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Hyundai Motor Companya t a d n o i t p m u s n o C Annual Report 2009 Facts and figures s t n e t n o C A further contribution towards preserving resources BMW Group Annual Report 2009 awarded the „Blue Angel“ eco-label. The paper used (Enviro Top and Nanoo Color) was produced, climate-neutrally and without optical brighteners and chlorine bleach, from recycled waste paper. All other production materials used also comply with the requirements of the Blue Angel eco-label (RAL-UZ 14). The Blue Angel is considered to be one of the most stringent eco-labels in the world. The CO2 emissions generated through print and production were neutralised by the BMW Group. To this end, the corresponding amount of emissions allowances was erased, with the transaction identification DE-89388 on February 23, 2010. Published by Bayerische Motoren Werke Aktiengesellschaft 80788 Munich Germany Telephone +49 89 382-0 9 0 0 2 t r o p e R l a u n n A p u o r G W M B s t n e t n o C 04 BMW Group in figures 06 Report of the Supervisory Board 12 12 14 18 42 45 48 63 64 70 74 74 74 76 78 80 81 Group Management Report A Review of the Financial Year General Economic Environment Review of Operations BMW Group – Capital Market Activities in 2009 Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 56 56 58 59 Internal Control System Risk Management Outlook 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 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes to the Group Financial Statements 81 90 97 98 119 133 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 138 Responsibility Statement by the Company’s Legal Representatives 139 Auditors’ Report 140 140 141 142 145 146 151 157 158 162 162 164 166 168 170 173 174 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board and on the Composition and Work Procedures of its Committees Compensation Report Information on Corporate Governance Practices Applied Beyond Mandatory Requirements Compliance in the BMW Group Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Financial Calendar Contacts t r o p e R t n e m e g a n a M p u o r G s t n e m e t a t S l i i a c n a n F p u o r G e c n a n r e v o G e t a r o p r o C n o i t a m r o f n I r e h t O Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) BMW 530d xDrive Touring 535d Touring 2 M5 Touring 3 535i Gran Turismo 2, 4 550i Gran Turismo 2, 4 530d Gran Turismo 2, 4 535d Gran Turismo 2, 4 630i Coupé 650i Coupé 635d Coupé 2 630i Convertible 650i Convertible 635d Convertible 2 M6 Coupé 3 M6 Convertible 3 740i 2, 4 740Li 2, 4 750i 2, 4 750i xDrive 2, 4 750Li 2, 4 750Li xDrive 2, 4 760i 2, 4 760Li 2, 4 730d 2, 4 730Ld 2, 4 740d 2, 4 ActiveHybrid 7 2, 4 ActiveHybrid 7L 2, 4 X1 sDrive18i 4 X1 xDrive25i 2, 4 X1 xDrive28i 2, 4 X1 sDrive18d 4 X1 xDrive18d 4 X1 sDrive20d 4 X1 xDrive20d 4 X1 xDrive23d 2, 4 X3 xDrive20i 1 X3 xDrive25i X3 xDrive30i X3 xDrive18d 1, 4 X3 xDrive20d 4 X3 xDrive30d X3 xDrive35d 2 X5 xDrive35i 2, 4 X5 xDrive50i 2, 4 X5 xDrive30d 2, 4 X5 xDrive40d 2, 4 X5 M 4, 10 X6 xDrive35i 2, 4 X6 xDrive50i 2, 4 X6 xDrive30d 2, 4 X6 xDrive40d 2, 4 ActiveHybrid X6 2, 4 9.6 (9.9) 9.2 21.7 5.8 (5.6) 5.6 10.5 7.2 (7.2) 6.9 14.6 192 (192) 182 348 12.3 16.2 8.1 8.3 6.9 8.3 5.6 5.8 8.9 11.2 6.5 6.7 209 263 173 175 11.2 (11.0) 17.8 (15.9) 9.2 11.8 (11.6) 19.2 (16.5) 9.6 21.4 22.0 6.0 (5.8) 8.1 (7.4) 5.6 6.3 (6.0) 8.8 (7.7) 5.8 10.2 10.6 7.9 (7.7) 11.7 (10.5) 6.9 8.3 (8.1) 12.6 (10.9) 7.2 14.3 14.7 188 (184) 279 (249) 183 198 (192) 299 (258) 190 342 352 13.8 14.0 16.4 17.1 16.4 17.1 18.8 18.9 9.0 9.1 9.0 12.6 12.6 11.3 (11.5) 12.9 13.0 6.1 (7.1) 6.7 (7.7) 6.4 (7.1) 7.0 (7.7) 7.8 12.6 12.8 (13.1) 13.4 (13.3) 7.9 8.2 (8.3) 9.7 (9.9) 9.7 13.2 17.5 8.7 8.8 19.3 13.2 17.5 8.7 8.8 10.8 7.6 7.7 8.5 8.9 8.5 8.9 9.5 9.6 5.5 5.6 5.7 7.6 7.6 6.4 (6.6) 7.2 7.3 4.7 (5.2) 5.1 (5.4) 4.7 (5.2) 5.1 (5.4) 5.5 6.9 7.3 (7.4) 7.3 (7.6) 5.2 5.5 (5.8) 6.0 (6.4) 6.7 8.3 9.6 6.7 6.8 10.8 8.3 9.6 6.7 6.8 9.4 9.9 10.0 11.4 11.9 11.4 11.9 12.9 13.0 6.8 6.9 6.9 9.4 9.4 232 235 266 278 266 278 299 303 178 180 181 219 219 8.2 (8.4) 9.3 9.4 5.2 (5.9) 5.7 (6.2) 5.3 (5.9) 5.8 (6.2) 6.3 9.0 9.3 (9.5) 9.5 (9.7) 6.2 6.5 (6.7) 7.4 (7.7) 7.8 191 (195) 217 219 136 (155) 150 (164) 139 (155) 153 (164) 167 215 224 (228) 229 (233) 165 172 (178) 196 (206) 208 10.1 12.5 7.4 7.5 13.9 10.1 12.5 7.4 7.5 9.9 236 292 195 198 325 236 292 195 198 231 BMW X6 M 4, 10 19.3 10.8 13.9 325 Z4 sDrive23i 4 Z4 sDrive30i 4 Z4 sDrive35i 4 Z4 sDrive35is 2, 4 12.4 (11.8) 12.4 (11.9) 13.5 (12.6) 12.6 6.2 (6.1) 6.2 (6.2) 7.0 (6.9) 6.9 8.5 (8.2) 8.5 (8.3) 9.4 (9.0) 9.0 199 (192) 199 (195) 219 (210) 210 MINI MINI One 4 MINI One MINIMALIST 4, 8 MINI Cooper 4 MINI Cooper S 4 MINI John Cooper Works 1, 4 MINI One D 1 MINI Cooper D 7.2 (8.7) 6.5 6.9 (8.7) 7.3 (8.9) 9.4 4.7 4.7 (6.5) MINI One Convertible 4 7.3 (8.9) MINI Cooper Convertible 4 7.2 (8.9) MINI Cooper S Convertible 4 7.5 (9.1) MINI John Cooper Works Convertible 1, 4 9.6 4.4 (5.1) 4.3 4.6 (5.1) 5.0 (5.0) 5.8 3.5 3.5 (4.2) 4.3 (5.3) 4.9 (5.3) 5.1 (5.1) 5.4 (6.4) 5.1 5.4 (6.4) 5.8 (6.4) 7.1 3.9 3.9 (5.0) 127 (150) 119 127 (150) 136 (149) 165 104 104 (134) 5.7 (6.6) 5.7 (6.6) 6.0 (6.6) 133 (154) 133 (154) 139 (153) 5.9 7.3 169 MINI One Clubman 4 MINI Cooper Clubman 4 MINI Cooper S Clubman 4 MINI John Cooper Works Clubman 1, 4 MINI Cooper D Clubman Rolls-Royce Rolls-Royce Ghost 2, 4 Rolls-Royce Phantom 2 Rolls-Royce Phantom extended Wheelbase 2 7.3 (8.8) 7.0 (8.8) 7.4 (8.9) 4.5 (5.2) 4.7 (5.2) 5.0 (5.0) 5.5 (6.5) 5.5 (6.5) 5.9 (6.4) 129 (152) 129 (152) 137 (150) 9.5 4.9 (6.6) 5.8 3.6 (4.2) 7.2 4.1 (5.1) 167 109 (136) 20.5 23.2 9.6 11.3 13.6 15.7 317 377 23.3 11.4 15.8 380 Rolls-Royce Phantom Coupé 2 23.2 11.3 15.7 377 Rolls-Royce Phantom Drophead Coupé 2 23.2 11.3 15.7 377 Figures in brackets only valid for automatic transmissions. 1 only available with manual transmission 2 only available with automatic transmission 3 comes as standard with sequential M transmission (7-gear) 4 EU-5 comes as standard 5 EU-4 comes as standard for right-hand drive vehicles 6 variant with 1.6-litre cubic capacity 7 Consumption values for models with automatic transmission in right-hand drive vehicles vary. 8 only available in selected EU countries 9 figures not yet available 10 comes as standard with 6-gear M Sport automatic transmission Further information and constantly updated data for the vehicles is available on the Internet at www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com. as of model year 2010 a t a d n o i t p m u s n o C Annual Report 2009 Facts and figures s t n e t n o C A further contribution towards preserving resources BMW Group Annual Report 2009 awarded the „Blue Angel“ eco-label. The paper used (Enviro Top and Nanoo Color) was produced, climate-neutrally and without optical brighteners and chlorine bleach, from recycled waste paper. All other production materials used also comply with the requirements of the Blue Angel eco-label (RAL-UZ 14). The Blue Angel is considered to be one of the most stringent eco-labels in the world. The CO2 emissions generated through print and production were neutralised by the BMW Group. To this end, the corresponding amount of emissions allowances was erased, with the transaction identification DE-89388 on February 23, 2010. Published by Bayerische Motoren Werke Aktiengesellschaft 80788 Munich Germany Telephone +49 89 382-0 9 0 0 2 t r o p e R l a u n n A p u o r G W M B s t n e t n o C 04 BMW Group in figures 06 Report of the Supervisory Board 12 12 14 18 42 45 48 63 64 70 74 74 74 76 78 80 81 Group Management Report A Review of the Financial Year General Economic Environment Review of Operations BMW Group – Capital Market Activities in 2009 Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 56 56 58 59 Internal Control System Risk Management Outlook 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 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes to the Group Financial Statements 81 90 97 98 119 133 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 138 Responsibility Statement by the Company’s Legal Representatives 139 Auditors’ Report 140 140 141 142 145 146 151 157 158 162 162 164 166 168 170 173 174 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board and on the Composition and Work Procedures of its Committees Compensation Report Information on Corporate Governance Practices Applied Beyond Mandatory Requirements Compliance in the BMW Group Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Financial Calendar Contacts t r o p e R t n e m e g a n a M p u o r G s t n e m e t a t S l i i a c n a n F p u o r G e c n a n r e v o G e t a r o p r o C n o i t a m r o f n I r e h t O Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) BMW 530d xDrive Touring 535d Touring 2 M5 Touring 3 535i Gran Turismo 2, 4 550i Gran Turismo 2, 4 530d Gran Turismo 2, 4 535d Gran Turismo 2, 4 630i Coupé 650i Coupé 635d Coupé 2 630i Convertible 650i Convertible 635d Convertible 2 M6 Coupé 3 M6 Convertible 3 740i 2, 4 740Li 2, 4 750i 2, 4 750i xDrive 2, 4 750Li 2, 4 750Li xDrive 2, 4 760i 2, 4 760Li 2, 4 730d 2, 4 730Ld 2, 4 740d 2, 4 ActiveHybrid 7 2, 4 ActiveHybrid 7L 2, 4 X1 sDrive18i 4 X1 xDrive25i 2, 4 X1 xDrive28i 2, 4 X1 sDrive18d 4 X1 xDrive18d 4 X1 sDrive20d 4 X1 xDrive20d 4 X1 xDrive23d 2, 4 X3 xDrive20i 1 X3 xDrive25i X3 xDrive30i X3 xDrive18d 1, 4 X3 xDrive20d 4 X3 xDrive30d X3 xDrive35d 2 X5 xDrive35i 2, 4 X5 xDrive50i 2, 4 X5 xDrive30d 2, 4 X5 xDrive40d 2, 4 X5 M 4, 10 X6 xDrive35i 2, 4 X6 xDrive50i 2, 4 X6 xDrive30d 2, 4 X6 xDrive40d 2, 4 ActiveHybrid X6 2, 4 9.6 (9.9) 9.2 21.7 5.8 (5.6) 5.6 10.5 7.2 (7.2) 6.9 14.6 192 (192) 182 348 12.3 16.2 8.1 8.3 6.9 8.3 5.6 5.8 8.9 11.2 6.5 6.7 209 263 173 175 11.2 (11.0) 17.8 (15.9) 9.2 11.8 (11.6) 19.2 (16.5) 9.6 21.4 22.0 6.0 (5.8) 8.1 (7.4) 5.6 6.3 (6.0) 8.8 (7.7) 5.8 10.2 10.6 7.9 (7.7) 11.7 (10.5) 6.9 8.3 (8.1) 12.6 (10.9) 7.2 14.3 14.7 188 (184) 279 (249) 183 198 (192) 299 (258) 190 342 352 13.8 14.0 16.4 17.1 16.4 17.1 18.8 18.9 9.0 9.1 9.0 12.6 12.6 11.3 (11.5) 12.9 13.0 6.1 (7.1) 6.7 (7.7) 6.4 (7.1) 7.0 (7.7) 7.8 12.6 12.8 (13.1) 13.4 (13.3) 7.9 8.2 (8.3) 9.7 (9.9) 9.7 13.2 17.5 8.7 8.8 19.3 13.2 17.5 8.7 8.8 10.8 7.6 7.7 8.5 8.9 8.5 8.9 9.5 9.6 5.5 5.6 5.7 7.6 7.6 6.4 (6.6) 7.2 7.3 4.7 (5.2) 5.1 (5.4) 4.7 (5.2) 5.1 (5.4) 5.5 6.9 7.3 (7.4) 7.3 (7.6) 5.2 5.5 (5.8) 6.0 (6.4) 6.7 8.3 9.6 6.7 6.8 10.8 8.3 9.6 6.7 6.8 9.4 9.9 10.0 11.4 11.9 11.4 11.9 12.9 13.0 6.8 6.9 6.9 9.4 9.4 232 235 266 278 266 278 299 303 178 180 181 219 219 8.2 (8.4) 9.3 9.4 5.2 (5.9) 5.7 (6.2) 5.3 (5.9) 5.8 (6.2) 6.3 9.0 9.3 (9.5) 9.5 (9.7) 6.2 6.5 (6.7) 7.4 (7.7) 7.8 191 (195) 217 219 136 (155) 150 (164) 139 (155) 153 (164) 167 215 224 (228) 229 (233) 165 172 (178) 196 (206) 208 10.1 12.5 7.4 7.5 13.9 10.1 12.5 7.4 7.5 9.9 236 292 195 198 325 236 292 195 198 231 BMW X6 M 4, 10 19.3 10.8 13.9 325 Z4 sDrive23i 4 Z4 sDrive30i 4 Z4 sDrive35i 4 Z4 sDrive35is 2, 4 12.4 (11.8) 12.4 (11.9) 13.5 (12.6) 12.6 6.2 (6.1) 6.2 (6.2) 7.0 (6.9) 6.9 8.5 (8.2) 8.5 (8.3) 9.4 (9.0) 9.0 199 (192) 199 (195) 219 (210) 210 MINI MINI One 4 MINI One MINIMALIST 4, 8 MINI Cooper 4 MINI Cooper S 4 MINI John Cooper Works 1, 4 MINI One D 1 MINI Cooper D 7.2 (8.7) 6.5 6.9 (8.7) 7.3 (8.9) 9.4 4.7 4.7 (6.5) MINI One Convertible 4 7.3 (8.9) MINI Cooper Convertible 4 7.2 (8.9) MINI Cooper S Convertible 4 7.5 (9.1) MINI John Cooper Works Convertible 1, 4 9.6 4.4 (5.1) 4.3 4.6 (5.1) 5.0 (5.0) 5.8 3.5 3.5 (4.2) 4.3 (5.3) 4.9 (5.3) 5.1 (5.1) 5.4 (6.4) 5.1 5.4 (6.4) 5.8 (6.4) 7.1 3.9 3.9 (5.0) 127 (150) 119 127 (150) 136 (149) 165 104 104 (134) 5.7 (6.6) 5.7 (6.6) 6.0 (6.6) 133 (154) 133 (154) 139 (153) 5.9 7.3 169 MINI One Clubman 4 MINI Cooper Clubman 4 MINI Cooper S Clubman 4 MINI John Cooper Works Clubman 1, 4 MINI Cooper D Clubman Rolls-Royce Rolls-Royce Ghost 2, 4 Rolls-Royce Phantom 2 Rolls-Royce Phantom extended Wheelbase 2 7.3 (8.8) 7.0 (8.8) 7.4 (8.9) 4.5 (5.2) 4.7 (5.2) 5.0 (5.0) 5.5 (6.5) 5.5 (6.5) 5.9 (6.4) 129 (152) 129 (152) 137 (150) 9.5 4.9 (6.6) 5.8 3.6 (4.2) 7.2 4.1 (5.1) 167 109 (136) 20.5 23.2 9.6 11.3 13.6 15.7 317 377 23.3 11.4 15.8 380 Rolls-Royce Phantom Coupé 2 23.2 11.3 15.7 377 Rolls-Royce Phantom Drophead Coupé 2 23.2 11.3 15.7 377 Figures in brackets only valid for automatic transmissions. 