have been recognised in the balance sheet to
cover such claims. Part of the risk, especially where
the American market is concerned, has been in-
sured externally up to economically acceptable
levels. The high quality of BMW Group products,
additionally ensured by regular quality audits and
on-going improvement measures, helps to reduce
this risk. In comparison with competitors, this
can give rise to benefits and opportunities for the
BMW Group.

– Changes in the regulatory environment may im-
pair the sales volume, revenues and earnings
performance of the BMW Group in individual mar-
kets or economic regions.

Personnel risks
– As an attractive employer, the BMW Group has

found itself in a favourable position for many years
in the intense competition for qualified technical
and managerial staff. Employee satisfaction and
a low level of employee fluctuation also help to
minimise the risk of know-how drift.

– An ageing and shrinking population in Germany
will have a lasting impact on the conditions pre-
vailing in the labour, product, services and financial
markets. Demographic changes will give rise to
risks and opportunities which enterprises will
be increasingly faced with in coming years. The
BMW Group carefully reviews the effects of
demographic change on operations, focusing in
particular on the following issues:

measures as well as standard activities such as virus
scanners, firewall systems and access controls at
operating system and application level.

Protecting BMW Group-specific know-how is
also treated as a major issue as far as cooperation
arrangements and relationships with partner com-
panies are concerned. The BMW Group protects its
intellectual property by ensuring that the relevant
departments have clear instructions regarding data
protection and the use of information technology. In-
formation underlying key areas of expertise is espe-
cially protected. In addition, staff members working
in IT functions are increasingly receiving specific train-
ing in the area of data protection.

– the creation of a working environment for the

future

– promotion and maintenance of the workforce’s
ability to perform with the appropriate set of skills

– training
– increasing employees’ awareness of their re-
sponsibility to make personal provisions for
their future

– individual employee working life-time models

– The BMW Group’s pension obligations to its

employees resulting from defined benefit plans
are measured on the basis of actuarial reports.
In accordance with IAS 19, future pension pay-
ments are discounted by reference to market
yields on high quality corporate bonds. These
yields are subject to market fluctuation and influ-
ence the level of pension obligations. Further-
more, changes in other factors, such as longer
life expectancies, can also have an impact on
pension obligations.
In the United Kingdom, the USA and a number of
other countries, funds intended to cover pension
entitlements are held separately from corporate
assets and are mainly invested in fixed-income
securities with a high level of creditworthiness,
and in equities. In Germany, by contrast, the funds
remain part of the enterprise’s assets.

Information and IT risks
The BMW Group protects data, business secrets and
innovative developments against unauthorized ac-
cess, damage and misuse using security measures
appropriate to the risk involved. These measures
encompass manual, process design and IT controls.
Group directives are in place requiring employees

to handle information appropriately and ensure that
information systems are properly used. Targeted
communication measures increase employees’
awareness of security requirements.

The protection of information and data is an in-

tegral component of business processes and is
achieved within the BMW Group by applying inter-
national security standards. Together with the related
IT infrastructure, the group’s core process “Product
development” has been audited and certified to in-
ternational security standard (ISO 27001/17799).
Certification had already been received back in 2003
and was again achieved in 2006.

The technical data protection procedures used
by the BMW Group include process-specific security

62 Group Management Report

Outlook

10 Group Management Report

10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to § 289 (4)

The economic environment in 2007
The BMW Group predicts that the global economy
will lose some of its momentum in 2007, with the
growth rate tailing off towards the end of the year,
but that it will nevertheless continue to grow overall
at a high level. Higher interest rates across the board
and the persistent high level of oil prices are, in the
meantime, beginning to have an impact. For the
year as a whole, it is forecast that prices will remain
at a similarly high level compared to 2006. Although
marginally lower global demand for oil and the fact
that new production and refinery capacities are com-
ing on line do not point to a sharp increase in prices,
the oil market will nevertheless remain strained and
consequently subject to volatility.

In 2007, the US economy is not expected to
grow as fast as in recent years. However, even taking
a sharp rise in interest rates, higher energy and raw
material prices and a more sluggish property mar-
ket into account, it is still not expected to weaken
significantly. Growth rates are also likely to drop
slightly in Japan and the euro region. Nevertheless,
the overall economic situation in these regions still
remains robust. In the euro region, it is most likely
to be Germany that will put the brake on the growth
rate, with consumer spending, already on the weak
side, being held down by the value added tax increase.
The emerging markets of Asia, Eastern Europe and
Latin America will continue to grow strongly. Here,
too, the global slow-down will, however, result in
slightly lower growth rates.

Economic outlook for the automobile industry
in 2007
The fast-growing Asian markets will continue to give
impetus to the global automobile economy in 2007.
These markets will continue to grow dynamically,
albeit at a slightly slower pace. China’s and India’s
automobile markets will continue to expand, with
high growth rates in the double-digit range. The
equivalent markets in Latin American will also enjoy
another year of strong growth.

By contrast, the triad of traditional car markets

(USA, Japan and Western Europe) will again generate
little momentum; the overall forecast here is one of
market stagnation. In Germany, purchases brought
forward into 2006 may even cause a small contraction
of the market in 2007.

Motorcycle markets still developing divergently
The motorcycle markets relevant to the BMW Group
(500 cc plus) are forecast to register a low growth
rate in 2007, with the individual markets developing
divergently. Stronger growth is expected in the
Southern European countries.

Interest rates to remain at high level
Interest rates rose sharply in 2006 and will remain
at that high level throughout 2007. Within the euro
region, the European Central Bank is expected to
continue to raise interest rates. For the US dollar re-
gion, the BMW Group anticipates that the US Federal
Reserve Bank will increase rates again by the second
half of the year at the latest.

Outlook for the BMW Group in 2007
Within the economic parameters described above,
the BMW Group expects overall that it will continue
to make good progress in the financial year 2007.

The sales volume of the Automobiles segment

is forecast to rise further, with each of its three
brands – BMW, MINI and Rolls-Royce – expected to
achieve new high levels. Seasonal effects will again
be evident during the year, albeit reflecting an oppo-
site pattern to the year 2006. Whilst sales volume
growth is likely to be on the moderate side during
the early months of the year, it should be much
stronger during the second half of the year.

Adverse external factors attributable to the for-

eign exchange impact and to higher raw material
prices will continue to affect the reported earnings
of the Automobiles segment in 2007. Nonetheless,
the BMW Group aims to improve segment profit
before tax, given that the continuing positive trend
in sales volumes, plus the benefit of on-going effi-
ciency improvement measures, will help profitability.
As far as the motorcycles business is con-
cerned, the BMW Group forecasts that the individual
markets will continue to develop extremely diver-
gently in 2007. Numerous new models, the related
entry into new segments and intensified market
activities will again have a positive impact on busi-
ness development. Efficiency improvement pro-
grammes will be continued on an on-going basis,
thus contributing to sustainable profitable growth.

The BMW Group’s Financial Services business

will continue to grow in 2007. It will, however, be

the Rolls-Royce exchangeable bond in 2006, pre-tax
group earnings for the financial year 2007 are fore-
cast to be better than in 2006.

The extent of this improvement in earnings will

largely depend on whether opportunities arise to
improve group earnings against a background of ad-
verse currency factors, high raw material prices,
changes in interest rates and greater competition.
The BMW Group is rising to these challenges by
achieving sales volume growth and continuously
improving efficiency.

The BMW Group aims to continue its growth

course in the coming years and, in comparison to
the sector, will continue to generate above-average
returns.

confronted with increased refinancing costs in the
wake of higher interest rates. The Financial Services
segment will counter the resulting pressure on
earnings by purposeful expansion across all lines of
business. This strategy will be accompanied by fur-
ther geographical expansion and a wider range of
products. The BMW Group considers that financial
services will generally become more significant in
terms of vehicle sales. Overall therefore, the seg-
ment’s business volume is expected to continue its
upward trend. This growth, together with a pro-
gramme of continuous efficiency improvement,
will make a positive contribution towards improved
earnings.

With the exchangeable bond option on the
BMW Group’s investment in Rolls-Royce plc, London,
largely settled in 2006, reconciliations to group
profit will not benefit from any comparable positive
earnings impact in 2007.

The BMW Group will continue to make good use

of opportunities to achieve further growth over the
coming years and, with that aim in mind, invest in
both new products and in the further expansion of
its sales and production networks. Based on current
forecasts, total capital expenditure for the period
from 2005 to 2009 is still forecast to be in the region
of approximately euro 19 billion.

The number of people employed by the BMW

Group will remain more or less constant in 2007.
The necessary build-up of the workforce during the
product and market initiative was completed in 2005
and in the coming years, it will only be necessary to
offset normal fluctuation.

Foreign exchange rate factors and the on-going

high price levels on international commodity mar-
kets will again influence the BMW Group’s earnings
in 2007. However, it is anticipated that these exter-
nal factors will have less of an impact than in the
past and that the additional cost to the BMW Group
will be correspondingly lower than in the previous
year. Growth in the operating segments as well as
continuous efficiency and productivity improvements
will continue to have a positive impact on group
earnings.

Based on the general economic environment

and segment forecasts discussed above, the BMW
Group anticipates a continuation of its good per-
formance in 2007. Adjusted for the one-off gain on

64 Group Financial Statements

Contents

Group Financial Statements
Group and sub-group Income Statements
Group and sub-group Balance Sheets at 31 December
Group and sub-group Cash Flow Statements
Group Statement of Changes in Equity
Statement of Income and Expenses recognised directly in Equity
Notes to the Group Financial Statements
Accounting Principles and Policies
Notes to the Income Statement
Notes to the Balance Sheet
Other Disclosures
Segment Information

Auditors’ Report

65
66
68
70
71

72
79
86
104
111

115

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

BMW Group
Group and sub-group Income Statements

in euro million

Notes

Group

Industrial operations*

Financial operations*

2006

2005

2006

2005

2006

2005

[8]
[9]

[10]
[11]
[12]

[13]
[14]

Revenues

Cost of sales

Gross profit

Sales and administrative costs

Research and development costs

Other operating income and expenses

Profit before financial result

Result from equity accounted investments

Other financial result

Financial result

Profit before tax

Income taxes

Net profit

48,999

46,656

49,227

47,206

11,349

9,801

– 37,660 – 35,992

– 39,238 – 37,343

– 10,050

– 8,623

11,339 10,664

9,989

9,863

1,299

1,178

– 4,972

– 4,762

– 4,464

– 4,312

– 535

– 479

– 2,544

– 2,464

– 2,544

– 2,464

227

355

176

275

–

4,050

3,793

3,157

3,362

814

723

– 25

– 520

– 506

– 25

383

358

– 488

– 474

4,124

3,287

3,515

2,888

[15]

– 1,250

– 1,048

– 1,066

– 934

2,874

2,239

2,449

1,954

–

– 33

781

–

769

– 246

535

– 242

527

–

535

–

527

Attributable to minority interest

–

Attributable to shareholders of BMW AG

2,868

2,239

2,443

1,954

Earnings per share

of common stock in euro

Earnings per share

of preferred stock in euro

[16]

4.38

3.33

4.40

3.35

* before consolidation of transactions between the sub-groups; unaudited

66 Group Financial Statements

BMW Group
Group and sub-group Balance Sheets at 31 December

Assets
in euro million

Notes

Group

Industrial operations*

Financial operations*

2006

2005

2006

2005

2006

2005

Intangible assets

Property, plant and equipment

Leased products

Investments accounted for using the

equity method

Other investments

Receivables from sales financing

Financial assets

Deferred tax

Other assets

Non-current assets

Inventories

Trade receivables

Receivables from sales financing

Financial assets

Current tax

Other assets

Cash and cash equivalents

Current assets

[19]
[20]
[21]

[22]
[22]
[23]
[24]
[25]
[26]

[27]
[28]
[23]
[24]
[25]
[26]
[29]

5,312

4,593

5,276

4,569

11,285

11,087

11,260

11,060

13,642

11,375

254

230

16,364

14,110

401

17,865
816

755

378

1,178

17,202

642

772

613

388

–

1,192

875

1,147

–

126

1,144

908

–

17,865

17,202

755

516

– 1,828

– 1,674

255

273

50,514

47,556

19,366 19,278

33,485 30,509

6,794

2,258

6,527

2,135

12,503

11,851

3,134

246

2,272

1,336

2,654

267

1,955

1,621

6,784

2,214

–

6,521

2,086

–

2,348

2,022

222

5,574

1,235

238

3,411

1,372

12,503

11,851

786

772

101

632

753

249

28,543

27,010

18,377 15,650

14,240 13,569

Total assets

79,057 74,566

37,743 34,928

47,725 44,078

Total assets adjusted for

asset backed financing transactions

74,556

70,667

–

43,224

40,179

* before consolidation of transactions between the sub-groups; unaudited

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Equity and liabilities
in euro million

Notes

Group

Industrial operations*

Financial operations*

2006

2005

2006

2005

2006

2005

Subscribed capital

Capital reserves

Revenue reserves

Accumulated other equity

Treasury shares

Minority interest

Equity

Pension provisions

Other provisions

Deferred tax

Financial liabilities

Other liabilities

Non-current provisions and liabilities

Other provisions

Current tax

Financial liabilities

Trade payables

Other liabilities

654

674

1,911

1,971

18,121

16,351

– 1,560

– 1,517

–

– 506

–

[30]

[31]
[32]
[33]
[34]
[35]

[32]
[33]
[34]
[36]
[35]

19,130 16,973

15,315 13,672

4,965

4,581

5,017

2,865

2,758

5,255

3,243

2,522

18,800

16,830

1,932

1,659

4,983

2,462

2,012

882

1,458

5,220

2,921

1,611

1,070

1,224

403

464

322

658

17,918

15,760

1,732

1,457

31,372 29,509

11,797 12,046

20,551 18,232

2,671

2,663

2,489

2,367

567

462

17,656

17,838

3,737

3,924

3,544

3,577

437

1,407

3,288

3,010

322

655

3,118

2,748

207

130

328

140

16,249

17,183

449

5,174

426

3,188

Current provisions and liabilities

28,555 28,084

10,631

9,210

22,209 21,265

Total equity and liabilities

79,057 74,566

37,743 34,928

47,725 44,078

Total equity and liabilities adjusted for

asset backed financing transactions

* before consolidation of transactions between the sub-groups; unaudited

74,556

70,667

–

43,224

40,179

68 Group Financial Statements

BMW Group
Group and sub-group Cash Flow Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

in euro million

Notes

Group

2006

2005

Net profit

Depreciation of leased products

Depreciation and amortisation of tangible, intangible and investment assets

Change in provisions

Change in deferred taxes

Other non-cash income and expense items

Gain/loss on disposal of non-current assets and marketable securities

Result from equity accounted investments

Changes in current assets and liabilities

Change in inventories

Change in receivables

Increase in liabilities

Cash inflow from operating activities

[39]

2,874

3,808

3,340

137

242

– 329

– 68

– 265

– 566

782

9,980

2,239

3,441

3,025

764

236

176

– 99

– 14

187

– 239

975

10,691

Investment in intangible assets and property, plant and equipment

– 4,313

– 3,875

Proceeds from the disposal of intangible assets and property, plant and equipment

Expenditure for investments

Proceeds from the disposal of investments

Proceeds from sale of Land Rover

Investment in leased products

Disposals of leased products

Additions to receivables from sales financing

Payments received on receivables from sales financing

Investment in marketable securities

Proceeds from marketable securities

Cash outflow from investing activities

Buy-back of treasury shares

Payment of dividend for the previous year

Proceeds from the issue of bonds

Repayment of bonds

Internal financing of financial operations

Change in financial liabilities

Change in commercial paper

Cash inflow/outflow from financing activities

Effect of exchange rate and changes in composition of group on

cash and cash equivalents

Change in cash and cash equivalents

Cash and cash equivalents as at 1 January

Cash and cash equivalents as at 31 December

* unaudited

– 29

110

–

– 10,754

3,719

– 50,313

47,848

– 2,654

2,677

– 74

1,000

– 9,461

3,197

– 45,365

42,634

– 455

381

[39]

– 13,670

– 11,963

– 253

– 419

6,876

– 506

– 419

5,819

– 4,491

– 3,432

–

1,027

583

3,323

–

– 214

– 549

699

– 285

– 507

1,621

1,336

2,128

1,621

[39]

Industrial operations*
2005

2006

Financial operations*
2005

2006

2,449

3,315

236

– 436

– 70

– 261

– 330

364

5,373

1,954

2,997

441

– 54

342

– 99

– 14

184

– 73

501

535

3,560

– 104

227

107

–

– 4

– 70

329

527

2,899

304

418

Net profit

Depreciation of leased products

Depreciation and amortisation of tangible, intangible and investment assets

Change in provisions

Change in deferred taxes

– 166

Other non-cash income and expense items

–

218

276

Gain/loss on disposal of non-current assets and marketable securities

Result from equity accounted investments

Changes in current assets and liabilities

Change in inventories

Change in receivables

Increase in liabilities

6,184

4,607

4,507

Cash inflow from operating activities

– 4,272

– 3,834

– 24

–

– 392

364

–

– 2,619

2,419

– 4,417

– 253

– 419

– 1

– 1,040

– 129

644

– 1,197

138

1,000

– 369

355

–

– 183

381

– 2,467

– 506

– 419

–

– 3,456

– 108

129

– 4,360

– 41

– 5

–

– 10,362

3,355

– 50,313

47,848

– 35

258

– 41

– 212

–

– 9,092

2,842

Investment in intangible assets and property, plant and equipment

Proceeds from the disposal of intangible assets and property, plant and equipment

Expenditure for investments

Proceeds from the disposal of investments

Proceeds from sale of Land Rover

Investment in leased products

Disposals of leased products

– 45,365

Additions to receivables from sales financing

42,634

– 272

Payments received on receivables from sales financing

Investment in marketable securities

–

Proceeds from marketable securities

– 9,253

– 9,496

Cash outflow from investing activities

–

6,875

– 4,490

1,040

1,156

– 61

4,520

–

5,819

– 3,432

3,456

– 106

– 678

5,059

Buy-back of treasury shares

Payment of dividend for the previous year

Proceeds from the issue of bonds

Repayment of bonds

Internal financing of financial operations

Change in financial liabilities

Change in commercial paper

Cash inflow/outflow from financing activities

104

– 22

cash and cash equivalents

Effect of exchange rate and changes in composition of group on

– 137

– 625

– 148

118

Change in cash and cash equivalents

1,372

1,235

1,997

1,372

249

101

131

249

Cash and cash equivalents as at 1 January

Cash and cash equivalents as at 31 December

70 Group Financial Statements

BMW Group
Group Statement of Changes in Equity

in euro million

Subscribed
capital

Capital Revenue
reserves

reserves

Accumulated other equity

Treasury Minority
interest

Total

Translation Fair value Derivative
financial
differences measure-
instru-
ment of
marketable
ments
securities

Pension
obliga-
tions

31 December 2004 *

674

1,971 14,531

– 763

1,072 – 1,013

Acquisition of treasury shares

Dividends paid

Translation differences

Financial instruments

Actuarial gains and losses

on pension obligations

Deferred tax on transactions

recognised directly in equity

Net profit 2005

–

– 419

–

2,239

–

117

–

31 December 2005

674

1,971 16,351

– 646

65 Group Financial Statements

Withdrawal of shares from

Acquisition of treasury shares

–

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

circulation

Dividends paid

Translation differences

Financial instruments

Actuarial gains and losses

on pension obligations

Deferred tax on transactions

recognised directly in equity

Net profit 2006

Other changes

– 20

– 60

–

– 679

– 419

–

2,868

–

– 191

–

– 15

–

562

–

– 370

–

110

515

– 1,780

–

– 736

627

–

287

–

29 – 1,462

– 506

–

198

– 28

–

543

– 69

– 168

–

31 December 2006

654

1,911 18,121

– 837

214

178

– 1,115

see also Note [30]
* adjusted figures

–

– 506

–

– 253

759

–

16,534

– 506

– 419

227

– 1,265

– 736

899

2,239

16,973

– 253

–

– 419

– 199

– 172

543

–

– 2

– 215

2,874

– 2

19,130

BMW Group
Statement of Income and Expenses recognised directly in Equity

in euro million

2006

2005

Fair value gains and losses on available-for-sale investments

recognised directly in equity

Fair value gains and losses on financial instruments used for

hedging purposes recognised directly in equity

Exchange differences arising on the translation of foreign subsidiaries

Actuarial gains and losses on defined benefit pension

and similar obligations

Deferred tax on gains and losses recognised directly in equity

Gains and losses recognised directly in equity

– 370

218

– 191

515

– 215

– 43

515

– 1,670

117

– 736

899

– 875

Profit after tax attributable to shareholders of BMW AG

2,868

2,239

Aggregate amount of net profit for period and gains and losses

recognised directly in equity

2,825

1,364

72 Group Financial Statements

BMW Group
Notes to the Group Financial Statements
Accounting Principles and Policies

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

[1]

Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (“BMW Group
financial statements“ or “Group financial statements“)
at 31 December 2006 have been drawn up in accor-
dance with International Financial Reporting Standards
(IFRSs) as applicable in the EU. The designation
“IFRSs” also includes all valid International Accounting
Standards (IASs). All interpretations of the Interna-
tional Financial Reporting Interpretations Committee
(IFRIC) mandatory for the financial year 2006 are al-
so applied.

The Group financial statements comply in their

present form with provision § 315a of the German
Commercial Code (HGB). This provision, in con-
junction with the Regulation (EC) No. 1606/2002 of
the European Parliament and Council of 19 July 2002,
relating to the application of International Financial
Reporting Standards, provides the legal basis for
preparing consolidated financial statements in ac-
cordance with international standards in Germany
and applies to financial years beginning on or after
1 January 2005.

The BMW Group and sub-group income state-
ments are presented using the cost of sales method.
The Group balance sheet and sub-group balance
sheets correspond to the classification provisions
contained in IAS 1 (Presentation of Financial State-
ments). In order to improve clarity, various items are
aggregated in the income statement and balance
sheet. These items are disclosed and analysed sep-
arately in the Notes.

In order to support the sale of its products, the

BMW Group provides various financial services –
mainly loan and lease financing – to retail customers
and to dealers. The inclusion of the financial servic-
es activities of the Group therefore has an impact on
the Group financial statements. In order to provide
a better insight into the earnings, financial and net
assets position of the Group, additional information
has been presented in the BMW Group financial
statements on its industrial and financial operations.
Financial operations include financial services and
the activities of the Group financing companies. The
operating interest income and expense of Financial
operations are included in revenues and cost of
sales respectively. The holding companies BMW (UK)
Holdings Ltd., Bracknell, BMW Holding B.V., The
Hague, BMW Österreich Holding GmbH, Steyr, BMW
(US) Holding Corp., Wilmington, Del., BMW España
Finance S.L., Madrid, and BMW Holding Malaysia
Sdn Bhd, Kuala Lumpur, are allocated to Industrial
operations. The main business transactions between

Industrial and Financial operations, which are elimi-
nated in the Group financial statements, are internal
sales of products, the provision of funds for Group
companies and the related interest. These additional
disclosures allow the assets, liabilities, financial po-
sition and performance of Industrial operations and
Financial operations to be presented, in accordance
with the recognition and measurement principles
stipulated by IFRSs, as if they were two separate
groups. This information, which has not been audited
by the Group auditors, is provided on a voluntary
basis.

In conjunction with the refinancing of financial
services 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
transactions are usually in the form of “asset backed
financing” transactions involving the sale of a port-
folio of receivables to a trust which, in turn, issues
marketable securities 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 Statements) and the inter-
pretation contained in SIC-12 (Consolidation –
Special Purpose Entities) such assets remain in the
Group financial statements although they have been
legally sold. Gains and losses relating to the sale of
such assets are not recognised until the assets are
removed from the group balance sheet on transfer
of the related significant risks and rewards. The bal-
ance sheet value of the assets sold at 31 December
2006 totalled euro 4.5 billion (31 December 2005:
euro 3.9 billion). For an additional understanding of
the asset, liability and financial position of the BMW
Group, the Group balance sheet contains a supple-
mentary disclosure of the balance sheet total adjusted
for assets which have been sold.

The Group currency is the euro. All amounts are

disclosed in millions of euros (euro million) unless
stated otherwise.

The Group Financial Statements, drawn up in
accordance with § 315a HGB, and the Group Manage-
ment Report for the financial year 2006 will be sub-
mitted to the operator of the electronic version of
the German Federal Gazette and can be obtained
via the Company Register website. Printed copies
will also be made available on request. In addition
the Group Financial Statements and the Group
Management Report can be downloaded from the
BMW Group website at www.bmwgroup.com/ir.

[2]

Consolidated companies
The BMW Group financial statements include, be-
sides BMW AG, all material subsidiaries, 17 special
securities funds and 19 trusts (almost all used for
asset backed financing transactions) both in Ger-
many and abroad.

The number of subsidiaries, special purpose

funds and other special purpose entities included
in the Group financial statements changed in 2006
as follows:

Included at 31.12. 2005

Included for the first time in 2006

No longer included in 2006

Included at 31.12. 2006

Germany

Foreign

Total

–

136

144

180

189

68 subsidiaries (2005: 72), either dormant or

generating a negligible volume of business, are not
included. Their influence on the Group’s earnings,
financial and net assets position is immaterial.

Non-inclusion of operating subsidiaries reduces

total Group revenues by 1.5 % (2005: 1.7%).

Two joint ventures have been consolidated using

the equity method. With effect from the beginning
of the financial year 2006, F. A.S.T. Gesellschaft für
angewandte Softwaretechnologie mbH, Munich,
became a fully consolidated subsidiary following
the acquisition of the remaining 50 % of the voting

rights. Three equity investments are not consolidated
since they are not material to the Group’s earnings,
financial and net assets position. They are included
in the line “Other investments”, measured at cost less,
where applicable, accumulated impairment losses.
A separate “List of Group Investments” pur-
suant to § 313 (4) HGB will be submitted to the oper-
ator of the electronic version of the German Federal
Gazette. This list, along with the “List of Third Party
Companies which are not of Minor Importance for
the Group”, will also be posted on the BMW Group
website.

[3]

Changes in the group reporting entity
BMW Hellas Trade of Cars SA, Athens, Park Lane
Ltd., Bracknell, BMW Portugal Lda., Lisbon, BMW
Holding Malaysia Sdn Bhd, Kuala Lumpur, BMW
Malaysia Sdn Bhd, Kuala Lumpur, BMW Asia Tech-
nology Centre Sdn Bhd, Kuala Lumpur, BMW China
Automotive Trading Ltd., Peking, BMW Leasing
(Thailand) Co., Ltd., Bangkok, BMW Danmark A/S,
Kolding, BMW International Investment B.V., Rijswijk,
and F.A.S.T. Gesellschaft für angewandte Software-
technologie mbH, Munich, were consolidated for the
first time in 2006.

Bavaria Insurance Brokers Limited, Dublin, is no

longer a consolidated company.

The group reporting entity also changed by com-

parison to the previous year as a result of the first-
time consolidation of two special purpose entities
and the deconsolidation of three special purpose
entities.

The changes in the composition of the group

reporting entity do not have a material impact on
the earnings, financial and net assets position of the
Group.

[4] Consolidation principles

The equity of subsidiaries is consolidated in accor-
dance with IFRS 3 (Business Combinations). IFRS 3
requires that all business combinations are accounted
for using the purchase method, whereby identifiable
assets and liabilities acquired are measured initially

at their fair value. The excess of the Group’s interest
in the net fair value of the identifiable assets and lia-
bilities acquired over cost is recognised as goodwill
and is subjected to a regular review for possible
impairment. Goodwill of euro 91 million which arose
prior to 1 January 1995 remains netted against

74 Group Financial Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

reserves. In the event of impairment and deconsoli-
dation, goodwill that has been deducted from equity
is dealt with directly in equity.

Receivables, liabilities, provisions, income and
expenses and profits between consolidated com-
panies (intragroup profits) are eliminated on consoli-
dation.

Under the equity method, investments are
measured at the group’s share of equity taking
account of fair value adjustments on acquisition,

based on the group’s shareholding. Any difference
between the cost of investment and the group’s
share of equity are accounted for as a general rule
using the purchase method. Investments in other
companies are accounted for using the equity
method, when significant influence can be exercised
(IAS 28 Investments in Associates). This is normally
the case when voting rights of between 20 % and
50 % are held (associated companies).

[5]

Foreign currency translation
The financial statements of consolidated companies
which are drawn up in a foreign currency are trans-
lated using the functional currency concept (IAS 21:
The Effects of Changes in Foreign Exchange Rates)
and the modified closing rate method. The func-
tional currency of a subsidiary is determined as a
general rule on the basis on the primary economic
environment in which it operates and corresponds
therefore to the relevant local currency. Income and
expenses of foreign subsidiaries are translated in the
Group financial statements at the average exchange
rate for the year, and assets and liabilities are trans-
lated at the closing rate. Exchange differences arising
from the translation of shareholders’ equity are off-

set directly against accumulated other equity. Ex-
change differences arising from the use of different
exchange rates to translate the income statement
are also offset directly against accumulated other
equity.

Foreign currency receivables and payables in

the single entity accounts of BMW AG and sub-
sidiaries are recorded, at the date of the transaction,
at cost. Exchange gains and losses computed at
the balance sheet date are recognised as income or
expense.

The exchange rates of those currencies which
have a material impact on the Group financial state-
ments were as follows:

US Dollar

British Pound

South African Rand

Japanese Yen

Australian Dollar

Closing rate

Average rate

31.12. 2006

31.12. 2005

2006

2005

1.32

0.67

9.20

156.88

1.67

1.18

0.69

7.47

139.11

1.61

1.26

0.68

8.52

146.06

1.67

1.24

0.68

7.91

136.83

1.63

[6]

Accounting principles
The financial statements of BMW AG and of its sub-
sidiaries in Germany and elsewhere have been
prepared for consolidation purposes using uniform
accounting policies in accordance with IAS 27.

Revenues from the sale of products are recog-

nised when the risks and rewards of ownership
of the goods are transferred to the customer, the
sales price is agreed or determinable and receipt

of payment can be assumed. Revenues are stated
net of discounts, allowances, settlement discount
and rebates. In the case of long-term construction
work, revenues are, in accordance with IAS 18
(Revenue) and IAS 11 (Construction Contracts),
recognised using the stage of completion method.
Revenues also include lease rentals and interest
income from financial services. Revenues for the
financial operations sub-group also include the

interest income earned by group financing com-
panies.

If the sale of products includes a determinable
amount for subsequent services (“multiple-compo-
nent contracts”), the related revenues are deferred
and recognised as income over the period of the
contract. Amounts are normally recognised as in-
come by reference to the expected pattern of related
expenditure.

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 realised. The vehicles are included
in inventories and stated at cost.

Cost of sales comprises the cost of products
sold and the acquisition cost of purchased goods
sold. It includes all directly attributable material and
production costs and production overheads, includ-
ing depreciation/amortisation of property, plant and
equipment and 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 which are directly attributable to
financial services business and interest expense from
refinancing the entire financial services business,
including the expense of risk provisions and write-
downs, are reported in cost of sales. Cost of sales
for the financial operations sub-group also includes
the interest expense of group financing companies.

Research costs and development costs which

are not capitalised are recognised as an expense
when incurred.

In accordance with IAS 20 (Accounting for
Government Grants and Disclosure of Government
Assistance), public sector grants are not recognised
until there is reasonable assurance that the condi-
tions attaching to them have been complied with
and the grants will be received. They are recognised
as income over the periods necessary to match
them with the related costs which they are intended
to compensate.

Basic earnings per share are computed in ac-
cordance with IAS 33 (Earnings per Share). Undiluted
earnings per share are calculated for common and
preferred stock by dividing the net profit after mi-
nority interest, as attributable to each category of
stock, by the average number of outstanding shares.

The net profit is accordingly allocated to the differ-
ent categories of stock. The portion of the group net
profit for the year which is not being distributed is
allocated to each category of stock based on the
number of outstanding shares. Profits available for
distribution are determined directly on the basis of
the dividend resolutions passed for common and
preferred stock. Diluted earnings per share would
have to be disclosed separately.

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 the asset will generate future economic
benefits and where the costs of the asset can be
determined reliably. Such assets are measured at
acquisition and/or manufacturing cost and, to the
extent that they have a finite useful life, amortised
on a straight-line basis over their estimated useful
lives. With the exception of capitalised development
costs, intangible assets are generally amortised
over their estimated useful lives of between three
and five years. Intangible assets with finite useful
lives are assessed regularly for recoverability and
their carrying amounts are reduced to the recover-
able amount in the event of impairment.

Development costs for vehicle and engine
projects are capitalised at production cost, to the
extent that costs can be allocated reliably and both
technical feasibility and successful marketing are
assured. It must also be probable that the develop-
ment expenditure will generate future economic
benefits. Capitalised development costs comprise
all expenditure that can be attributed directly to the
development process, including development-re-
lated overheads. Capitalised development costs
are amortised on a systematic basis, following the
commencement of production, over the estimated
product life which is generally seven years.

All items of property, plant and equipment are

considered to have finite useful lives and are meas-
ured at acquisition or manufacturing cost. Deprecia-
ble assets are reduced by systematic depreciation
based on the estimated useful lives of the assets.
Depreciation on property, plant and equipment
reflects the pattern of their usage and is generally
computed using the straight-line method. Compo-
nents of items of property, plant and equipment
with different useful lives are depreciated separately.

76 Group Financial Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Expenditure on low value non-current assets is

Systematic depreciation is based on the following

written off in full in the year of acquisition.

useful lives, applied throughout the Group:

in years

Factory and office buildings, distribution facilities and residential buildings

Plant and machinery

Other equipment, factory and office equipment

8 to 50

5 to 10

3 to 10

For machinery used in multiple-shift operations,

depreciation rates are increased to account for the
additional utilisation.

The cost of internally constructed plant and
equipment comprises all costs which are directly
attributable to the manufacturing process and an
appropriate portion of production-related overheads.
This includes production-related depreciation and
an appropriate proportion of administrative and so-
cial costs.

Financing costs are not included in acquisition

or manufacturing cost.

Non-current assets also include assets relating
to leases. The BMW Group uses property, plant and
equipment as lessee and also leases out assets,
mainly vehicles manufactured by the Group, as les-
sor. IAS 17 (Leases) contains rules for determining,
on the basis of risks and rewards, the economic
owner of the assets. In the case of finance leases
the assets are attributed to the lessee and in the
case of operating leases the assets are attributed
to the lessor.

In accordance with IAS 17, assets leased under
finance 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 recog-
nised as financial liabilities.

Where Group products are recognised by BMW

Group leasing companies as leased assets under
operating leases, they are measured at manufactur-
ing cost. All other leased products are measured at
acquisition cost. All leased products are depreciated
using the straight-line method over the period of
the lease to the lower of their imputed residual value
or estimated fair value.

The recoverability of the carrying amount of in-
tangible assets (including capitalised development
costs and goodwill) and property, plant and equip-
ment is tested regularly for impairment in accordance
with IAS 36 (Impairment of Assets) on the basis of
cash generating units. An impairment loss is recog-
nised when the recoverable amount (defined as the
higher of the asset’s net selling price and its value in
use) is lower than the carrying amount. If the reason
for the previously recognised impairment loss no
longer exists, the impairment loss is reversed up to
the level of its rolled-forward depreciated or amor-
tised cost.

Investments accounted for using the equity
method are (except when the investment is impaired)
measured at the group’s share of equity taking ac-
count of fair value adjustments on acquisition.

Investments in non-consolidated group com-

panies reported in other investments are measured
at cost, or at their lower fair value.

Investments in other companies are measured

at their quoted market price or fair value. When, in
individual cases, these values are not available or
cannot be determined reliably, investments in other
companies are measured at cost.

Non-current marketable securities are measured
according to the category of financial asset to which
they are classified. No held-for-trading financial as-
sets are included under this heading.

Financial assets are accounted for on the basis

of the settlement date. On initial recognition, they
are measured at acquisition cost, including transac-
tion costs.

Subsequent to initial recognition, available-for-
sale and held-for-trading financial assets are meas-
ured at fair value. When market prices are not avail-
able, the fair value of available-for-sale financial
assets is measured using appropriate valuation

techniques e.g. discounted cash flow analysis based
on market information available at the balance sheet
date.

Loans and receivables which are not held by the
Group for trading purposes, held-to-maturity finan-
cial investments and all financial assets for which
published price quotations in an active market are
not available and whose fair value cannot be deter-
mined reliably, are measured, to the extent that they
have a fixed term, at amortised cost, using the effec-
tive interest method. When the financial assets do
not have a fixed term, they are measured at acquisi-
tion 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 impairment test are recognised as
an expense. Gains and losses on available-for-sale
financial assets are recognised directly in equity until
the financial asset is disposed of or is determined to
be impaired, at which time the cumulative loss pre-
viously recognised in equity is included in net profit
or loss for the period.

With the exception of derivative financial instru-
ments, all receivables and other current assets relate
to loans and receivables which are not held for trading.
They are measured at amortised cost. Receivables
with maturities of over one year which bear no or a
lower than market interest rate are discounted. Ap-
propriate allowances are recognised to take account
of all identifiable risks.

Receivables from sales financing comprise
receivables from retail customer, dealer and lease
financing.

Items are presented as financial assets to the

extent that they relate to financing transactions.

Derivative financial instruments are only used
within the BMW Group for hedging purposes in or-
der to reduce the currency, interest rate and market
price risks from operating activities and related fi-
nancing requirements. All derivative financial instru-
ments (such as interest, currency and combined
interest/currency swaps as well as forward currency
contracts) are measured in accordance with IAS 39
at their fair value, irrespective of their purpose or the
intention for which they are held. The fair values of
derivative financial instruments are measured using

market information and recognised valuation tech-
niques. In those cases where hedge accounting is
applied, changes in fair value are recognised either
in income or directly in equity under accumulated
other equity, depending on whether the transac-
tions are classified as fair value hedges or cash flow
hedges. In the case of fair value hedges, the results
of the fair value measurement of the derivative finan-
cial instruments and the related hedged items are
recognised in the income statement. In the case of
fair value changes from cash flow hedges which are
used to mitigate the future cash flow risk on a recog-
nised asset or liability or on forecast transactions,
unrealised gains and losses on the hedging instru-
ment are recognised initially directly in accumulated
other equity. Any such gains or losses are recog-
nised subsequently in the income statement when
the hedged item is recognised in the income state-
ment. The portion of the gains or losses from fair
value measurement not relating to the hedged item
is recognised immediately in the income 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 immediately in
the income statement.

In accordance with IAS 12 (Income Taxes), de-
ferred taxes are recognised on all temporary differ-
ences between the tax and accounting bases of
assets and liabilities and on consolidation proce-
dures. Deferred tax assets also include claims to
future tax reductions which arise from the expected
usage of existing tax losses available for carryfor-
ward, where usage is probable. Deferred taxes are
computed using enacted or planned tax rates which
are expected to apply in the relevant national juris-
dictions when the amounts are recovered.

Inventories of raw materials, supplies and goods
for resale are stated at the lower of average acquisi-
tion cost and net realisable value.

Work in progress and finished goods are stated

at the lower of average acquisition cost and net
realisable value. Manufacturing cost comprises all
costs which are directly attributable to the manu-
facturing process and an appropriate proportion of
production-related overheads. This includes pro-
duction-related depreciation and an appropriate
proportion of administrative and social costs.

78 Group Financial Statements

Financing costs are not included in acquisition

or manufacturing cost.

Provisions for pensions and similar obligations are
recognised using the projected unit credit method in
accordance 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 effect of future increases in pensions
and salaries. This involves taking account of various
input factors which are evaluated on a prudent basis.
The provision is derived from an independent actu-
arial valuation which takes into account the relevant
biometric factors.

Actuarial gains and losses are recognised, net of

deferred tax, directly in equity.

The expense related to the reversal of discount-
ing on pension obligations and the income from the
expected return on pension plan assets are reported
separately as part of the financial result. All other costs
relating to allocations to pension provisions are allo-
cated to costs by function in the income statement.
Other provisions are recognised when the Group

has an obligation to a third party, an outflow of re-
sources is probable and a reliable estimate can be
made of the amount of the obligation. Measurement
is computed on the basis of fully attributable costs.
Non-current provisions with a remaining period of

more than one year are discounted to the present
value of the expenditures expected to settle the
obligation at the balance sheet date.

Financial liabilities are measured on first-time
recognition at cost, which is equivalent to the fair
value of the consideration given. Transaction costs
are included in this initial measurement. Subse-
quent to initial recognition, liabilities are, with the
exception of derivative financial instruments, meas-
ured at amortised cost. The BMW Group has no
liabilities which are held for trading. Liabilities from
finance leases are stated at the present value of
the future lease payments and disclosed under finan-
cial liabilities.

The preparation of the Group financial state-

ments in accordance with IFRSs requires manage-
ment to make certain assumptions and estimates
that affect the reported amounts of assets and lia-
bilities, revenues and expenses and contingent
liabilities. The assumptions and estimates relate
principally to the group-wide determination of eco-
nomic useful lives, the recognition and measure-
ment of provisions and the recoverability of future
tax benefits. Actual amounts could in certain cases
differ from those assumptions and estimates.
Where new information comes to light, differences
are reflected in the income statement.

[7]

New financial reporting rules
(a) Financial reporting rules applied for the first time
in the financial year 2006
The following revised financial reporting standards
were applied for the first time in the financial year
2006:
– Amendments to IAS 39 and IFRS 4 (Financial

Guarantee Contracts)

– Amendment to IAS 21 (Effects of Changes in

Foreign Exchange Rates)

In addition, the following Interpretations were applied
for the first time:
– IFRIC 4 (Determining whether an Arrangement

contains a Lease)

– IFRIC 5 (Rights to Interests arising from Decom-

missioning, Restoration and Environmental
Rehabilitation Funds)

– IFRIC 6 (Liabilities arising from Participating in a

Specific Market – Waste Electrical and Electronic
Equipment)

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

BMW Group
Notes to the Group Financial Statements
Notes to the Income Statement

The financial reporting rules applied for the first time
in 2006 did not have a significant impact on the
BMW Group.
(b) New financial reporting rules issued in 2006
The IASB issued IFRS 8 (Operating Segments) in
2006. IFRS 8 will replace IAS 14 (Segment Reporting)
and is mandatory for financial periods commencing
after 1 January 2009.

In addition, the following Interpretations were

issued:
– IFRIC 8 (Scope of IFRS 2)
– IFRIC 9 (Reassessment of Embedded Derivatives)

– IFRIC 10 (Interim Financial Reporting and

Impairment)

– IFRIC 11 (IFRS 2 – Group and Treasury Share

Transactions)

IFRIC 8 is mandatory for financial years commencing
on or after 1 May 2006. IFRIC 9 is mandatory for
financial years commencing on or after 1 June
2006. IFRIC 10 takes effect for financial years com-
mencing after 1 November 2006. IFRIC 11 applies
to financial years commencing on or after 1 March
2007. The financial reporting rules issued in 2006
will not have a significant impact on the BMW Group.

[8]

Revenues
Revenues by activity comprise the following:

in euro million

Sales of products and related goods

Income from lease instalments

Sale of products previously leased to customers

Interest income on loan financing

Other income

Revenues

2006

2005

38,769

38,042

4,141

3,107

1,925

1,057

3,322

2,759

1,632

901

48,999

46,656

An analysis of revenues by business segment and geographical region is shown in the segment information
on pages 111 to 114.

[9]

Cost of sales
Cost of sales comprises:

in euro million

Manufacturing costs

Warranty expenditure

Cost of sales directly attributable to financial services

Interest expense for financial operations

Expense for risk provisions and write-downs for financial services business

Other cost of sales

Cost of sales

2006

2005

26,449

25,598

1,081

6,612

1,308

501

1,709

1,553

5,586

1,033

541

1,681

37,660

35,992

Cost of sales include euro 8,421 million (2005:

euro: 7,160 million) relating to financial services
business.

Expense for risk provisions and write-downs in-
cludes write-downs of euro 211 million (2005: euro
248 million) on receivables from financial services.

80 Group Financial Statements

Manufacturing costs for industrial operations

include impairment losses on intangible assets and
property, plant and equipment of euro 15 million
(2005: euro 25 million). Public subsidies in the form

of reduced taxes on assets and consumption-based
taxes amounted to euro 11 million (2005: euro 15
million).

[10]

Sales and administrative costs
Sales costs amounted to euro 4,039 million (2005:
euro 3,889 million) and comprise mainly marketing,
advertising and sales personnel costs.

Administrative costs amounted to euro 933 mil-
lion (2005: euro 873 million) and comprised expenses
for administration not attributable to development,
production or sales functions.

[11]

Research and development costs
Research and development costs of euro 2,544 mil-
lion (2005: euro 2,464 million) comprise all research
costs and development costs not recognised as
assets as well as amortisation and disposals of capi-
talised development costs totalling euro 872 million
(2005: euro 745 million).

Total research and development expenditure

comprising research costs, development costs not
recognised as assets and capitalised development
costs were as follows:

in euro million

Research and development costs

Amortisation

New expenditure for capitalised development costs

Total research and development expenditures

2006

2005

2,544

– 872

1,536

3,208

2,464

– 745

1,396

3,115

[12]

Other operating income and expenses

in euro million

2006

2005

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Exchange gains

Income from the reversal of provisions

Income from the reversal of write-downs

Gains on the disposal of assets

Sundry operating income

Other operating income

Exchange losses

Expense for additions to provisions

Expenses for write-downs on receivables

Sundry operating expenses

Other operating expenses

Other operating income and expenses

245

141

102

232

744

219

109

155

517

227

135

265

116

262

844

161

165

134

489

355

Sundry operating income includes public-sector grants of euro 32 million (2005: euro 36 million).

[13]

Result from equity method accounting
The loss of euro 25 million (2005: profit of euro 14
million) from equity method accounting includes the

result of the joint venture, BMW Brilliance Automotive
Ltd., Shenyang, and an impairment loss on the in-
vestment in TRITEC Motors Ltda., Campo Largo.

[14]

Other financial result

in euro million

Income from investments

– thereof from subsidiaries: euro 58 million (2005: euro 3 million)

Impairment losses on investments in subsidiaries and other companies

Reversals of impairment losses on investments in subsidiaries and other companies

Result on investments

Expected return on plan assets

Other interest and similar income

– thereof from subsidiaries: euro 19 million (2005: euro 21 million)

Interest and similar income

Expense from reversing the discounting of pension obligations

Expense from reversing the discounting of other long-term provisions

Write-downs on marketable securities

Sundry interest and similar expenses

– thereof to subsidiaries: euro 2 million (2005: euro 1 million)

Interest and similar expenses

Net interest result

Fair value measurement of financial instruments

Sundry other financial result

Other financial result

2006

2005

– 46

315

259

574

– 501

– 35

– 2

– 319

–

283

363

646

– 482

– 78

– 10

– 318

– 857

– 888

– 283

– 242

350

– 306

– 520

Income from investments relates principally to divi-
dend income from BMW Asia Pte. Ltd., Singapore
and from BMW (P+A) Ltd., Bracknell.

Within sundry other financial result, income and
expenses resulting from the fair value measurement
of hedged items and hedging instruments have

been presented on a net basis. The improvement is
mainly attributable to the partial settlement of the
exchangeable bond on shares in Rolls-Royce plc,
London. Furthermore, the previous year’s figure
was affected by a substantial loss recognised on
the option obligation.

[15]

Income taxes
Taxes on income comprise the following:

in euro million

Current tax expense

Deferred tax expense

2006

2005

993

257

1,250

437

611

1,048

82 Group Financial Statements

Current tax expense in the previous year in-
cluded tax reimbursements relating to prior years.

Deferred tax expense decreased mainly as a

result of the lower expense to recognise deferred
tax liabilities.

Deferred taxes are recognised on temporary
differences between the carrying amount of assets
and liabilities for IFRS purposes and their tax bases.
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 corporation tax rate of 25.0 % applies
in Germany. After taking account of the average mul-
tiplier rate (Hebesatz) of 412 % for municipal trade

tax and the solidarity charge of 5.5 %, the overall
tax rate for BMW companies in Germany is un-
changed at 38.9 %. The tax rates for companies
outside Germany range from 12.5 % to 40.7%
(2005: 10.0 % to 40.7%). A valuation allowance is
recognised on deferred tax assets when recover-
ability is uncertain. In determining the level of the
valuation allowance, all positive and negative fac-
tors concerning the likely existence of sufficient
taxable profit in the future are taken into account.
These estimates can change depending on the
actual course of events.

An analysis of deferred tax assets and liabilities

by position at 31 December is shown below:

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

in euro million

Intangible assets

Property, plant and equipment

Leased products

Investments

Other current assets

Tax loss carryforwards

Provisions

Liabilities

Consolidations

Valuation allowance

Netting

Deferred tax assets
2005

2006

Deferred tax liabilities
2005

2006

–

572

1,058

849

1,540

3,653

1,600

9,322

– 528

– 8,039

755

127

780

807

947

1,639

3,386

1,489

9,192

– 641

– 7,779

772

1,859

510

3,368

–

3,696

–

134

827

403

1,594

474

3,255

–

3,810

–

789

281

10,797

10,301

–

– 8,039

2,758

–

– 7,779

2,522

Compared to the previous reporting period, the

The changes in deferred tax assets and liabili-

main changes to deferred tax assets and liabilities
were as follows:

The increase of deferred tax liabilities relating

to intangible assets was mainly due to the higher
level of capitalised development costs recognised in
accordance with IFRS.

As at the end of the previous year, no valuation

allowance is recognised on deferred tax assets
relating to capital allowances on property, plant and
equipment in the United Kingdom.

ties relating to leased products and other current
assets are attributable primarily to financial services
business. The figures reflect higher business vol-
umes and the different categorisation of operating
and finance lease arrangements for tax and account-
ing purposes.

Deferred tax assets on tax losses available for
carryforward and capital losses increased marginally
on a net basis (i.e. after taking account of the amount
shown as a valuation allowance). This was due to

the expectation that a greater volume of tax losses
will be utilisable, especially in the United Kingdom.
Tax losses available for carryforward, which for the
most part can be carried forward without restriction,
totalled euro 1.7 billion at the year-end (31.12. 2005:
euro 2.1 billion). A valuation allowance of euro 65 mil-
lion (2005: euro 188 million) was recognised in
2006 on deferred tax assets relating to tax losses.
Deferred tax assets of euro 463 million (31.12. 2005:
euro 453 million) relating to capital losses in the
United Kingdom of euro 1.5 billion (unchanged) were
written down in full since these losses can only be
offset against capital gains, but not against operating
profits.

The increase of deferred tax assets relating
to liabilities was due primarily to the higher level of
other liabilities and the related increase in temporary
differences.

Deferred taxes recognised directly in equity
amounted to euro 512 million (31.12. 2005: euro 727
million), whereby the decrease was mainly due to
actuarial gains and losses arising in conjunction with
pension obligations. The level of actuarial gains and
losses in 2006 was affected in particular by the in-
crease in the discount factors applied.

Deferred taxes are not recognised on retained

profits of euro 13,866 million (31.12. 2005: euro
12,413 million) 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.

The tax returns of the BMW Group entities are

checked regularly by German and foreign tax author-
ities. Taking account of a variety of factors – including
existing interpretations, commentaries and legal de-
cisions relating to the various tax jurisdictions and
the BMW Group’s past experience – adequate provi-
sion has, as far as identifiable, been made for poten-
tial future tax obligations.

The actual tax expense for the financial year 2006

of euro 1,250 million (2005: euro 1,048 million) is
euro 354 million (2005: euro 231 million) lower than
the expected tax expense of euro 1,604 million (2005:
euro 1,279 million) which would theoretically arise
if the tax rate of 38.9 % (unchanged), applicable for
German companies, was applied across the Group.
The difference between the expected and actual
tax expense is attributable to the following:

in euro million

2006

2005

Expected tax expense

Variances due to different tax rates

Tax reductions (–)/ tax increases (+) as a result of non-taxable income and

non-deductible expenses

Tax expense (+)/ benefits (–) for prior periods

Other variances

Actual tax expense

1,604

– 213

– 68

– 94

1,250

1,279

– 123

158

– 232

– 34

1,048

The slightly lower effective tax rate is partially

due to lower nominal tax rates in a number of coun-
tries. The tax-exempt gain on the partial settlement
of the exchangeable bond on shares in Rolls-Royce
plc, London, also had an impact. Furthermore, legis-
lation relating to the taxation of retained earnings in

Germany has changed as a result of § 37 (5) of the
German Corporation Tax Act (new version). For this
reason, the present value of the tax reimbursements
arising under the new rules was recognised as an
asset for the first time in 2006.

84 Group Financial Statements

[16] Earnings per share

2006

2005

Net profit for the year after minority interest

euro million

2,867.8

2,239.3

Profit attributable to common stock

Profit attributable to preferred stock

euro million

2,641.0

226.8

2,066.6

172.7

Average number of common stock shares in circulation

Average number of preferred stock shares in circulation

number

602,461,673

619,815,630

number

51,506,787

51,488,137

Earnings per share of common stock

Earnings per share of preferred stock

Dividend per share of common stock

Dividend per share of preferred stock

euro

4.38

4.40

0.70

0.72

3.33

3.35

0.64

0.66

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

relevant financial years. Diluted earnings per share
were not applicable in either the current or prior
year.

[17]

Other disclosures relating to the income statement
The income statement includes personnel costs as follows:

in euro million

Personnel costs

Wages and salaries

Social security, retirement and welfare costs

– thereof retirement costs: euro 767 million (2005: euro 713 million)

2006

2005

6,207

1,241

6,104

1,202

7,448

7,306

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

The average number of employees during the year was:

Wage earners

Other employees

Apprentices and students gaining work experience

2006

2005

52,812

44,394

97,206

53,708

43,397

97,105

6,521

6,441

103,727

103,546

The fee expense recognised in the financial
year 2006 for the auditors of the Group financial
statements, KPMG Deutsche Treuhand-Gesell-
schaft, Aktiengesellschaft, Wirtschaftsprüfungsge-

sellschaft, pursuant to § 314 (1) no. 9 HGB amounted
to euro 4 million (2005: euro 4 million) and consists
of the following:

in euro million

Fee expense

Year-end audits

Tax advisory services

2006

2005

The item “Year-end audits” includes fees for the
audit of the annual financial statements of BMW AG,
the audit of the Group financial statements and the
audit of the annual financial statements of the German
subsidiaries.

The item “Tax advisory services” relates prin-

cipally to fees for services provided to employees
seconded abroad.

86 Group Financial Statements

BMW Group
Notes to the Group Financial Statements
Notes to the Balance Sheet

[18]

Analysis of changes in Group tangible, intangible and investment assets 2006

in euro million

Acquisition and manufacturing cost

1.1. 20061]

Translation
differences

Additions

Reclassi-
fications

Disposals

31.12. 2006

65 Group Financial Statements

Investments accounted for using the equity method

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Development costs

Other intangible assets

Intangible assets

Land, titles to land, buildings, including buildings on

third party land

Plant and machinery

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

6,593

739

7,332

6,150

18,977

2,078

899

28,104

–

– 5

– 70

– 185

– 46

– 15

– 316

1,536

121

1,657

242

1,717

206

491

2,656

Leased products

13,983

– 1,182

8,522

Investments in associated companies

Investments in other companies

Non-current marketable securities

Other investments

191

1,002

1,225

1] including the gross balances brought forward of companies consolidated for the first time
2] including impairment losses of euro 15 million

–

– 2

–

– 1

– 3

–

152

–

163

–

152

464

– 632

–

445

501

1,333

211

7,684

799

8,483

6,425

19,640

2,043

740

1,596

28,848

4,578

16,745

807

909

267

195

476

Analysis of changes in Group tangible, intangible and investment assets 2005

in euro million

Acquisition and manufacturing cost

1.1. 20051] Translation
differences

Additions

Reclassi-
fications

Disposals

31.12. 2005

Development costs

Other intangible assets

Intangible assets

Land, titles to land, buildings, including buildings on

third party land

Plant and machinery

Other facilities, factory and office equipment

Advance payments made and construction in progress

Property, plant and equipment

5,596

583

6,179

5,584

18,464

1,957

820

26,825

–

222

372

1,396

189

1,585

314

1,107

257

730

2,408

Leased products

9,275

1,291

7,202

Investments accounted for using the equity method

Investments in associated companies

Investments in other companies

Non-current marketable securities

Other investments

150

564

734

1] including the gross balances brought forward of companies consolidated for the first time
2] including impairment losses of euro 25 million
3] total fair value measurement changes recognised directly in accumulated other equity

–

4383]

496

–

183

441

– 645

–

399

443

1,260

225

6,593

737

7,330

6,139

18,974

2,061

898

1,533

28,072

3,785

13,983

–

174

1,002

1,208

Depreciation and amortisation

Reversals

1.1. 20061]

Translation Current year 2]
differences

Disposals

31.12. 2006

Net book values

31.12. 2006

31.12. 2005

2,447

290

2,737

2,384

13,104

1,506

–

– 4

– 30

– 128

– 36

–

872

959

207

1,867

239

–

445

495

1,318

201

–

16,995

– 194

2,313

1,551

2,608

– 222

1,576

859

–

2,874

297

3,171

2,529

13,525

1,508

17,563

3,103

–

4,810

502

5,312

3,896

6,115

535

739

4,146

447

4,593

3,757

5,871

562

897

11,285

11,087

13,642

11,375

197

190

401

149

997

1,178

Depreciation and amortisation

Reversals

1.1. 20051] Translation Current year 2]

Disposals

31.12. 2005

differences

Net book values

31.12. 2005

31.12. 2004

2,101

320

2,421

2,174

12,404

1,434

16,013

–

– 1

171

–

240

745

813

193

1,783

236

–

399

443

1,255

208

–

2,212

1,480

1,773

241

1,182

588

–

2,447

290

2,737

–

2,382

13,103

1,499

16,985

2,608

–

4,146

447

4,593

3,757

5,871

562

897

3,495

263

3,758

3,387

6,059

522

756

11,087

10,724

11,375

7,502

149

997

1,178

125

559

704

88 Group Financial Statements

[19]

[20]

Intangible assets
Intangible assets mainly comprise capitalised de-
velopment costs on vehicle and engine projects as
well as subsidies for tool costs, licences, purchased
development projects and software. Amortisation
on intangible assets is presented in cost of sales,
administrative costs and research and development
costs.

Goodwill, with a total carrying amount of euro
66 million (2005: euro 57 million), relates mainly to
entory AG, Ettlingen, and to the Axentiv Group. This

item is not presented separately in the BMW Group
balance sheet since the amount is not significant in
relation to either the balance sheet total or intangible
assets.

Reversals of impairment losses on intangible

assets totalling euro 26 million (2005: euro 53 mil-
lion) were recognised during the year.

Changes in intangible assets during the year are

shown in the analysis of changes in Group tangible,
intangible and investment assets on pages 86 and
87.

Property, plant and equipment
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 analy-
sis of changes in Group tangible, intangible and in-
vestment assets on pages 86 and 87.

Property, plant and equipment includes leased

buildings, plant and machinery and other equipment
with a carrying amount of euro 146 million (2005:
euro 205 million). This comprises mainly operational
buildings used by BMW AG and leased plant and
equipment used primarily in the Oxford and Hams
Hall production plants. Due to the nature of the lease
arrangements (finance leases), economic owner-
ship of these assets is attributable to the Group. The
leases relating to operational buildings, with a carrying
amount of euro 66 million (2005: euro 79 million)

run for periods up to 2023 at the latest. Some of
the leases contain extension and purchase options.
The leases for plant and machinery and other equip-
ment at the Oxford production plant, with a carrying
amount of euro 46 million (2005: euro 77 million)
at 31 December, run for periods up to 2012 at the
latest. For each of the leases, there is a recurring
option to extend the leases by one year. A purchase
option was not agreed. The lease for plant and ma-
chinery and other facilities, factory and office equip-
ment at the Hams Hall production plant, with a car-
rying amount of euro 25 million (2005: euro 38 mil-
lion) runs until 2018 and may be extended for one
year periods thereafter. A purchase option was not
agreed.

Minimum lease payments of the relevant leases

are as follows:

in euro million

31.12. 2006

31.12. 2005

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Total of future minimum lease payments

due within one year

due between one and five years

due later than five years

Interest portion of the future minimum lease payments

due within one year

due between one and five years

due later than five years

Present value of future minimum lease payments

due within one year

due between one and five years

due later than five years

413

257

761

111

186

354

146

575

494

298

887

113

210

416

185

677

[21]

Leased products
The BMW Group, as lessor, leases out assets (pre-
dominantly own products) as part of its financial

services business. Minimum lease payments of
euro 6,210 million (2005: euro 5,919 million) from
non-cancellable operating leases fall due as follows:

in euro million

31.12. 2006

31.12. 2005

within one year

between one and five years

later than five years

3,342

2,867

6,210

2,908

3,010

5,919

Contingent rents of euro 4 million (2005: euro
2 million), based principally on the distance driven,
were recognised in income. The agreements have,
in part, extension and purchase options as well as
price escalation clauses.

Changes in leased products during the year
are shown in the analysis of changes in Group tangi-
ble, intangible and investment assets on pages 86
and 87.

[22]

Investments accounted for using the equity
method and other investments
Investments accounted for using the equity method
include the Group’s interests in the joint ventures

BMW Brilliance Automotive Ltd., Shenyang, and
TRITEC Motors Ltda., Campo Largo. The Group’s
interest in these joint ventures (50 % in each case),
on an aggregated basis, was as follows:

in euro million

31.12. 2006

31.12. 2005

Disclosures relating to the Income Statement

Income

Losses

Disclosures relating to the balance sheet

Non-current assets

Current assets

Equity

Non-current liabilities

Current liabilities

589

568

122

286

110

264

463

461

134

215

165

Other investments relate primarily to invest-
ments in non-consolidated subsidiaries and to equi-
ty investments in other entities.

Additions to investments in subsidiaries relate
to share capital increases for the companies PT BMW
Indonesia, Jakarta, BMW Philippines Corp., Manila,
BMW Roma S.r.l., Rome, BMW Distribution S. A.S.,
Montigny le Bretonneux, and BMW Vertriebs GmbH,
Salzburg. They also include the foundation of BMW
India Pvt. Ltd., New Delhi, and the acquisition of a
majority interest in the Sauber Group.

Disposals of investments in subsidiaries relate

mainly to the first-time consolidation of BMW Hellas
Trade of Cars SA, Athens, Park Lane Ltd., Bracknell,
BMW Portugal Lda., Lisbon, BMW Holding Malaysia
Sdn Bhd, Kuala Lumpur, BMW Malaysia Sdn Bhd,
Kuala Lumpur, BMW Asia Technology Centre Sdn
Bhd, Kuala Lumpur, BMW China Automotive Trading
Ltd., Peking, BMW Leasing (Thailand) Co., Ltd.,
Bangkok, and BMW Danmark A/S, Kolding.

Write-downs on investments in subsidiaries re-

late mainly to PT BMW Indonesia, Jakarta.