1 only available with manual transmission 2 only available with automatic transmission 3 comes as standard with sequential M transmission (7-gear) 4 EU-5 comes as standard 5 EU-4 comes as standard for right-hand drive vehicles 6 variant with 1.6-litre cubic capacity 7 Consumption values for models with automatic transmission in right-hand drive vehicles vary. 8 only available in selected EU countries 9 figures not yet available 10 comes as standard with 6-gear M Sport automatic transmission Further information and constantly updated data for the vehicles is available on the Internet at www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com. as of model year 2010 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 Bayerische Motoren Werke Aktiengesellschaft (BMW AG) in 1918. The BMW Group has meanwhile become one of the ten largest car manufacturers in the world. With our BMW, MINI and Rolls-Royce brands, we possess three of the strongest premium brands in the automobile industry. We also command a strong market position in the motorcycle sector and operate successfully in the field of financial services. The Strategy Number ONE adopted in 2007 has put us on the right path to a successful future. The business was given a new strategic direction with an emphasis on profitability and long-term value growth. Our activities will remain firmly focused on the premium segments of the international car markets. Our mission statement up to the year 2020 is clearly defined: the BMW Group is the world’s leading provider of premium products and premium services for individual mobility. Long-term thinking and responsible action have long been the cornerstones of our success. Striving for ecological and social sustainability along the entire value-added chain, taking full responsibility for our products and giving an unequivocal commitment to preserving resources are prime objectives firmly embedded in our corporate strategy. For these reasons, the BMW Group has been sector leader in the Dow Jones Sustainability Indices for the last five years. 04 BMW Group in figures Deliveries of automobiles in thousand units 1,500 1,400 1,300 1,200 1,100 1,000 Revenues in euro billion 55 50 45 40 35 30 05 06 07 08 09 05 06 07 08 09 1,328.0 1,374.0 1,500.7 1,435.9 1,286.3 46.7 49.0 56.0 53.2 50.7 Profit before financial result in euro million Profit before tax in euro million 4,500 3,750 3,000 2,250 1,500 750 4,500 3,750 3,000 2,250 1,500 750 05 06 07 08 09 05 06 07 08 09 3,793 4,050 4,212 921 289 3,287 4,124 3,873 351 413 05 BMW Group in figures Deliveries to customers BMW MINI Rolls-Royce 2005 2006 2007 2008 2009 Change in % Automobile deliveries total 1,327,992 1,373,970 1,500,678 1,435,876 1,286,310 1,126,768 1,185,088 1,276,793 1,202,239 1,068,770 200,428 796 188,077 805 222,875 1,010 232,425 1,212 216,538 1,002 –11.1 – 6.8 –17.3 –10.4 Motorcycles1 97,474 100,064 102,467 101,685 87,306 –14.1 Vehicle production BMW MINI Rolls-Royce 1,122,308 1,179,317 1,302,774 1,203,482 1,043,829 200,119 692 186,674 847 237,700 1,029 235,019 1,417 213,670 918 Automobile production total 1,323,119 1,366,838 1,541,503 1,439,918 1,258,417 –13.3 – 9.1 – 35.2 –12.6 Motorcycles2 92,012 103,759 104,396 104,220 82,631 – 20.7 Workforce at end of year 3 BMW Group 105,798 106,575 107,539 100,041 96,230 – 3.8 Financial figures in euro million Revenues Capital expenditure Depreciation and amortisation Operating cash flow 4 Profit before financial result Profit before tax Net profit 46,656 48,999 56,018 53,197 50,681 3,993 3,025 6,184 3,793 3,287 2,239 4,313 3,272 5,373 4,050 4,124 2,874 4,267 3,683 6,246 4,212 3,873 3,134 4,204 3,670 4,471 921 351 330 3,471 3,600 4,921 289 413 210 – 4.7 – 17.4 – 1.9 10.1 – 68.6 17.7 – 36.4 1 excluding Husqvarna Motorcycles (13,052 motorcycles) 2 from 2006 including BMW G 650 X assembly by Piaggio S. p. A., excluding Husqvarna Motorcycles (10,612 motorcycles) 3 Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners. 4 reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities of the Automobiles segment 06 Joachim Milberg Chairman of the Supervisory Board 07 Report of the Supervisory Board Ladies and Gentlemen, The financial year 2009 presented many challenges for the BMW Group. Throughout this difficult period, the Super- visory Board and Board of Management worked together closely, constructively and in an atmosphere of trust. We supported the Board of Management in an advisory capacity in key management issues, including strategic decisions concerning the expansion of the product portfolio within the Automobiles segment. We also continu- ously monitored the management of the business with the aid of regular written and oral reports provided by the Board of Management and on the basis of joint discussions. In a total of five meetings, one of them held over a two-day period, we deliberated at length on the Group’s business plan and forecasts – the preparation of which has clearly been rendered more difficult by the financial and economic crisis. Our discussions also covered risk management issues, risk provisions, the current performance and financial position of the BMW Group and the compensation of the Board of Management. In addition to the scheduled meetings, the Board of Management also kept us informed of current business and economic developments, in particular sales volume performance, personnel figures and other significant matters. The Chairman of the Board of Management informed me per- sonally and on a regular basis about major business transactions and projects. Primary objectives of the Supervisory Board’s monitoring and advisory activities Against the background of the current financial and economic crisis, legislative measures in key markets to reduce CO2 emissions and changing customer requirements, we paid particular attention to the Board of Management’s detailing and implementation of the Strategy Number ONE. The main focus of our monitoring and advisory work was on management’s en- deavours to engage in new growth areas and with new customer target groups, on securing access to customers and innovative technologies, on improving profitability and hence safeguarding the long-term competitiveness of the BMW Group. The Board of Management reported to the Supervisory Board at regular intervals and in depth on risk management and risk provision issues. These two topics constituted a further area of emphasis for our de- liberations in the Supervisory Board. The Board of Management kept us informed of changes in the general economic environment caused by the finan cial and economic crisis and provided a detailed analysis of the risk profile, particularly that of the Financial Services segment. In this context we also held discussions with the Board of Management regarding its plans to restructure activities in this segment to take account of the changing economic environment and regulatory framework. The Supervisory Board fully supports the initiatives taken by the Board of Management to optimise liquidity management, risk management, sales support facilities within the Automobiles segment as well as cor- porate and management organisational structures. In September we joined the Board of Management over a two-day period in a board meeting with a new format. During one session of that meeting – dedicated to reviewing technical information, exploring the concept of motoring as an experience and exchanging ideas – members of the Board of Management gave presentations on new products and innovative drive concepts developed in conjunction with the Strategy Number ONE. It is hoped that these developments will provide some answers to the changing requirements of customers, legislation and the environment. In a further session, the Board of Management presented the results of its strategy review which were discussed at great length. The Supervisory Board considers that the Board of Management is on the right track with new projects designed to tap new growth markets, address new customer groups and move into other vehicle segments. In the course of this meeting we also gave intensive consideration to the long-term business plan which the Board of Management presented for approval and which, due to the financial and economic crisis, predicts a delayed increase in sales volume but a quality of earnings from 2012 onwards in line with pre vious forecasts. The Board of Management explained variances from earlier forecasts and reported fully on the main external risk factors affecting business. The Supervisory Board remains convinced that the Board of Manage- ment’s Strategy Number ONE is robust and accordingly granted its formal approval to the long-term business plan. We also carefully considered the annual budget for the financial year 2010 and the targets incorporated therein and discussed these with the Board of Management. 08 In regular reports, the Board of Management kept us informed of sales volume performance in the Automobiles and Motorcycles segments, new business developments in the Financial Services segment and vehicle residual values in key markets. We were also regularly informed about measures to bring production capacities into line with current demand and about important changes in the area of human resources. The Board of Management also reported on other current events such as the sale of the Formula One racing team. Key projects, such as the expansion of production capacities in China undertaken to strengthen competitiveness and open up potential opportunities for growth, were also explained. One Supervisory Board meeting was held at the BMW plant in Dingolfing, Lower Bavaria, where the BMW 5 Series, 6 Series, 7 Series, 5 Series Gran Turismo and a wide range of components are produced. The central parts distribution centre is also located at this site. During our visit to the plant we were shown how profitability has been significantly improved through rigorous application of the principles of value-added production. In 2009 the Personnel Committee and the Supervisory Board carried out an in-depth review of the structure and level of the Board of Management’s compensation, and deliberated on the new pension arrangements for mem- bers of the Board of Management. A detailed Compensation Report is included in the Corporate Governance Report section of the Annual Report. Tasks dealing with issues relating to the Board of Management’s compensa- tion were reallocated between the Personnel Committee and the Supervisory Board as a result of the German Act on the Appropriateness of Management Board Compensation (VorstAG). With effect from the date on which that law came into force, the Supervisory Board has been responsible for determining and regularly reviewing the Board of Management’s compensation. The Personnel Committee now plays a preparatory role in this process. The Supervisory Board’s terms of reference were adapted to take account of the change in allocation of tasks be- tween the Personnel Committee and the full Supervisory Board. The Personnel Committee and the Supervisory Board also took an in-depth look at the requirements of the VorstAG and the recommendations of the German Corporate Governance Code relating to the structure of board compensation. Further information is provided in the detailed Compensation Report. Corporate Governance and Declaration of Compliance At a joint meeting in December 2009, the Supervisory Board and the Board of Management examined whether the corporate governance principles laid down in the previous year had been applied during the financial year 2009 and also deliberated in detail on future corporate governance developments within the BMW Group. The two boards issued a joint Declaration of Compliance with the German Corporate Governance Code (GCGC) pursuant to § 161 AktG and had it posted to the BMW Group’s website. The recommendations of the Government Commission on the German Corporate Governance Code (draft from 18 June 2009) contained in the revised code issued on 5 August 2009 will be complied with in the future with one exception, namely the level of an appropriate excess amount of directors’ and officers’ (D & O) liability in- surance for Supervisory Board members. In view of the different financial circumstances of Supervisory Board members, both boards consider it appropriate that a differentiation should be made in the level of the D & O insur- ance excess amount applicable for members of the Board of Management on the one hand and members of the Supervisory Board on the other, and are of the opinion that the levels of insurance excess already agreed for mem- bers of the Supervisory Board remain appropriate. The Board of Management and the Supervisory Board decided to comply with all other recommendations. This includes the code’s recommendations to take diversity into ac- count when making proposals for elections to the Supervisory Board and in the composition of the Board of Man- agement. In their assess ment of individuals for posts on the Board of Management or for proposed election to the Supervisory Board, the Personnel Committee, Nomination Committee and the full Supervisory Board will take even more care to ensure that the process is impartial and also pays due attention to diversity. The full Declaration of Compliance is also shown in the