90 Group Financial Statements

In the case of investments in other companies,

A break-down of the different classes of other

the changes in 2006 related to the disposal of shares
in Rolls-Royce plc, London, following the exercise of
the conversion option relating to exchangeable bond
issued by the BMW Group on shares in Rolls-Royce
plc, London.

investments disclosed in the balance sheet and
changes during the year are shown in the analysis
of changes in Group tangible, intangible and invest-
ment assets on pages 86 and 87.

[23]

Receivables from sales financing
Receivables from sales financing, totalling euro
30,368 million (2005: euro 29,053 million), comprise
euro 23,038 million (2005: euro 22,301 million) for

loan financing for retail customers and dealers and
euro 7,330 million (2005: euro 6,752 million) for
finance leases. Finance leases are analysed as
follows:

in euro million

31.12. 2006

31.12. 2005

65 Group Financial Statements

due between one and five years

Gross investment in finance leases

due within one year

due later than five years

Present value of future minimum lease payments

due within one year

due between one and five years

due later than five years

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

3,029

5,192

8,227

2,758

4,567

7,330

2,771

4,773

7,547

2,511

4,238

6,752

Unrealised interest income

897

795

Contingent rents recognised as income, generally

relating to the distance driven, amounted to euro 7
million (2005: euro 4 million). Write-downs on finance
leases amounting to euro 60 million (2005: euro 46
million) were measured and recognised on the basis
of specific credit risks.

Receivables from sales financing include euro
17,865 million (2005: euro 17,202 million) with a re-
maining term of more than one year.

[24]

Financial assets
Financial assets comprise:

in euro million

31.12. 2006

31.12. 2005

Interest and currency derivatives

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

thereof non-current

thereof current

1,321

2,034

239

289

3,950

816

3,134

806

2,074

221

105

3,296

642

2,654

The increase in the line item “Interest and cur-

rency derivatives” relates primarily to changed
exchange rate parities with the US dollar and to the
higher level of interest rates.

Marketable securities and investment funds
relate to available-for-sale financial assets and com-
prise:

in euro million

31.12. 2006

31.12. 2005

Stocks

Investment funds

Fixed income securities

Sundry marketable securities

579

487

943

2,034

500

467

1,085

2,074

The contracted maturities of debt securities are as follows:

in euro million

31.12. 2006

31.12. 2005

Fixed income securities

due within 3 months

due later than 3 months

Sundry marketable securities

due within 3 months

due later than 3 months

942

968

1,069

1,107

Investment funds and fixed income securities
include euro 2 million and euro 64 million respec-
tively assigned as collateral to Deutsche Treuinvest
Stiftung, Frankfurt am Main, (2005: cash and cash

equivalents of euro 43 million assigned as collateral).
to secure obligations relating to pre-retirement part-
time work arrangements.

[25]

Income tax assets
Income tax assets can be analysed as follows:

31 December 2006
in euro million

Deferred tax

Current tax

31 December 2005
in euro million

Deferred tax

Current tax

Maturity
within
one year

Maturity
later than
one year

–

123

755

123

878

Maturity
within
one year

Maturity
later than
one year

–

267

772

–

772

Total

755

246

1,001

Total

772

267

1,039

92 Group Financial Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

[26]

Other assets
Other assets comprise:

in euro million

31.12. 2006

31.12. 2005

Other taxes

Receivables from subsidiaries

Receivables from other companies in which an investment is held

Prepayments

Collateral receivables

Sundry other assets

thereof non-current

thereof current

584

693

202

683

120

368

2,650

378

2,272

418

766

635

153

509

2,568

613

1,955

Receivables from subsidiaries include trade re-

ceivables of euro 198 million (2005: euro 160 mil-
lion) and financial receivables of euro 495 million
(2005: euro 606 million). A total of euro 44 million
(2005: euro 114 million) has a remaining term of
more than one year.

Receivables from other companies in which an
investment is held are all due within one year (2005:
non-current amount of euro 4 million).

Prepayments of euro 683 million (2005: euro
635 million) relate mainly to prepaid interest, de-
velopment costs not eligible for capitalisation as
non-current assets, insurance premiums and rent.
Prepayments of euro 522 million (2005: euro 438
million) have a maturity of less than one year.

Collateral receivables comprise mainly custom-

ary collateral arising on the sale of receivables.

[27]

Inventories
Inventories comprise the following:

in euro million

31.12. 2006

31.12. 2005

Raw materials and supplies

Work in progress, unbilled contracts

Finished goods

Goods for resale

689

911

4,280

914

6,794

674

931

4,042

880

6,527

At 31 December 2006, inventories measured at
their net realisable value amounted to euro 316 mil-
lion (2005: euro 268 million) and are included in
total inventories of euro 6,794 million (2005: euro
6,527 million). Write-downs to net realisable value

amounting to euro 12 million (2005: euro 10 million)
were recognised in 2006. Amounts recognised as
income from the reversal of write-downs were not
significant.

[28]

Trade accounts receivable
Trade receivables amounting in total to euro 2,258
million (2005: euro 2,135 million) include euro 21 mil-

lion due later than one year (2005: all due within
one year).

[29]

Cash and cash equivalents
Cash and cash equivalents of euro 1,336 million
(2005: euro 1,621 million) comprise cash on hand

and at bank, all with a maturity of under three
months.

[30]

Equity
The Group Statement of Changes in Equity is
shown on page 70.

Number of shares issued
At 31 December 2006, common stock issued by
BMW AG was divided into 601,995,196 shares with
a par-value of one euro. Preferred stock issued by
BMW AG was divided into 52,196,162 shares with a
par-value of one euro, unchanged from the previous
year. Unlike the common stock, no voting rights are
attached to the preferred stock. All of the company’s
stock is issued to bearer. Preferred stock bears an
advance profit (additional dividend) of euro 0.02 per
share. 689,375 of the shares of preferred stock are
only entitled to receive dividends with effect from
the beginning of the financial year 2007.

During the financial year 2006, BMW Group
acquired 689,375 treasury shares of preferred stock
at an average price of euro 37.52 per share; these
shares were issued to employees at a reduced price
of euro 27.84 per share in conjunction with an em-
ployee share scheme. As a result of the repurchase
of shares of preferred stock and their subsequent
issue, the preferred stock portion of share capital re-
mained unchanged at euro 52 million.

At the Annual General Meeting of BMW AG
on 12 May 2005, the shareholders authorised the
Board of Management to acquire treasury shares
via the stock exchange, up to a maximum of 10 % of
the share capital in place at the date of the resolution
and to withdraw these shares from circulation without
any further resolution by the Annual General Meeting.
The authorisation for the buy-back was valid until
11 November 2006.

In conjunction with this authorisation, the Board

of Management of BMW AG resolved on 20 Sep-
tember 2005 to put a programme in place to buy
back shares via the stock exchange. Under this pro-
gramme, 3 % of BMW AG’s common stock was
acquired.

Up to 17 February 2006, a total of 20,232,722

treasury shares of common stock were bought back
via the stock exchange at an average price per share
of euro 37.47 and a total acquisition cost of euro
758 million. These shares were withdrawn from cir-
culation in accordance with the resolution taken by
the Board of Management on 21 February 2006.
Equity was reduced by the buy-back amount.

Transaction costs amounted to euro 0.776 mil-
lion (net of income tax effect) and were recognised
directly in equity.

At the Annual General Meeting on 16 May 2006,

the shareholders authorised the Board of Manage-
ment to acquire treasury shares via the stock ex-
change, up to a maximum of 10 % of the share capital
in place at the date of the resolution and to withdraw
these shares from circulation without any further reso-
lution by the Annual General Meeting. At the same
time, the authorisation from 12 May 2005 to acquire
treasury shares was rescinded. The authorisation
from 16 May 2006 is valid until 15 November 2007.

Capital reserves
The capital reserves comprise additional paid in
capital on the issue of shares. The balance reported
decreased by euro 60 million to euro 1,911 million
as a result of the withdrawal of treasury shares from
circulation.

Revenue reserves
Revenue reserves comprise the post-acquisition
and non-distributed earnings of consolidated group
companies. In addition, revenue reserves include
both positive and negative goodwill arising on the
consolidation of group companies prior to 31Decem-
ber 1994.

Revenue reserves stood at euro 18,121 million at

31 December 2006, 10.8% higher than one year
earlier. They were increased in 2006 by the amount
of the net profit attributable to shareholders of
BMW AG amounting to euro 2,868 million and were

94 Group Financial Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

[31]

reduced by the payment of the dividend for 2005
amounting to euro 419 million. As a result of the
withdrawal of treasury shares from circulation,
revenues reserves decreased by euro 679 million.
The unappropriated profit of BMW AG of euro

458 million for 2006 will be proposed to the Annual
General Meeting for distribution. A tax reimburse-
ment claim of euro 12 million arose in 2006 in con-
junction with the corporation tax system applicable
until 2001.

As a consequence of new German tax legislation

relating to transitional taxation measures enacted
in conjunction with the introduction of the European
company and other changes in tax regulations, the
BMW AG’s ability to recover tax reduction claims
of euro 156 million arising from the previous corpo-
ration tax system are no longer linked to actual distri-
butions. The corporation tax credit will now be dis-
bursed in ten equal instalments over a ten-year period
between 2008 and 2017. The present value of the
tax reimbursement receivable amounted to euro

123 million and has been recognised in full as
an asset.

Accumulated other equity
Accumulated other equity consists of all amounts
recognised directly in equity resulting from the trans-
lation of the financial statements of foreign sub-
sidiaries, the effects of recognising changes in the
fair value of financial instruments directly in equity
as well as actuarial gains and losses relating to de-
fined benefit pension plans and similar obligations.
Accumulated other equity was increased by de-
ferred taxes amounting to euro 512 million (2005:
euro 727 million) recognised directly in equity.

Minority interest
The minority interest in the equity of subsidiaries
amounted to euro 4 million (2005: euro 0.188 million).
This includes a minority interest of euro 6 million
(2005: euro 0.098 million) in subsidiaries’ results for
the year.

Pension provisions
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 surviving dependants.
Depending on the legal, economic and tax circum-
stances prevailing in each country, various pension
plans are used, based generally on the length of
service and salary of employees. Due to similarity
of nature, the obligations of BMW Group companies
in the U.S. and of BMW (South Africa) (Pty) Ltd.,
Pretoria, for post-employment medical care are also
disclosed as pension provisions. The provision for
these pension-like obligations amounts to euro 49
million (2005: euro 43 million) and is measured, simi-
lar to pension obligations, in accordance with IAS 19.
In the case of post-employment medical care, it is
assumed that costs will increase on a long-term basis
by 6 % p.a. (unchanged from the previous year).
The expense for medical care costs in the financial
year 2006 amounted to euro 6 million (2005: euro
8 million).

fixed contributions into a separate entity or fund and
does not assume any other obligations. The total
pension expense for all defined contribution plans
of the BMW Group amounts to euro 409 million
(2005: euro 400 million). This includes employer
contributions paid to state pension insurance
schemes amounting to euro 388 million (2005: euro
381 million).

Under defined benefit plans, the enterprise is

required to pay the benefits granted to present and
past employees. Defined benefit plans may be fund-
ed or unfunded, the latter sometimes financed by
means of accounting provisions. Most of the pen-
sion commitments of the BMW Group in Germany
relate to BMW AG, whose pension plans, like all
those of all of the BMW Group’s German subsidiaries,
are unfunded and financed by means of accounting
provisions. In addition, a deferred remuneration re-
tirement scheme is in place which is funded by em-
ployee contributions. The main funded plans of the
BMW Group are in the United Kingdom, the USA,
Switzerland, the Netherlands, Belgium and Japan.

Post-employment benefit plans are classified as
either defined contribution or defined benefit plans.
Under defined contribution plans, an enterprise pays

Pension obligations are computed on an actuar-
ial basis at the level of the defined benefit obligation.
This computation requires the use of estimates.

The main assumptions, in addition to life expectancy,
depend on the economic situation in each particular
country. The following weighted average values are

used in the United Kingdom (UK) and in the other
countries:

in %
31 December

Discount rate

Salary level trend

Pension level trend

Germany

Other

2006

2005

2006

2005

2006

2005

4.40

3.25

1.75

4.25

3.25

1.75

5.11

4.12

3.09

4.72

3.86

2.83

5.19

2.59

1.79

5.28

2.62

1.89

The salary level trend refers to the expected rate

of salary increase which is estimated annually de-
pending on inflation and the period of service of em-
ployees with the Group.

In the case of funded plans, the defined benefit
obligation is offset against plan assets measured at
their fair value. Where the plan assets exceed the
pension obligations and the enterprise has a right of
reimbursement or a right to reduce future contribu-
tions, the surplus amount is recognised in accor-
dance with IAS 19 as an asset under other assets. In
the case of funded pension plans, a liability is recog-
nised under pension provisions where the benefit
obligation exceeds fund assets.

Actuarial gains or losses may result from in-
creases or decreases in either the present value of
the defined benefit obligation or in the fair value of
the plan assets. Causes of actuarial gains or losses
include the effect of changes in the measurement
parameters, changes in estimates caused by the
actual development of risks impacting on pension
obligations and differences between the actual and
expected return on plan assets. Past service cost
arises where a BMW Group company introduces a
defined benefit plan or changes the benefits payable
under an existing plan.

Based on the measurement principles con-
tained in IAS 19, the following funding status applies
to the Group’s pension plans:

in euro million
31 December

Germany

Other

Total

2006

2005

2006

2005

2006

2005

2006

2005

Present value of pension benefits covered by

accounting provisions

Present value of funded pension benefits

Defined benefit obligations

Fair value of plan assets

Net obligation

Income (+) expense (–) from past service cost

not yet recognised

Amount not recognised as an asset because of

the limit in IAS 19.58

Balance sheet amount at 31.12.

thereof pension provision

thereof pension asset (–)

4,412

4,234

–

4,412

4,234

–

4,412

4,234

–

6,568

6,134

434

–

6,576

5,784

792

–

4,412 4,234

4,412

4,234

–

439

440

– 1

–

792

819

– 27

134

316

450

298

152

164

165

– 1

112

315

4,546

6,884

4,346

6,891

427 11,430 11,237

233

194

6,432

4,998

6,017

5,220

– 2

202 5,015 5,228

202

5,017

5,255

–

– 2

– 27

Pension provisions relating to pension plans in

other countries amounted to euro 165 million (2005:

euro 202 million). This includes euro 80 million (2005:
euro 82 million) relating to externally funded plans.

96 Group Financial Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

The change in the defined benefit obligations
was attributable mainly to changes in the discount
rates used in the actuarial computation.

The changes in the pension provision and the
pension asset (reimbursement claims or right to re-
duce future contributions to the funds) as disclosed
in the balance sheet can be derived as follows:

in euro million

Germany

Other

Total

2006

2005

2006

2005

2006

2005

2006

2005

Balance sheet amounts at 1 January

Expense from pension obligations

Pension payments or transfers to external funds

4,234

3,336

329

– 72

271

– 67

792

– 98

678

– 87

202

– 55

180

5,228

4,194

445

397

– 27

– 225

– 181

Actuarial gains (–) and losses (+)

on defined benefit obligations

Actuarial gains (–) and losses (+) on plan assets

Employee contributions to the deferred

remuneration retirement scheme

Translation differences and other changes

Balance sheet amounts at 31 December

thereof pension provision

thereof pension asset (–)

– 167

619

– 241

516

–

– 98

– 425

– 19

–

4,412 4,234

4,412

4,234

–

439

440

– 1

–

792

819

– 27

–

– 17

164

165

– 1

– 4

–

– 400

– 117

1,131

– 424

– 3

202 5,015 5,228

202

5,017

5,255

–

– 2

– 27

The defined benefit plans of the BMW Group
give rise to an expense from pension obligations in
the financial year 2006 of euro 445 million (2005:

euro 397 million), comprising the following com-
ponents:

in euro million

Germany

Other

Total

2006

2005

2006

2005

2006

2005

2006

2005

Current service cost

160

120

Expense from reversing the discounting of

pension obligations

Past service cost

Expected return on plan assets (–)

Expense from pension obligations

169

151

–

307

–

308

–

– 300

– 271

329

271

– 15

258

198

–

– 12

501

482

–

– 315

– 283

445

397

The expense from reversing the discounting of

pension obligations and the income from the ex-
pected return on plan assets are reported as part of
the financial result. All other components of pension
expense are included in the relevant costs by func-
tion in the income statement.

The actual return from external pension funds

was euro 432 million (2005: euro 707 million).

The level of the pension obligations differs de-
pending on the pension system applicable in each
country. Since the state pension system in the
United Kingdom only provides a basic fixed amount
benefit, retirement benefits are largely organised in
the form of company pensions and arrangements

financed by the individual. The pension benefits in
the United Kingdom therefore contain contributions
made by the employee.

The net obligation from pension plans in
Germany, the United Kingdom and other countries
changed as follows:

in euro million

Defined benefit obligation

Germany
Plan assets

2006

2005

2006

2005

Net obligation

2006

2005

1 January

Expense from pension obligations

Payments to external funds

Pension payments

Actuarial gains (–) and losses (+)

Employee contributions to the deferred remuneration

retirement scheme

Translation differences and other changes

4,234

3,336

329

–

– 72

– 167

271

–

– 67

619

–

31 December

4,412

4,234

–

4,234

3,336

329

–

– 72

– 167

271

–

– 67

619

–

4,412

4,234

in euro million

Defined benefit obligation

2006

2005

United Kingdom
Plan assets

2006

2005

Net obligation

2006

2005

1 January

Expense from pension obligations

Payments to external funds

Pension payments

Actuarial gains (–) and losses (+)

Translation differences and other changes

6,576

5,764

– 5,784

– 5,086

371

–

– 278

– 241

140

361

–

– 262

516

197

– 300

– 271

– 98

278

– 98

– 132

– 87

262

– 425

– 177

31 December

6,568

6,576

– 6,134

– 5,784

792

– 98

–

– 339

434

678

– 87

–

792

in euro million

Defined benefit obligation

2006

2005

Other countries
Plan assets

2006

2005

Net obligation

2006

2005

1 January

Expense from pension obligations

Payments to external funds

Pension payments

Actuarial gains (–) and losses (+)

Translation differences and other changes

31 December

427

–

– 10

– 34

450

353

– 233

– 180

–

– 9

– 4

– 14

– 51

– 19

– 12

– 27

– 20

427

– 298

– 233

194

– 51

– 4

– 11

– 21

152

173

– 27

– 4

– 3

194

98 Group Financial Statements

Plan assets in the United Kingdom and other countries comprise the following:

in euro million

Equity instruments

Debt securities

Real estate

Other

31 December

United Kingdom
2005
2006

Components of plan assets
Other countries
2005
2006

Total

2006

2005

1,902

3,323

664

245

1,471

3,461

621

231

6,134

5,784

172

106

298

141

233

2,074

3,429

669

260

1,612

3,546

625

234

6,432

6,017

Benefit obligations are covered in Germany by

accounting provisions. In the United Kingdom, a

substantial portion of plan assets is invested in debt
securities in order to minimise fair value fluctuations.

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

[32]

Other provisions
Other provisions principally comprise the following items:

in euro million

Obligations for personnel and social expenses

Obligations for on-going operational expenses

Other obligations

31.12. 2006

31.12. 2005

Total

thereof
due within
one year

Total

thereof
due within
one year

1,493

3,000

1,043

5,536

979

1,135

557

2,671

1,355

3,414

1,137

5,906

812

1,428

423

2,663

Provisions for obligations for personnel and so-
cial expenses comprise mainly profit-share schemes
and bonuses, early retirement part-time working
arrangements and employee long-service awards.
The increase compared to the previous year was
mainly attributable to the higher level of obligations
relating to early retirement arrangements.

Provisions for obligations for on-going opera-

tional expenses comprise primarily warranty obliga-

tions. These obligations decreased during the year
under report.

Provisions for other obligations cover numerous

specific risks and obligations of uncertain amount.
They comprise mainly obligations and risks in re-
spect of the disengagement from the former Rover
Group, risks from legal disputes and the obligation
for recovery and recycling of end-of-life vehicles.

Other provisions changed during the year as follows:

in euro million

Translation
1. 1. 2006* differences

Additions

Reversal of
discounting

Utilised

Reversed

At
31.12. 2006

Obligations for personnel and

social expenses

Obligations for on-going

operational expenses

Other obligations

* including first-time consolidated entities

1,356

– 8

3,434

1,158

5,948

– 32

– 24

– 64

877

991

416

2,284

729

1,493

1,371

302

2,402

214

264

3,000

1,043

5,536

Of the amount shown as reversed, euro 123 million are included in costs by function in the income statement.

[33]

Income tax liabilities

31 December 2006
in euro million

Deferred tax

Current tax

31 December 2005
in euro million

Deferred tax

Current tax

Maturity
within
one year

Maturity
later than
one year

–

206

2,758

361

3,119

Maturity
within
one year

Maturity
later than
one year

–

459

2,522

2,525

Total

2,758

567

3,325

Total

2,522

462

2,984

Current tax liabilities of euro 567 million (2005:

euro 462 million) comprise euro 88 million (2005:
euro 219 million) for taxes payable and euro 479 mil-

lion (2005: euro 243 million) for tax provisions. In
2006, tax provisions totalling euro 2 million were re-
versed (2005: euro 90 million).

100 Group Financial Statements

[34] Financial liabilities

Financial liabilities include all liabilities of the BMW

Group at the relevant balance sheet dates relating to
financing activities and comprise:

31 December 2006
in euro million

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Interest and currency derivatives

Bills of exchange payable

Other

31 December 2005
in euro million

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Interest and currency derivatives

Bills of exchange payable

Other

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

Total

3,528

16,420

4,442

2,077

5,138

4,154

1,305

279

260

8,450

2,205

643

–

3,196

317

–

235

17,656

15,046

–

220

3,754

4,288

5,781

4,154

4,501

596

715

36,456

Total

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

5,057

1,846

5,768

3,814

1,018

156

177

6,481

1,798

624

–

2,881

673

–

473

3,624

15,162

–

246

3,653

6,392

3,814

3,899

850

896

17,838

12,930

3,900

34,668

Other financial liabilities of euro 715 million at 31 December 2006 (2005: euro 896 million) comprise mainly
finance lease liabilities.

101

Issue volume
in relevant currency
(ISO-Code)

Weighted
average maturity
period (in years)

Weighted
average effective
interest rate (in %)

Bonds comprise:

Issuer

BMW Finance N.V., The Hague

BMW Coordination Center V. o. F., Bornem

BMW (UK) Capital plc, Bracknell

BMW US Capital, LLC, Wilmington, Del.

Interest

variable

fixed

variable

fixed

variable

fixed

variable

fixed

JPY 2,500 million

EUR 805 million

GBP 100 million

CAD 100 million

USD 20 million

JPY 92,000 million

EUR 3,139 million

USD 650 million

GBP 400 million

CHF 200 million

EUR 1,135 million

CHF 100 million

USD 60 million

GBP 25 million

SGD100 million

EUR 30 million

JPY 5,000 million

EUR 275 million

GBP 150 million

JPY 47,750 million

USD 1,400 million

EUR 695 million

EUR 2,500 million

JPY 2,200 million

USD 750 million

CHF 450 million

GBP 150 million

AUD 100 million

Rolls-Royce Motor Cars Ltd., Bracknell

variable

GBP 45.8 million

Other

variable

fixed

JPY 3,000 million

EUR 1,475 million

USD 120 million

JPY 82,000 million

EUR 300 million

CHF 250 million

GBP 150 million

2.0

1.7

1.0

2.0

6.6

9.1

4.8

6.0

5.0

1.2

1.5

1.0

1.4

2.0

2.5

7.0

1.9

4.0

2.0

7.1

3.0

6.2

3.8

3.0

2.0

1.0

8.0

2.2

6.0

13.8

4.0

3.5

0.4

3.4

5.2

4.4

5.4

1.5

4.2

5.0

5.2

2.0

3.6

2.0

5.4

5.1

3.3

3.8

0.6

3.7

6.0

0.5

5.3

3.7

4.0

1.1

4.3

2.3

4.6

5.8

5.4

0.6

3.7

5.7

2.3

3.0

1.6

5.8

102 Group Financial Statements

The following details apply to the commercial paper:

Issuer

Issue volume
in relevant currency
(ISO-Code)

Weighted
average maturity
period (in days)

Weighted
average nominal
interest rate (in %)

BMW AG, Munich

BMW Coordination Center V. o. F., Bornem

BMW Finance N.V., The Hague

BMW (UK) Capital plc, Bracknell

BMW US Capital, LLC, Wilmington, Del.

EUR 775 million

EUR 475 million

EUR 460 million

GBP 50 million

GBP 250 million

USD 2,640 million

18.1

15.7

20.5

22.0

26.8

8.3

[35]

Other liabilities
Other liabilities comprise the following items:

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

31 December 2006
in euro million

Other taxes

Social security

Advance payments from customers

Deposits received

Subsidiaries

Deferred income

Other

31 December 2005
in euro million

Other taxes

Social security

Advance payments from customers

Deposits received

Subsidiaries

Liabilities to other companies in which an investment is held

Deferred income

Other

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

553

267

909

2,066

3,924

–

1,362

118

1,586

–

306

346

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

328

121

359

1,026

1,642

3,577

104

–

1,179

110

1,402

–

216

257

3.7

3.5

3.7

5.2

5.3

Total

553

278

143

2,577

2,224

5,856

Total

329

122

366

164

2,421

1,793

5,236

103

Deferred income comprises the following items:

in euro million

Deferred income from lease financing

Deferred income relating to service contracts

Grants

Other deferred income

31.12. 2006

31.12. 2005

Total

thereof
due within
one year

Total

thereof
due within
one year

763

1,295

412

107

2,577

484

266

909

678

1,083

443

217

2,421

408

375

200

1,026

Deferred income relating to service contracts
relates to service and repair work to be provided un-
der commitments given at the time of the sale of a
vehicle (Multi-Component Arrangements). Grants
comprise primarily public funds to promote regional

structures; this has been invested in the construction
of the production plant in Leipzig. In accordance with
IAS 20, they are recognised as income over the useful
lives of the assets to which they relate.

[36]

Trade payables

31 December 2006
in euro million

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

Total

Trade payables

3,624

3,737

31 December 2005
in euro million

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

Total

Trade payables

3,389

103

3,544

The total amount of financial liabilities, other
liabilities and trade payables with a maturity later

than five years amounts euro 4,139 million (2005:
euro 4,209 million).

104 Group Financial Statements

BMW Group
Notes to the Group Financial Statements
Other Disclosures

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

[37]

Contingent liabilities and other financial commitments
Contingent liabilities
No provisions were recognised for the following con-
tingent liabilities (stated at their nominal amount),

since an outflow of resources is not considered to
be probable:

in euro million

31.12. 2006

31.12. 2005

Guarantees

Performance guarantees

Bills of exchange

224

252

As at the end of the previous year, all contingent

liabilities relate to non-group entities.

Several liability applies in the case of investments

in general partnerships.

The usual commercial guarantees have been
given in relation to the sale of Rover Cars and Land
Rover activities.

Other financial obligations
In addition to liabilities, provisions and contingent
liabilities, the BMW Group also has other financial

commitments, primarily under lease contracts for
land, buildings, plant and machinery, tools, office
and other facilities. The leases run for periods of one
to 96 years and in some cases contain extension
and/or purchase options. Lease payments of euro
77 million (2005: euro 79 million) were recognised
as expense during the year.

The total of future minimum lease payments
under non-cancellable leases can be analysed by
maturity as follows:

in euro million

31.12. 2006

31.12. 2005

Nominal total of future minimum lease payments

due within one year

due between one and five years

due later than five years

271

583

560

174

521

591

1,414

1,286

The above amounts include euro 4 million (2005:

In addition, the BMW Group is the lessee in the

euro 2 million) in respect of non-consolidated sub-
sidiaries and euro 65 million (2005: euro 63 million)
for back-to-back operating leases.

case of operating leases for vehicles which are
leased to third parties over matching periods. The
following amounts are payable under these contracts:

in euro million

31.12. 2006

31.12. 2005

Total of future minimum lease payments

due within one year

due between one and five years

due later than five years

677

497

–

802

667

–

1,174

1,469

105

These future obligations are matched, or ex-

Sundry other financial commitments amount to

ceeded, by income on sub-leases.

euro 249 million (2005: euro 217 million).

Purchase commitments for property, plant and

equipment amount to euro 1,099 million (2005: euro
1,057 million).

[38]

Financial instruments
Use and control of financial instruments
As an enterprise with worldwide operations, busi-
ness is conducted in a variety of currencies, from
which exchange rate risks arise. The BMW Group’s
operations are financed in various currencies,
mainly by the issue of bonds and medium term
notes and through bank loans. The BMW Group’s
financial management system involves 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, market prices and ex-
change rates. Financial instruments are only used
to hedge underlying positions or forecast trans-
actions.

Protection against such risks is provided at first
instance though 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 remaining after netting.

The scope of permitted transactions, responsi-

bilities, 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 pro-
cessing. Exchange rate, interest rate and liquidity
risks of the BMW Group are managed at a corporate
level. At 31 December 2006, derivative financial in-
struments were in place to hedge exchange rate
risks, in particular for the currencies US dollar, British
pound, Canadian dollar and Japanese yen.

Further disclosures relating to risk management

are provided in the management report.

Quantitative disclosures on financial
instruments
The carrying amount and fair value of material non-
derivative financial instruments are set out in the
following table:

in euro million

31.12. 2006

31.12. 2005

Carrying amount

Fair value Carrying amount

Fair value

Receivables from sales financing

Financial liabilities

30,368

36,456

30,183

36,244

29,053

34,668

29,426

34,534

The fair values shown are computed using mar-

ket information available at the balance sheet date,
on the basis of prices quoted by the contract partners
or using appropriate measurement methods, e.g.

discounted cash flow models. In the latter case,
amounts were discounted at 31 December 2006 on
the basis of the following interest rates:

ISO-Code
in %

Interest rate for six months

Interest rate for one year

Interest rate for five years

Interest rate for ten years

EUR

USD

GBP

JPY

3.8

4.0

4.1

4.2

5.4

5.3

5.1

5.2

5.4

5.6

5.4

5.1

0.6

0.8

1.4

1.9

106 Group Financial Statements

These interest rates were adjusted, where
necessary, to take account of the credit quality and
risk of the underlying financial instrument.

The nominal amounts of derivative financial
instruments correspond to the purchase or sale

amounts or contract values of the underlying trans-
actions. The nominal amounts, fair values (and also
carrying amounts) and maturities of derivative finan-
cial instruments of the BMW Group are shown in
the following analysis:

in euro million

31 December 2006

Assets

Currency hedge contracts

Interest rate contracts

Other derivative instruments

Total

Liabilities

Currency hedge contracts

Interest rate contracts

Other derivative instruments

Total

31 December 2005

Assets

Currency hedge contracts

Interest rate contracts

Other derivative instruments

Total

Liabilities

Currency hedge contracts

Interest rate contracts

Other derivative instruments

Total

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Nominal
amount

Fair values

Total

due within due between
one and
five years

one year

due later
than
five years

15,567

13,411

172

29,150

9,350

3,479

209

13,038

6,378

11,975

209

18,562

14,509

5,792

561

20,862

618

658

1,321

427

596

270

488

806

361

453

850

572

666

269

–

279

163

225

154

–

156

468

520

158

317

107

315

449

207

453

673

–

135

–

135

–

132

–

132

–

The disclosed fair values of derivative financial

instruments, based on their nominal amounts, do
not take account of any compensating changes in
the value of the underlying transaction. Moreover,
the fair values disclosed do not necessarily corre-
spond to the amounts which the BMW Group will
realise in the future under the market conditions pre-
vailing at that time.