Corporate Governance Report (part of the Annual Report). The BMW Group Corporate Governance Code was updated on the basis of resolutions taken by the Board of Management and the Supervisory Board. This code, which sets out the principles of good corporate governance applied within the BMW Group, is available to shareholders and the general public via the Group’s website. Examining and improving the efficiency of the Supervisory Board’s work is seen as an ongoing task, one key element of which is to engage in open and constructive dialogue within the Supervisory Board and in dealings with the Board of Management. The efficiency examination was also the subject of a separate discussion by the full Supervisory Board. Our prepa- rations for this were based on the results of a questionnaire previously devised and distributed by the members 09 Report of the Supervisory Board of the Supervisory Board in advance of the meeting. The two-day meeting held in September (including self- evaluation sessions and opportunities for in-depth technical discussions amongst the members of the two boards) and the introductory programme for new Supervisory Board members received much praise. There was no indication during the past year of any conflicts of interest on the part of members of the Supervisory Board or the Board of Management. Attendance at Supervisory Board meetings in 2009 was on average over 90 %. One member was unable to attend four meetings during the financial year 2009 due to illness. Presiding Board and committee meetings were fully attended. Description of Presiding Board activities and committee work In a total of five meetings, the Presiding Board focused mainly on preparing for the meetings of the full Supervisory Board, including corporate governance related issues unless such preparation fell under the remit of one of the committees. The Presiding Board selected addi- tional topics for Supervisory Board meetings and made suggestions to the Board of Management regarding items to be included in its reports to the full Supervisory Board. The Audit Committee convened five times during the period under report. In accordance with a recommendation by the GCGC, the Group’s three interim reports in 2009 were discussed with the Board of Management prior to publication (by telephone conference). One meeting of the Audit Committee dealt in particular with preparations for the Supervisory Board meeting at the beginning of 2009 at which the financial statements were examined. Before giving the Supervisory Board its recommendations for nominations for election at the Annual General Meeting and engaging the external auditor for the financial year 2009, the Audit Committee obtained a Declaration of Independence from the proposed external auditor as well as fee proposals for the audit of the year-end financial statements and the review of the six-month financial report. After the Annual General Meeting 2009, the Audit Committee appointed the external auditor for the financial year 2009 and, taking the suggestions of the full Super- visory Board into account, specified areas of audit emphasis, including risk management within the financial services line of business. The Audit Committee also looked carefully at the current risk profile, risk management and risk provision issues (in particular with regard to the Financial Services segment) as well as at the Group’s internal control system. The Audit Committee received reports from the Head of Group Internal Audit on the main areas of emphasis, the re- sults of the audits conducted as well as on the Group Internal Audit Department’s organisation, capacities and audit projects. The BMW Group Compliance Committee chairman reported to the Audit Committee on the current status of implementation of the Group’s compliance programme at an international level, preventative measures taken and the evaluation of any indications of non-compliance. In line with the authority given to it by the full Supervisory Board, the Audit Committee approved the decision taken by the Board of Management to increase BMW AG’s share capital pursuant to § 4 section 5 of the Articles of Incorporation (Authorised Capital 2009) by euro 469,200 and, in conjunction with the employee share scheme, to issue 469,200 new non-voting shares of preferred stock, each with a par value of euro 1, at favourable conditions to employees. The Personnel Committee held five meetings during the financial year 2009, focusing in particular on issues relating to the compensation of the Board of Management. Further information is provided in the detailed Com- pensation Report. In addition, the Personnel Committee undertook preparatory work ahead of the full Super- visory Board’s decisions to extend two mandates of Board of Management members. In line with its terms of reference, the Personnel Committee also gave its approval in specific cases to contracts with Board of Manage- ment members. The Nomination Committee, which is charged with the task of finding suitable candidates for the Supervisory Board for inclusion in the Supervisory Board’s proposals for election at the Annual General Meeting, met twice 10 in 2009 to agree on the names of candidates and recommendations to be put forward to the full Supervisory Board. The statutory Mediation Committee (§ 27 (3) of the Law on Worker Participation) was not required to convene during the financial year 2009. The relevant chairmen reported regularly and in depth at Supervisory Board meetings on the status of Presiding Board and committee work. Changes in the composition and organisation of the Board of Management The management team comprising seven persons was unchanged in 2009 in terms of composition and portfolio responsibilities. The Supervisory Board extended mandates in two cases. Changes in the composition of the Supervisory Board, Presiding Board and committees 17 members of the Supervisory Board commenced their new term of office at the end of the Annual General Meeting 2009. The ten employee representatives elected at the meeting of Workers’ Delegates held on 3 March 2009 in accordance with applicable co-determination regulations – Bertin Eichler, Willibald Löw, Werner Neugebauer, Franz Oberländer, Anton Ruf, Stefan Schmid, Maria Schmidt, Manfred Schoch, Werner Zierer and, for the first time, Horst Lischka – took up office alongside the shareholders’ representatives elected individually at the Annual General Meeting held on 14 May 2009. The following representatives were elected at the Annual General Meeting: Franz Markus Haniel, Susanne Klatten, Wolfgang Mayrhuber, Stefan Quandt, Professor Dr. Jürgen Strube and myself, and one new representative, Dr. Robert Lane. The mandates of Ulrich Eckelmann and Professor Dr. rer. nat. Dr. h. c. mult. Hubert Markl came to an end at the conclusion of the Annual General Meeting. Mr. Eckelmann had been an em- ployee representative on the Supervisory Board for more than eleven years, Professor Markl a shareholders’ repre- sentative on the Supervisory Board for almost 15 years. On behalf of the Supervisory Board, I would like to thank both gentlemen for their commendable work and their constructive, steadfast years of service to the BMW Group. After the Annual General Meeting 2009, the Presiding Board and committees were constituted anew. I was elected unanimously as Chairman, Mr. Manfred Schoch as First Deputy Chairman and Messrs. Stefan Quandt, Stefan Schmid and Professor Dr. Jürgen Strube as further Deputy Chairmen. In accordance with the recommendations of the GCGC, I had it made known on the BMW Group’s website in conjunction with the invitation of shareholders to the Annual General Meeting, and again before election at that meeting, that, should I be re-elected to the Su- pervisory Board, I would stand again for the position of Chairman. The Supervisory Board passed a resolution that the Presiding Board should at the same time take over the function of the Personnel Committee and the Audit Committee. The shareholders’ representatives on the Supervisory Board elected Stefan Quandt and Professor Dr. Jürgen Strube as members of the Nomination Committee. By virtue of my position as Chairman of the Super- visory Board, in accordance with the applicable terms of reference, I assumed the chair of both the Nomination Committee and the Personnel Committee, in line with the recommendation of the GCGC. As a result of his exper- tise in the fields of financial reporting and internal control procedures, Professor Dr. Jürgen Strube was re-elected (as an independent member of the Supervisory Board) to chair the Audit Committee. Together with myself and the First Deputy Chairman of the Supervisory Board, Messrs. Stefan Quandt and Stefan Schmid were elected members of the Mediation Committee. The work procedures of the Supervisory Board committees are described in detail in the corporate governance section of the Annual Report. This also includes an overview of the structure of the Supervisory Board and its committees. Examination of financial statements and the profit distribution proposal KPMG AG Wirtschaftsprüfungsgesell- schaft, Berlin, conducted a review of the abridged Interim Group Financial Statements and Interim Group Manage- 11 Report of the Supervisory Board ment Report for the six-month period ended 30 June 2009. The results of the review were reported orally to the Audit Committee: no issues were identified that might indicate that the abridged Interim Group Financial Statements and Interim Group Management Report had not been prepared, in all material respects, in accord- ance with the applicable provisions. The Company and Group Financial Statements of Bayerische Motoren Werke Aktiengesellschaft for the year ended 31 December 2009 and the combined Company and Group Management Report were audited by KPMG AG Wirtschaftsprüfungsgesellschaft and given an unqualified audit opinion on 19 February 2010. The Audit Committee examined these documents in detail at its meeting on 26 February 2010. At its meeting on 11 March 2010 and after hearing the committee chairman’s report on the meeting of the Audit Committee, the Supervisory Board deliberated on and examined the relevant drafts drawn up by the Board of Management. Representatives of the external auditors attended both meetings, reported on significant findings and answered any additional questions raised by the members of the Supervisory Board. The representatives of the external auditors con- firmed that the risk management system established by the Board of Management is capable of identifying events or developments impairing the going-concern status of the Company and that no material weakness in the internal control system and risk management system were found with regard to the financial reporting process. In the course of their audit work, the external auditors did not identify any facts inconsistent with the contents of the Declaration of Compliance issued jointly by the two boards. Documents relating to the Company and Group Fi- nancial Statements, the combined Management Report, the long-form audit reports of the external auditors and the Board of Management’s profit distribution proposal were made available to all members of the Supervisory Board in a timely manner. 