The currency hedge contracts comprise princi-
pally options and forward currency contracts which
are designated as a cash flow hedge. The interest
rate contracts include swaps which are accounted
for on the basis of whether they are designated as a
fair value hedge or as a cash flow hedge.

The fair values of financial instruments relating

to hedged forecast transactions and available-for-

107

sale securities are recognised directly in accumulated
other equity. At 31 December 2006, the positive
impact from the fair value measurement of financial
instruments (net of deferred taxes) amounted to
euro 392 million (2005: euro 591 million) and has
been recognised directly in equity. This comprises a
positive impact from cash flow hedges of euro 178
million (2005: euro 29 million) and a positive impact
from available-for-sale securities of euro 214 million
(2005: euro 562 million).

During the year under report, negative changes

in fair value measurement amounting to euro 199
million (2005: euro 543 million) were recognised
directly in equity. This includes a positive impact of
euro 149 million from cash flow hedges (2005: neg-
ative impact of euro 1,043 million) and a negative im-
pact of euro 348 million (2005: positive impact of
euro 500 million) from available-for-sale securities.

In the financial year under report, positive fair
value measurement changes of euro 266 million
(2005: euro 661 million) were removed from other
accumulated equity and realised in the income state-
ment. Write-downs of euro 2 million (2005: euro 10
million) on available-for-sale securities, for which fair
value changes were previously recognised directly
in equity, were recognised as expenses in 2006.
Reversals of write-downs on current marketable se-
curities of euro 4 million were recognised directly in

equity (2005: euro 3 million). In 2006, gains of euro
431 million (2005: euro 33 million) were realised on
the disposal of available-for-sale securities and the
equivalent amount removed from other accumulated
equity and recognised in the income statement.

Credit risk
Financial assets are recognised in the balance sheet
net of write-downs for the risk that counter-parties
are unable to fulfil their contractual obligations, irre-
spective of the value of collateral received. In the
case of performance relationships underlying non-
derivative financial instruments, collateral will be
required, information on the credit-standing of the
counter-party 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 depending on the nature and amount
of exposure entered into. Write-downs are recorded
as soon as credit risks are identified on individual
financial assets. This credit risk 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 instruments utilised
by the BMW Group is therefore not considered to
be significant. A concentration of credit risk with par-
ticular borrowers or groups of borrowers has not
been identified.

[39]

Explanatory notes to the cash flow statements
The cash flow statements show how the cash and
cash equivalents of the BMW Group, industrial oper-
ations and financial operations have changed in the
course of the year as a result of cash inflows and
cash outflows. In accordance with IAS 7 (Cash Flow
Statements), cash flows are classified into cash
flows from operating, investing and financing activi-
ties. The cash flow statements of the BMW Group
are presented on pages 68 and 69.

Cash and cash equivalents included in the cash

flow statement comprise cash in hand, cheques,
and cash at bank, to the extent that they are available
within three months from the balance sheet date

and are subject to an insignificant risk of changes in
value. The negative impact of changes in cash and
cash equivalents due to the effect of exchange rate
fluctuations in 2006 was euro 42 million (2005: posi-
tive impact of euro 60 million).

The cash flows from investing and financial ac-
tivities are based on actual payments and receipts.
The cash flow from operating activities is com-
puted using the indirect method, starting from the
net profit of the Group. Under this method, changes
in assets and liabilities relating to operating activi-
ties are adjusted for currency translation effects
and changes in the composition of the Group. The
changes in balance sheet positions shown in the

108 Group Financial Statements

cash flow statement do not therefore agree directly
with the amounts shown in the Group balance
sheet.

The cash inflow from operating activities in-
cludes the following cash flows in accordance with
IAS 7 paragraphs 31 and 35:

in euro million

Interest received

Interest paid

Dividends received

Income taxes paid

2006

2005

391

328

733

283

240

604

[40]

Related party relationships
In accordance with IAS 24 (Related Party Disclo-
sures), related individuals or entities which have the
ability to control the BMW Group or which are con-
trolled by the BMW Group, must be disclosed un-
less such parties are not already included in the
consolidated financial statements as consolidated
companies. Control is defined as ownership of more
than one half of the voting power of BMW AG or the
power to direct, by statute or agreement, the finan-
cial and operating policies of the management of
the Group.

In addition, the disclosure requirements of IAS
24 also cover transactions with associates and with
parties which have the ability to exercise significant
influence over the financial and operating policies
of the BMW Group. This also includes close relatives
and intermediaries. Significant influence over the
financial and operating policies of the Group can
arise when a party holds 20 % or more of the shares
of BMW AG or is a member of the Board of Manage-
ment or Supervisory Board of BMW AG.

For the financial year 2006, the disclosure re-
quirements contained in IAS 24 only affect the BMW
Group with regard to business relationships with
affiliated, non-consolidated entities, joint ventures
and other entities in which an investment is held as
well as with members of the Board of Management
and Supervisory Board of BMW AG.

The BMW Group’s relationships with affiliated,

non-consolidated entities are conducted on the
basis of arm’s length principles. Transactions with
these related parties are small in scale and arise in
the normal course of business.

Transactions of BMW Group companies with
joint ventures and other equity investments – mainly
BMW Brilliance Automotive Ltd., Shenyang (50 %)
and TRITEC Motors Ltda., Campo Largo (50 %) –
all arise in the normal course of business and are
conducted on the basis of arm’s length principles.
Stefan Quandt is a shareholder and Deputy
Chairman of the Supervisory Board of BMW AG. He
is also sole shareholder and Chairman of the Super-
visory Board of DELTON AG, Bad Homburg v. d. H.,
which, via its subsidiaries, performed logistics serv-
ices for the BMW Group during the financial year
2006. In addition, companies of the DELTON Group
purchased vehicles from the BMW Group. In addi-
tion, SOLARWATT AG, Dresden, in which Stefan
Quandt has a significant investment, supplied solar
modules with a total value of euro 3 million to the
BMW Group in 2006. These service and sale con-
tracts are not material for the BMW Group and are
made, without exception, on the basis of arm’s
length principles.

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

109

Susanne Klatten is a shareholder and member

of the Supervisory Board of BMW AG, and also a
shareholder and Deputy Chairman of the Supervisory
Board of Altana AG, Bad Homburg v. d. H. which pur-
chased vehicles from the BMW Group during the
financial year 2006. These service and sale con-
tracts are not material for the BMW Group and are
made, without exception, on the basis of arm’s
length principles.

With the exception of these related party trans-
actions, companies of the BMW Group did not enter
into any significant transactions with members of
the Board of Management or Supervisory Board of
BMW AG or with companies in whose representative
bodies those persons are represented. The same
applies to close members of the families of those
persons.

[41]

Declaration with respect to the Corporate
Governance Code
The Board of Management and the Supervisory
Board of Bayerische Motoren Werke Aktiengesell-
schaft have issued a declaration, required by §161 of

the German Stock Corporation Act, which is included
in the BMW Group Annual Report 2006 and which
is available to shareholders on the BMW Group web-
site under the address www.bmwgroup.com/ir.

[42]

Shareholdings of members of the Board of
Management and Supervisory Board
The members of the Supervisory Board of BMW AG
hold in total 27.7% of the issued common and
preferred stock shares, of which 16.12 % relates to

Stefan Quandt, Bad Homburg v. d. H. and 11.58 %
to Susanne Klatten, Munich. The shareholding of
the members of the Board of Management of
BMW AG is, in total, less than 1% of the issued
stock shares.

[43]

Compensation of members of the Board of
Management and Supervisory Board
Subject to the approval of the proposed dividend at
the Annual General Meeting of Shareholders, the

remuneration of current members of the Board of
Management and the Supervisory Board amounts
to euro 17.8 million (2005: euro 15.2 million). The
compensation consists of the following:

in euro million

Short-term employment benefits

Benefits due at end of employment relationship

2006

2005

17.2

0.6

17.8

14.7

0.5

15.2

Subject to the approval of the proposed divi-
dend at the Annual General Meeting, the salaries of
the members of the Board of Management for the
financial year 2006 amounted to euro 14.5 million
(2005: euro 12.2 million). This comprises fixed com-
ponents of euro 2.3 million (2005: euro 2.0 million)
and variable components of euro 12.2 million (2005:
euro 10.2 million).

In addition, an amount of euro 0.6 million (2005:
euro 0.5 million) has been granted to current mem-
bers of the Board of Management after the end of

their employment relationship. This relates to the
expense for allocations to pension provisions.

Subject to the approval of the proposed divi-

dend at the Annual General Meeting, the compen-
sation of the members of the Supervisory Board for
the financial year 2006 amounts to euro 2.7 million
(2005: euro 2.5 million), comprising fixed compo-
nents of euro 0.1 million (2005: euro 0.1 million) and
variable components of euro 2.6 million (2005: euro
2.4 million).

110 Group Financial Statements

Further details about the remuneration of cur-
rent members of the Board of Management and of
the Supervisory Board can be found in the compen-
sation report on pages 121 to 124. The compensa-
tion report is sub-section of the management report.
The remuneration of former Board members
and their surviving dependants amounted to euro
3.8 million (2005: euro 2.6 million).

Pension obligations to former members of the

Board of Management and their surviving dependants
are fully covered by pension provisions amounting
to euro 38.8 million (2005: euro 37.0 million), com-
puted in accordance with IAS 19.

The names of the members of the Supervisory
Board and of the Board of Management are disclosed
on pages 116 to 119.

[44]

Application of exemptions pursuant to § 264 (3)
and § 264 b HGB
A number of companies and incorporated partner-
ships (as defined by § 264a HGB) which are affiliated
and consolidated entities of BMW AG and for which
the consolidated financial statements of BMW AG
represent exempting consolidated financial state-
ments, 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:
– Alphabet Fuhrparkmanagement GmbH, Munich
– BMW Ingenieur-Zentrum GmbH + Co., Dingolfing

– BMW Leasing GmbH, Munich
– BMW M GmbH Gesellschaft für individuelle Auto-

mobile, Munich

– BMW Vertriebs GmbH, Munich
– BMW Vertriebs GmbH & Co. oHG, Dingolfing
– Rolls-Royce Motor Cars GmbH, Munich
In addition, the following entities also apply the ex-
emption available in § 264 (3) and § 264b HGB with
regard to publication:
– Alphabet Fuhrparkmanagement GmbH, Munich
– BMW Leasing GmbH, Munich
– BMW Vertriebs GmbH, Munich
– BMW Vertriebs GmbH & Co. oHG, Dingolfing

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

BMW Group
Notes to the Group Financial Statements
Segment Information

111

[45]

Segment information
Description of business segments
In accordance with the rules contained in IAS 14
(Segment Reporting), the BMW Group presents
segment information using business segments as
its primary reporting format and geographical seg-
ments as its secondary reporting format. This
distinction is based on internal management and
financial reporting systems and reflects the risk and
earnings structure of the Group.

The activities of the BMW Group are broken
down into the segments Automobiles, Motorcycles
and Financial Services.

The Automobiles segment develops, manu-
factures, assembles and sells cars and off-road vehi-
cles, under the brands BMW, MINI and Rolls-Royce
as well as spare parts and accessories.

BMW and MINI brand products are sold in Ger-

many through branches of BMW AG and by inde-
pendent, authorised dealers. Sales outside Germany
are handled primarily by subsidiary companies and,
in a number of markets, by independent import com-
panies. Rolls-Royce brand vehicles are sold in the
USA via a subsidiary company and elsewhere by in-
dependent, authorised dealers.

The BMW Motorcycles segment develops,
manufactures, assembles and sells BMW brand mo-
torcycles as well as spare parts and accessories.

Reconciliations to the Group profit before for the

Group include holding companies, group financing
companies and income and expenses not specifi-
cally attributable to the business segments. Recon-
ciliations also include certain operating companies
which are not allocated to segments, namely BMW
Services Ltd., Bracknell, BMW (UK) Investments Ltd.,
Bracknell, and the softlab Group.

Other explanatory comments on segment
information

Segment information is generally prepared in
conformity with the accounting policies adopted for
preparing and presenting the Group financial state-
ments. Inter-segment receivables and payables,
provisions, income, expenses and profits are elimi-
nated in Reconciliations. Inter-segment sales take
place at arm’s length prices.

Significant non-cash items comprise mainly

changes in provisions, write-downs, reversal of
write-downs and depreciation on leased products.
Capital expenditure comprises additions to
property, plant and equipment and intangible assets.

Segment assets and segment liabilities com-
prise all assets and liabilities employed by the rele-
vant business segment to generate the profit before
financial result.

The return on sales for each segment is based

The Financial Services segment focuses prima-

on the profit before tax.

rily on car leasing, fleet business, retail customer
and dealer financing, customer deposit business
and insurance activities. The profit before financial
result of this segment includes net interest income
on retail customer and dealer financing business and
the result of lease business. Leased products are
carried at acquisition cost less straight-line deprecia-
tion down to the imputed residual value of the vehi-
cles. Leased products are written down to their fair
value where this is lower. Inter-group profits on own
products are eliminated on consolidation and in-
cluded in the Reconciliations to the Group profit be-
fore tax.

Internal financing is computed as the profit be-

fore tax activities adjusted for depreciation and signif-
icant non-cash items and less actual tax payments.
In the case of segment information by geo-
graphical region, external sales are based on the lo-
cation of the customer’s registered office. Segment
information is provided for the regions Germany,
rest of Europe, the Americas and Africa, Asia and
Oceania, in line with internal management and re-
porting procedures.

112 Group Financial Statements

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Segment information by business segment
in euro million

Automobiles

2006

2005

Revenues with third parties

Change compared to previous year

Inter-segment revenues

Change compared to previous year

Total revenues

Change compared to previous year

Gross profit

Profit before financial result

Change compared to previous year

Result from equity method accounting

Other financial result

Profit before tax

Change compared to previous year

Return on sales

Significant non-cash items

Internal financing

Capital expenditure

Depreciation and amortisation

Additions to leased products

Investments accounted for using the equity method

Assets

Liabilities

Average workforce during the year

37,948

1.9

9,819

14.0

47,767

4.2

9,636

3,055

– 0.8

– 25

– 18

3,012

1.2

6.3

– 117

5,552

4,185

3,159

392

37,247

2.3

8,614

40.2

45,861

7.8

9,512

3,080

– 7.7

– 118

2,976

– 5.9

6.5

802

6,017

3,832

2,903

369

27,227

25,679

20,069

19,692

95,920

96,436

113

Motorcycles

Financial Services

Reconciliations

Group

2006

2005

2006

2005

2006

2005

2006

2005

9,603

19.0

1,476

10.6

11,079

17.8

1,215

689

10.8

–

– 4

685

13.2

6.2

3,475

4,095

8,073

18.2

1,335

– 4.4

9,408

14.4

1,067

622

20.8

–

– 17

605

17.5

6.4

2,803

3,346

193

62.2

– 11,305

13.6

– 11,112

13.0

166

231

862.5

–

130

361

–

272

119

40.0

– 9,955

31.9

– 9,836

31.8

48,999

5.0

46,656

5.2

–

48,999

5.0

46,656

5.2

– 230

11,339

10,664

– 120.5

–

– 378

– 354

–

478

145

–

4,050

6.8

– 25

4,124

25.5

8.4

3,400

10,063

4,313

3,272

8,522

3,793

0.5

– 520

3,287

– 8.3

7.0

4,086

9,649

3,993

3,025

7,202

1,255

3.1

66.7

1,265

3.4

322

11.9

–

– 9

10.0

5.2

144

–

687

396

1,217

19.1

– 14.3

1,223

18.9

315

76.3

–

– 7

93.5

4.9

141

–

602

377

10,362

9,092

– 2,232

– 2,259

–

50,529

47,270

–

614

1,015

79,057

74,566

44,480

41,318

– 5,018

– 3,794

59,927

57,593

2,816

2,859

3,315

2,958

1,676

1,293

103,727

103,546

114 Group Financial Statements

Segment information by region
in euro million

External sales

2006

2005

Capital expenditure
2005
2006

Assets

2006

2005

Germany

Rest of Europe

The Americas

Africa, Asia, Oceania

Reconciliations

Group

10,601

18,440

12,336

7,622

–

11,001

17,266

11,560

6,829

–

3,089

3,248

665

511

–

430

239

–

28,903

19,789

21,589

8,705

27,278

17,759

19,977

7,970

1,582

48,999

46,656

4,313

3,993

79,057

74,566

65 Group Financial Statements

65 Income Statements
66 Balance Sheets
68 Cash Flow Statements
70 Group Statement of

Changes in Equity

71 Statement of Income and

Expenses recognised directly
in Equity

72 Notes
72 – Accounting Principles

and Policies

79 – Notes to the Income Statement
86 – Notes to the Balance Sheet

104 – Other Disclosures
111 – Segment Information

Munich, 20 February 2007

Bayerische Motoren Werke
Aktiengesellschaft

The Board of Management

BMW Group
Auditors’ Report

115

We have audited the consolidated financial state-
ments prepared by Bayerische Motoren Werke
Aktiengesellschaft, comprising the income statement,
the balance sheet, statement of changes in equity,
cash flow statement and the notes to the consoli-
dated financial statements and its report on the
position of the company and the Group for the busi-
ness year from 1 January to 31 December 2006.
The preparation of the consolidated financial state-
ments and the group management report in accor-
dance with IFRSs, as adopted by the EU, and the
additional requirements of German commercial law
pursuant to § 315a Abs. 1 HGB are the responsibility
of the parent company`s management. Our respon-
sibility is to express an opinion on the consolidated
financial statements and on the group management
report based on our audit.

We conducted our audit of the consolidated
financial statements in accordance with § 317 HGB
and German generally accepted standards for the
audit of financial statements promulgated by the
Institut der Wirtschaftsprüfer (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 results of
operations in the consolidated financial statements
in accordance with the applicable financial reporting
framework and in the group management report are
detected with reasonable assurance. Knowledge of
the business activities and the economic and legal

environment of the Group and expectations as to
possible misstatements are taken into account in the
determination of audit procedures. The effectiveness
of the accounting-related internal control system
and the evidence supporting the disclosures in the
consolidated financial statements and the group
management report are examined primarily on a test
basis within the framework of the audit. The audit
includes assessing the annual financial statements
of those entities included in consolidation, the deter-
mination of entities to be included in consolidation,
the accounting and consolidation principles used
and significant estimates made by management,
as well as evaluating the overall presentation of the
consolidated financial statements and group manage-
ment report. We believe that our audit provides a
reasonable basis for our opinion.

Our audit has not led to any reservations.
In our opinion, based on the findings of our audit,

the consolidated financial statements comply with
IFRSs, as adopted by the EU, the additional require-
ments of German commercial law pursuant to § 315a
Abs. 1 HGB and give a true and fair view of the net
assets, financial position and results of operations of
the Group in accordance with these requirements.
The group management report is consistent with the
consolidated financial statements and as a whole
provides a suitable view of the Group’s position and
suitably presents the opportunities and risks of
future development.

Munich, 2 March 2007

KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

Dr. Schindler
Wirtschaftsprüfer

Höfer
Wirtschaftsprüfer

Konrad Gottinger *
Deputy Chairman
Member of the Works Council, Dingolfing

Member of the Presiding Board,
Personnel Committee, Audit Committee
and Mediation Committee

Dr. Hans-Dietrich Winkhaus
Deputy Chairman
Former Chairman of the Board of
Henkel KGaA

Member of the Presiding Board,
Personnel Committee and Audit Committee

Mandates**

Deutsche Lufthansa AG
ERGO Versicherungsgruppe AG

Henkel KGaA

Volker Doppelfeld
(until 16. 05. 2006)
Former member of the Board of
Management of BMW AG

Mandates**

Bizerba GmbH & Co. KG
UniCredit S.p. A.

116 Corporate Governance

Members of the Supervisory Board

Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h.
Joachim Milberg
Chairman
Former Chairman of the Board of
Management of BMW AG

Chairman of the Presiding Board,
Personnel Committee, Audit Committee
Member of the Mediation Committee

Mandates**

Bertelsmann AG
FESTO AG
MAN AG (Deputy Chairman)

Deere & Company

Manfred Schoch*
Deputy Chairman
Chairman of the General Works Council

Member of the Presiding Board,
Personnel Committee, Audit Committee
and Mediation Committee

Stefan Quandt
Deputy Chairman
Industrial Engineer

Member of the Presiding Board,
Personnel Committee, Audit Committee
and Mediation Committee

Mandates**

DELTON AG (Chairman)
Dresdner Bank AG

DataCard Corp.

* Employee representative
** Mandates at 31 December 2006 or on final day of office
Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards

116 Corporate Governance

116 Members of the Supervisory Board
119 Members of the Board of Management
120 Corporate Governance in the

BMW Group

121 Compensation Report
124 Directors’ Dealings
124 Shareholdings of members of the Board
of Management and Supervisory Board

125 Declaration of Board of Management

and of the Supervisory Board pursuant
to §161 AktG

117

Ulrich Eckelmann*
Head of Division Industry, Technology and
Environment with the Executive Board of IG Metall

Arthur L. Kelly
Managing Partner of KEL
Enterprises L. P.

Bertin Eichler *
Executive Member of the
Executive Board of IG Metall

Mandates**

ThyssenKrupp AG (Deputy Chairman)
BGAG Beteiligungsgesellschaft der
Gewerkschaften GmbH (Chairman)

Werner Eisgruber *
(until 31.12. 2006)
Member of the Works Council, Dingolfing

Franz Haniel
Engineer, MBA

Mandates**

DELTON AG (Deputy Chairman)
Franz Haniel & Cie. GmbH (Chairman)
Heraeus Holding GmbH
secunet Security Networks AG

Giesecke & Devrient GmbH

Mandates**
BASF AG

DataCard Corp.
Deere & Company
Northern Trust Corp.
Robert Bosch Corp.
Snap-on Inc.

Susanne Klatten
BSc., MBA
Honorary Senator of the
Technical University of Munich

Mandates**

ALTANA AG (Deputy Chairman)
ALTANA Pharma AG

UnternehmerTUM GmbH
Technical University of Munich

Willibald Löw *
Chairman of the Works Council, Landshut

118 Corporate Governance

116 Corporate Governance

116 Members of the Supervisory Board
119 Members of the Board of Management
120 Corporate Governance in the

BMW Group

121 Compensation Report
124 Directors’ Dealings
124 Shareholdings of members of the Board
of Management and Supervisory Board

125 Declaration of the Board of Manage-

ment and of the Supervisory Board
pursuant to §161 AktG

Prof. Dr. rer. nat. Drs. h. c. mult. Hubert Markl
Former President of Max-Planck-Gesellschaft
zur Förderung der Wissenschaften e.V.
Professor of Biology (retired)

Mandates**

Münchener Rückversicherungs-Gesellschaft AG

Werner Neugebauer*
Regional Executive Officer of IG Metall Bavaria

Franz Oberländer *
Member of the Works Council, Munich

Georg von Holtzbrinck GmbH
Sanofi-Aventis S. A.

Anton Ruf *
Director Product Line L7

Wolfgang Mayrhuber
Chairman of the Board of Management of
Deutsche Lufthansa AG

Mandates**

Eurowings Luftverkehrs AG
Fraport AG
LSG Lufthansa Service Holding AG
Lufthansa Cargo AG
Lufthansa Technik AG
Münchener Rückversicherungs-Gesellschaft AG
Thomas Cook AG (Deputy Chairman)

HEICO Corp.
SWISS International Air Lines AG

Heinz-Joachim Neubürger
(from 16. 05. 2006)
Export Merchant, MBA

Mandates**

Allianz Versicherungs-AG

KKR Guernsey GP Limited
Gruppo Banca Leonardo S.p. A.

Stefan Schmid *
(from 03. 01. 2007)
Chairman of the Works Council, Dingolfing

Prof. Dr. Jürgen Strube
Chairman of the Supervisory Board of BASF AG

Mandates**

Allianz Deutschland AG
BASF AG (Chairman)
Bertelsmann AG (Deputy Chairman)
Commerzbank AG
Fuchs Petrolub AG (Chairman)
Hapag-Lloyd AG
Linde AG

Werner Zierer *
Chairman of the Works Council, Regensburg

* Employee representative
** Mandates at 31 December 2006 or on final day of office
Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards

Members of the Board of Management

119

Dr.-Ing. Norbert Reithofer
Chairman (from 01. 09. 2006)

Dr. Helmut Panke
(until 31. 08. 2006)
Chairman

Mandates**

Microsoft Corp.
UBS AG

Frank-Peter Arndt
(from 01. 09. 2006)
Production

Mandates**

BMW Motoren GmbH (Chairman)
BMW (South Africa) (Pty) Ltd. (Chairman)

Leipziger Messe GmbH

Ernst Baumann
Human Resources, Industrial Relations Director

Mandates**
Krones AG

Dr.-Ing. Klaus Draeger
(from 01.11. 2006)
Development and Purchasing

Dr. Michael Ganal
Sales and Marketing

Mandates**

BMW Brilliance Automotive Ltd. (Deputy Chairman)

Prof. Dr.-Ing. Dr.-Ing. E. h. Senator E. h.
Burkhard Göschel
(until 31.10. 2006)
Development and Purchasing

Stefan Krause
Finance

Mandates**

Allianz Deutschland AG

General Counsel:
Dr. Dieter Löchelt

** Mandates at 31 December 2006 or on final day of office

Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards

120 Corporate Governance

Corporate Governance

Corporate Governance in the BMW Group
For the BMW Group, corporate governance is an
all-embracing issue which affects all areas of the
enterprise. Transparent reporting and a policy of
corporate governance aimed at the interests of
stakeholders are well-established traditions within
the BMW Group. Cooperation between the Board
of Management and the Supervisory Board, in an
atmosphere of commonly shared trust and respon-
sibility, have long been the basis for managing the
affairs of the BMW Group. The underlying corporate
culture at BMW is founded upon the principles of
transparency, placing trust in others and taking re-
sponsibility for one’s own actions.

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 officially published and relevant recommenda-
tions issued by the “Government Commission of the
German Corporate Governance Code”, as valid at
the date of the declaration, have been, and are be-
ing, complied with. Companies affected are also
required to state which of the recommendations of
the Code have not been or are not being applied.
The Board of Management and Supervisory

Board of Bayerische Motoren Werke Aktiengesell-
schaft believe that the recommendations and sug-
gestions contained the German Corporate Gover-
nance Code (GCGC) help to enhance the financial
markets in Germany, in particular for international
investors. At the joint meeting held on 5 December
2006, the Board of Management and Supervisory
Board of BMW AG issued the Declaration of Compli-
ance with the new version of the German Corporate
Governance Code valid from 24 July 2006. With
the effect from that meeting, BMW AG complies
with the recommendations of the GCGC with one
exception only, namely that the discussion and regu-
lar review of the structure of the compensation sys-
tem of the Board of Management is performed by
the Personnel Committee. The Chairman of that
committee informs the members of the Supervisory
Board at its next meeting. All other recommendations
are complied with. Moreover, the Board of Manage-
ment and Supervisory Board have, in the past, de-
veloped the BMW Group’s own corporate governance
code which is based on the GCGC and takes account
of the specific circumstances of the BMW Group.
The aim is to provide shareholders and other stake-
holders with a comprehensive, stand-alone docu-
ment covering the corporate governance practices

applied by the BMW Group. The BMW Group’s Cor-
porate Governance Code has been revised in con-
junction with the new version of the GCGC. A copy of
it can be obtained, along with other shareholder in-
formation, such as notifications pursuant to §15a of
the GermanTrade Securities Act (Directors’ Dealings)
from the BMW Group website. Interested parties
can also find other general information about the
Group, up-to-date analysts’ reports and all financial
publications of the Group at www.bmwgroup.com/ir.
A coordinator responsible for all corporate
governance issues regular reports to the Board of
Management and Supervisory Board.

Good corporate governance requires efficient

mechanisms, capable of preventing breaches of law,
and a system of regular review.

Additional measures were taken in 2006 within
the purchasing function to reduce the risk of irregular-
ities. Furthermore, in addition to the guidelines and
training measures already in place, an open letter was
sent to all employees working within the purchasing
function and to 600 suppliers specifically addressing
the issue of “Accepting gifts or other benefits and
participating in non-business events”. Systematic job
rotation is required within the purchasing function,
supported by measures taken by the Human Re-
sources department. It was again made absolutely
clear that all employees must act with integrity and
that any breaches of rules will be dealt with rigorously.
In the interest of investor protection and in
order to ensure that the BMW Group complies with
regulations relating to potential insider information,
the Board of Management has appointed an Ad-hoc
Committee made up of representatives from various
specialist departments; its members examine the
relevance of issues for ad-hoc disclosure purposes.
The procedures and decision-taking process applied
by this committee, which has been in place since
1994, have been brought into line with the revised
requirements of the Investors’ Protection Improve-
ment Act. All persons working on behalf of the enter-
prise with access to insider information are entered
into a special register and advised of their legal obli-
gations with regard to insider rules.

Fair treatment and mutual respect of others,

equal opportunities and a clear stance against dis-
crimination are core principles, which have been
anchored for many years in the BMW Group’s “Long-
Term Personnel Policies”. In 2005, these principles
were underlined in a “Joint Declaration of Human
Rights and Working Conditions in the BMW Group”
signed by the group’s management, the EURO Works
Council and the International Metalworkers Federation.
All employees in Germany are kept informed via the

116 Corporate Governance

116 Members of the Supervisory Board
119 Members of the Board of Management
120 Corporate Governance in the

BMW Group

121 Compensation Report
124 Directors’ Dealings
124 Shareholdings of members of the Board
of Management and Supervisory Board

125 Declaration of the Board of Manage-

ment and of the Supervisory Board
pursuant to §161 AktG

121

group’s intranet of the objectives, rights and duties
ensuing from the General Equal Treatment Act (GETA).
Staff and senior management, particularly those
working in the Human Resources department are
regularly given training regarding the content of the
GETA. Acknowledgement of the aims incorporated in
this law, together with the corresponding guide-
lines for management and employees are docu-
mented in the agreement “Fairness in the Workplace”.

Compensation Report
The BMW Group supports the endeavours of the
German Corporate Governance Code to increase
transparency in the disclosure of the components
of compensation. The following section therefore
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. As well as discussing
the structure of remuneration, the components of
compensation are also disclosed in absolute figures.
In accordance with the recommendations of the
GCGC, the compensation of each member of the
Board of Management and the Supervisory Board is
individually disclosed and analysed into components.

1. Compensation of the Board of Management
Responsibilities
The determination and monitoring of the compen-
sation of the Board of Management are the respon-
sibility of the Personnel Committee of the Super-
visory Board. The Personnel Committee comprises
the Chairman of the Supervisory Board and his four
deputies.

Overall objectives
The compensation model used for the Board of
Management should be attractive in the context of
the competitive environment for highly qualified
executives. As an incentive to encourage perform-
ance, the variable component should be closely
linked to the financial success of the BMW Group.
The structure of the compensation of the Board of
Management should also contain parallels to the
compensation system applied to employees and
senior management.

Components of compensation
The compensation of the Board of Management
comprises a fixed and a variable component. In addi-
tion, benefits are payable at the end of members’
mandates, primarily in the form of pension benefits.
For the purposes of determining the overall compen-
sation of the Board of Management, the Personnel

Committee, having considered the overall position
and forecasts of the BMW Group, decides on a
salary framework, which will include a high variable
proportion.

The Personnel Committee reviews the compen-

sation system at regular intervals, with regard to
the structure and amount of the remuneration of the
Board of Management.

Fixed remuneration comprises a base remuner-

ation amount, which is paid as monthly salary, and
other remuneration elements. Other remuneration
elements comprise mainly the use of company cars
and the payment of insurance premiums.

The factors determining the amount of variable

compensation enable members of the Board of
Management to earn a competitive level of income
with a very high bonus element (2006: 84.1%, 2005:
83.6 %) for financial years in which the BMW Group
performs well. The measures used to determine
the variable component of compensation are the
BMW Group’s net profit for the relevant year and the
level of the dividend. An upper limit is set for the
compensation of each member of the Board of
Management.

The compensation system does not include any

stock options, value appreciation rights comparable
to stock options or any other stock-based compen-
sation components. No compensation agreements
have been concluded with members of the Board
of Management for situations involving a take-over
offer. The members of the Board of Management do
not receive any loans from the BMW Group. Similarly,
they did not receive any payments or benefits from
third parties in 2006 on account of their activities as
members of the Board of Management.

Pension agreements are in place in the event of

the termination of a mandate.

Pensions are paid to former members of the
Board of Management who have either reached the
age of 65, or, if their mandate had terminated earlier
and had not been extended, to members who have
reached the age of 60, or are unable to work due
to ill-health or accident, or who have entered into early
retirement in accordance with a special arrangement.
The pension comprises a basic monthly amount of
euro 10,000 or euro 15,000 (Chairman of the Board
of Management) plus a fixed amount. The fixed
amount is made up of approximately euro 75 for
each year of service in the company before becom-
ing a member of the Board of Management, plus
between euro154 and euro 400, or between euro153
and euro 600 (Chairman of the Board of Manage-
ment), for each full year of service on the board (up
to a maximum of 15 years). Pension payments are

122 Corporate Governance

adjusted by analogy to the rules applicable for the
adjustment of civil servants’ pensions: the pensions
of members of the Board of Management are ad-
justed accordingly when civil servants’ remuneration
level B6 (excluding allowances) is increased by more
than 5 %.

If a mandate is ended before the member of
the Board of Management reaches the age of 60, a
transitional payment amounting to 2/3rds of the
pension theoretically earned up to the date when a
full pension can be drawn, may become payable if,
after a minimum of three years of service as a mem-
ber of the Board of Management, this is considered
appropriate on the basis of an objective evaluation
of all circumstances. Arrangements are in place con-
cerning the offsetting of other income against pen-
sions and transitional payments.

The amounts disclosed below as the annual pen-
sion provision allocation for each member correspond
to the pension service cost.

Former members of the Board of Management

are entitled to lease or purchase cars and motor-
cycles on the basis of the terms and conditions ap-
plicable to senior management.

Compensation of the Board of Management
for the financial year 2006 (total)
On the basis of the proposed dividend, the total re-
muneration of the current members of the Board of

Management of BMW AG for the financial year 2006
amounted to euro 14.5 million (2005: euro 12.2 mil-
lion). This comprises fixed components (including
other remuneration) of euro 2.3 million (2005:
euro 2.0 million) and variable components of euro
12.2 million (2005: euro 10.2 million).

in euro million

2006

2005

Amount Proportion Amount Proportion

Fixed renumeration

2.3

Variable renumeration 12.2

Total renumeration

14.5

15.9 %

84.1 %

100 %

2.0

10.2

12.2

16.4 %

83.6 %

100 %

In addition, an amount of euro 0.6 million (2005:
euro 0.5 million) was incurred for current members of
the Board of Management after termination of their
employment relationship.This relates to the expense
for allocations to pension provisions.

The amount paid to former members of the
Board of Management and their surviving dependants
was euro 3.8 million (2005: euro 2.6 million). Pen-
sion obligations to former members of the Board of
Management and their surviving dependants are
fully covered by pension provisions amounting to
euro 38.8 million (2005: euro 37.0 million), computed
in accordance with IAS 19.

116 Corporate Governance

116 Members of the Supervisory Board
119 Members of the Board of Management
120 Corporate Governance in the

BMW Group

121 Compensation Report
124 Directors’ Dealings
124 Shareholdings of members of the Board
of Management and Supervisory Board

125 Declaration of the Board of Manage-

ment and of the Supervisory Board
pursuant to §161 AktG

Compensation of the individual members of the Board of Management for the financial year 2006

in euro

Fixed remuneration

Salary

Other
remuneration

Fixed remune-
ration Total

Variable
remuneration

Remuneration
Total

Allocation for
year to pension
provision

Norbert Reithofer1]

Helmut Panke2]

Frank-Peter Arndt3]

Ernst Baumann

Klaus Draeger4]

Michael Ganal

Burkhard Göschel5]

Stefan Krause

Total6]

440,000

246,667

100,000

360,000

50,000

360,000

300,000

360,000

13,703

13,230

6,788

18,451

5,178

14,644

26,493

16,789

453,703

259,897

106,788

378,451

55,178

374,644

326,493

376,789

2,258,600

2,153,333

523,200

1,818,300

261,600

1,818,300

1,515,250

1,818,300

2,712,303

2,413,230

629,988

2,196,751

316,778

2,192,944

1,841,743

2,195,089

2,216,667

115,276

2,331,943

12,166,883

14,498,826

108,767

117,566

29,219

97,540

14,759

125,855

69,653

75,710

639,069

1] Chairman of the Board of Management from 1 September 2006.
2] Chairman of the Board of Management until 31 August 2006.
3] Member of the Board of Management from 1 September 2006.
4] Member of the Board of Management from 1 November 2006.
5] Member of the Board of Management until 31 October 2006.
6] Group perspective.

123

2. Compensation of the Supervisory Board
Responsibilities, regulation pursuant to
Articles of Incorporation
The compensation of the Supervisory Board is de-
termined by shareholders’ resolution at the Annual
General Meeting. Compensation is currently based
on shareholders’ resolutions taken at the Annual
General Meeting on 18 May 1999 and §15 of the
Articles of Incorporation of BMW AG. The Articles
of Incorporation of BMW AG can be accessed via
the Internet.

Components of compensation
In addition to the reimbursement of expenses, each
member of the Supervisory Board receives a fixed
amount of euro 6,000 (payable after the end of the
financial year), and a variable amount of euro 1,500
for each percent of the dividend resolved by the
shareholders at the Annual General Meeting in ex-
cess of 4% of the company’s share capital (common
stock). The Chairman of the Supervisory Board re-
ceives three times this amount and each deputy
receives two times this amount. The company also
reimburses to the member of the Supervisory Board
any value added tax arising on their remuneration.

Compensation of the Supervisory Board for the
financial year 2006 (total)
On the basis of the proposed dividend, the compen-
sation of the Supervisory Board for activities during
the financial year 2006 amounted to euro 2.7 million
(2005: euro 2.5 million). This comprised a fixed
component of euro 0.1 million (2005: euro 0.1 mil-
lion) and a variable component of euro 2.6 million
(2005: euro 2.4 million).

in euro million

2006

Amount Proportion

2005
Amount Proportion

Fixed compensation

0.1

3.7 %

Variable compensation 2.6

96.3 %

Total compensation

2.7

100 %

0.1

2.4

2.5

4.0 %

96.0 %

100 %

None of the members of the Supervisory Board

performed advisory, agency or other services for
the BMW Group in a personal capacity in 2006. In
consequence, no additional compensation was paid.
It is BMW Group’s policy and practice, not to enter
into contractual relationships with members of the

Compensation of the individual members of the Supervisory Board for the financial year 2006

in euro

Fixed
compensation1]l

Variable
compensation2]

Joachim Milberg (Chairman)

Manfred Schoch (Deputy Chairman)

Stefan Quandt (Deputy Chairman)

Konrad Gottinger (Deputy Chairman)

Hans-Dietrich Winkhaus (Deputy Chairman)

Volker Doppelfeld3]

Ulrich Eckelmann

Bertin Eichler

Werner Eisgruber

Franz Haniel

Arthur L. Kelly

Susanne Klatten

Willibald Löw

Hubert Markl

Wolfgang Mayrhuber

Heinz-Joachim Neubürger4]

Werner Neugebauer

Franz Oberländer

Anton Ruf

Jürgen Strube

Werner Zierer

Total

18,000

12,000

2,238

6.000

6,000

3,780

6,000

297,000

198,000

36,888

99,000

62,384

99,000

Total

315,000

210,000

39,126

105,000

66,164

105,000

1] In accordance with §15 of the Articles of Incorporation, the fixed compensation is paid after the end of the financial year.
2] Calculation based on dividend proposal of the Board of Management and Supervisory Board. The variable compensation for the financial year 2006 will be paid following the

resolution of the shareholders at the Annual General Meeting 2007 regarding the utilisation of unappropriated profit.

3] Member of the Supervisory Board until 16 May 2006.
4] Member of Supervisory Board from 16 May 2006.

156,018

2,574,272

2,730,290

124 Corporate Governance

Supervisory Board requiring them to provide per-
sonal services, in particular advisory and agency
services, in return for compensation (cf. Section 4.4
of the BMW Group Corporate Governance Code).
The members of the Supervisory Board do not re-
ceive any loans from the BMW Group.

Directors’ Dealings
Members of the Board of Management and the
Supervisory Board and persons closely related to

them, are required, pursuant to §15a of the German
Securities Trading Act (WpHG), to give notice of
any of their transactions with BMW stock or related
financial instruments, if the total sum of such trans-
actions exceeds an amount of euro 5,000 during the
calendar year. BMW AG was given notice of the fol-
lowing transactions, which were also posted on the
group website at www.bmwgroup.com:

Date of
transaction

Person reporting

Person with Manage-
ment responsibility

Nature of
transaction and ISIN code

Financial instrument

Number

Price
in euro

Volume notified
in euro

2. 8. 2006

Susanne Klatten

2. 8. 2006

Stefan Quandt
GmbH & Co. KG
für Automobilwerte

Susanne Klatten
Member of the
Supervisory Board

Stefan Quandt,
Member of the
Supervisory Board

Sale,
Off-
Exchange DE0005190003

BMW
common stock

Sale,
Off-
Exchange DE0005190003

BMW
common stock

2,343,277 39.80

93,262,424.60

3,261,373 39.80 129,802,645.40

Shareholdings of members of the Board of
Management and the Supervisory Board
The members of the Supervisory Board of BMW AG
hold in total 27.70 % of the issued common and
preferred stock shares, of which 16.12 % relates to
Stefan Quandt, Bad Homburg v. d. H. and 11.58 % to
Susanne Klatten, Bad Homburg v. d. H. The share-
holding of the members of the Board of Manage-
ment is, in total, less than 1% of the issued stock
shares.

116 Corporate Governance

116 Members of the Supervisory Board
119 Members of the Board of Management
120 Corporate Governance in the

BMW Group

121 Compensation Report
124 Directors’ Dealings
124 Shareholdings of members of the Board
of Management and Supervisory Board

125 Declaration of the Board of Manage-

ment and of the Supervisory Board
pursuant to §161 AktG

Declaration of the Board of Management and of the Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft with respect to the
recommendations of the “Government Commission of the German Corporate
Governance Code” pursuant to §161 German Stock Corporation Act

125

The Board of Management and Supervisory Board
of Bayerische Motoren Werke Aktiengesellschaft
declare the following with respect to the recommen-
dations of the “Government Commission of the Ger-
man Corporate Governance Code”:

The recommendations published in the official
section of the electronic Federal Gazette on 12 July
2005 (Code version dated 2 June 2005) have been
complied with, except for the exceptions described
in the declaration dated 6 December 2005 relating
to section 4.2.2 paragraph 1, section 4.2.4 sentence
2, section 5.4.7 paragraph 3 and section 6.6 para-
graph 3.

The recommendations published in the official
section of the electronic Federal Gazette on 24 July
2006 (Code version dated 12 June 2006) are being,
and will be complied with, with the following diver-
gence: the discussion and regular review of the
structure of the compensation system of the Board
of Management is performed by the Personnel
Committee and not, additionally, by the Supervisory
Board (section 4.2.2 paragraph 1 GCGC).

Munich, 5 December 2006

Bayerische Motoren Werke
Aktiengesellschaft

Supervisory Board

Board of Management

Reason for divergence
Section 4.2.2 paragraph 1 GCGC:
The Supervisory Board has transferred discussion
and regular review of the structure of the compensa-
tion system of the Board of Management to the
Personnel Committee. The Supervisory Board is
informed on a regular basis of the work of the Per-
sonnel Committee.

126 Other Information

BMW AG
Principal Subsidiaries

Principal subsidiaries of BMW AG
at 31 December 2006

Equity
in euro million

Net result Capital investment
in %

in euro million

Domestic1]

BMW Bank GmbH, Munich2]

BMW Finanz Verwaltungs GmbH, Munich

BMW INTEC Beteiligungs GmbH, Munich2]

softlab GmbH für Systementwicklung und EDV-Anwendung, Munich

BMW Ingenieur-Zentrum GmbH + Co., Dingolfing

BMW Maschinenfabrik Spandau GmbH, Berlin

BMW Leasing GmbH, Munich2]

BMW Hams Hall Motoren GmbH, Munich3]

BMW Fahrzeugtechnik GmbH, Eisenach2]

BMW M GmbH Gesellschaft für individuelle Automobile, Munich2]

268

176

113

–

– 40

–

100

1] In the case of German subsidiaries, based on financial statements drawn up in accordance with HGB.
2] profit and loss transfer agreement with BMW AG
3] profit and loss transfer agreement with a subsidiary of BMW AG
4] below euro 0.5 million
5] In the case of foreign subsidiaries, based on financial statements drawn up in accordance with uniform IFRSs accounting policies.

Equity and net result are translated at the closing rate.

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

127

Principal subsidiaries of BMW AG
at 31 December 2006

Equity
in euro million

Net result Capital investment
in %

in euro million

Foreign5]

BMW Österreich Holding GmbH, Steyr

BMW Motoren GmbH, Steyr

BMW Russland Trading OOO, Moscow

BMW China Automotive Trading Ltd., Beijing

BMW Austria Gesellschaft m. b. H., Salzburg

BMW Holding B.V., The Hague

BMW Australia Finance Ltd., Melbourne, Victoria

BMW Finance N.V., The Hague

BMW Overseas Enterprises N.V., Willemstad

BMW (South Africa) (Pty) Ltd., Pretoria

BMW (Schweiz) AG, Dielsdorf

BMW Japan Corp., Tokyo

BMW Japan Finance Corp., Tokyo

BMW Italia S. p. A., Milan

BMW Canada Inc., Whitby

BMW France S. A., Montigny le Bretonneux

BMW Belgium Luxembourg S. A. /N.V., Bornem

BMW Australia Ltd., Melbourne, Victoria

BMW Portugal Lda., Lisbon

BMW Korea Co., Ltd., Seoul

BMW Hellas Trade of Cars SA, Athens

BMW Sverige AB, Stockholm

BMW Nederland B.V., The Hague

BMW Automotive (Ireland) Ltd., Dublin

BMW New Zealand Ltd., Auckland

BMW (UK) Holdings Ltd., Bracknell

BMW (UK) Manufacturing Ltd., Bracknell

BMW (UK) Ltd., Bracknell

BMW Financial Services (GB) Ltd., Hook

BMW (UK) Capital plc, Bracknell

BMW Malta Ltd., Valletta

BMW Malta Finance Ltd., Valletta

BMW Coordination Center V. o. F., Bornem

BMW España Finance S. L., Madrid

BMW Ibérica S. A., Madrid

BMW de Mexico, S. A. de C.V., Mexico City

BMW (US) Holding Corporation, Wilmington, Del.

BMW Financial Services NA, LLC, Wilmington, Del.

BMW Manufacturing, LLC, Wilmington, Del.

BMW of North America, LLC, Wilmington, Del.

BMW US Capital, LLC, Wilmington, Del.

1,260

897

110

5,789

453

406

391

322

274

244

255

197

169

149

1,594

899

729

344

174

776

658

590

295

227

1,259

564

497

424

282

209

703

– 19

131

101

– 1

227

272

– 1

429

127

– 1

100

128 Other Information

BMW Group 10-year Comparison

Deliveries to customers

Automobiles3]

Motorcycles 4]

Production

Automobiles3]

Motorcycles 5]

Financial Services

Contract portfolio

2006

2005

IASs/IFRSs

units

1,373,970

100,064

1,327,992

97,474

1,366,838

103,759

1,323,119

92,012

contracts

2,270,528

2,087,368

Business volume (based on balance sheet carrying amounts)

euro million

44,010

40,428

Income Statement

Revenues

Gross profit percentage Group

Gross profit percentage industrial operations

Gross profit percentage financial operations

Profit before financial result

Profit before tax

Return on sales (EBT/revenues)

Income taxes

Effective tax rate

Net profit / – loss for the year

Balance sheet

Non-current assets

Current assets

Equity

Equity ratio Group

Industrial operations

Financial operations

Non-current provisions and liabilities

Current provisions and liabilities

Balance sheet total

Cash flow statement

Cash and cash equivalents at balance sheet date

Operative cash flow 8]

Capital expenditure

Capital expenditure (capital expenditure/revenues)

Personnel

Workforce at the end of year7]

Personnel cost per employee

Dividend

Dividend total

Dividend per share of common stock/preferred stock

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

euro million

48,999

46,656

euro million

23.1

20.3

11.4

4,050

4,124

8.4

1,250

30.3

2,874

50,514

28,543

19,130

24.2

40.6

10.4

31,372

28,555

79,057

1,336

5,373

4,313

8.8

22.9

20.9

12.0

3,793

3,287

7.0

1,048

31.9

2,239

47,556

27,010

16,973

22.8

39.1

10.4

29,509

28,084

74,566

1,621

6,184

3,993

8.6

euro

106,575

76,621

105,798

75,238

euro million

458

4199]

euro

0.70/0.72

0.64/0.66

1] adjusted for new accounting treatment of pension obligations
excluding C1 production by Bertone, production volume C1 up to 2002: 33,489 units
of treasury shares

2] reclassified after harmonisation of internal and external reporting systems

3] including Rover Cars up to 9 May 2000

6] the net profit before exceptional items amounted to euro 663 million

7] figures since 1998

129

2004

IASs/IFRSs

adjusted1]

2003

IASs/IFRSs

2002

IASs/IFRSs

adjusted2]

2001

2000

IASs/IFRSs

2000

HGB

1999

HGB

1998

HGB

1997

HGB

1,208,732

92,266

1,104,916

92,962

1,057,344

92,599

905,657

84,713

1,011,874

1,180,429

74,614

65,168

1,187,115

60,308

1,196,096

54,014

1,250,345

1,118,940

1,090,258

93,836

89,745

93,010

946,730

90,478

1,026,775

1,147,420

1,204,000

74,397

69,157

60,152

1,194,704

54,933

1,843,399

1,623,425

1,443,236

32,556

28,647

26,505

1,297,702

25,306

1,317,150

24,958

970,747

17,578

1,010,839

16,859

855,250

12,564

719,861

10,862

44,335

41,525

42,411

38,463

37,226

23.2

21.9

12.5

3,774

3,583

8.1

1,341

37.4

2,242

40,822

26,812

16,534

24.4

41.6

9.7

26,517

24,583

67,634

2,128

6,157

4,347

9.8

22.7

22.1

12.3

3,353

3,205

7.7

1,258

39.3

1,947

36,921

24,554

16,150

26.3

45.4

9.8

22,090

23,235

61,475

1,659

4,970

4,245

10.2

22.8

22.7

10.5

3,505

3,297

7.8

1,277

38.7

2,020

34,667

20,844

13,871

25.0

43.1

9.4

20,028

21,612

55,511

2,333

4,553

4,042

9.5

25.3

24.0

16.0

3,356

3,242

8.4

1,376

42.4

1,866

31,282

19,977

10,770

21.0

37.0

8.4

19,223

21,266

51,259

2,437

4,304

3,516

9.1

22.8

23.5

12.0

2,065

2,032

5.5

823

40.5

1,209

30,079

19,261

9,432

19.1

35.9

8.1

17,386

22,522

49,340

2,927

3,966

2,781

7.5

35,356

18.1

–

1,578

1,663

4.7

637

38.3

1,026

20,056

15,819

4,896

13.6

19.1

8.0

13,457

17,522

35,875

2,879

–

2,138

6.0

34,402

16.4

–

931

1,111

3.2

448

40.3

– 2,4876]

19,857

17,650

3,932

10.5

11.9

8.7

14,785

18,790

37,507

2,055

–

2,155

6.3

32,280

16.0

–

1,232

1,061

3.3

537

50.6

462

18,586

12,053

6,445

21.0

28.7

10.0

9,331

14,863

30,639

1,935

–

2,179

6.8

30,748

17.1

–

1,451

1,293

4.2

590

45.6

638

16,735

10,506

5,240

19.2

25.3

10.0

10,288

11,713

27,241

1,257

–

2,311

7.5

105,972

73,241

104,342

73,499

101,395

69,560

97,275

66,711

93,624

63,548

93,624

62,307

114,952

55,710

118,489

51,703

117,624

50,493

419

392

351

350

310

269

234

203

0.62/0.64

0.58/0.60

0.52/0.54

0.46/0.48

0.40/0.42

10.23 /10.74

and Land Rover up to 30 June 2000
exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners

5] up to 1999 including BMW F 650 assembly by Aprilia S.p. A., from 2006 including BMW G 650 X assemply by Piaggio S.p. A. /
9] adjustment to dividend due to acquisition
8] figures available since 2000

4] excluding C1, sales volume to 2003: 32,859 units

130 Other Information

BMW Group Locations. The BMW Group is present in the world markets
with 23 production and assembly plants, 39 sales subsidiaries and a
research and development network.

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

131

Headquarters

Research and Development
BMW Group Research and Innovation
Centre (FIZ), Munich
BMW Forschung und Technik, Munich
BMW Group Car IT, Munich
BMW Innovations- und Technologiezentrum
für Leichtbau, Landshut
BMW Entwicklungszentrum für Dieselmotoren,
Steyr, Austria
BMW Group Designworks, Newbury Park, USA
BMW Group Technology Office, Palo Alto, USA
BMW Group Engineering and Emission Test
Center, Oxnard, USA
BMW Group Technology Office, Tokyo, Japan
BMW Group Entwicklungsbüro, Peking, China

Production
Berlin plant
Dingolfing plant
Eisenach plant
Goodwood plant, GB (headquarters of
Rolls-Royce Motor Cars Limited)
Hams Hall plant, GB
Landshut plant
Leipzig plant
Munich plant
Oxford plant, GB
Regensburg plant (including Wackersdorf)
Rosslyn plant, South Africa
BMW Brilliance Automotive Ltd.,
Shenyang, China (joint venture with
Brilliance China Automotive Holdings)
Spartanburg plant, USA
Steyr plant, Austria
Swindon plant, GB
TRITEC Motors Ltda., Curitiba,
Brazil (joint venture with DaimlerChrysler)

Contract production
Magna Steyr Fahrzeugtechnik, Austria

Assembly plants
CKD production Cairo, Egypt
CKD production Chennai, India (Opening March

2007)

CKD production Jakarta, Indonesia
CKD production Kaliningrad, Russia
CKD production Kuala Lumpur, Malaysia
CKD production Rayong, Thailand

Sales subsidiary markets
Argentina
Australia
Austria
Belgium
Brazil
China
Canada
Czech Republic
Denmark
Finland
France
Germany
Great Britain
Greece
Hungary
India
Indonesia
Ireland
Italy
Japan
Malaysia

Malta
Mexico
Netherlands
New Zealand
Norway
Philippines
Poland
Portugal
Russia
Slovakia
Slovenia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
USA

132 Other Information

Glossary

[ACEA]
Abbreviation for “Association des Constructeurs
Européens d’Automobiles” (European Automobile
Manufacturers Association).

[Cash flow, operating]
Cash inflow from industrial operations.

[Common stock]
Stock with voting right (cf. preferred stock).

[Cost of materials]
Comprises all expenditure to purchase raw materials
and supplies.

[DAX]
Abbreviation for “Deutscher Aktien Index”, the Ger-
man Stock Index. The index is based on the weighted
market prices of the 30 largest German stock cor-
porations (by stock market capitalisation).

[Deferred taxes]
Accounting for deferred taxes is a method of
allocating tax expense/benefit to the appropriate
accounting period.

[Derivatives]
Financial products, whose measurement is derived
principally from market price, market price fluctua-
tions and expected market price changes of the
underlying instrument (e. g. indices, stocks or bonds).

[DJSI]
Abbreviation for “Dow Jones Sustainability Index
World”. A family of indexes created by Dow Jones
and the Swiss investment agency SAM Sustain-
ability Group for companies with strategies based

on a sustainability concept. The BMW Group has
been one of the leading companies in the DJSI
since 1999.

[EBIT]
Abbreviation for “Earnings Before Interest and Taxes”.
The profit before income taxes, minority interest and
financial result.

[EBITDA]
Abbreviation for “Earnings Before Interest, Taxes,
Depreciation and Amortisation”. The profit before
income taxes, minority interest, financial result and
depreciation /amortisation.

[Effectiveness]
The degree to which offsetting changes in fair value
or cash flows attributable to a hedged risk are
achieved by the hedging instrument.

[EfficientDynamics]
The aim of “EfficientDynamics” is to reduce con-
sumption and emissions whilst simultaneously
increasing dynamics and performance. This involves
a holistic approach to achieving optimum automo-
bile potential, ranging from efficient engine tech-
nologies, lightweight construction and comprehen-
sive energy and heat management inside the
vehicle.

[EMAS]
Abbreviation for “Eco-Management and Audit
Scheme”. A management tool that allows com-
panies and organisations to evaluate, report on and
improve their environmental performance.

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

133

[Equity ratio]
The proportion of equity (= subscribed capital, re-
serves and accumulated other equity) to the balance
sheet total.

[ERA]
Remuneration Framework Agreement.

[Free cash flow]
Free cash flow corresponds to the cash inflow from
operating activities of Industrial operations less
the cash outflow for investing activities of Industrial
operations.

[IASs]
International Accounting Standards.

[IFRSs]
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.

[Internal financing]
Internal financing is calculated as the profit before
tax, adjusted for depreciation and amortisation and
material non-cash items, less income tax paid.

[Preferred stock]
Stock which receives a higher dividend than com-
mon stock, but without voting rights.

[Principal subsidiaries]
Subsidiaries are those enterprises which, either
directly or indirectly, are under the uniform control of
the management of BMW AG or in which BMW AG,
either directly or indirectly
– holds the majority of the 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 BMW AG
is at the same time (directly or indirectly) a share-
holder

– has control (directly or indirectly) over another

enterprise on the basis of a control agreement or
a provision in the statutes of that enterprise.

[Production network]
The BMW Group production network consists
worldwide of 16 plants, six assembly plants and one
contract production plant. Within this network, the
plants supply one another with systems and com-
ponents and are all characterised by a high level of
productivity, agility and flexibility.

[Production Triangle MINI]
The three British plants (Hams Hall, Oxford and
Swindon) are jointly manufacturing the MINI – with
greater capacity levels, flexibility and efficiency.
The Hams Hall plant produces the new MINI petrol
engines; the Oxford plant remains responsible for
chassis construction, painting and assembly. The
Swindon plant produces the pressed panels and
chassis components.

[Rating]
Standardised evaluation of a company’s credit
standing which is widely accepted on the global
capital markets. Ratings are published by inde-
pendent rating agencies e.g. Standard & Poor’s or
Moody’s based on their analysis of a company.

[Return on Assets BMW Group]
Profit before interest expense (expense from revers-
ing the discounting of pension obligations and of
other non-current provisions, other interest and simi-
lar expenses) and tax as a percentage of the balance
sheet total.

[Return on Assets Financial Services]
Profit before tax as a percentage of operating assets.

[Return on Capital Employed]
Profit before financial result as a percentage of
capital employed. Capital employed is defined as
operating assets less non-interest bearing liabilities.
For this purposes, non-interest bearing liabilities
exclude non-interest bearing provisions and liabili-
ties.

[Return on sales]
The ratio of the profit from ordinary activities to
Group revenues. For segment reporting purposes,
the computation is based on the profit before finan-
cial result.

[Risk management]
An integral component of all business processes.
Following enactment of the Law on Control and
Transparency 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, 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 docu-
ment that system and monitor it regularly with the
aid of the internal audit department.

[Sports Activity Vehicle]
The BMW X5 is the first-ever Sports Activity Vehicle –
a combination of a typical BMW sedan featuring
sporting and comfortable driving features on the
one hand, with far-reaching driving abilities in terrain
on the other. This creates a new market segment.
In 2004, the BMW Group added another SAV, the
BMW X3, to its model range.

[Subscribed capital]
The share capital of a company is computed by
multiplying the nominal value of the shares by the
number of shares.

134 Other Information

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

135

[Supplier relationship management]
Supplier relationship management (SRM) uses
focused procurement strategies to organise net-
worked supplier relationships, optimise processes
for supplier qualification and selection, ensure
the application of uniform standards throughout
the group and create efficient sourcing and pro-
curement processes along the whole added-value
chain.

[Sustainability]
Sustainability or sustainable development. The
United Nations Conference on the Environment
and Development, held in Rio de Janeiro in 1992,
resolved a global action plan for combating poverty,
ensuring a suitable population policy, promoting
urban development, human rights, trade, agriculture,
environmental protection, research and technology.
Referred to as Agenda 21, this action plan serves
to ensure sustainable development, preserving the
world’s natural resources and limiting the emission
of pollutants to a volume the environment can ab-
sorb or degrade.

[xDrive]
The xDrive all-wheel drive system distributes engine
power fully variably to all four wheels. The system
recognises at a very early stage when power has to
be shifted and reacts in fractions of a second. This
increases driving dynamics, ensures maximum trac-
tion and can maintain the vehicle’s directional stability
in critical situations.

136 Other Information

Index

[A]
Accounting principles 54, 72, 74
Analysis of changes in Group tangible, intangible and
investment 86
Annual comparison 128
Annual General Meeting 06, 09 –10, 38, 41– 42, 93ff.,
109, 123
Application of § 264 (3) and § 264b of the German
Commercial Code (HGB) 110
Apprentices 25, 27, 85

[B]
Balance sheet 23, 42, 44, 46, 48ff., 55, 57, 59 – 60,
72, 74, 77–78, 86, 88ff., 95–96, 100, 105, 107–108,
115,128,133–134
Balance sheet structure 49
Board of Management 04ff., 38, 41– 42, 50, 58, 93,
108 ff.,114,118ff.,133–134

[C]
Capital expenditure 02– 03, 05,11,19, 45, 47– 48, 54,
63,111–112,114,128
Cash and cash equivalents 46ff., 55, 66, 68, 91, 93,
107,128
Cash flow statement 03,11, 46 – 47,107–108,115,128
Changes in the group reporting entity 73
Commercial Code 54, 72
Compensation of members of the Board of Manage-
ment and the Supervisory Board 109
Compensation report 121ff.
Consolidated companies 73–74,108
Consolidation principles 73,115
Contingent liabilities and other financial commit-
ments 104
Corporate Governance 06 – 07, 50,109,120 –121,
124–125
Cost of materials 51– 52,132
Cost of sales 44– 45, 54, 56
Cost of sales 65, 72, 75, 79, 88
Current assets 47, 49, 55 – 56, 66, 68, 76 –77, 82, 89,
92,128

[D]
DAX 07, 38 – 39,132
Debt 43, 60, 91, 98
Deferred income 50, 55,102–103
Deferred taxes 51, 68, 77, 82– 83, 94,107,132
Dividend 08ff., 40ff., 47, 50, 68, 75, 81, 84, 93 – 94,
109,121ff.,128,133
Dow Jones Sustainability Index World 39,132

[E]
Earnings per share 40, 44, 65, 75, 84
Employees 03, 08 – 09, 20, 25ff., 33, 38 – 39, 42,
51– 52, 54, 61
Employees 85, 93ff.,120 –121,128
Environment 12,14,19, 27, 29, 38, 58, 60ff., 74,115,
117,121,135
Equity 40, 42ff., 48ff., 53ff., 65ff., 70 –71, 73ff., 81, 83,
86, 89, 93 – 94, 98,107–108,112,115,126ff.,133

Exchange rates 12, 38, 44, 48, 74, 78,105
Explanatory notes to the cash flow statements 107

[F]
Financial assets 48, 50, 53– 54, 66, 76 –77, 90 – 91,
107
Financial instruments 42, 45, 50, 59, 70 –71, 77–78,
81, 94,105ff., 124
Financial liabilities 100
Financial result 44 – 45, 65, 78, 81, 96,111–112,128,
132,134
Financial Services 02, 06,10 –11,14, 23ff., 39,
43 – 44, 46 – 47, 53, 59 ff., 72, 74 –75, 79, 82, 89,
111–112,127–128,134
Financial statements 03, 07– 08,11, 43, 54, 57, 72ff.,
78 –79, 85 – 86, 94,104,108,110 –111,115,126,128,
133
Fleet consumption 30 – 31
Foreign currency translation 74

[G]
Group management report 10ff.