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 2009 prepared by the Board of Management. The Company Financial Statements are therefore adopted. The Board of Management’s profit distribution proposal was reviewed by the Audit Committee and the Supervi- sory Board. Taking account of the financial condition of the BMW Group and the interests of the shareholders, they consider the proposal appropriate and concur with it. In accordance with the conclusion reached on the ex- amination by the Audit Committee and Supervisory Board, no objections were raised. The financial year 2009 was overshadowed by the ongoing financial and economic crisis. The strategy of incorpo- rating Efficient Dynamics throughout the whole range of products and the successful implementation of profita- bility improvement measures made an important contribution to the Group’s ability to take action and be competi- tive during the financial year 2009. Seen in the context of unfavourable macroeconomic conditions, the BMW Group was able to successfully assert itself in 2009 as a robust, autonomous company. This achievement required a high degree of commitment and constructive cooperation at all levels. On behalf of the Supervisory Board I sincerely wish to thank the members of the Board of Management, all em- ployees and employee representatives for their continued hard work and their commitment to furthering the interests of the BMW Group. Munich, 11 March 2010 On behalf of the Supervisory Board Joachim Milberg Chairman of the Supervisory Board 45 48 Group Management Report 12 12 A Review of the Financial Year 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 12 Group Management Report A Review of the Financial Year BMW Group performs well despite economic crisis The worldwide economic and financial crisis again had a major impact on our business in 2009. The steep decline in demand on key sales markets and unfavourable refinanc- ing conditions on international capital markets were partic- ularly pronounced during the first half of the year. Manufac- turers of premium vehicles benefited only to a very minor extent from the various stimulus programmes established in many countries to help increase car sales volumes. The first signs of moderate economic recovery, from which our automobile business also profited, emerged during the second half of the year. With a total of 1,286,310 BMW, MINI and Rolls-Royce cars sold in 2009, we ended the year 10.4 % down on the previous year’s sales volume perform- ance and within the predicted range of 10 % to 15 %. In- tense competition and model life-cycle factors also played a role in reducing sales volumes to below the previous year’s figures. We were nevertheless able to increase mar- ket share in the premium segment and retain our position as the world’s leading premium manufacturer. International motorcycle markets contracted on average by roughly one third in 2009. Despite this difficult environ- ment, we were still able to sell 87,306 BMW motorcycles worldwide (– 14.1 %), convincingly outperforming the mar- ket as a whole. The weak state of the global economy also cast its shadow over financial services business in 2009. Ongoing adverse conditions on the international car markets also caused new financing and lease business to decline. The situation on the international used car markets differed greatly from market to market. Whereas demand for previously owned cars stabilised over the course of the year in North America and the United Kingdom, the situation in Continental Europe remained difficult. The economic and financial crisis was especially reflected in this region in a higher volume of bad debts. Narrower risk spreads on the international capital markets reduced refinancing costs during the year. Due to the uncertain conditions on international capital markets, we increased our liquidity levels at the beginning of 2009. As the financial markets have settled somewhat and with economic conditions stabilising, we have been able to reduce those levels. Some of the liquidity raised was used to externalise the financing of a second tranche of pension liabilities. Positive earnings achieved With the economy performing so weakly, revenues fell short of their previous year’s level. Group revenues in 2009 totalled euro 50,681 million, 4.7 % down on the previous year. Excluding the exchange rate impact, revenues would have fallen by 5.1 %. Efficiency improvement measures initiated at an early stage as part of our Strategy Number ONE and rigorous cost management policies have both helped to enable us to report positive Group earnings for the full year. A steep sales volume decline, adverse exchange rate factors and a difficult competitive environment had a negative impact on business performance. The BMW Group reports a profit before financial result (EBIT) of euro 289 million (– 68.6 %). At euro 413 million, the profit before tax was up by 17.7 % on the previous year. In line with the sales volume performance, automobile business revenues fell short of the previous year, dropping by 10.3 % to euro 43,737 million. Reflecting the weak state of most of the major car markets, the Automobiles segment recorded a negative EBIT of euro 265 million (2008: positive EBIT of euro 690 million). The slight eco- nomic recovery in the final months of 2009 resulted in a resurgence in car sales volume, enabling the segment to achieve a positive EBIT of euro 93 million in the last quar- ter of 2009. The segment recorded a loss before tax of euro 588 million for the year (2008: profit before tax of euro 318 million). The Motorcycles segment generated revenues totalling euro 1,069 million in 2009, 13.1 % down on the previous year. The difficult market environment in 2009 pushed down EBIT by 68.3 % to euro 19 million, with profit before tax falling to euro 11 million (– 78.4 %). The total business volume of the Financial Services seg- ment was similar to that of the previous year, with revenues of euro 15,798 million (+ 0.5 %). The positive EBIT gen- erated by this line of business, at euro 355 million, was well above the previous year’s level (2008: negative EBIT of euro 216 million). The pre-tax segment result turned around from a segment loss before tax of euro 292 million to a seg- ment profit before tax of euro 365 million. The slight im- provement in the global economy brought with it lower risk levels in terms of residual values and within the lending business. Narrower risk spreads on capital markets nudged refinancing costs down during the year. The income tax expense for the year was euro 203 million (2008: euro 21 million). The sharp increase in the effective tax rate was due to the lower level of tax-exempt income and partly to the tax expense incurred for prior years in con- junction with a tax field audit at the level of BMW AG, mostly relating to intragroup transfer pricing arrangements. The 13 Group Management Report BMW Group Revenues by region in euro million 60,000 52,500 45,000 37,500 30,000 22,500 15,000 7,500 Rest of Europe North America Germany Asia / Oceania United Kingdom Other markets 05 06 07 08 09 Rest of Europe North America Germany Asia / Oceania United Kingdom Other markets Total 12,141 10,957 11,001 5,538 5,125 1,894 46,656 13,226 11,779 10,601 6,200 5,214 1,979 48,999 16,450 12,161 11,918 7,353 5,945 2,191 56,018 15,780 12,461 10,739 7,523 4,913 1,781 53,197 12,911 11,724 11,436 8,495 4,078 2,037 50,681 Group net profit for the year decreased to euro 210 million (– 36.4 %). Dividend maintained at previous year’s level Despite the adverse economic factors affecting earnings generated in 2009, the Board of Management and the Supervisory Board will propose to shareholders at the Annual General Meeting that the unappropriated profit available for distribution at the level of BMW AG, amounting to euro 197 million, be used to pay an unchanged dividend of euro 0.30 for each share of common stock and an un- changed dividend of euro 0.32 for each share of preferred stock. The distribution rate for 2009 would then be 96.6 % (2008: 60.8 %). Capital expenditure reduced on targeted basis At euro 3,471 million, capital expenditure in 2009 was reduced by comparison to the previous year (2008: euro 4,204 million / –17.4 %), with the main focus on product investments for new model start-ups (such as the new BMW 5 Series, the 5 Series Gran Turismo, the X1, the MINI Convertible and the Rolls-Royce Ghost) and on in- frastructure investments. In 2009 we invested euro 2,384 million in property, plant and equipment and other intangible assets (2008: euro 2,980 million / – 20.0 %). In addition, development expen- diture of euro 1,087 million was recognised as assets (2008: euro 1,224 million / –11.2 %). The percentage of develop- ment costs capitalised rose to 44.4 % (2008: 42.7 %). The capital expenditure ratio (capital expenditure / Group revenue) fell to 6.8 % in 2009 (2008: 7.9 %) due to more efficient use of capital. Despite our investment in innovative technologies, the ratio was below 7 % of Group revenues and therefore within the target range set in conjunction with Strategy Number ONE. BMW Group Capital expenditure and operating cash flow in euro million 7,000 6,000 5,000 4,000 3,000 2,000 1,000 05 06 07 08 09 Capital expenditure Operating cash flow* 3,993 4,313 4,267 4,204 3,471 6,184 5,373 6,246 4,471 4,921 * reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities of the Automobiles segment 12 12 14 18 42 45 48 Group Management Report A Review of the Financial Year General Economic Environment Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management Internal Management System Earnings Performance Financial Position 63 64 70 Outlook 14 General Economic Environment End of worldwide recession reached The year 2009 was dominated by the worst economic crisis seen for decades. Global economic output decreased for the first time since the Second World War. The property and financial crisis that started in the USA in 2007 devel- oped into a crisis of the real economy over the winter period 2008 / 09, encompassing practically all countries and busi- ness sectors. The lowest point of this global recession came during the first quarter 2009. Falling property prices, the virtual collapse of the credit markets, a massive drop in prices on the share and commodity markets and a drastic slump in global trading volumes cast their shadows over the economic landscape until well into the second quarter 2009. The slump in the world economy was only halted during the second quarter 2009 by the global switch to expansionary money and fiscal policies. Share and com- modity prices have recovered strongly from their low points in the first quarter. Risk spreads in the credit markets nar- rowed somewhat, although nowhere near the levels seen prior to the crisis. Most countries again began reporting positive growth rates during the second half of 2009. The crisis favoured an eastward shift in regional economic strength: China recorded growth of approximately 8.7 % in gross domestic product (GDP) even in the year of crisis and although the global economy was contracting. China’s state- financed economic stimulus programmes had a stabilising effect on the domestic economy as a whole as well as on the commodity, investment and consumer goods markets. Unlike the benefits felt from consumer spending in China, US consumers did not provide a similar impetus in 2009. The 2.4 % drop in GDP in the USA was largely attributable to weak consumer spending. With the unemployment rate doubling to more than 10 % since the beginning of the crisis and with many private households suffering under the burden of high debt, falling residential property prices and deteriorating credit conditions, there was a definite lack of willingness to spend. The euro zone was even more negatively affected by the crisis in 2009 and recorded a 4.0 % downturn in economic output. The drastic slump in global trade over the 2008 / 09 winter period took a particularly heavy toll on export-based economies. Germany registered one of its biggest drops ever, with GDP down by 4.9 % for the year 2009. Unem- ployment, however, rose less than expected thanks to the implementation of short-time working arrangements. With effect from the second quarter of the year, Germany even found itself leading the upturn within the euro zone. Due to the high proportion of exported investment goods, the German economy benefited particularly strongly from eco- nomic stimulus programmes initiated both in Germany and elsewhere. Private spending was boosted by the scrap- page bonus scheme, which generated a level of demand not seen in the automotive industry for many years. The British economy also performed weakly over the course of 2009, contracting by 4.8 % compared to the previous year. As in the USA, the crisis in the UK was mainly characterised by sharply declining property prices, high levels of private debt, rising unemployment and weak con- sumer spending. Despite the persistent weakness of the British pound, structural deficiencies in the industrial sec- tor prevented the British economy from rallying as global trade picked up. Of all the world’s major economies, Japan has witnessed the greatest volatility over the course of the economic crisis due to its high dependency on exports. Similar to Germany, there was a dramatic slump in the first quarter of 2009 fol- lowed by a period of stabilisation at a relatively early stage on the back of state-funded stimulus programmes and a re- covery in demand for exports from the second quarter on- wards. Over the year, however, GDP deteriorated by 5.0 %. After several years of economic boom, the crisis took a heavy toll on most countries in Eastern Europe. The EU countries in that region saw an overall drop of 3.7 % in economic output as international capital was withdrawn. Russia’s GDP fell by 7.9 % compared to the previous year, revealing the extent to which the Russian economy is dependent on the international raw material markets. In contrast to Eastern Europe and to past economic crises, Exchange rates compared to the Euro (Index: 31 December 2004 = 100) 150 140 130 120 110 100 90 Source: Reuters 05 06 07 08 09 British Pound US Dollar Japanese Yen 15 Group Management Report Oil price trend Price per