[I]
Income Statement 45, 56 – 57, 65, 72, 74, 77ff., 84,
89, 96, 99,107,115,128
Income tax assets 91
Income taxes 45, 56, 65, 77, 81, 83,108,128,132
Intangible assets 11, 45, 47– 48, 53ff., 66, 68, 75 –76,
80, 82, 86, 88,111,132
Internal financing 51, 68,111–112,133
Inventories 47– 48, 54 – 55, 66, 68, 75, 77, 92
Investments accounted for using the equity method
and other investments 76, 86, 89,112

[K]
Key data per share 40

[L]
Leased products 47– 48, 66, 68,76, 82, 86, 89,111–112
Locations 26, 28 –29, 33,130

[M]
Mandates of members of Board of Management 119
Mandates of members of Supervisory Board 116
Market price changes 132
Marketable securities 48ff., 55, 68, 72, 76, 81, 86,
90 – 91,107
Minority interest 50, 52, 67, 84, 94,132
Motorcycles 03, 06,10,14, 21– 22, 26, 43ff., 53 – 54,
62,111–112,122

[N]
New accounting treatment 02– 03,11, 40, 43,128
New financial reporting rules 78 –79
Non-current assets 66, 68, 76, 89, 92,128

[O]
Other disclosures relating to the income statement 84
Other liabilities 50, 55, 67, 83,102–103

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

Index for graphs

137

Other operating income and expenses 45, 56, 65, 80
Other provisions 50, 55, 67, 78, 98 – 99
Outlook 14, 60, 62

[P]
Pension provisions 50, 54 – 55, 67, 78, 94, 95,
109 –110,122,132
Personnel costs 80, 84
Prepayments 55, 92
Principal subsidiaries 126 –127,133
Product and market initiative 63
Production 03ff., 11,13,17ff., 26ff., 32, 35, 42, 48,
58 – 59, 62– 63, 75ff., 80, 88, 103,119,128,130ff.
Production network 05,18 –19, 59,133
Profit before tax 02– 03,10, 43ff., 62, 65,111–112,
128,133 –134
Property, plant and equipment 11, 45, 47– 48, 53ff.,
66, 68, 75 –76, 80, 82, 86, 88,105,111,132
Provisions 28, 42, 45– 46, 49 – 50, 54 – 55, 59ff.,
67– 68, 72, 74 –75, 78ff., 94, 95, 98 – 99,104,109ff.,
122,128,132,134
Purchases 58, 62

[R]
Rating 24, 60,134
Receivables 46ff., 55, 66, 68, 72, 74, 77, 79 – 80, 90,
92– 93,105,111
Reconciliations 10, 46, 63,111–112,114
Related party relationships 108
Research and development 33, 44 – 45, 56, 65, 80,
88,130,131
Return on sales 44 – 45, 53,111–112,128,134
Revenues 02– 03,10 –11, 44ff., 48, 51– 52, 54 – 56,
58, 60, 65, 72ff., 78 –79, 94,112,128,134
Risk management 04, 07, 58,105,134

[S]
Sales and administrative costs 44 – 45, 65, 80
Sales volume 03, 05 – 06,10,14ff., 21– 22, 36,
45 – 46, 60, 62– 63,128
Segment information 79,111ff.
Shareholdings of members of the Board of Manage-
ment and Supervisory Board 109,124
Stock 02, 08ff., 24, 38ff., 44, 54, 65, 75, 84, 93,109,
120ff.,128,132ff.
Subsidiaries 48, 54 – 55, 71, 73 –74, 81, 83, 85, 89,
92, 94,102,104,108,126 –127,130,133
Supervisory Board 04ff., 41– 42, 58,108ff.,116,118,
120ff.
Supervisory Board Report 04ff.
Suppliers 35 – 36, 59,120

[T]
Trade accounts receivable 93
Trade payables 50, 55, 67,103

[W]
Workforce 03, 20, 25ff., 54, 61, 63,112,128

[Finances]
BMW Group Capital expenditure 02
BMW Group Profit before tax 02
BMW Group Revenues 02
BMW Group Revenues by region 11
BMW Group capital expenditure and operating cash
flow 11
Exchange rates compared to the Euro 12
Oil price 13
Precious metals price trend 13
Steel price trend 13
Contract portfolio of BMW Group Financial Services 23
Contract portfolio retail customer financing of BMW
Group Financial Services 2006 23
Regional mix of BMW Group purchase
volumes 2006 35
Change in cash and cash equivalents 47
Balance sheet structure Group 49
Balance sheet structure industrial operations 49
BMW Group value added 2006 52

[Production and sales volume]
BMW Group Deliveries of automobiles 02
BMW Group Deliveries of automobiles by region
and market 15
BMW Group – key automobile markets 2006 15
BMW brand cars in 2006 – analysis by series 16
Deliveries of BMW diesel automobiles 17
MINI brand cars in 2006 – analysis by engine and
model variant 17
Automobile production of the BMW Group by
plant in 2006 18
BMW Group – key motorcycle markets 2006 21
BMW motorcycles delivered 21
BMW motorcycles in 2006 – analysis by series 22

[Workforce]
BMW Group apprentices at 31 December 25
Employee fluctuation ratio BMW AG 26

[Environment]
Process effluent per manufactured car 29
Volatile organic compounds (VOC)
per unit produced 29
CO2 emissions per unit produced 30
Energy consumed per unit produced 30
Efficiency improvement of the BMW 118i revised
model 31
Efficiency improvement of the BMW 320i 31
Efficiency improvement of the BMW 525i 31
Fuel consumption of BMW Group cars according
to VDA commitment 31

[Stock]
Development of BMW stock compared to stock
exchange indices 38
Development in value of a BMWstock investment 39

This version of the Annual Report is a translation
from the German version. Only the original German
version is binding.

138

Contacts

Business Press
Telephone +49 89 382-2 33 62
+49 89 382-2 41 18
+49 89 382-2 44 18
presse@bmwgroup.com

Fax
E-mail

Investor Relations
Telephone +49 89 382-2 42 72
+49 89 382-2 53 87
+49 89 382-2 44 18
ir@bmwgroup.com

Fax
E-mail

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.

126 Other Information

126 BMW AG Principal Subsidiaries
128 BMW Group 10-year Comparison
130 BMW Group Locations
132 Glossary
136 Index
138 Contacts
139 Financial Calendar

Financial Calendar

139

Interim Report to 31 March 2007
Annual General Meeting
Interim Report to 30 June 2007
Interim Report to 30 September 2007

3 May 2007
15 May 2007
1 August 2007
6 November 2007

The BMW Group

The year 2006

Focus: Assuming responsibility

Assuming
responsibility.

Creating values.

Preface by the Chairman of the Board of Management >> 04
The BMW Group >> 08
The year 2006 >> 14
Focus: Assuming responsibility >> 36

The BMW Group

0303

Growing profitably,
acting responsibly.
Challenge and
aspiration at once.
The BMW Group’s
solution: assuming
responsibility.

Focus: responsibility

Page

Norbert Reithofer
Chairman of the Board of Management

Ladies and Gentlemen,

I am pleased to inform you that we have achieved our objec-
tives for the year 2006 and, in fact, even exceeded some of
them. In the financial year 2006, the BMW Group confirmed
its position as the world’s leading premium manufacturer
in the automobile industry with record sales, revenues and
income. Thus, 2006 was the most successful year ever in
the Company’s history.

The 1,373,970 automobiles and 100,064 motorcycles
sold, as well as around 2.3 million contracts in place in the
Financial Services segment show that we were again able
to continue our growth course in 2006. Never before have
so many customers placed their trust in us. We are proud
of this and at the same time realise that it is our duty to earn
this trust anew each and every day with our automobiles,
motorcycles and financial services.

Our key financial data also improved last year. For the first
time in the Company’s history, our profit before tax exceeded
the four billion euro mark. Admittedly, book profit from the
exchangeable bond option relating to shares in Rolls-Royce
plc, London, gave us tailwind. However, even without this
special effect, our profit clearly tops that of the previous
year – despite the well-known adverse external factors
arising from negative currency effects and high prices for
raw materials.

We achieved all this only because all the employees in the
BMW Group work together as a team to attain our objec-
tives. They do so with a dedication and motivation, which
cannot be taken for granted. Therefore, my colleagues
on the Board of Management and I would like to express
our sincere thanks to all of them. Our dealer network and
business partners also contributed to the success of the
BMW Group in 2006 with great commitment. Their dedi-
cation and willingness to invest help to ensure that the
BMW Group will continue its growth course in the future.

Preface

At this juncture, I would also like in particular to thank my
colleagues Dr. Helmut Panke and Professor Burkhard Göschel,
both of whom retired from the Board of Management in 2006
upon reaching the statutory age limit. The BMW Group has
gained a position of strength as a result of their successful
work in recent years.

Today, many of our models hold leading positions in the
premium segments of the international automobile markets.
Indeed, the BMW 3 and 5 Series are the market leaders
worldwide in their respective segments. We aim to strengthen
this position in the coming years – and, to this end, we will
extend our product range with a variety of new models. Here
are a few examples: in March, we will be launching attractive
new products such as the new BMW 3 Series Convertible,
the revised BMW 1 and 5 Series, and the M5 Touring. The
new BMW X5, which has already been introduced success-
fully in the United States, will also be launched in Europe
and Asia during the first months of 2007. Other new products
will follow in the course of the year. In 2007, we will continue
the model change in the MINI, for example, with the new
MINI One and the MINI Cooper D, thus stabilising the brand’s
extraordinary success. For Rolls-Royce, the year 2007 will
be dominated by the market launch of the convertible,
the Rolls-Royce Phantom Drophead Coupé, which has
already aroused great interest and expectations. As already
announced, a new model positioned below the Phantom
will also be added to the product range in the coming years.

The new and existing models will enable us to develop
new markets and segments in 2007 and the following years.
To do this, we will again step up our international presence
in 2007. The latest example is our commitment in India
where we opened a new sales subsidiary near Delhi at the
beginning of the year. A few days ago our new BMW plant
in Chennai began production of BMW 3 Series automobiles
for the Indian market. The plant will also produce BMW 5
Series models for India from May onwards. Our activities in
China continue to develop in a very promising way. In 2006,

we sold 36,430 automobiles there, more than a 50 percent
increase on the previous year. This significant growth is
further proof that we are following the right path with our
strategy to develop new markets.

But we will also continue to grow in our core markets in
Europe, the United States and Japan. That is how we
intend to demonstrate our position as leading premium
manufacturer. I am firmly convinced that we will succeed
in this because one thing is perfectly clear: the BMW Group
stands for premium and no other manufacturer in the world
can do this better than we can. Steadily rising sales volumes
for BMW, MINI and Rolls-Royce, robust business with BMW
motorcycles as well as years of continuing growth for
BMW Financial Services are all impressive evidence of this.

However, a record year such as 2006 should not mislead us.
Our Company, like the entire automobile industry, faces
formidable challenges. The continuing weakness of the US
dollar against the euro, comparatively high prices for raw
materials and still very intense competition on the world’s
automobile and motorcycle markets will again influence the
course of business in the year ahead. This is the environ-
ment in which we have to maintain the upper hand if we are
to end the coming year as successfully as the year 2006.

At the same time, we as company have to rise to the huge
challenges we all face and make our contribution – first and
foremost the reduction of CO2 emissions and their con-
sequences for climate change. Here all members of society
are called upon to contribute whatever they can. And that
is exactly what the BMW Group will do – as so often in its
own way, which is typical of our Company. As automobile
manufacturer we have a responsibility in many fields. We

Preface

must continue to develop our business success, increase
the Company’s profitability and, at the same time, safeguard
employment. We have to meet our customers’ wishes for
efficient and dynamic vehicles and, at the same time, con-
tinue to keep environmental protection in mind. And we
must push ahead with innovations and develop drive con-
cepts that guarantee individual mobility even in an age with-
out fossil fuels.

Against this background, it is decisive to consider and bal-
ance the interests of shareholders, customers, employees
and other stakeholders in order to master the challenges and,
at the same time, to safeguard the success of the BMW
Group in the future. We at the BMW Group aim to devote
even greater attention to this objective and to our responsi-
bility as company in the next few years. So there is good
reason why the subject of responsibility should play a spe-
cial role in this Annual Report. For it is the answers to the
challenges mentioned earlier that determine a company’s
future viability; a characteristic that is to be found neither in
the Balance Sheet nor in the Income Statement. But it is
this characteristic that determines decisively the value of
a company such as the BMW Group. This is the value which
we aim to increase – in 2007 and in the years that follow.

Yours,

Norbert Reithofer
Chairman of the Board of Management

The BMW Group

The Company is unique in the automobile industry. It is among the
most profitable manufacturers in its sector. It concentrates exclu-
sively on the premium segments of the international automobile and
motorcycle markets. And it does so with a consistency of purpose
that is unequalled. Premium and nothing else – that is the philosophy
behind the BMW Group’s success. An aspiration that determines the
character of the entire Company: not only in the automobile and
motorcycle business, but also in the business with financial services
for corporate and private customers.

Premium – and nothing else.
Growing profitably – worldwide.
Anticipating the future – sustainably.

The BMW Group

Premium – and nothing else. Anyone who purchases a BMW, a MINI or a
Rolls-Royce knows exactly what to expect. All the vehicles of these three
brands stand for top quality and innovative technical solutions – in short: product
substance. At the same time, the vehicles of all three brands, however much
they differ from one another, have something else in common: they convey a
particular lifestyle and exert a defining influence on the spirit of their time. In
other words: they arouse emotions. This combination of product substance and
emotions endows with the automobiles and motorcycles of the BMW Group
with their unique character.

Premium is what the BMW Group does best. Premium is this Company’s
inherent strength. Each of the three brands – BMW, MINI and Rolls-Royce –
has its own unmistakable profile, authenticity and individual history. Thus, each
brand appeals to a particular type of customer. We aim constantly to meet all
the expectations of these clearly defined groups of customers. This means we
will always supply the customer with 100 percent BMW, 100 percent MINI or
100 percent Rolls-Royce. Conversely, the BMW Group does not claim to provide
something for everyone. Rather, the BMW Group does what it can do best –
with consistency of purpose and without compromises.

Growing profitably – worldwide. The BMW Group aims to continue its success
with this strategy in the future. Numerous potentials for further growth exist.
For example, demand for premium automobiles is increasing worldwide, with pre-
mium automobile markets growing more strongly than the so-called volume
segments. The BMW Group intends to participate in this growth. That is why it
is extending its product range and is pressing forward into new segments with
new models. In doing so, the Company is meeting the customers’ wish for
individualised vehicle concepts. With success: in the last six years alone, the
BMW Group’s automobile sales have risen by almost two thirds. This growth is
the result of the most extensive product and market initiative in the Company’s
history. At the same time, the financial services segment also grew steadily and
is now one of the mainstays of the Group’s business development.

However, for the BMW Group growth means not only launching new, desirable

products onto the market, but also developing new markets at the same time –
and at exactly the right time. In doing so, the BMW Group follows the principle
of “production follows market”. First of all, it develops the market with importers
and then it enters the market with its own sales subsidiary. If a market offers
corresponding potential, the Company establishes its own production facilities
there. Numerous examples demonstrate the success of this strategy: the
BMW Group built its own BMW plant in South Africa in 1974, which today plays
an important role in the Company’s worldwide production network. In the United
States, the BMW Group has been represented by its own plant in Spartanburg,
South Carolina, since the mid-1990s. Since then the BMW Group’s sales on the
world’s largest automobile market has more than trebled; the BMW Group is the
leading European premium manufacturer in the United States.

In 2004, a sales and production joint venture was opened in cooperation
with a partner in the emerging Chinese market. Since then sales have more than
doubled there, too. In 2007, the BMW Group is now entering India with its own
sales subsidiary and an assembly plant for BMW 3 and 5 Series automobiles.
Thus, the BMW Group currently has 23 production locations in 13 countries and
is represented by 39 of its own sales subsidiaries all over the world.

The BMW Group

Anticipating the future – sustainably. Just as the BMW Group knows what it
does best in terms of its products, the Company also knows what it stands for:
profitable growth and the long-term increase in the Company’s value. Achieve-
ments merely serve as the point of departure for further improvements. This
conviction, combined with the wish to achieve the very best, moves and drives
not only the more than 106,000 employees of the BMW Group worldwide. It
also shapes corporate culture and determines all processes in the Company.

More than 1.3 million customers placed their trust in the BMW Group last year.

Thus, they have once again made the Company the most successful premium
manufacturer in the automobile industry worldwide. The BMW Group aims to
justify this trust in the future, too. Therefore it will continue to offer its customers
individual mobility with technically superior and emotionally appealing automo-
biles and motorcycles as well as attractive financial services – and will do so as
an independent company that shapes its future on its own.

nationalities work together at the BMW Group’s Munich location. Thus, the BMW
Group is not only a truly international company in its geographical scope, but also
in the composition of its workforce.

billion euros were paid to BMW Group employees in wages
and salaries in 2006. This amount includes pension scheme
and social security costs.

7.448

BMW enthusiasts visited the BMW Group Mobile Tradition museum
in 2006. Only about half the visitors came from German-speaking
countries, the rest were international guests.

196,735

is the number under which the BMW brand and trademark were entered
in the German Imperial Trademark Register on 10 December 1917.

221,388

The BMW Group

people are employed in the BMW Group’s dealer network,
namely at independent dealerships or importers – almost as
many people as within the BMW Group itself.

100,000

seconds was the average time between two sales of a
BMW Group automobile in 2006.

tons is the load the foresail of the BMW
ORACLE Racing Team’s yacht has to
bear in regattas such as the America’s
Cup – even though the sail itself weighs
a mere 38 kilograms.

seconds are all it takes for the BMW Sauber Team’s F1.06 to accelerate
from 0 to 100 km/h. Less than three seconds later the vehicle reaches
a speed of 200 km/h – and it has a stopping distance of only 55 metres
when the brakes are slammed on.

2.6

metres was the distance the golf balls of the 156 players had
to travel in the 18th BMW International Open.

2,885,757

The year 2006 was the most successful in the company

history of the BMW Group. This is evident not only from record
sales, revenues and income, but also from the many events and
highlights that marked the year 2006 for the BMW Group – here
are some of them.

The year 2006

What events
marked the
year 2006 for the
BMW Group?
Too many to all be
listed here. Some
of the highlights.
31 Highlights

The year
2006

January

February

March

April

May

June

July

August

September

October

November

December

The year 2006

09/01/2006

North American International Auto Show Detroit. >> 18

01/02/2006

10/02/2006

17/02/2006

20/02/2006

Construction work begins in India. >> 19
Design Award of the Federal Republic of Germany. >> 19
World premiere at the International Motor Show in Geneva. >> 20
Prince Andrew visits Rolls-Royce in Goodwood. >> 21

07/03/2006

28/03/2006

BMW plant in Spartanburg passes the one million mark. >> 21
New yacht for the BMW ORACLE Racing Team. >> 22

13/04/2006

BMW 3 Series is World Car of the Year. >> 23

10/05/2006

17/05/2006

Engine of the Year – V10 power unit from the BMW M5/M6. >> 23
Victories in the Mille Miglia 2006. >> 24

09/06/2006

16/06/2006

Hotel MINI International opens in time for the Football World Cup. >> 25
100,000 BMW 3 Series automobiles made in Leipzig. >> 25

01/07/2006

25/07/2006

Sales subsidiaries opened in the Czech Republic and in Slovakia. >> 25
Relaunch of an icon. >> 26

09/08/2006

Go ahead for the Scientific Award 2007. >> 26

01/09/2006

12/09/2006

26/09/2006

28/09/2006

29/09/2006

Change in the Board of Management of the BMW Group. >> 27
MINI production triangle launched. >> 27
A new era of mobility begins – the BMW Hydrogen 7. >> 28
BMW Group remains the most popular employer. >> 28
MINI world premiere at the Mondial de l’Automobile 2006. >> 29
Rolls-Royce announces new model range. >> 30

10/10/2006

BMW Motorrad at INTERMOT 2006 in Cologne. >> 30

02/11/2006

08/11/2006

09/11/2006

18/11/2006

19/11/2006

2,000,000 retail customer contracts for BMW Group Financial Services. >> 31
Excellence Award for the BMW Group. >> 31
Golden Steering Wheel for MINI. >> 31
Auto China, the international motor show in Beijing. >> 32
BMW and Andy Priaulx score a double victory in the FIA WTCC. >> 32

01/12/2006

07/12/2006

14/12/2006

15/12/2006

BMW X5 has its world premiere at the Los Angeles Auto Show. >> 33
BMW Group as partner of the world’s most important art fair. >> 34
Super-brain for BMW Sauber F1. >> 35
BMW plant in Berlin breaks the 100,000 barrier. >> 35

09/01/2006
BMW Z4 Roadsters have their
world premiere at the North
American International Auto
Show Detroit.

Detroit. At the beginning of January the BMW Group
staged two world premieres at the North American
International Auto Show (NAIAS). The new BMW Z4
Roadster and the particularly powerful BMW Z4 M
Roadster by BMW M GmbH were introduced to the
public for the first time. The BMW Z4 Coupé Con-
cept Car was also exhibited to show the model’s
additional potential for the near future in terms of
design, technology and performance.

With the BMW Concept X3 EfficientDynamics,

the Company demonstrated how the intelligent
management of energy flows can help to reduce
fuel consumption and emissions.

At the beginning of 2006, the year of the 100th

birthday of the Mini’s inventor, Sir Alec Issigonis,
the MINI brand presented the design study MINI
Concept Detroit at NAIAS. This model interprets
the core idea of the Mini Traveller with the motto
“Go sports!”

>> 01 BMW Z4 Roadster:
special focus on new
engines and a discreetly
updated design.

>> 02 BMW Z4 M Roadster:
a purist high-perform-
ance vehicle that extends
the range upwards.

>> 03 Design study MINI
Concept Detroit: dynamic
engine performance and
sporting ambience inside
the car combined with
flexible, intelligent use of
space.

>> 04 The BMW Group is
continuing its inter-
national market initiative
in India. From 2007 the
BMW Group will begin by
setting up six new BMW
dealerships in Delhi,
Mumbai, Chandigarh and
Bangalore.

>> 01

>> 02

>> 03

The year 2006

01/02/2006
Construction
work begins in
India.

10/02/2006
Design Award of the Federal
Republic of Germany for the
BMW Group.

Frankfurt/Munich. In 2006, the BMW Group was
the only manufacturer to receive the “Design
Award of the Federal Republic of Germany” twice
over. Each year, this prestigious official design prize
is awarded by the German Design Council on
behalf of the Federal Ministry of Economics and
Technology. The BMW Group gained the Design
Award for the BMW 6 Series Coupé and Convertible
and for its trade fair presentation of the MINI brand.

Companies and individuals cannot compete

for the award on their own. Rather, they have to be
nominated by the ministries and senators of eco-
nomic affairs of Germany’s federal states or by the
Federal Ministry of Economics. To be considered,
however, the product must have already won a Ger-
man or international prize. Awards are made for a
maximum of 25 products.

Chennai. A milestone for
the BMW Group’s activ-
ities in India: construc-
tion work began on the
new plant in India. In the
new assembly plant in
Chennai, in the south-
east of India, BMW 3 and
5 Series automobiles are
to be produced exclu-
sively for the Indian mar-
ket. The BMW Group is
also establishing its own
sales subsidiary in the
Greater Delhi area and
is thus continuing its
international market ini-
tiative with a wide range
of activities in India. In
addition to running the
assembly plant and
importing BMW auto-
mobiles, the subsidiary’s
responsibilities will in-
clude the development
of the dealer network,
pricing and product
strategy, marketing and
aftersales. Subsidiary
and assembly plant will
go into operation at the
beginning of 2007. The
BMW Group will also
expand its dealer net-
work to all the country’s
major urban areas.

>> 04

17/02/2006
World premiere at the International
Motor Show in Geneva.

Geneva. The BMW Group introduced two particularly
sporty automobiles to the international public at
the 76th International Motor Show in Geneva: the
BMW Z4 M Coupé and the BMW Z4 Coupé 3.0si.
The third new product on show was the BMW 320si,
which is available in a limited edition and at the same
time serves as a basis for the competition vehicle in
the World Touring Car Championship 2006 (WTCC).
The first major European motor show of the
year is also the arena for presenting numerous tech-
nical innovations. Therefore BMW also presented a
world premiere in Geneva in the drive sector: the first
straight-six petrol engine with bi-turbocharger, High
Precision Injection and all-aluminium crankcase.

The MINI brand presented a particularly sporty
automobile in Geneva. The new MINI Cooper S with
John Cooper Works GP Kit weighs about 50 kilo-
grams less than a MINI Cooper S with average equip-
ment. At the same time, with engine power boosted
to 160 kW/218 bhp and a top speed of 235 km/h,
the model produced in a strictly limited edition of
2,000 units offers performance that far exceeds that
of the MINI Cooper S.

>> 01

>> 02

>> 03

>> 04

The year 2006

07/03/2006
BMW plant in Spartanburg
passes the one million mark.

Spartanburg. At the beginning of March, the one
millionth BMW was produced at the BMW plant in
Spartanburg, South Carolina. The jubilee vehicle,
a blue Z4 M Roadster, remained on the premises
and was handed over to the plant’s Visitor Centre.

Twelve years ago, on 8 September 1994, the
first BMW rolled off the assembly lines in the United
States. The BMW Group has invested more than
2.6 billion US dollars in Spartanburg to date and now
has more than 4,300 employees there. Today, the
Spartanburg plant produces the BMW Z4 models
and the X5 for markets all over the world.

20/02/2006
Prince Andrew
visits
Rolls-Royce
in Goodwood.

Goodwood. For the first
time, His Royal Highness
the Duke of York, Prince
Andrew, visited the
Rolls-Royce Motor Cars
manufacturing plant
and head office in Good-
wood near Chichester.
The Duke of York

arrived in a Rolls-Royce
Phantom and was wel-
comed by the Chairman
and Chief Executive of
Rolls-Royce Motor Cars,
Ian Robertson. During a
tour of the plant, Prince
Andrew was informed
about the production
process: each Phantom
is hand-built.

>> 05

>> 06

>> 01 BMW Z4 M Coupé:
without compromise,
purist and extraordinarily
powerful.

>> 02 BMW Z4 Coupé:
two-door roadster
with superior chassis,
maximum dynamics and
agility.

>> 03 BMW 320si: excel-
lent performance and
exclusive appearance,
combined with the typi-
cal functionality of the
BMW 3 Series.

>> 04 MINI Cooper S
John Cooper Works GP Kit:
the first series-produced
MINI with just two seats.

>> 05 His Royal Highness
the Duke of York,
Prince Andrew, asked
employees about
the production of the
Rolls-Royce Phantom.

>> 06 BMW plant in
Spartanburg: at the
beginning of 2006 the
production area was
converted to one-line
production.

28/03/2006
New yacht for the BMW ORACLE
Racing Team.

Valencia. Its name: USA 87. 24 metres long, four
metres wide, total weight 24 tons. At the end of March
the BMW ORACLE Racing Team’s new yacht was
christened officially by smashing a bottle of champagne
across the bow. The new yacht is the impressive result
of 1,000 hours of two-boat testing and 30,000 man-
hours of boat-building – and is the decisive milestone
on the way to participating in the 32nd America’s Cup
in Valencia in the summer of 2007. The BMW ORACLE
Racing Team spent much of the 2006 season improv-
ing the new yacht. The season was a great success.
In 2006, the BMW ORACLE Racing Team took part in
four regattas and won two first places.

>> 01

>> 01 Christening of the
USA 87: Sue Dickson,
wife of the BMW ORACLE
Racing team CEO Chris
Dickson, took on the role
of godmother for the new
BMW ORACLE racing
yacht.

>> 02 USA 87: At the
end of February the hull,
weighing around two
tons, was transported
from Seattle to Valencia in
a spectacular way – 8,900
kilometres aboard a Russ-
ian cargo plane.

>> 03 The BMW V10 high-
performance engine
that powers the BMW M5
and M6.

>> 02

The year 2006

13/04/2006
BMW 3 Series
is World Car of
the Year.

Munich/New York. The
BMW 3 Series is the
“World Car of the Year”.
In the competition for
this international car
award, the fifth genera-
tion of the BMW 3 Series
automobile beat the
26 other contenders in
its category. For the
“World Car of the Year”
award a panel of 46 mo-
toring journalists from
all over the world judges
the most important new
models of the year ac-
cording to 20 criteria,
including design, per-
formance, handling,
comfort and functionality.
The awards ceremony
was held during the
New York International
Auto Show.

10/05/2006
Engine of the Year – V10 power
unit from the BMW M5/M6.

Munich. Never before in the history of the “Engine
of the Year” award has a power unit received the
accolade in two consecutive years. The V10 high-
performance power unit from the BMW M5/M6
accomplished this feat. In Stuttgart in May, around
60 internationally renowned motoring journalists
voted it “International Engine of the Year 2006”.
The power unit also received the much-sought-after
“Best Performance Engine 2006” award and won
the Best Above 4-litre category.

The 3.2-litre straight-six with 343 bhp from the

BMW M3, which now also powers the BMW Z4 M
Roadster and Z4 M Coupé, was another success
for the BMW Group: for the sixth time in a row it was
Best in the 3- to 4-litre category – no engine has
ever achieved this since the competition began.
In addition, the 3.0-litre twin-turbocharged

diesel engine, which powers the BMW 535d with
272 bhp, won the 2.5- to 3.0-litre category for the
second time and is thus the only diesel winner in
the competition. The new BMW 3-litre six-cylinder
petrol engine, used in almost all BMW models, took
second place.

>> 03

17/05/2006
Victories in the Mille Miglia 2006.

Munich/San Donato Milanese. In the year of the
BMW 328’s 70th birthday, the Cané/Galliani team of
the BMW Group Mobile Tradition won the Mille
Miglia 2006 in the historic BMW 328 MM Roadster
that had already taken third place in 1940.

The ladies’ trophy or “Coppa delle Dame” was
awarded for the twelfth time to Franca Boni and her
daughter Monica Barziza, who had already won in
a BMW 328 in the previous year.

Altogether, 375 vehicles went to the start of
what is undoubtedly the most famous classic car
rally. Eleven teams represented the BMW Group
Mobile Tradition.

>> 01

>> 02

>> 01 The winning team in
the ladies’ trophy, “Coppa
delle Dame”: Franca Boni
and Monica Barziza won
for the twelfth time.

>> 02 Giuliano Cané and
his co-pilot and wife Lucia
Galliani won the race for
the ninth time; seven of
these victories were in a
BMW.

>> 03 The interior of the
MINI Hotel is equipped
so comfortably that it
can be used as overnight
accommodation.

>> 04 Welcome to MINI
Hotel International: the
MINI Hotels were always
right at the heart of the
World Cup action.

The year 2006

01/07/2006
Sales subsidiaries opened in the
Czech Republic and in Slovakia.

Munich. The BMW Group extended its global
presence by opening sales subsidiaries in the
Czech Republic and Slovakia from 1 July 2006.
Thus, as part of its ongoing market initiative, the
Company is continuing resolutely to implement
its strategy of assuming market responsibility in
all the EU states of Central and Eastern Europe.
In these countries, the BMW Group is responsible
not only for importing vehicles, but also for opera-
tions such as the management of the dealerships,
including aftersales and marketing.

With the start of its activities in the Czech

Republic and in Slovakia, the BMW Group’s sales
network is now directly represented in 37, and
from the beginning of 2007 in 39 countries world-
wide. The Company sells 97% of its automo-
biles in these countries. A network of national
importers serves another 100 or so countries.

09/06/2006
Hotel MINI
International
opens in time
for the Football
World Cup.

Munich. MINI Hotels
specially designed for
football fans were ready
in time for the World
Cup. To ensure that all
the football fans felt
really at home the MINI
Hotel International was
joined by MINI national
hotels in the appropriate
national colours. The
MINI Hotel International
is equipped so comfor-
tably that anyone who
so wishes can spend the
night in it.

16/06/2006
100,000 BMW
3 Series auto-
mobiles made
in Leipzig.

Leipzig. On 16 June
2006, the 100,000th
BMW 3 Series auto-
mobile rolled off the
assembly lines at the
BMW plant in Leipzig
since the beginning of
series production on
1 March 2005. The
BMW 330i in Titan Silver
Metallic was destined
for a customer in Saxony-
Anhalt.The BMW plant
in Leipzig reached this
milestone earlier than
scheduled and thus
impressively demon-
strated its efficiency. So
far, more than 4,100 new
jobs have been created
on the plant premises,
more than 2,300 at BMW,
the others at suppliers
and service partners. In
2007, daily output is to
increase to 650 vehicles.

>> 03

>> 04

25/07/2006
Relaunch of an icon.

Munich. An architectural icon looks as good as new.
In September, after 29 months, the employees
moved back into the BMW Group’s headquarters in
Munich, a complex comprising the “Four Cylinders”,
the BMW Museum, a low-rise building and a multi-
storey car park. The “inside” of both the 22-storey
Tower and the low-rise building had been completely
replaced from April 2004 onwards. During this period,
the 1,500 employees had their offices in nearby
buildings.

When the striking bowl-shaped BMW Museum

re-opens in the spring of 2008 it will be far larger
and have a new concept.

The BMW Tower is classified as a historic monu-

ment. Therefore, its external façade, made of silvery
shining aluminium elements, was left untouched
and only cleaned. Inside, however, everything was
stripped down to the bare concrete ceilings and
floors: air-conditioning and heating systems, lifts,
fittings and furnishings, and the entire electrical
supply system. A Herculean task: 330,000 cubic
metres of enclosed space and thus a gross usable
area of 53,000 square metres were refurbished.
14,000 tons of material required environmentally
compatible disposal. All 2,302 windows in the
BMW Group’s headquarters in the BMW Tower
were replaced.

>> 01

09/08/2006
Go ahead for
the Scientific
Award 2007.

Munich. The BMW
Group invited young
academics to apply for
the Scientific Award
2007 for up-and-coming
scientists. In this com-
petition with the motto
“Passion for Innovation”
prizes are awarded for
excellent Bachelor’s,
Master’s and Doctoral
Theses from all fields of
expertise. In 2007, the
competition will be held
for the ninth time. The
award is worth a total of
70,000 euros. The
deadline for entries was
7 January 2007.

An international and

multi-disciplinary jury
with representatives of
science and industry
judges the entries. Dur-
ing the selection process,
the jury considers the
following criteria: innov-
ation potential, relation
to reality, benefit for the
environment and society,
theory, economic effi-
ciency and form of pres-
entation.

The competition
for the BMW Group’s
Scientific Award was
introduced in 1991 and
is held every two years.
So far, the BMW Group
has honoured 45 young
prize-winners together
with their respective
professors.

The year 2006

12/09/2006
MINI ProductionTriangle launched.

Munich/Oxford. The start of series production of
the new MINI also signalled the launch of a new pro-
duction network for the BMW Group in Great Britain.
The BMW Group has invested a total of nearly 200
million pounds sterling to build the new MINI in the
so-called MINI production triangle with plants in
Hams Hall, Oxford and Swindon. Thus, maximum
production capacity will rise by 20 percent to up to
240,000 units a year in the medium term. By the
time the plant reaches full capacity, the number of
employees in the production triangle will have risen
from the current 6,350 to a total of around 6,800.

The British Chancellor of the Exchequer, Gordon

Brown, visited the BMW Group plant in Oxford for
the start of production of the new MINI, along with
representatives of British industry and the Chair-
man of the Board of Management of BMW AG, Dr.
Norbert Reithofer.

“The new MINI production triangle is a particu-

larly efficient and flexible production network that
allows us to react individually to our customers’
wishes in the MINI’s production”, said Reithofer.
“This flexibility and customer orientation is unique
in the small car segment.”

>> 02

01/09/2006
Change in the
Board of
Management of
the BMW Group.

Munich. At its meeting
on 20 July 2006, the
Supervisory Board of
BMW AG made deci-
sions which will deter-
mine the course of the
BMW Group’s manage-
ment in the long term.
Dr. Norbert Reithofer
was appointed to suc-
ceed Dr. Helmut Panke
as Chairman of the
Board of Management
from 1 September 2006.
The Supervisory
Board appointed Frank-
Peter Arndt, formerly
Head of the BMW
plant in Dingolfing, as
Reithofer’s successor
responsible for Produc-
tion. The Supervisory
Board also appointed
Dr. Klaus Draeger to the
Board of Management
from 1 November 2006.
He will take over respon-
sibility for Research,
Development and Pur-
chasing from Professor
Burkhard Göschel.
Draeger was formerly
responsible for the
development of the
BMW 5, 6 and 7 Series.

>> 01 The BMW “Four
Cylinders” in Munich were
completely refurbished
within 29 months.

>> 02 MINI plant in Oxford:
surface check in the paint
shop.

26/09/2006
BMW Group
remains the
most popular
employer.

Hamburg. When asked
where they would like
best to start their careers,
economists and engi-
neers have, for the last
five years, placed the
BMW Group at the top
of their list.

The Trendence-
Institut regularly con-
ducts surveys to find
Germany’s most popular
employers. Trendence
polled almost 20,000
young graduates and
students who were near-
ing their finals in its sur-
vey “Absolventenbaro-
meter 2006”. Respon-
dents from faculties of
law, economics and
engineering were asked
to name their favourites.

12/09/2006
A new era of mobility begins –
the BMW Hydrogen 7.

Munich. The BMW Group was the first automobile
manufacturer worldwide to present a hydrogen-
driven vehicle that has completed the series de-
velopment process. The BMW Hydrogen 7 with a
hydrogen-powered combustion engine is the result
of a resolute development strategy which has made
the progressive concept of sustainable mobility
available for immediate everyday use. The BMW 7
Series Sedan is powered by a twelve-cylinder engine
with 191 kW/260 bhp and accelerates from 0 to
100 km/h in 9.5 seconds. As long as the hydrogen
infrastructure has not been fully developed, the dual-
mode power unit of the BMW Hydrogen 7 can be
switched conveniently from hydrogen to conventional

>> 01

>> 02

fuel at the touch of a button. The BMW Hydrogen 7
will be offered to selected customers in several mar-
kets from 2007.

Integration of the use of hydrogen into an exist-
ing vehicle concept that has been tested in practice
also creates the right conditions for an alternative to
conventional drive systems to be accepted on the
market and tried out by customers. Therefore, the
premiere of the BMW Hydrogen 7 is not only a mile-
stone for the BMW Group on the way to an age of
mobility that is independent of fossil fuels, but also
a signal for the entire automobile and energy sector.

>> 01/02 The BMW Hydro-
gen 7 has a range of more
than 200 kilometres in
hydrogen operation; it can
travel another 500 kilo-
metres in conventional
petrol mode.

>> 03 The new MINI: while
an evolutionary approach
was taken to developing
the exterior design in the
brand’s characteristic
look, the interior has been
updated with intelligent
and trendy features.

>> 04 BMW 3 Series
Coupé: BMW continues
a long tradition with this
two-door automobile and
at the same time adds new
highlights in an interesting
segment.

>> 05 BMW M6 Conver-
tible: the open-top model
of the high-performance
BMW M6 sports car and
at the same time the
BMW 6 Series Convertible
at its sportiest.

>> 06 BMW X3: the agile
Sports Activity Vehicle
has been enhanced with
powerful engines, a fresh
design and high-quality
interior design.

The year 2006

28/09/2006
MINI world premiere at Mondial de
l’Automobile 2006 in Paris.

Munich/Paris. Five models from the BMW Group’s
range of vehicles staged their world premiere at the
Mondial de l’Automobile 2006 in Paris.

First and foremost: the new MINI, which has
been completely updated five years after its prede-
cessor’s market launch. The new MINI Cooper S and
the new MINI Cooper were introduced with com-
pletely new four-cylinder engines at the end of 2006.
The BMW brand also presented new models.
The new BMW 3 Series Coupé joined the Sedan and
Touring as an exclusive addition to the BMW 3 Series.
In Paris, trade visitors and automobile enthusiasts
from all over the world also had the opportunity to
see the new BMW X3 for the first time. The BMW X3
with its meticulously revised design, particularly
high-quality interior and new powerful engines has
become even more attractive. The BMW M6 Con-
vertible was also among the special attractions at the
Mondial de l’Automobile. The open-top four-seater
combines the dynamic performance of a super sports
car with the exclusiveness of a luxury convertible.

>> 03

>> 04

>> 05

>> 06

29/09/2006
Rolls-Royce
announces new
model range.

Goodwood. At the end
of September, Ian
Robertson, Chairman
and Chief Executive of
Rolls-Royce Motor Cars,
announced that a new
model range was being
developed. The vehicle
is to be positioned below
the Phantom in terms
of both size and price.

Development of the

Rolls-Royce Phantom

>> 01

Drophead Coupé,
which has already been
announced and will be
available in 2007, con-
tinues to be on schedule.

10/10/2006
BMW Motorrad at INTERMOT
2006 in Cologne.

Cologne. BMW Motorrad was represented at
INTERMOT 2006 in Cologne by the most extensive
and varied model range in its history. A completely
new range of single-cylinder motorcycles with a
fascinating choice of three very different models,
the G 650 Xcountry, the G 650 Xchallenge and the
G 650 Xmoto, had their world premiere at the fair.
The K series was also extended: the BMW K1200 R
now has a sister model, the K 1200 R Sport with
sporty half-fairing.

BMW Motorrad has added the new single-
cylinder models to its product range to attract new
target groups. While they share the same technical
base, these three motorcycles – the hard enduro
G 650 Xchallenge, the street moto G 650 Xmoto
and the scrambler G 650 Xcountry – are very diffe-
rent in character.

With their high-grade product substance, purist

look and unusually sporty handling, these single-
cylinder models occupy attractive niches.

The K 1200 R Sport was the fourth model of the
most powerful range of motorcycles to be presented
by BMW Motorrad at INTERMOT. The new K 1200 R
Sport’s special feature is the half-fairing fitted to the
frame with the headlamp of the R 1200 S. The new
BMW K 1200 R Sport is intended for ambitious,
sporty bikers who attach importance to progressive,
visible technology and appreciate the machine’s
increased versatility.

BMW has also added a dynamic supermoto
machine to its exclusive HP2 family: the Megamoto.
This motorcycle, based on the HP2 enduro, will
take the lead among two-cylinder supermotos for
street use because of its excellent performance and
superior materials. As a consistent continuation of
the HP2 line, the Megamoto demonstrates impres-
sively the dynamic nature and scope of the Boxer
concept.

>> 02

>> 03

>> 04

>> 05

>> 06

The year 2006

02/11/2006
2,000,000
retail customer
contracts in
place with
BMW Group
Financial
Services.

Munich. In its Interim
Report to 30 September
2006, the BMW Group
announced a new record
for its Financial Services
segment. For the first
time in the Company’s
history, the BMW Group
Financial Services seg-
ment had more than two
million retail customer
contracts in place. By
30 September, the
number of leasing and
credit financing con-
tracts in place with retail
customers had risen to
2,039,255.This figure is
renewed evidence of the
successful growth course
of the BMW Group’s
Financial Services in
recent years.

08/11/2006
Excellence
Award for the
BMW Group.

09/11/2006
Golden
Steering Wheel
for MINI.

Munich/Dingolfing. On
7 November, Frank-
Peter Arndt, member of
the Board of Manage-
ment of BMW AG
responsible for Produc-
tion, received the Excel-
lence Award of the
European Foundation
for Quality Management
(EFQM) in Budapest,
Hungary. This prize
honours outstanding
management achieve-
ments in the promotion
of competitiveness,
satisfaction among
employees and cus-
tomers, social responsi-
bility and, not least, the
sparing use of resources.
The Excellence

Award is presented to
companies and organ-
isations in Europe which
have the edge on their
international competi-
tors not only because of
their technical and busi-
ness achievements,
but also because of their
sustainable corporate
strategy – for at least
three consecutive years.
The BMW Group’s
strategic customer ori-
entation and its coope-
rative and sustainable
corporate strategy
received special praise.

Munich. Exactly ten days
before its official intro-
duction to the market,
the new MINI was hon-
oured with one of the
world’s most coveted
automobile awards,
the Golden Steering
Wheel 2006. Each year,
Europe’s largest-circula-
tion Sunday paper, Bild
am Sonntag, awards this
prize to the best new
editions in the various
categories. Dr. Michael
Ganal, member of the
Board of Management
of BMW AG responsible
for Sales and Marketing,
was presented the
Golden Steering Wheel
during a festive ceremony
in Berlin. In a statement
before numerous repre-
sentatives from the
world of politics, the busi-
ness community and the
media, as well as show
business personalities,
Ganal declared, “We are
pleased that the new
MINI has convinced such
a prestigious and critical
jury. This again clearly
confirms that the inde-
pendent course we are
following with MINI is the
right one: a strong prod-
uct and a strong brand in
a unique composition.”

>> 07

>> 01 The new Rolls-Royce
Convertible, the Phantom
Drophead Coupé.

>> 02 The G 650 Xcountry:
for riding pleasure on-
and off-road.

>> 03 TheG650Xchallenge:
a hard enduro for riding on
rough terrain.

>> 04 The G 650 Xmoto for
active touring.

>> 05 The K 1200 R Sport:
the sporty sister of the
K 1200 R.

>> 06 The HP2 Megamoto:
an exclusive Boxer con-
cept with excellent per-
formance.

>> 07 Golden Steering
Wheel for MINI: the new
MINI won one of the
most coveted automobile
prizes ten days before its
official introduction to the
market.

18/11/2006
Auto China, the international
motor show in Beijing.

Munich/ Beijing. In mid-November the BMW Group
presented the BMW 530Li, 525Li and 523Li to
the public at Auto China in Beijing. The long-wheel-
base versions, developed exclusively for the Chinese
market, differ from the other already successful
BMW 5 Series automobiles in China in that their
wheelbase has been extended by 140 millimetres
so that rear passengers have more space.

The BMW Group’s presence in China continues

to be marked by dynamic growth. By the end of
2006, 44,766 BMW Group automobiles had been
sold on the Chinese markets (China, Hong Kong,
Taiwan), 35.4 % more than in the previous year.

>> 01

19/11/2006
BMW and Andy
Priaulx score a
double victory in
the FIA WTCC.

Munich/Macao. After an
exciting finale to the
season, Andy Priaulx
with the BMW Team UK
won the World Touring
Car Championship in
a BMW 320si and thus
retained the title for the
second year in a row.
With a second place in
the driver’s champion-
ship, the BMW Team
Germany with Jörg
Müller scored a double
success for BMW. The
manufacturer’s cham-
pionship was also
defended successfully;
BMW won the World
Touring Car title with
254 points.

>> 02

>> 03

The year 2006

01/12/2006
BMW X5 has its world premiere
at the Los Angeles Auto Show.

Munich/Los Angeles. As the Los Angeles Auto
Show celebrated its 100th jubilee in December, the
BMW Group staged two world premieres, both of
which were spectacular jubilee highlights. The new
BMW X5 was presented to the public for the first
time in Los Angeles. The new edition of the suc-
cessful Sports Activity Vehicle (SAV) is produced in
the BMW plant in Spartanburg, South Carolina, and
had been awaited on the US market, which is so
important for vehicles of this segment, with tremen-
dous excitement. The BMW Group also presented
the BMW Hydrogen 7, the first luxury sedan for
everyday use to be powered by liquid hydrogen. A
limited number of these series-produced vehicles
will be available to a select group of customers
from 2007.

During the run-up to the auto show, the BMW

Group announced that it would offer its equally per-
formance-oriented and efficient diesel power units
in the United States during the course of 2008.Thus,
these engines, known in Europe for their unique
synthesis of dynamic power development and low
fuel consumption, will also enter the BMW Group’s
strongest single market for retail: the United States.

>> 04

>> 01 Long-wheelbase
version of the BMW 5
Series – developed exclu-
sively for the Chinese
market.

>> 02 Trophy for Andy
Priaulx, World Champion
twice over.

>> 03 FIA World Touring
Car Championship
(WTCC), “Guia Circuit”,
Macau, China.

>> 04 The new BMW X5
continues the success of
its predecessor with
dynamic performance,
powerful elegance and
great exclusivity.

07/12/2006
BMW Group as partner of the
world’s most important art fair.

Miami. Art Basel Miami Beach (ABMB), the largest
and most famous international show of modern
and contemporary art, was held in Florida from 7 to
10 December 2006. For the fifth time, the BMW
Group was the show’s official partner and also pro-
vided the VIP Shuttle Service, which this year con-
sisted exclusively of BMW 7 Series Sedans.

An exclusive selection of 200 of the world’s lead-
ing art galleries exhibited more than 1,500 art works
at the show. The 50,000 or so international visitors
to ABMB included famous individuals from the
art world: collectors, art dealers, curators, journalists,
directors of renowned museums and successful
artists.

The BMW Group presented the newly designed
BMW Museum, which will be re-opened to the pub-
lic in 2008. Adrian van Hooydonk, Head of Design
BMW Automobiles, demonstrated the dynamic
exhibition architecture of the BMW Museum using
pictures, films and a model. This museum, with its
combination of innovative media presentations and
design, promises once again to set international
standards.

In addition to the presentation of the BMW

Museum, the BMW Group was represented by its
three brands at the art show. Visitors experienced the
new BMW X5 in the Art Guest Lounge. As partner
of the international lifestyle magazine VISIONAIRE,
MINI launched the 50th jubilee edition of the maga-
zine during a party and presented three vehicles, in
the style of the “artist toys” shown in the magazine,
in front of the Raleigh Hotel. Rolls-Royce Motor Cars
appeared as host at the Art Nexus Party and pres-
ented its product range in the historic atmosphere of
the Biltmore Hotel.

>> 01

>> 01 Art Basel Miami
Beach: the BMW Group
provided the VIP Shuttle
Service as the art show’s
official partner.

>> 02 The new BMW Sauber
F1.07 for the Formula 1
season 2007.

>> 03 Employees of the
BMW plant in Berlin with
the100,000th motorcycle,
an R 1200 R.

The year 2006

14/12/2006
Super-brain for
BMW Sauber F1.

15/12/2006
BMW plant in Berlin breaks the
100,000 barrier.

Munich/Berlin. For the first time in the history of
the BMW Group, more than 100,000 motorcycles
were produced in the Berlin plant in a single year.
The 100,000th motorcycle, an R1200 R, rolled off the
assembly lines on 15 December 2006. The motor-
cycle segment’s sales also broke the 100,000 barrier
by the end of the year. Deliveries of 100,064 motor-
cycles represented a new high. In 2006, total BMW
motorcycle output since 1923 reached the two mil-
lion mark. By the end of the year, 2,061,977 motor-
cycles had been produced; 1,616,016 of them had
rolled off the assembly lines of the motorcycle plant
in Berlin-Spandau since 1969.

>> 03

Hinwil.The BMW Sauber
F1 Team has a new
super-brain. According
to the current top-500
list of supercomputers,
Albert2, which was intro-
duced to international
media representatives in
Hinwil, is the fastest com-
puter in industrial use in
Europe. Albert2 has
more than 256 nodes
with two Intel Xeon 5160
processors each. It has
a maximum computing
power of 12,288 giga-
flops. To achive the
same computing power
as Albert2 musters in a
second, all 1.3 million
inhabitants of the city of
Munich would have to
multiply two eight-digit
numbers every three-
and-a-half seconds for
an entire year.

BMW Motorsport
Director Mario Theissen:
“Aerodynamics have a
crucial influence on the
performance of modern
Formula 1 vehicles, with
experimental work in the
wind tunnel and com-
putational fluid dynamics
(CFD) complementing
each other. The launch
of Albert2 means a deci-
sive reinforcement of
our CFD capacity. For
the new season, we
have set ourselves the
goal of further reducing
the gap to the top. Our
new supercomputer is
an important tool which
will support us in this.”

>> 02

Growing profitably, acting responsibly – challenge and

aspiration at once. The BMW Group’s view: a company only has a
viable future – and can thus increase its value sustainably and on
a long-term basis – if it takes responsibility.

Focus: Assuming responsibility

Assuming
responsibility.
Or: What does
responsibility
mean for the
BMW Group as
leading premium
manufacturer in
the automobile
industry?

The answer: Creating values.

Why does the BMW Group assume responsibility in society? And in
doing so, what does the Company expect to gain? Is it just cultivating
its image? Or is there more to it?

Today, companies such as the BMW Group operate in an extremely
complex environment – and their success depends on many different
factors. The company can determine some of these itself, primarily by
taking decisions on corporate strategy, individual products, the number
of employees and more besides. However, it has no direct influence
on other factors that are just as important for the company’s success.
These are, in particular, social developments and challenges, which in
the long term affect the conditions in which we operate.

At the same time, many companies today have more economic
strength than many of the world’s states. Around half of the 100 largest
economic entities are not states but companies with global operations.
Around 65,000 multinational companies with 800,000 subsidiaries
and millions of suppliers now operate worldwide. Never before have
companies had so much economic power and size. Consequently,
never before have they had so much responsibility: responsibility for
jobs, for returns, for environment and society. And yet companies are
not states. Their structures are designed for maximising profits and
safeguarding future growth. So what can be expected of them?

Focus: Assuming responsibility

The answer differs from company to company. It ranges from
egoism to altruism, from self-interest to benefactorship. In other words:
it lies somewhere between “making money” and “taking merit”.

For the BMW Group, the answer is clear – and it did not just think
it when the public started discussing the subject of corporate responsi-
bility. On the contrary, the BMW Group has long pursued the objective
of continuously and permanently increasing company value. This
means that the Company aspires to play an active role – both in shaping
internal economic success factors and as corporate citizen in society.
After all, the BMW Group has a vital interest in securing, in the long
term, the conditions that are necessary for the Company’s sustained
success. More than that: the BMW Group considers it quite natural to
actively shape the future by taking responsibility. This does not only
apply to its German home market, for just as the Company competes
worldwide, it also takes responsibility worldwide.

Responsibility out of conviction – to increase company value

For the BMW Group, therefore, taking corporate responsibility

is far more than “just” philantropy or patronage. It is all about making the
Company viable for the future and thus increasing its value on a sus-
tained, long-term basis. To be more specific: we want the Company’s
value to increase from year to year. But what does “value” mean in this
context?

A variety of methods and indicators can be used to determine
the value of a company. For example, current market capitalisation can
serve as an indication of a company’s value, as can sales, revenues and
income. The relevant figures all indicate a company’s performance on
a certain date. But do they adequately describe a company’s value?

Today, the BMW Group is the leading premium manufacturer in

the automobile industry. By our standards, this position is not defined
solely by key figures, such as sales, revenues or income. On the contrary,
non-financial performance indicators are moving increasingly into the
foreground. Healthy and motivated employees, the right solutions for
drive concepts of the future, a recognised role, appreciated by all parties,
as company in society, a commitment to assuming the challenges of
tomorrow – all these play at least as important a role for determining the
value of a company as the short-term view of key financial data from
quarter to quarter.

Safeguarding future viability

In order to maintain or even develop the BMW Group’s leading

position in keeping with these standards, the Company must today
address intensively the challenges of tomorrow. In short, it must assume
responsibility for the solution of the immense global tasks for society –
from climate change to the finiteness of fossil fuels, from the fight
against HIV/AIDS to achieving a high level of education among potential
young employees.

Focus: Assuming responsibility

Companies that do not set the right course today will find

themselves on the sidelines tomorrow. In other words: what we do now
determines our competence in the future. Cost reduction programmes,
measures to increase efficiency and short-term, quarter-oriented improve-
ments in results are far less decisive than the ability to create suitable
conditions. Recognising problem areas and potentials at an early stage,
actively seeking solutions, sensing social and ecological risks ahead
of the competition – that is what makes a company viable for the future.
Corporate responsibility is thus transformed from reaction to forward-
looking action – and at the same time advances to become one of the
aspects that decisively determine a company’s value in the future.

These aspects play an increasingly important role also on the

financial markets, for financial analysts and investment banks have
spotted the correlations and increasingly include sustainability criteria in
their analyses.

>>01 Industry leader. Each year the SAM Group

in Zurich assesses the ecological, social and economic performance of
2,500 companies and selects the best 10 % for the Dow Jones Sustainability
Indexes. Challenges specific to the industry are considered in the process. In
the automobile industry these are, for example, climate change or ecological
and social standards at suppliers.

In September 2006, the BMW Group was again rated as industry

leader for sustainability. The SAM Group came to this conclusion when making
its assessment for the Dow Jones Sustainability Indexes (DJSI) 2006. Thus,
the BMW Group successfully defended the first place it gained in 2005 and
is the only company in the automobile industry to have been represented
without a break in the Dow Jones Sustainability Index World and the European
Dow Jones Sustainability STOXX Index since their establishment in 1999.

Only people who ask the right questions come up with the right answers
What are the greatest challenges of the future for the
BMW Group? How are the fields of action defined for our Company?

As for all automobile manufacturers, environmental protection –

and thus climate change and, in particular, the reduction of CO2 emis-
sions – is clearly in the foreground for the BMW Group. Not surprisingly,
therefore, the BMW Group is focusing on the following questions:
How do we deal with climate change? What does the drive concept of
the future look like? What does sustainable mobility mean?

We need to develop drive concepts with which we can achieve

a significant reduction in emissions and which at the same time satisfy
the customers’ wishes for contemporary, individual mobility. In view of the
finiteness of fossil fuels, we are clearly on the road towards the hydrogen
economy.

In ten or twenty years an automobile manufacturer will only be

able to operate successfully if the prevailing environmental conditions
worldwide permit individual mobility in a form similar to today’s. Failure
to consider this aspect would be a reckless way of dealing with the com-
pany’s own future viability. The BMW Group is committed to environ-
mental protection because a healthy environment is essential to our
existence. In addition to efforts to build more environmentally compatible
vehicles, the application and improvement of company environmental
protection plays a pivotal role at the BMW Group locations. It is important
to reduce negative impacts on the environment in the production
process and to minimise the consumption of resources. And even the
conditions in which the automobiles and motorcycles of the BMW Group
are produced must meet social and ecological standards worldwide.

>>02 The roadtowards sustainable mobility. The BMW

Group has elaborated a three-stage energy strategy to meet the challenges of
climate change and the finiteness of fossil fuels. In a first stage, the fuel con-
sumption of the current vehicle concepts is to be further reduced in the short
and medium term. The BMW Group achieves this with highly efficient genera-
tions of engines, active aerodynamics, the use of innovative lightweight engin-
eering and intelligent energy management in the vehicle. Current examples
of this include new engines with High Precision Injection, but also innovations
for enhanced energy management in the vehicle, such as Brake Energy Regen-
eration or the Auto Start/Stop Function. In the medium term, the BMW Group
will introduce more innovations to reduce fuel consumption, ranging from the
further electrification of the power train to comprehensive hybrid solutions with
a high level of technical maturity. In the long term, however, the BMW Group is
convinced that the most sustainable technology is the hydrogen-powered
combustion engine.

Focus: Assuming responsibility

>>03 Innovative energy-saving projects

at the BMW Group locations. Groundwater is piped about four-and-a-half kilo-
metres to the BMW Group’s Research and Innovation Centre (FIZ) in the north
of Munich. The water comes from drains for the underground railway. These
drains consist of an underground system of pipes which ensures that the
water flows at right angles to the underground railway track. This groundwater
cooling system, used to cool parts of the Research and Innovation Centre,
makes conventional refrigerating machines largely superfluous and thus saves
electricity consumption of around 8,000,000 kWh a year, which is equivalent
to the annual electricity consumption of more than 3,000 private households
in Munich. Annual emissions of CO2 are reduced by around 5,000 tons. The
BMW Group carried out this project in cooperation with the Munich City Utilities
(SWM). The use of groundwater to cool buildings in this way and on this scale
is unique.

Another continent, another approach

In May 2006, the BMW plant in Spartanburg, South Carolina, United

States, began using methane gas to power its paint shop. The gas is generated
by the biological degradation of waste at a landfill 15 kilometres away. The
BMW plant in Spartanburg is thus using a previously wasted energy source
and at the same time reducing impacts on the environment. The results: the
BMW plant in Spartanburg acquires around 63 % of its energy from methane
gas. Consequently, CO2 emissions will decrease by 58,724 tons a year – this is
equivalent to the heating energy requirements of 15,337 American households.
At the same time, the plant’s annual energy costs will fall by a six-digit euro
amount.

The BMW Group’s Research and Innovation Centre

U-Bahn (underground railway)

01 Process cooling system
02 Heat exchanger
03 Return water
04 Supply water
05 Water-bearing stratum
06 Groundwater flow direction
07 Impermeable stratum
08 Groundwater drain structure

The BMW Group believes it has a special responsibility towards

its employees. The Company is greatly indebted to them and their
families. After all, they are the ones who make the Company strong and
competitive. For the BMW Group, safeguarding employment is, there-
fore, an important aspect of responsible management of company
affairs – even if this aspect is often considered self-evident in view of the
immense global challenges.

At the same time, the BMW Group with its workforce of more
than 106,000, most of whom are employed in Germany, is confronted
in special measure with the consequences of demographic change.
Obviously, a company that manages to anticipate these changes now,
and to make the right decisions for tomorrow, will be more competitive
than others in the future. A company that prepares its employees in good
time for the impacts of demographic change will also be less strongly
affected by these impacts. And just as the company must anticipate this
change, its employees must also cope with the impacts of an ageing
society in their private environment.

Focus: Assuming responsibility

>>04 Today for tomorrow – using demographic

change as an opportunity. For years, the industrial nations have recorded fewer
births than deaths. At the same time, statistical life expectancy continues to
rise. The result: the age structure of society is changing.