barrel of Brent Crude 160 140 120 100 80 60 40 20 Source: Reuters Price in US Dollar Price in Euro 05 06 07 08 09 other major emerging economies proved to be surprisingly stable. India came through the global recession success- fully with the aid of its own stimulus programme and fin- ished the year with a growth rate of 6.0 %. Brazil managed to keep economic output at a relatively stable level (– 0.3 %). US dollar and British pound weaker At the beginning of 2009, the worst point of the economic crisis, the US dollar gained sharply with rates of up to US dollar 1.25 to the euro. As a result of the zero-interest-rate policy of the US Reserve Bank and the increased willing- ness of international investors to take risks, the value of the US dollar deteriorated over the course of the year to as low as US dollar 1.50 to the euro. At the end of the period un- der report, the US currency closed at US dollar 1.43 to the euro, 2 % below its closing exchange rate one year earlier. The British pound also lost significantly in value during the crisis, hovering at around GBP 0.90 to the euro for most of the year. The Japanese yen rose sharply against the euro during the winter months of 2008 / 09, rising to yen 115 to the euro. By the year-end, however, it had fallen back to yen 133 to the euro. Emerging economy currencies were amongst the strongest in 2009 after having suffered sig- nificantly at the end of 2008 due to massive capital out- flows. The currencies of countries which export raw mate- rials – such as Brazil and Australia – also increased sharply in value against the euro over the course of 2009. Raw material prices steadier again After plummeting by an average of almost two thirds on worldwide markets during the second half of 2008, raw material prices regained more than half of the ground lost between their lowest point in February 2009 and the end of the year. The price of oil almost doubled, rising from US dollar 43 per barrel at the start of the year to US dollar 80 per barrel at the end. Massive injections of speculative capital in the raw materials sector also caused the prices of non-ferrous metals and precious metals to rise steeply. Steel price trend (Index: January 2005 = 100) 140 130 120 110 100 90 80 70 60 05 06 07 08 09 Source: Working Group for the Iron and Metal Processing Industry Precious metals price trend (Index: 31 December 2004 = 100) 400 350 300 250 200 150 100 Source: Reuters Palladium Gold Platinum 05 06 07 08 09 12 12 14 18 42 45 48 Group Management Report A Review of the Financial Year General Economic Environment Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management Internal Management System Earnings Performance Financial Position 63 64 70 Outlook 16 Within the real economy, the main factor behind the sharp rise in prices was China’s continuing need for raw materials. Car markets in 2009 Due to the economic crisis, the number of passenger cars and light commercial vehicles sold worldwide fell from 66.2 million units in 2008 to 62.5 million in 2009 (– 5.7 %). Whereas the total sales volume in the USA dropped by almost a quarter from 13.2 million units to 10.5 million units in 2009, the number sold in China rose from 8.6 million to 12.6 million. As a result, China replaced the USA as the world’s largest vehicle market (passenger cars and light commercial vehicles) for the first time. Amongst other fac- tors, the Chinese car market profited from the halving of the registration tax for small vehicles for a limited period of time. In the USA, however, the scrappage bonus programme (“cash for clunkers”) set up in summer 2009 failed to stop the market as a whole from contracting to its lowest level for many years. The market share of US manufacturers decreased by a further three percentage points to approxi- mately 45 % in 2009, with the insolvencies of General Motors and Chrysler playing a considerable role. The passenger car market also contracted in the European Union, falling by 2 % to 14.0 million units. Market perform- ance differed greatly from country to country, however, depending on the efficacy of various stimulus programmes in place. In Germany, Europe’s largest market, demand from private customers rose sharply. Despite the German economy suffering particularly badly in a European com- parison, the number of new registrations in Germany jumped by approximately one quarter to 3.8 million units. The scrappage programme in France boosted domestic passenger car sales to 2.3 million units (+ 11 %) in 2009. By contrast, however, national scrappage bonus pro- grammes put in place in countries where the property and credit markets were directly affected by the global eco- nomic crisis failed to compensate for weaker demand. In the UK, for instance, the number of new cars sold fell by 6 % to 2.0 million. In Spain – particularly hard hit by the property crisis – sales were down by a quarter to less than one million units in 2009, meaning that this market had contracted by almost one-half due to the crisis. Eastern European EU countries also registered a slump in passen- ger car sales (by approximately a quarter), with only 0.9 mil- lion units sold altogether. The Japanese car market was also unable to escape the effects of the international crisis, contracting by a further 9 % to only 4.5 million units despite the introduction of a scrappage bonus programme and tax breaks. Market performance among the emerging economies varied greatly. Sales in Russia fell by one half to 1.4 million units, whereas the Brazilian car market grew by 9 % to 3.0 million units on the back of a short-term tax reduction for small cars. The car market in India continued to grow, with sales up by 18 % to 2.1 million units. For the first time in automotive history, at 47 %, sales in the triad of traditional markets – the USA, Europe and Japan – accounted for less than half of car sales world- wide. Motorcycle markets in 2009 Developments on international motorcycle markets in 2009 were largely shaped by the knock-on effects of the international economic and financial crisis. Worldwide motor cycle sales in the 500 cc plus segment were down by almost one third (– 30.3 %) against the previous year. The number sold in Europe fell by 21.9 %, with all coun- tries registering negative rates. While the decreases in France (– 9.6 %) and the United Kingdom (– 10.3 %) were relatively moderate, market volumes in Spain (– 55.2 %), Italy (– 21.7 %) and Germany (– 16.7 %) were well down on those of the previous year. The decline in sales in the USA – the largest market for motorcycles in the 500 cc plus segment – was particularly steep at 40.9 %. The Japanese market also failed to reach the previous year’s figures (–17.1 %). The financial services market in 2009 The escalation of the international financial crisis during the winter months of 2008 / 2009 created an all-encompassing sense of uncertainty on the money and capital markets throughout 2009. At the beginning of the year, governments around the world adopted extensive measures in an effort to stabilise the financial markets. In addition, the leading central banks continued the policy, begun in 2008, of re- ducing interest rates in order to counter worldwide reces- sion. Towards the middle of the year, these measures did indeed begin to have a certain positive impact. In particular, they ensured the supply of liquidity to international money and capital markets, which was also beneficial to the finan- cial services sector. However, developments on the em- ployment market and rising public-sector debt remain risk factors which could jeopardise the situation. After initially narrowing, credit risk spreads then widened substantially during the early months of 2009 before the situation began to ease on money and capital mar- kets. Spreads then went on to stabilise at much narrower levels during the second half of 2009, without, however, reaching the levels seen before the onset of the crisis. 17 Group Management Report The leading central banks continued to lower their reference interest rates throughout the reporting period and then kept them at an historically low level. During the year, the US reference rate moved within a range of 0 % to 0.25 %. The European Central Bank reduced its reference interest rate by 1.5 percentage points in four steps to 1.0 %, while the Bank of England lowered its reference interest rate by 1.5 percentage points to 0.5 % in three steps. With certain economies recovering earlier than expected, the central banks of some countries, including Australia and Norway, decided to raise their rates. Despite improved prospects for growth, interest rates within the medium-term maturity segment remained largely at the same historically low level. Interest rate rises were only observed in countries with better economic indicators, such as Australia. Developments on used car markets varied greatly around the world. The situation in North America and in the United Kingdom stabilised in 2009. In Continental Europe, the impact of the economic crisis on used car markets was not felt until later. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 18 Review of Operations Car sales down on previous year as expected As predicted, the worldwide economic downturn had a palpable effect on the BMW Group’s car sales volumes in 2009. In many countries, sales volume figures only really began to stabilise in the fourth quarter 2009. A total of 1,286,310 vehicles was sold in 2009, 10.4 % down on the previous year, and hence within the 10 to 15 % range pre- dicted earlier in the year. 1,068,770 BMW brand cars were sold worldwide in 2009, 11.1 % fewer than in 2008. The number of MINI brand cars sold fell by 6.8 % to 216,538 units. A total of 1,002 Rolls-Royce brand vehicles was handed over to customers in the course of the year (– 17.3 %). First signs of recovery in a number of markets The first signs of stabilisation on international car markets are slowly emerging, most evidently in the last three months of 2009. However, many markets registered a contraction for the year as a whole. In North America we handed over 271,032 BMW, MINI and Rolls-Royce brand cars (– 18.3 %) to customers during the year under report. Sales in the USA in 2009 fell to 242,053 units (– 20.3 %). In Canada, by contrast, we sold 28,979 units, surpassing our previous year’s sales volume performance by 2.9 %. The difficult market conditions also had a negative impact on business in Europe. We sold 761,887 vehicles in this region in 2009, 11.9 % fewer than in the previous year. In Germany, currently our largest single market, we recorded a sales volume of 267,539 units, down slightly (– 4.8 %) on 2008. 137,062 units (– 9.5 %) were sold in the UK in 2009. BMW Group Deliveries of automobiles by region and market in 1,000 units BMW Group – key automobile markets 2009 as a percentage of sales volume Other Germany Spain France Italy USA China United Kingdom Germany USA United Kingdom China 20.8 18.8 10.7 7.7 Italy France Spain Other 5.9 4.9 3.2 28.0 This included 37,361 units sold in the last three months of the year, an increase of 55.8 % compared to the same period last year. Car sales in Italy totalled 75,679 units (– 16.3 %) in 2009. The car markets in Spain and France did not even recover in the final quarter of the year. As a consequence, the number of cars sold in Spain in 2009 fell by 31.7 % to 40,718 units and the number in France to 63,309 units (– 10.2 %). Sales volume grew sharply in Asia, with 183,206 units sold in 2009 (+ 10.5 %). The Chinese markets (China, Hong 1,600 1,400 1,200 1,000 800 600 400 200 Rest of Europe North America Germany Asia United Kingdom Other markets Rest of Europe North America Germany Asia United Kingdom Other markets 05 350.8 329.0 295.9 125.7 156.2 70.4 06 375.0 337.4 285.3 142.2 154.1 80.0 07 443.6 364.0 280.9 159.5 173.8 78.9 08 432.2 331.8 280.9 165.7 151.5 73.8 09 357.3 271.0 267.5 183.1 137.1 70.3 Total 1,328.0 1,374.0 1,500.7 1,435.9 1,286.3 19 Group Management Report Kong, Taiwan) made a big contribution to this performance. The number of cars sold there rose by 31.1 % to 98,960 units. As experienced in many countries, the sales volume achieved in Japan fell by 15.8 % to 41,125 units for the full year. Here, too, the market picked up slightly in the final quarter of the year (10,162 units / +2.1 %). BMW brand sales volume below previous year’s level Sales volume performance for the BMW brand was ad- versely affected by both the generally weak state of the economy and, in part, model life-cycle factors. During 2009, 216,944 units of the BMW 1 Series were handed over to customers, a moderate reduction of 3.6 % for the year. Sales of the BMW 3 Series during the year under report fell by 16.3 % to 397,103 units. Despite this fact, the BMW 3 Se- ries remained the worldwide leader in its segment. Model life-cycle factors held down sales of the BMW 5 Series (175,983 units / – 13.0 %) and the BMW 6 Series (8,648 units / – 46.9 %). 3,052 units of the BMW 5 Series Gran Turismo had been sold by year-end, even though this Deliveries of BMW automobiles by model variant in units 2009 2008 Change Proportion of in % BMW deliveries 2009 in % BMW 1 Series Three-door Five-door Coupé Convertible BMW 3 Series Sedan Touring Coupé Convertible BMW 5 Series Sedan Touring Gran Turismo BMW 6 Series Coupé Convertible BMW 7 Series BMW X1 BMW X3 BMW X5 BMW X6 BMW Z4 44,034 120,323 24,081 28,506 216,944 49,559 122,666 26,304 26,566 225,095 219,850 246,231 84,601 54,852 37,800 93,191 79,248 55,538 397,103 474,208 135,944 36,987 3,052 175,983 4,501 4,147 8,648 156,825 45,462 – 202,287 8,337 7,962 16,299 –11.1 –1.9 – 8.5 7.3 – 3.6 –10.7 – 9.2 – 30.8 – 31.9 –16.3 –13.3 –18.6 – –13.0 – 46.0 – 47.9 – 46.9 52,680 38,835 35.7 8,499 – – 55,634 84,440 – 34.1 88,851 116,489 – 23.7 41,667 26,580 22,761 18,006 56.8 26.4 20.3 37.2 16.5 0.8 4.9 0.8 5.2 8.3 3.9 2.1 BMW total 1,068,770 1,202,239 –11.1 100.0 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 20 model did not come onto the markets until the end of October 2009. By contrast, there was a sharp increase (+ 35.7 %) in sales volume for the new BMW 7 Series – available worldwide since spring 2009, with 52,680 units sold. As a result of this performance, the new BMW 7 Se- ries became segment leader in both Europe and China. The BMW X1, which has been available since the end of October 2009, sold remarkably well right through to the end of the year. During this short space of time, 8,499 cus- tomers chose to purchase the first compact Sports Activity Vehicle available in the premium segment. Now getting towards the end of its life-cycle, we sold 55,634 units of the BMW X3, a decrease of 34.1 % on the previous year’s figure. At 88,851 units, sales of the BMW X5 were also down on the previous year (– 23.7 %). In the case of the BMW X6, sales volume rose by 56.8 % to 41,667 units. Deliveries of BMW diesel automobiles in 1,000 units and as a percentage of total volume 650 600 550 500 450 400 350 300 05 06 07 08 09 units 438.3 472.7 525.9 511.2 464.2 as a percentage of total volume 39 40 41 43 43 The BMW Z4, launched in May 2009, is enjoying great popularity with the number of cars sold up by 26.4 % to 22,761 units. Italy (91 %) and in Belgium / Luxembourg (90 %). In Germany the proportion rose by two percentage points to 63 %. Proportion of diesel-powered BMW cars remains high The proportion of diesel-powered BMW brand cars con- tinues to be high (43 %). The proportion in Europe was 71 %, up slightly by one percentage point. BMW diesels were particularly popular in Portugal where they accounted for 95 % of sales. The proportion of diesel-powered BMW brand cars also remained very high in France (93 %), in MINI brand sales volume slightly down The BMW Group sold 216,538 MINI brand cars worldwide in 2009 (– 6.8 %). The new MINI Convertible, which has been on the markets since spring 2009, recorded sales of 28,303 units, an increase of 22.0 % over the previous year. At 150,043 units, the total number of MINI cars sold fell 7.5 % short of the previous year. The MINI Clubman re- corded a sales volume of 38,192 units (– 18.9 %). Deliveries of MINI automobiles by model variant in units MINI One Cooper Cooper S MINI Convertible One Cooper Cooper S MINI Clubman One Cooper Cooper S 2009 2008 Change in % Proportion of MINI deliveries 2009 in % 41,180 75,213 33,650 27,154 91,695 43,286 150,043 162,135 186 16,565 11,552 28,303 2,291 24,265 11,636 38,192 4,100 11,706 7,402 23,208 – 31,741 15,341 47,082 51.7 –18.0 – 22.3 – 7.5 – 95.5 41.5 56.1 22.0 – – 23.6 – 24.2 –18.9 69.3 13.1 17.6 MINI total 216,538 232,425 – 6.8 100.0 21 Group Management Report MINI brand cars in 2009 – analysis by model variant as a percentage of total MINI brand sales volume MINI One (including One D) MINI Cooper S MINI Cooper (including Cooper D) MINI Cooper MINI Cooper S 26.2 (including Cooper D) 53.6 MINI One (including One D) 20.2 In 2009 the MINI brand continued to generate a very high-value product mix in terms of engine variants sold. More than one half of customers (53.6 %) opted for the MINI Cooper, with 26.2 % selecting the MINI Cooper S and 20.2 % the MINI One. Rolls-Royce remains segment leader Despite the lower sales volume recorded by Rolls-Royce Motor Cars in 2009, the brand once again underlined the leading role it plays in its segment. In total, we handed over 1,002 Rolls-Royce brand cars to customers in 2009 (– 17.3 %). The new model, the Ghost, which only became available in December, achieved a sales volume of 167 units within a very short time. Car production volumes adjusted flexibly to match lower demand Production volumes were reduced at an early stage in line with falling demand. In total, 1,258,417 BMW, MINI and Rolls-Royce brand cars came off the production lines in 2009 (– 12.6 %). Deliveries of Rolls-Royce automobiles by model variant in units Rolls-Royce Phantom (including Phantom Extended Wheelbase) Drophead Coupé Coupé Ghost Rolls-Royce total The BMW brand accounted for 1,043,829 units (– 13.3 %). A total of 213,670 MINI brand cars left the Oxford plant in England, 9.1 % fewer than in the previous year. 918 Rolls-Royce brand cars were manufactured during the year under report (– 35.2 %). Production network displays great flexibility Our production network proved its underlying strength during a difficult year. Efficiency and flexibility were both further improved despite the difficult business conditions. With nine product start-ups successfully executed and a whole range of investments made at the plants in 2009 at a cost in excess of euro one billion, we continued to lay the foundation for further rises in productivity. Instru- ments such as flexible working hours and shift models made it possible to adjust production schedules at short notice. At the BMW plant in Munich, we reacted flexibly to fluctua- tions in demand on the automobile markets in 2009 with non-production days during the first half of the year and additional shifts in the second. It was not necessary there- fore to introduce short-time working arrangements for car production at the Munich site. Overall, in fact, we pro- duced more cars than in the previous year. With more than 24,000 units manufactured in September 2009, the Mu- nich plant recorded its best-ever monthly production vol- ume figure in its almost 90 years of existence. In November 2009, the 5,555,555th BMW 5 Series came off the production lines at our Dingolfing plant and was donated to the Bavarian Forest National Park. During the year under report, series production commenced at the Dingolfing plant for a total of 23 new models and engine variants (BMW 7 Series and 5 Series Gran Turismo) and preparations were made for the new generation of the BMW 5 Series. We also invested euro 50 million at the Dingolfing site on two new sheet steel presses for automo- tive bodywork. This involves the first-time use of innovative hot stamping technology in the automobile industry. This 2009 2008 376 261 198 167 644 431 137 – 1,002 1,212 Change in % – 41.6 – 39.4 44.5 – –17.3 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 22 Automobile production of the BMW Group by plant in 2009 in 1,000 units Graz2 Shenyang1 Goodwood Rosslyn Regensburg Spartanburg Leipzig Oxford Dingolfing Munich Regensburg Oxford Munich Dingolfing Leipzig 1 Joint venture 2 Contract production 250.5 213.7 203.9 194.7 143.5 Spartanburg Rosslyn Goodwood Shenyang1 Graz (Magna Steyr) 2 123.0 46.2 0.9 36.0 46.0 new technique allows the production of high-strength, low- weight body panels. The new BMW Z4 came off the production lines at the Regensburg plant for the first time in February 2009. With the production of future models in mind, we invested a total of euro 130 million from 2007 to 2009 in expanding this plant for BMW Z4 production. A further euro 84 million has been invested to expand the pressing plant. The Regens- burg site now has the world’s first servo drive cutting press and is able to cut high-strength and ultra high-strength steel directly from coils and pre-stamp it into sheet metal blanks for pressing. In future, nearly all of the pressed parts required will be manufactured on-site and go directly into bodywork production, enabling annual savings of some two million truck-kilometres and 1,600 tons of CO2 emis- sions. We also plan to invest a further euro 300 million in car body construction and assembly during the coming years. We were able to avoid having to resort to short-time working arrangements at the BMW plant in Leipzig during the year under report by switching to one-shift operations and utilising the flexibility of working-time accounts at an early stage. We returned to two-shift operations in summer 2009 with the production start-up of the new BMW X1. Ad- ditional employees from other plants helped to cope with capacity peaks. The new pressing plant and new produc- tion facilities for doors and front and rear hatches was commissioned in September 2009. Overall, we invested approximately euro 100 million in the plant. The switch to a new, environment-friendly production process was initiated at our light-metal foundry at the Landshut plant in 2009. In 2010 it will then become the world’s first emission-free foundry in which sand cores will be used as the basis for casting. Instead of using con- ventional, organic binding agents, processes in the future will involve the use of particularly eco-compatible and in- organic binding agents which create practically no environ- mentally harmful emissions. Using these innovative pro- duction techniques, the light-metal foundry will be able to reduce emissions from combustion residues by 98 %. This not only protects the environment; the new techniques also generate commercial and work-related benefits. Amongst other things, our employees are able to work under sig- nificantly improved working conditions. The new BMW 6-cylinder petrol engine featuring Twin- Power Turbo Technology was produced for the first time in 2009 at our engine factory in Steyr, Austria. This engine is destined for use in the new BMW 5 Series Gran Turismo. Production of the new BMW 6-cylinder diesel engine equipped with TwinPower Turbo Technology was also com- menced. This engine, which powers the new BMW 740d, has an exceptionally low level of fuel consumption (only 6.9 litres / 100 km) for its category. We have also sharply reduced the volume of electricity consumed at the Steyr plant thanks to our rigorous energy management strategy. The quantity of electricity bought in for the plant in 2009 was 26 % lower than in 2006. The amount thus saved would be sufficient to provide electricity to approximately 15,000 households for one year. In May 2009, celebrations were held at the MINI plant in Oxford to mark fifty years of the MINI brand. More than 1.5 million units of the new MINI have left the plant since production began in 2001. We also announced in Sep- tember that two further models would be produced at the Oxford plant. The 500,000th engine destined for a MINI left our Hams Hall plant in August 2009. In total, more than 360,000 en- gines were produced for BMW and MINI brand cars during the reporting period. More than two million engines have been produced at Hams Hall since production was taken up in 2001. One of the main focuses of activities at the Goodwood plant in England in 2009 was the start-up of production of the new Rolls-Royce Ghost. The first customers took delivery of their Ghosts just before the end of 2009. Due to strong demand, the new model will continue to have an important impact on activities at Goodwood in 2010. The Phantom nevertheless remains the brand’s key model. 