In 2020, therefore, the average age of the BMW Group’s workforce
will also be far higher than it is today. Older employees contribute decisively to
the Company’s success. They have experience, make sound judgements, show
a high degree of responsibility and have a great deal of organisational know-
ledge. However, there is also a significant correlation between the employees’
age on the one hand and time off sick or age-related limitations on the other.
Clearly, therefore, in an ageing society companies that both enhance the
performance of their workforce and resolutely make use of their employees’
knowledge and experience are more likely to gain a head start. With the
project “Today for tomorrow”, the BMW Group has accepted this challenge by
taking a comprehensive approach and focusing on five fields of action: adap-
tation of the working environment to suit future needs, for example by providing
ergonomically designed workplaces, health management at all locations, quali-
fications and competence management, individual retirement schemes and
communications on these subjects.

The BMW Group offers its employees comprehensive support for
their own provisions for the future – whether relating to health and finance,
skills or the design of the employees’ own working environment – through its
Intranet portal “Meine Zukunftsvorsorge”. For example, health: through its
comprehensive health care programme, the BMW Group provides its employees
with a variety of opportunities to protect their health. Selected cancer screening
campaigns, free health education days and fitness programmes at all plant loca-
tions help to detect illness and promote employees’ health and health aware-
ness. In addition, at the Health Forum employees can have their individual risk
factors assessed and then benefit from appropriate subsequent measures,
such as stop-smoking courses or diet seminars. Such schemes promote not
only the employees’ individual health but also their own responsibility for health
maintenance.

The BMW Group also encourages its employees’ sense of responsi-

bility for old-age provisions by offering a variety of privately financed pension
schemes to meet their individual needs.

As a company that has been represented by its own plant in

South Africa for many years, the BMW Group is strongly committed to
the fight against HIV/AIDS. This is an important field of action for its
social commitment – in the BMW plant in Rosslyn, South Africa, and far
beyond.

The BMW Group places special emphasis on the fields that have

just been described because it is part of these challenges, is affected
by them and must respond to them. Of course, we do not have an
answer to every question. But we make a point of keeping our eyes open
and will continue to look for solutions – today and tomorrow.

Responsibility and self-interest – a contradiction in terms?

The responsibility that a company assumes is particularly effec-
tive for everyone concerned when it is connected with the value-added
chain of the respective company. This means when value is created
as a result of responsible action – for the company and for society. An
example: the BMW Group has developed an extensive programme
against HIV/AIDS at its location in South Africa. However, it is not only a
company’s duty to care for its employees that drives BMW South Africa
to fight against HIV/AIDS, but also an economic necessity. The South
African plant produces some 55,000 automobiles a year, so long
absences of employees infected with HIV or suffering from AIDS should
be avoided; after all, the Company has invested in their training.

Conversely, this also means that it does not make sense to

expect every company to respond to every social challenge. While sub-
jects such as road safety or education play an important role for an
automobile manufacturer such as the BMW Group, completely different
subjects will be of special interest, for example, to a chemical company
or an IT manufacturer. Furthermore, the really formidable challenges –
whether global climate change or the fight against HIV/AIDS – are beyond
the reach of a single company. They require the cooperation of all social
forces if we are not all to fail.

When it comes to the challenge of climate change, this means

that we will make every effort and work extremely hard to develop
vehicles with more efficient fuel consumption. From our point of view, it

Focus: Assuming responsibility

is also clear that the automobile industry can only resolve the social
challenges of climate change in cooperation with everyone involved in
the transport sector. The passenger traffic sector, accounting for about
16 percent of total CO2 emissions, cannot solve the problem of climate
change alone; on the contrary, very different industries will have to work
together. An automobile manufacturer can mainly influence the fleet
of new vehicles. If, therefore, we are to achieve significant reductions in
CO2 emissions in all passenger traffic, the reduction potential of the
existing vehicle fleet must also be used with the introduction of appro-
priate traffic infrastructure measures, admixture of bio-fuels and more
efficient driving behaviour. If all participants in the traffic sector con-
tributed what they could, the potential for reducing CO2 emissions in
the traffic sector would be far higher. Clearly, as an innovative premium
manufacturer we are taking full responsibility and are forging ahead, with
even more determination, with our activities to develop innovative, fuel-
saving technologies for the future.

We have reached a decisive milestone for sustainable mobility
with the BMW Hydrogen 7 and demonstrated the Company’s technical
proficiency by completing the series development process for a
hydrogen vehicle. However, the development of a widespread hydrogen
infrastructure is still in its infancy and the legal requirements for hydro-
gen have not yet been defined. In developing sustainable mobility based
on hydrogen, we depend on the interplay of various partners in the
mobility sector. Moreover, considerable progress must be made in the
regenerative production of hydrogen. We can give decisive impulses in
this field, but the materialisation of a functioning hydrogen industry
demands great efforts on the part of many sectors and social players.

An example from quite a different area: as far as it is able, the

BMW Group provides its employees with qualifications and, with its
positive corporate culture, creates the stimuli that make people aspire to
work for the BMW Group. However, the Company has no direct influence
on the education policy of the countries in which it operates. Expressed
more simply: the BMW Group has, of course, a vested interest in quali-
fied young employees, but the possibilities for influencing their level of
education are limited.

>>05 The experts agree: in the long term, hydrogen

is the only fuel with the potential to replace fossil fuels in road traffic. As it is
present in water and almost all organic compounds, hydrogen is part of the
biological cycle and thus environmentally compatible. In addition, as the most
abundant element in the universe it is available in practically unlimited supply
and can be produced from all regenerative sources of energy. In order to
achieve the aim of the future of replacing fossil fuels with hydrogen, appropriate
measures have to be taken immediately. In Berlin in November 2006, the
BMW Group reached an important milestone on the way to the hydrogen
society. In November, the Company presented the world’s first hydrogen-
powered and thus practically emission-free luxury sedan for everyday use. The
BMW Hydrogen 7 has completed the series development process and is the
result of a resolutely pursued strategy, which already enables the BMW Group
to use hydrogen as trendsetting fuel for everyday operation. The BMW
Hydrogen 7 is equipped with a dual-mode twelve-cylinder combustion engine
that can be driven with both hydrogen and conventional petrol. In hydrogen
operation, the BMW Hydrogen 7 has a range of more than 200 kilometres, the
sedan can travel another 500 kilometres in conventional petrol mode.

In hydrogen operation, the BMW Hydrogen 7 emits practically only

steam. The new model thus represents an important step towards drastically
reducing the emissions, and particularly the CO2 output, of individual traffic.

The BMW Group offers this pioneering invention as a practical and

attractive solution for switching to hydrogen as fuel. It also sets a milestone on
the road to a future of emission-free individual mobility that is independent of
fossil fuels.

Focus: Assuming responsibility

Assuming responsibility, improving perspectives for the future

The examples show that our Company has only limited influence

on many of the external factors that determine our future viability in
some way. However, we are not closing our minds to doing what is within
the realm of our possibilities. For the BMW Group assuming responsi-
bility is – irrespective of ethical viewpoints – an indispensable avenue to
actively safeguarding the future. In addition, we see ourselves as part
of the societies in which we live and work. This applies on the one hand
to the BMW Group as a company and, on the other, to all our employees
as people in their respective environment.

The BMW Group is involved in many different fields. Our com-

mitment is based in part – and this is no secret – on an interest in our
own perspectives for the future. In this context, however, our interests
clearly overlap with those of society. If the BMW Group supports
education schemes out of self-interest, or develops more environment-
friendly automobiles in its own business interest, this is of benefit not
only to our perspectives for the future, but also to the societies in which
we operate.

The BMW Group does not need to be forced to assume social

responsibility. We assume responsibility, but we can only go as far as
our current success enables us. We know that the general public some-
times expects more, but our possibilities are limited.

In this context it is also important always to remember that no

one can claim to have exactly the right answers for all current and future
challenges. This applies to us as well. We are prepared to contribute
what we can, but we cannot promise to solve all the challenges and
problems. That would be expecting too much of a single company.

To put it concisely: assuming and bearing social responsibility

is, in our view, a community task for everyone – for policy-makers, com-
panies and every individual member of society. No one can be excluded.
No one should shift the responsibility to others.

We are prepared to continue to bear responsibility within the

scope of our possibilities. And in doing so, we will increase the value of
the BMW Group steadily, sustainably and continuously.

Focus: Assuming responsibility

Achieving success in the future for the Company and for society

Today, the BMW Group is a company that is involved in very

different fields and assumes responsibility. It does this within the
scope permitted by the Company’s business success. For clearly,
only successful companies that generate profit have the strength
and independence to assume responsibility on a permanent basis.
We are honest: our social commitment does not simply

reflect a wish to be benefactors, even though the Company is run
on moral and ethical principles. We also assume responsibility out
of self-interest. After all, we want to continue to be successful in
ten, twenty or thirty years. In our view, assuming responsibility is a
necessary and meaningful investment.

The bottom line is that the public may rest assured that the

BMW Group is a company with an honest interest in the positive
development of society. And for that very reason, it will remain a
successful company in the future.

Product range

With its three brands BMW, MINI and Rolls-Royce, the

BMW Group is represented in all the currently relevant premium
segments on the international automobile and motorcycle markets.
Thus, the Company offers a truly unique product range, which is
linked by a common claim: Premium – and nothing else.

The BMW Group 2006 portrait on DVD
<<

In addition to a very thin layer of aluminium, DVDs are made of high-grade, recyclable polycarbonate.
In order to be able to re-use this valuable raw material, we recommend after use that you dispose
the DVD properly through a recycling centre. Thank you.

The DVD cannot be used in players with a slot-in drive.

March 2007

The manufacture of, and the paper used for, the BMW Group’s Annual Report 2006, have been certified in accordance
with the criteria of the Forest Stewardship Council (FSC). The FSC prescribes stringent standards for forest manage-
ment, thus helping to avoid uncontrolled deforestation, human rights infringements and damage to the environment.
Since products bearing the FSC label are handled by various enterprises along the processing and trading chain, the
FSC chain of custody certification rules are also applied to enterprises which process paper e.g. printing companies.

10453_Poster RZ.indd 1

08.03.2007 11:52:07 Uhr

Model

Displacement Power Gearbox1]
(cc) output
(kw)

Fuel
type 2]

Urban
(l/100 km)

Extra- Combined
urban
(l/100 km)

CO2
(l/100 km) emissions
[g/km]

Model

Displacement Power Gearbox1]
(cc) output
(kw)

Fuel
type 2]

Urban
(l/100 km)

Extra- Combined
urban
(l/100 km)

CO2
(l/100 km) emissions
[g/km]

BMW
116i
116i (from 03/07)
118i
118i
118i (from 03/07)
118i (from 03/07)
120i
120i
120i (from 03/07)
120i (from 03/07)
130i
130i
130i (from 03/07)
130i (from 03/07)
118d
118d (from 03/07)
118d (from 03/07)
120d
120d
120d (from 03/07)
120d (from 03/07)
118i 3-door (from 05/07)
118i 3-door (from 05/07)
120i 3-door (from 05/07)
120i 3-door (from 05/07)
130i 3-door (from 05/07)
130i 3-door (from 05/07)
118d 3-door (from 05/07)
118d 3-door (from 05/07)
120d 3-door (from 05/07)
120d 3-door (from 05/07)
318i Sedan
318i Sedan
320i Sedan
320i Sedan
320si Sedan
325i Sedan
325i Sedan
325xi Sedan
325xi Sedan
330i Sedan
330i Sedan
330xi Sedan
330xi Sedan
335i Sedan
335i Sedan
335xi Sedan (from 03/07)
335xi Sedan (from 03/07)
318d Sedan
320d Sedan
320d Sedan
325d Sedan
330d Sedan
330d Sedan
330xd Sedan
330xd Sedan
335d Sedan
318i Touring
318i Touring
320i Touring
320i Touring
325i Touring
325i Touring
325xi Touring
325xi Touring
330i Touring
330i Touring
330xi Touring
330xi Touring
335i Touring
335i Touring
335xi Touring (from 03/07)
335xi Touring (from 03/07)
318d Touring
320d Touring
320d Touring
325d Touring
330d Touring
330d Touring
330xd Touring
330xd Touring
335d Touring
320i Coupé (from 03/07)

1596
1596
1995
1995
1995
1995
1995
1995
1995
1995
2996
2996
2996
2996
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
1995
2996
2996
1995
1995
1995
1995
1995
1995
1995
1995
1997
2497
2497
2497
2497
2996
2996
2996
2996
2979
2979
2979
2979
1995
1995
1995
2993
2993
2993
2993
2993
2993
1995
1995
1995
1995
2497
2497
2497
2497
2996
2996
2996
2996
2979
2979
2979
2979
1995
1995
1995
2993
2993
2993
2993
2993
2993
1995

85
85
95
95
105
105
110
110
125
125
195
195
195
195
90
105
105
120
120
130
130
105
105
125
125
195
195
105
105
130
130
95
95
110
110
127
160
160
160
160
190
190
190
190
225
225
225
225
90
120
120
145
170
170
170
170
210
95
95
110
110
160
160
160
160
190
190
190
190
225
225
225
225
90
120
120
145
170
170
170
170
210
125

M6
M6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
M6
A6
M6
M6
A6
M6
A6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
M6
A6
M6
M6
A6
M6
A6
A6
M6

S
S
S
S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
D
D
D
S
S
S
S
S
S
D
D
D
D
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
D
D
D
D
D
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
D
D
D
D
D
S

10.5
10.5
10.3
10.7
7.9
8.2
10.5
11.0
8.7
8.4
13.7
13.9
12.2
12.3
7.7
5.7
6.9
7.7
8.7
6.2
7.3
7.9
8.2
8.7
8.4
12.2
12.3
5.7
6.9
6.2
7.3
10.0
11.2
10.7
11.0
12.8
12.1
12.9
13.0
14.4
12.7
12.9
13.9
14.6
14.4
13.9
15.3
15.0
7.6
7.8
9.1
8.6
8.9
10.0
9.6
10.8
10.3
10.5
11.6
10.8
11.3
12.4
13.2
13.3
14.4
12.8
13.3
14.0
14.6
14.6
14.1
15.5
15.2
7.9
8.1
9.4
8.8
9.1
10.3
9.8
11.1
10.5
8.7

5.8
5.8
5.6
6.1
4.7
5.0
5.9
6.2
5.1
5.1
6.6
6.8
6.0
6.0
4.5
4.1
4.5
4.6
5.5
4.1
4.5
4.7
5.0
5.1
5.1
6.0
6.0
4.1
4.5
4.1
4.5
5.7
6.0
5.6
6.2
6.6
6.2
6.7
7.0
7.3
6.4
6.8
7.1
7.5
6.8
7.1
7.2
7.7
4.4
4.5
5.3
5.1
5.1
5.9
5.8
6.4
5.9
5.9
6.1
5.7
6.3
6.4
6.9
7.1
7.6
6.6
7.0
7.3
7.6
7.0
7.3
7.4
7.9
4.6
4.6
5.5
5.3
5.3
6.1
6.0
6.5
6.1
4.9

7.5
7.5
7.3
7.8
5.9
6.2
7.5
7.9
6.4
6.3
9.2
9.4
8.3
8.3
5.6
4.7
5.4
5.7
6.6
4.9
5.5
5.9
6.2
6.4
6.3
8.3
8.3
4.7
5.4
4.9
5.5
7.3
7.9
7.4
7.9
8.9
8.4
9.0
9.2
9.9
8.7
9.0
9.6
10.1
9.6
9.6
10.2
10.4
5.6
5.7
6.7
6.4
6.5
7.4
7.2
8.0
7.5
7.6
8.1
7.6
8.1
8.6
9.2
9.4
10.1
8.9
9.3
9.8
10.2
9.8
9.8
10.4
10.6
5.8
5.9
6.9
6.6
6.7
7.6
7.4
8.2
7.7
6.3

BMW
320i Coupé (from 03/07)
1995
2497
325i Coupé
2497
325i Coupé
2497
325xi Coupé
2497
325xi Coupé
2996
330i Coupé
2996
330i Coupé
2996
330xi Coupé
2996
330xi Coupé
2979
335i Coupé
2979
335i Coupé
320d Coupé (from 03/07)
1995
320d Coupé (from 03/07)
1995
325d Coupé (from 03/07)
2993
325d Coupé (from 03/07)
2993
2993
330d Coupé
2993
330d Coupé
2993
330xd Coupé
2993
330xd Coupé
2993
335d Coupé
1995
318Ci Convertible
1995
318Ci Convertible
2171
320Ci Convertible
320Ci Convertible
2171
320i Convertible (from 03/07) 1995
320i Convertible (from 03/07) 1995
2494
325Ci Convertible
325Ci Convertible
2494
325i Convertible (from 03/07) 2996
325i Convertible (from 03/07) 2996
330Ci Convertible
2979
2979
330Ci Convertible
330i Convertible (from 03/07) 2996
330i Convertible (from 03/07) 2996
335i Convertible (from 03/07) 2979
335i Convertible (from 03/07) 2979
320Cd Convertible
1995
330Cd Convertible
2993
330d Convertible (from 03/07) 2993
330d Convertible (from 03/07) 2993
2497
523i Sedan
2497
523i Sedan
523i Sedan (from 03/07)
2497
523i Sedan (from 03/07)
2497
2497
525i Sedan
2497
525i Sedan
525i Sedan (from 03/07)
2996
525i Sedan (from 03/07)
2996
2497
525xi Sedan
2497
525xi Sedan
525xi Sedan (from 03/07)
2996
525xi Sedan (from 03/07)
2996
2996
530i Sedan
2996
530i Sedan
530i Sedan (from 03/07)
2996
530i Sedan (from 03/07)
2996
2996
530xi Sedan
2996
530xi Sedan
530xi Sedan (from 03/07)
2996
530xi Sedan (from 03/07)
2996
4000
540i Sedan
4000
540i Sedan
540i Sedan (from 03/07)
4000
540i Sedan (from 03/07)
4000
4799
550i Sedan
4799
550i Sedan
550i Sedan (from 03/07)
4799
550i Sedan (from 03/07)
4799
1995
520d Sedan
1995
520d Sedan
520d Sedan (from 03/07)
1995
520d Sedan (from 03/07)
1995
2497
525d Sedan
2497
525d Sedan
525d Sedan (from 03/07)
2993
525d Sedan (from 03/07)
2993
2993
530d Sedan
2993
530d Sedan
530d Sedan (from 03/07)
2993
530d Sedan (from 03/07)
2993
2993
530xd Sedan
2993
530xd Sedan
530xd Sedan (from 03/07)
2993

125
160
160
160
160
200
200
200
200
225
225
130
130
145
145
170
170
170
170
210
110
110
125
125
125
125
141
141
160
160
170
170
200
200
225
225
110
150
170
170
130
130
140
140
160
160
160
160
160
160
160
160
190
190
200
200
190
190
200
200
225
225
225
225
270
270
270
270
120
120
120
120
130
130
145
145
170
170
173
173
170
170
173

A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
A6
M5
A5
M5
A5
M6
A6
M5
A5
M6
A6
M6
A5
M6
A6
M6
A6
M6
M6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6

180
179
176
188
140
148
181
190
152
150
221
226
197
198
150
123
144
152
176
129
145
140
148
152
150
197
198
123
144
129
145
175
190
178
190
214
203
218
221
238
210
216
230
243
231
231
245
250
150
153
179
171
174
197
192
213
200
182
195
182
196
208
222
226
243
214
224
235
245
235
235
250
225
155
158
184
176
179
203
197
218
205
151

S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
D
D
D
D
D
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D

8.8
12.1
12.9
13.0
14.4
12.8
12.9
13.9
14.6
14.3
13.8
6.1
7.2
8.6
9.3
8.9
10.0
9.6
10.8
10.3
10.8
11.6
12.8
13.5
9.0
9.1
13.2
13.9
11.0
11.4
13.4
14.9
11.1
11.0
14.9
14.4
8.5
9.5
9.3
10.0
12.1
13.4
10.1
10.3
12.4
13.5
10.3
10.4
13.7
14.8
11.3
11.2
12.6
13.6
10.9
10.8
13.6
14.4
11.5
11.6
16.2
15.5
15.8
14.4
16.4
15.9
16.6
15.5
8.0
9.3
8.0
9.3
9.3
10.8
8.2
8.5
9.4
10.3
8.6
9.1
10.2
11.1
8.6

5.0
6.2
6.7
7.0
7.3
6.5
6.8
7.1
7.5
6.7
7.0
4.2
4.5
5.1
5.5
5.1
5.9
5.8
6.4
5.9
6.1
6.6
7.4
7.7
5.2
5.3
7.5
7.6
6.1
6.2
7.3
7.5
6.3
6.7
7.0
7.3
5.0
5.6
5.3
5.9
6.4
6.9
5.7
5.9
6.5
7.0
5.7
5.8
7.2
7.7
6.2
6.3
6.6
6.8
5.8
5.6
7.4
7.9
6.2
6.0
8.0
7.5
7.4
6.9
8.0
7.8
7.6
7.2
4.7
5.5
4.7
5.5
5.5
6.2
5.0
5.3
5.2
5.9
5.1
5.2
6.1
6.5
5.1

6.4
8.4
9.0
9.2
9.9
8.8
9.0
9.6
10.1
9.5
9.5
4.9
5.5
6.4
6.9
6.5
7.4
7.2
8.0
7.5
7.8
8.4
9.4
9.8
6.6
6.7
9.6
9.9
7.9
8.1
9.6
10.2
8.1
8.3
9.9
9.9
6.3
7.0
6.8
7.4
8.5
9.3
7.3
7.5
8.7
9.4
7.4
7.5
9.6
10.3
8.1
8.1
8.8
9.3
7.7
7.5
9.7
10.3
8.2
8.1
11.0
10.4
10.5
9.7
11.1
10.8
10.9
10.3
5.9
6.9
5.9
6.9
6.9
7.9
6.2
6.5
6.7
7.5
6.4
6.6
7.6
8.2
6.4

154
203
218
221
238
212
216
230
243
228
228
131
145
171
184
174
197
192
213
200
190
203
225
236
157
161
230
239
190
195
229
244
194
198
238
238
167
187
181
197
205
224
174
178
210
227
176
178
232
249
193
193
212
224
182
178
234
249
194
193
264
250
250
232
267
260
260
246
158
185
158
185
185
211
165
172
179
200
170
176
203
219
170

Model

Displacement Power Gearbox1]
(cc) output
(kw)

Fuel
type 2]

Urban
(l/100 km)

Extra- Combined
urban
(l/100 km)

CO2
(l/100 km) emissions
[g/km]

Model

Displacement Power Gearbox1]
(cc) output
(kw)

Fuel
type 2]

Urban
(l/100 km)

Extra- Combined
urban
(l/100 km)

CO2
(l/100 km) emissions
[g/km]

A6
A6
A6
M6
M6
A6
M6
A6
M6
A6
M6
A6
M6
M6

M5
A5
M6
A6
M5
M6
A6
M6
M6
A6
M6
M5
M5
A5
M6
A6

S
S
S
S
S
S
S
S
S
S
S
S
SP
SP

S
S
S
S
D
S
S
D
S
S
S
S
S
S
S
S

14.9
17.5
11.3
10.8
11.8
12.0
12.0
12.8
12.6
12.8
13.0
12.8
18.2
18.2

9.6
10.9
7.6
9.3
5.8
7.8
9.3
5.6
8.9
10.9
11.8
9.8
10.0
10.7
11.3
12.7

8.6
9.6
7.2
5.6
6.1
6.3
6.3
6.8
6.3
6.8
6.5
6.8
8.6
8.6

5.2
5.9
4.6
5.0
4.3
4.6
5.2
3.7
5.7
5.7
6.8
5.4
5.7
5.8
6.6
6.4

10.9
12.5
8.7
7.5
8.2
8.4
8.4
9.0
8.6
9.0
8.9
9.0
12.1
12.1

6.8
7.7
5.7
6.6
4.8
5.8
6.7
4.4
6.9
7.6
8.6
7.0
7.3
7.6
8.3
8.7

260
299
231
181
197
202
202
216
207
217
213
216
292
292

164
187
138
157
129
139
161
118
164
182
207
168
174
182
199
208

23.2

11.3

15.7

377

23.3

11.4

15.8

380

BMW
X5 3.0si (from 03/07)
X5 4.8i (from 03/07)
X5 3.0d (from 03/07)
Z4 2.0i
Z4 2.5i
Z4 2.5i
Z4 2.5si
Z4 2.5si
Z4 3.0si
Z4 3.0si
Z4 3.0si Coupé
Z4 3.0si Coupé
Z4 M Roadster
Z4 M Coupé

MINI
One
One
One (from 04/07)
One (from 04/07)
One D
Cooper
Cooper
Cooper D (from 04/07)
Cooper S
Cooper S
Cooper S JCW GP3]
One Convertible
Cooper Convertible
Cooper Convertible
Cooper S Convertible
Cooper S Convertible

2996
4799
2993
1995
2497
2497
2497
2497
2996
2996
2996
2996
3246
3246

1598
1598
1397
1397
1364
1598
1598
1560
1598
1598
1598
1598
1598
1598
1598
1598

200
261
173
110
130
130
160
160
195
195
195
195
252
252

66
66
70
70
65
88
88
80
128
128
160
66
85
85
125
125

Rolls-Royce
Rolls-Royce Phantom
Rolls-Royce Phantom
Long wheel base

6749

338

6749

338

1] Gearbox type:

M5 = manual shift 5-speed

M6 = manual shift 6-speed

A5 = automatic transmission 5-speed

A6 = automatic transmission 6-speed

2] Fuel type:

S = Super

SP = Super plus

D = Diesel

3] John Cooper Works GP Kit

Revised March 2007

BMW
530xd Sedan (from 03/07)
535d Sedan
535d Sedan (from 03/07)
M5
M5 (from 03/07)
523i Touring
523i Touring
523i Touring (from 03/07)
523i Touring (from 03/07)
525i Touring
525i Touring
525i Touring (from 03/07)
525i Touring (from 03/07)
525xi Touring
525xi Touring
525xi Touring (from 03/07)
525xi Touring (from 03/07)
530i Touring
530i Touring
530i Touring (from 03/07)
530i Touring (from 03/07)
530xi Touring
530xi Touring
530xi Touring (from 03/07)
530xi Touring (from 03/07)
550i Touring
550i Touring
550i Touring (from 03/07)
550i Touring (from 03/07)
520d Touring
520d Touring
520d Touring (from 03/07)
520d Touring (from 03/07)
525d Touring
525d Touring
525d Touring (from 03/07)
525d Touring (from 03/07)
530d Touring
530d Touring
530d Touring (from 03/07)
530d Touring (from 03/07)
530xd Touring
530xd Touring
530xd Touring (from 03/07)
530xd Touring (from 03/07)
535d Touring
535d Touring (from 03/07)
M5 Touring (from 03/07)
630i Coupé
630i Coupé
650i Coupé
650i Coupé
630i Convertible
630i Convertible
650i Convertible
650i Convertible
M6
M6 Convertible
730i
730Li
740i
740Li
750i
750Li
760i
760Li
730d
730Ld
745d
X3 2.0i
X3 2.5si
X3 2.5si
X3 3.0si
X3 3.0si
X3 2.0d
X3 3.0d
X3 3.0d
X3 3.0sd
X5 3.0i
X5 3.0i
X5 4.4i
X5 4.8is
X5 3.0d

2993
2993
2993
4999
4999
2497
2497
2497
2497
2497
2497
2996
2996
2497
2497
2996
2996
2996
2996
2996
2996
2996
2996
2996
2996
4799
4799
4799
4799
1995
1995
1995
1995
2497
2497
2993
2993
2993
2993
2993
2993
2993
2993
2993
2993
2993
2993
4999
2996
2996
4799
4799
2996
2996
4799
4799
4999
4999
2996
2996
4000
4000
4799
4799
5972
5972
2993
2993
4423
1995
2497
2497
2996
2996
1995
2993
2993
2993
2979
2979
4398
4799
2993

173
200
210
373
373
130
130
140
140
160
160
160
160
160
160
160
160
190
190
200
200
190
190
200
200
270
270
270
270
120
120
120
120
130
130
145
145
170
170
173
173
170
170
173
173
200
210
373
190
190
270
270
190
190
270
270
373
373
190
190
225
225
270
270
327
327
170
170
242
110
160
160
200
200
110
160
160
210
170
170
235
265
160

A6
A6
A6
M7
M7
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
M6
A6
A6
A6
M7
M6
A6
M6
A6
M6
A6
M6
A6
M7
M7
A6
A6
A6
A6
A6
A6
A6
A6
A6
A6
A6
M6
M6
A6
M6
A6
M6
M6
A6
A6
M6
A6
A6
A6
A6

D
D
D
SP
SP
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
S
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
D
SP
S
S
S
S
S
S
S
S
SP
SP
SP
SP
SP
SP
SP
SP
SP
SP
D
D
D
S
S
S
S
S
D
D
D
D
S
S
SP
SP
D

9.1
10.9
9.2
22.7
22.7
12.1
13.7
10.6
10.6
12.5
13.5
10.8
10.7
13.7
14.7
11.8
11.7
13.1
13.3
11.1
11.0
14.1
14.6
12.0
12.1
17.0
16.6
17.0
16.1
8.3
9.6
8.3
9.6
9.7
11.0
8.4
8.6
9.8
10.6
8.8
9.3
10.6
11.5
9.6
9.9
11.1
9.4
22.4
13.1
13.9
17.6
16.3
13.6
14.2
19.1
17.2
22.7
22.8
14.6
14.6
16.3
16.3
16.9
16.9
20.7
20.7
11.3
11.3
13.5
13.1
13.7
14.1
14.2
14.3
9.6
10.3
11.2
11.3
17.8
18.1
18.2
18.7
12.0

5.2
6.3
5.4
10.2
10.2
6.7
7.1
6.0
6.0
6.8
7.2
5.9
6.0
7.7
7.9
6.4
6.5
6.9
7.3
6.0
5.8
7.8
8.1
6.4
6.3
8.3
8.2
7.8
7.5
4.8
5.6
4.8
5.6
5.7
6.4
5.2
5.4
5.4
6.0
5.3
5.3
6.3
6.8
5.8
5.6
6.5
5.6
10.6
6.7
7.0
8.6
8.1
7.3
7.5
9.3
8.5
10.2
10.7
7.5
7.5
8.2
8.2
8.3
8.3
9.5
9.5
6.4
6.4
7.2
7.1
7.7
7.8
7.7
8.0
5.9
6.5
7.1
7.2
9.7
9.9
10.2
10.5
8.0

6.6
8.0
6.8
14.8
14.8
8.7
9.5
7.7
7.7
8.9
9.5
7.7
7.7
9.9
10.4
8.4
8.4
9.2
9.5
7.9
7.7
10.1
10.5
8.5
8.4
11.5
11.3
11.2
10.7
6.1
7.1
6.1
7.1
7.2
8.1
6.4
6.6
7.0
7.7
6.6
6.8
7.9
8.5
7.2
7.2
8.2
7.0
15
9.0
9.5
11.9
11.1
9.6
9.9
12.9
11.7
14.8
15.2
10.1
10.1
11.2
11.2
11.4
11.4
13.6
13.6
8.2
8.2
9.5
9.3
9.9
10.1
10.1
10.3
7.2
7.9
8.6
8.7
12.7
12.9
13.1
13.5
9.4

176
211
182
357
357
210
230
183
184
215
229
183
184
239
251
201
201
222
230
187
184
244
253
203
201
276
272
267
254
162
189
162
189
191
216
171
176
187
205
176
180
211
227
192
192
216
186
361
216
226
286
267
229
238
310
281
357
366
241
242
267
268
271
272
327
327
216
216
251
223
238
243
243
248
191
210
229
232
307
312
317
324
250

Published by
Bayerische Motoren Werke
Aktiengesellschaft
80788 Munich
Germany
Telephone +49 89 382-0