23 Group Management Report In October 2009 we announced plans to invest the equiv- alent of more than euro 200 million in the BMW Rosslyn plant in South Africa prior to introducing the next generation of the BMW 3 Series. In the course of 2009 we completed the construction of new assembly facilities at our plant in Spartanburg, USA, which has now been in operation for 15 years. The paint shop was also expanded and car body construction facili- ties renovated. These investments were made primarily as part of a set of measures prior to the start-up for the new generation of the BMW X3. Production of the M variants of the BMW X5 and X6 as well as the BMW ActiveHybrid X6 was also commenced during the year. 60 % of the energy requirements for the plant were provided by methane gas collected from a local waste disposal site, enabling some 59,000 tons of CO2 emissions to be avoided each year. Together with our joint venture partner, Brilliance China Automotive Holdings Limited, we announced in November 2009 that we will be constructing a second production plant at the Shenyang site. The total amount to be invested is euro 560 million. Construction is to commence in 2010 and the new plant should start production activities in 2012. Motorcycle sales down on previous year The number of BMW motorcycles sold in 2009 fell to 87,306 units worldwide (– 14.1 %) in a difficult market environment. Despite the adverse conditions, the Motor- cycles segment was nevertheless able to improve its position and gain market share on all fronts, reflecting the fact that the drop in sales volume of BMW motorcycles was much less pronounced than the overall contraction of the markets in which we operate. A major contribution to this performance came from the K 1300 R, K 1300 S and K 1300 GT models, which have been available to customers since February, and from the F 800 R, on sale since May 2009. Lower sales volumes registered on most markets In total, 60,178 BMW motorcycles were handed over to customers in Europe in 2009, a decrease of 16.3 %. In Germany, currently the largest single market for BMW motorcycles, we were able to maintain market leadership with 15,375 units sold (– 17.2 %). Sales in France (7,014 units / – 14.6 %), Italy (13,162 units / – 12.5 %) and Spain (6,457 units / – 36.4 %) were all down on the previous year. In the United Kingdom, however, sales increased by 4.3 % to 5,859 units despite a generally contracting market. The number of motorcycles sold in 2009 fell by 20.9 % to 9,191 units in the USA and by 6.3 % to 2,825 units in Japan. Model range expanded The expansion of the model range in 2009 helped to cushion the impact of adverse business conditions for the Motorcycles segment. The K 1300 R, K 1300 S and K 1300 GT models were shipped to dealers for the first time in February 2009. The F 800 R and the special R 1200 GS, R 1200 R and R 1200 RT models (launched to coincide with the 15th anniversary of four-valve boxer BMW motorcycles delivered in 1,000 units 105 100 95 90 85 80 75 05 06 07 08 09 * 97.5 100.1 102.5 101.7 87.3 * excluding Husqvarna Motorcycles (13,052 motorcycles) 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook Motorcycle production selectively reduced in response to drop in demand We also selectively adapted motorcycle production volumes in 2009 to match the sharp decline in demand. In total, 82,631 motorcycles (– 20.7 %) were manufactured over the course of the year. During the year under report, our Berlin plant celebrated its 40th year as a production site for BMW motorcycles. During this period almost 1.9 million BMW motorcycles came off the production lines. The one- millionth BMW motorcycle equipped with ABS left the Spandau plant in summer 2009. Twenty-one years ago we were the first motorcycle manufacturer worldwide to equip motorcycles with ABS anti-blocking technology, thus setting an important milestone for active motorcycling safety at that time. 24 BMW Group – key motorcycle markets 2009 as a percentage of sales volume Other Germany Italy United Kingdom USA Spain France Germany Italy USA France 17.6 15.1 10.5 8.0 Spain United Kingdom Other 7.4 6.7 34.7 engines) followed in the period from May onwards. The S 1000 RR (based on the racing version) was launched in December. A technical update of the R 1200 GS and a model revision of the R 1200 RT were presented at the International Motorcycle Exhibition (EICMA) in Milan. A BMW motor cycle with a six-cylinder engine – the Concept 6 – was also unveiled for the first time. This con- cept study shows that a straight six-cylinder engine can be highly dynamic thanks to state-of-the-art design and en- gineering methods. The K model range will be expanded in the foreseeable future by the addition of the new BMW six-cylinder version. The first series production model will also be an innovative and luxurious BMW touring bike. BMW motorcycles in 2009 – analysis by series as a percentage of sales volume K Series F Series R Series R Series F Series 45.9 38.4 K Series 15.7 25 Group Management Report Financial services business continues to stabilise The knock-on effects of the worldwide economic and finan cial crisis continued to be felt throughout the financial year 2009. The situation remains tense on used car mar- kets, particularly in Europe. Bad debt risk levels continue to be higher than normal. Despite this difficult situation, our financial services business continued to stabilise. Compared to 31 December 2008, the segment’s business volume in balance sheet terms increased by 0.9 % to euro 61,202 million. A total of 3,085,946 lease and financing contracts was in place with dealers and retail customers at the end of the reporting period, 1.8 % more than one year earlier. The slight recovery on the used car markets in the USA and the UK had a stabilising impact on residual value levels. The situation remained difficult in Continental Europe. Credit risk remained high in the face of difficult economic conditions in 2009. The loss ratio incurred on the segment’s total credit portfolio was 0.84 % and therefore 25 basis points higher than in the previous year (2008: 0.59 %). Nu- merous measures – including stricter receivables manage- ment, revised credit-decision processes with more re- strictive rules for purchasing receivables and higher levels of collateral – were implemented as part of the process of actively managing credit risk exposures. The interest rate risk is managed using a risk-return approach and measured using value at risk (VaR) techniques. The VaR for the Finan- cial Services segment increased to euro 78.6 million at the end of 2009 compared to euro 51.0 million at the end of 2008. Awards underline high quality of service Our financial services line of business won further awards in 2009 from the internationally renowned market research institute J. D. Power and Associates. In the Dealer Financing Satisfaction StudySM published in the USA, our financial services operations came first for the sixth time in succes- sion in the category “Leasing”. Top marks were also received in other categories. In Canada we came first amongst leading credit providers in the area of dealer satisfaction. These awards underline once again the high quality of our financial services operations and the focus placed on pro- viding a high level of service. “EU passport” project started The decision was taken in 2009 to convert previous sepa- rate legal entities within the Financial Services segment into branches of BMW Bank, with the primary aim of further improving the allocation of segment liquidity and equity. This became feasible following the introduction of the so- called “EU passport” which allows banks to set up branches in European countries outside Germany under a German banking licence. The BMW Bank had previously taken the EU passport route to set up a branch in Portugal. The finan cial services company in Spain was converted into a BMW Bank branch during the financial year 2009. Measures are currently being drawn up to integrate further entities. The establishment of a single bank throughout the EU will enable us to expand deposit business and, in the medium term, to create the basis for open-market transactions. This will be a key factor in refinancing our financial services business more efficiently and flexibly in the future. Regional presence expanded We continued to pursue our strategy of targeted regional expansion during the financial year 2009 with the aim of opening up further opportunities for growth in Asia. In March 2009 for instance, a separate entity for financial services was established in Singapore. In future, cooperation ar- rangements with local insurance companies will provide an outlet for insurance products in Egypt, Cyprus and Croatia. Decline in volume of new business The unfavourable conditions prevailing on international car markets resulted in a lower volume of new financing and lease business in 2009. In total, 1,015,833 new contracts were concluded with retail customers, 15.2 % down on the previous year’s figure. The number of new leasing contracts decreased by 26.1 % while the number of credit contracts in the field of new retail customer business fell by 9.5 %. The creditworthiness of our customers, however, remained at a high level. Lease contracts accounted for 29.8 % of total new busi- ness, 4.4 percentage points lower than in the previous year, reflecting a targeted change in the proportion of new cus- tomer business towards credit financing. Credit financing contracts accounted for 70.2 % of new business. 49.0 % Contract portfolio of BMW Group Financial Services in 1,000 units 3,000 2,800 2,600 2,400 2,200 2,000 1,800 05 06 07 08 09 2,087 2,271 2,630 3,032 3,086 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 26 Contract portfolio retail customer financing of BMW Group Financial Services 2009 as a percentage by region Asia / Oceania / Africa America Europe Europe America 53.4 33.9 Asia / Oceania / Africa 12.7 of new cars were leased or financed by the Financial Services segment, an increase of 0.5 percentage points compared to the previous year. In the used car financing line of business, 312,960 new contracts for BMW and MINI brand cars were signed dur- ing the year under report, 6.6 % more than in 2008. The total volume of all new credit and leasing contracts concluded with retail customers during the period under report amounted to euro 24,709 million (– 15.8 %). How- ever, due to delayed effects, the decline in new business has not yet begun to affect the overall size of the portfolio. The total number of retail customer contracts under manage- ment increased by 2.0 % to 2,840,530 units, with growth attributable to Europe and the Americas. The number of retail customer contracts in Europe edged up by 0.7 %. Growth of 5.1 % was registered in the Americas region, whereas Asia / Oceania / Africa was roughly in line with the previous year (– 0.5 %). Dealer financing up on previous year The Financial Services segment offers inventories, real estate and equipment financing products for dealers, thus ensuring that it remains a key partner for dealerships, par- ticularly in difficult economic times. The total volume of dealer financing contracts managed by the Financial Ser- vices segment at the end of 2009 totalled euro 9,429 mil- lion, 6.1 % up on the previous year. 245,416 dealer financing contracts were in place at 31 December 2009 (– 0.4 %). Fleet business remains stable, multi-brand financing down The BMW Group’s international brand-neutral fleet busi- ness operates in the fields of financing, full-service leasing and fleet management, offering its services under the name “Alphabet”. Fleet business remained stable in 2009 despite the difficult economic situation. At 31 December 2009, 14 fleet entities managed a portfolio of 326,452 units worldwide, a 1.1 % increase in the contract portfolio. Within the multi-brand financing line of business, credit financ ing, leasing and other products were marketed to retail customers via dealerships in 21 markets under the brand name “Alphera”. With the portfolio continuing to grow profitably, a more restrictive credit approval policy re- sulted in a 51.0 % fall in the number of new contracts. A total of 84,463 new contracts was signed during the year under report. At the end of the reporting period, 312,687 contracts were under management (+ 0.7 %). Sharp rise in volume of deposits The Financial Services segment’s deposit volume world- wide increased to euro 9,933 million due to the attractive conditions offered. This represented an increase of 21.0 %. At the end of the reporting period we were managing 27,000 securities custodian accounts (– 14.8 %). It was not possible to maintain credit card business at the previous year’s level. The managed portfolio fell by 16.9 % to 295,334 BMW and MINI credit cards. Continued growth in the area of insurance business As attractive add-ons to lease and credit contracts we also offer customers in more than 30 markets a wide range of insurance products relating to individual mobility. Demand for these products and in particular for package solutions in combination with vehicle financing remained strong throughout the period under report. The number of new insurance contracts signed in 2009 rose by 18.3 % to 584,119 units. The insurance contract portfolio grew by 21.5 % compared to the previous year, increasing to 1,393,480 contracts at 31 December 2009. 27 Group Management Report Size of workforce reduced The size of the workforce decreased over the course of 2009 to stand at 96,230 employees at 31 December 2009. The reduction of 3,811 employees (– 3.8 %) was due to natural employee fluctuation, pre-retirement part-time working arrangements and voluntary employment contract termination agreements. Nonetheless, in addition to taking on more than 1,100 new apprentices, we also recruited staff again on a targeted basis. Apprentice numbers remain high A total of 1,118 young people started their apprenticeships with us at the beginning of the training year. 263 of these are pursuing dual vocational training courses at the end of which they will be qualified to attend a university. The number of apprentices has remained at a consistently high level for several years. The BMW Group employed 3,915 apprentices at 31 December 2009, 4.6 % less than one year earlier. The apprenticeship ratio in Germany (i. e. the ratio of apprentices to the total workforce) fell by 0.1 of a percentage point to 4.9 %. Since the beginning of 2009, apprentices who have completed their vocational training with us have also been given the opportunity to start their careers in Shenyang, China. We also offer highly attractive introductory programmes. Basic and further training tailored to requirements As a premium provider, we attach great importance to both the basic and the further training of our workforce. The creation of a training academy clearly demonstrates our commitment to training and education within the company. Training opportunities are made available to our German and British employees at the academy. Basic and further training courses are tailored to suit current requirements and implemented with specific objectives in mind. In the face of difficult business conditions, further training activi- ties in 2009 were focused on selected target groups and specific priority topics. Expenditure on basic and further training totalled euro 143 million in the financial year 2009 (– 7.1 %). BMW Group Employees Automobiles Motorcycles Financial Services Other BMW Group Attractiveness as employer confirmed We have long been aware of the strategic importance of being an attractive employer. Numerous measures have been put in place to ensure that the BMW Group is regarded as an employer of the highest repute. To this end, we focus on two areas of activity. Firstly, we regularly review our programmes for new recruits and modify them to meet changing requirements. The BMW Group Graduate Pro- gramme has been developed in this context; it is an interna- tionally oriented trainee programme for university graduates and applicants with some work experience. The structure of the programme and the guidance offered by mentors are designed to ensure that our highly qualified recruits are given the most appropriate training. Another new develop- ment is the SpeedUp programme, which is due to start in autumn 2010. This course, which ends with a Bachelor qualification, includes more than twelve months of prac- tical experience in Germany and abroad as well as one term of study abroad. In addition to the programmes offered for new recruits, university graduates are also given the option of joining the BMW Group directly. Secondly, we regularly assess how relevant target groups (students, graduates, new entrants) rate us as an employer. BMW Group Apprentices at 31 December 5,500 5,000 4,500 4,000 3,500 3,000 2,500 05 06 07 08 09 4,464 4,359 4,281 4,102 3,915 31.12. 2009 31.12. 2008 89,457 2,796 3,882 95 96,230 92,924 2,917 4,077 123 100,041 Change in % – 3.7 – 4.1 – 4.8 – 22.8 – 3.8 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 28 Share of women in management positions at BMW AG in % 9.0 8.0 7.0 6.0 5.0 4.0 3.0 Employee fluctuation ratio BMW AG1 as a percentage of workforce 7.0 6.0 5.0 4.0 3.0 2.0 1.0 05 06 07 08 09 05 06 07 08 09 6.9 7.0 7.4 7.8 8.0 2.45 2.68 2.66 5.85 2 4.59 The result is extremely positive and once again we were nominated as one of the most attractive employers in 2009. This conclusion is based on numerous studies and ranking tables (including Trendence and Universum). Ac- cording to these, young academics studying in the fields of economics and engineering sciences voted us among the most popular employers. We were the highest placed German company in Universum’s worldwide ranking table, coming fourth in the list selected by engineers. This is a further confirmation of our excellent reputation amongst students and young people about to embark on careers. Encouraging women to join our company Women are still under-represented at BMW AG, whether as apprentices (23.0 %), works students, employees working towards diplomas and doctorates (27.8 %) or in management positions (8.0 %). Nevertheless, the number of women in management positions at BMW AG is 52 % higher than it was six years ago. The total proportion of women working for BMW AG currently stands at 13.1 %. Our aim is to encourage more women to join the company and support them on their way from the training stage into management positions. We therefore make a point of increasing the opportunities for women with the aid of various mentoring programmes and internal networks. Safety at work in line with international standards A safe working environment is one of the basic precon- ditions for a healthy workforce. Health and safety-at-work management systems that comply with international standards are in place at twelve of our 24 production sites. Similar systems that comply with national standards are in place at a further four sites. Approximately 80 % of our employees are in workplaces covered by certified man- agement systems. More locations will follow suit in 2010. 1 Number of employees on unlimited employment contracts leaving the company 2 after implementation of previously reported measures to reduce the size of the workforce The accident rate for the BMW Group in 2009 was 3.1 ac- cidents per one million working hours (2008: 2.7), again lower than the average for the sector as a whole. “Today for Tomorrow” project – seeing demographic change as an opportunity The BMW Group is consciously preparing itself for the com- ing changes in age structure, particularly in industrialised countries. Maintaining and furthering the performance of our employees is seen as a crucial factor for success. With its holistic approach and emphasis on preventative measures, our “Today for Tomorrow” project is intended to create the conditions necessary for maintaining a stable, productive workforce in the future. Designing competitive remuneration systems Maintaining a competitive level of personnel costs plays a major role in the success of the BMW Group. This is not simply a one-sided matter of focusing on cost; it is equally important to achieve greater efficiency by improving pro- ductivity. The high degree of motivation amongst employees and the positive corporate approach towards staff are maintained and underlined by a combination of rewards determined individually on the basis of performance and success. Flexible and individually designed working time models represent a further important aspect. Remunera- tion, working time rules and other benefits are reviewed regularly and, when necessary, adjusted in close coopera- tion with employee representatives. Commitment to the new understanding of management leadership Implementing the Strategy Number ONE also places new demands on our approach to leadership within the organi- sation. A key task for managers is to make staff aware that changes are omnipresent and that management must deal 29 Group Management Report Accident frequency at BMW Group per one million hours worked 4.5 4.0 3.5 3.0 2.5 2.0 1.5 05 06 07 08 09 3.3 3.3 3.1 2.7 3.1 with these changes. By taking this approach, employees are better able to understand, support and proactively facilitate change. Our management team is highly professional and focused on results. Defining targets clearly and taking a process- based approach are firmly embedded in our management culture. In these challenging times it is a special respon- sibility of each manager to provide guidance to, and instil confidence in, the workforce. Staff will only be open to change and motivated to work at their best, if management can generate a sense of passion and enthusiasm for the tasks ahead. Thus, in addition to traditional managerial qualities, leader- ship is also called for. The Board of Management has im- pressed the importance of this understanding of excellent leadership throughout all levels of management in a “top- down” process and made it a key element both in the evaluation process and the set of skills that managers are expected to have. This process is being continuously im- proved. We are convinced that we are in an optimal posi- tion with our management team to accomplish the targets laid down in the Strategy Number ONE. Remuneration systems We also wish to see sustainability reflected in our remuner- ation systems. The BMW Group depends on the perform- ance of highly motivated employees for whom hard work and commitment are the norm. Based on this understand- ing, annual pay not only serves as an incentive, it is also our way of showing our appreciation for the work performed by each and every employee. The remuneration system practiced at the BMW Group is based on the following underlying principles: – Fairness, transparency and understandability. – Continuity through all levels of corporate hierarchy, re- flected in a well-balanced salary progression. – Encouraging a performance-oriented corporate culture by a targeted combination of fixed and variable remuner- ation components. – Key performers can be retained and potential employ- ees attracted to the BMW Group. The remuneration system is based on a number of com- ponents. Each BMW Group employee receives a fixed salary consisting of 12 monthly payments, complemented by additional components according to local conditions. This fixed salary is reviewed once a year and adjusted as appropriate. In addition, staff and managers receive variable salary com- ponents designed to encourage them to participate in the Group’s success and reward personal performance. Corporate success is the reflection of the Group’s perform- ance as a whole. This, in turn, is rewarded by participating staff and managers in the Group’s success through the payment of variable components. The level of these com- ponents does not depend on individual performance but solely on the results achieved by the Group as a whole. Working in close cooperation with the General Works Council, it is now ensured that this remuneration com- ponent is measured using a standardised methodology across all hierarchies within BMW AG. For this reason the system previously used to calculate the remuneration of Board of Management members as well as middle and senior management will also be applied from 1 January 2010 onwards to tariff employees. The key indicators used to determine variable remuneration components, which are dependent on the Group’s success, are the Group’s post-tax return on sales, Group net profit and the dividend paid on common stock. The recognition of personal commitment is also taken into account by means of appropriate components in the remuneration of employees, managers and Board of Manage ment members. This is taken into account in tariff- based remuneration in the form of performance bonuses. From the middle management level upwards, this part of the remuneration depends on the extent to which targets, individually agreed upon with each manager, are achieved. As well as key business performance indicators, the suc- cessful involvement in areas aimed at securing the Group’s future also play an important role. Examples of this are achievements made in the area of personnel development and behavioural aspects in the implementation of corporate strategies: importance is attached not only on achieving 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 30 targets but also on the way in which they are achieved. A binding evaluation instrument is in place for all non- tariff-remunerated employees, based on the Group’s core principles. The two variable components of remuneration are added and weighted similarly in terms of the target structure. Overall, the remuneration system described above will – depending of future market developments – help us to achieve our long-term corporate objectives and success- fully implement the Strategy Number ONE. Implementation of instruments to increase flexibility In view of the difficult economic conditions in 2009 we implemented a series of measures to increase flexibility, thus adapting vehicle production to the situation swiftly and in a timely manner. Good examples of this, in close coordi- nation with employee representatives, were the use of employee time accounts and the flexible deployment of employees within the production network. Fluctuating pro- duction volumes were also managed flexibly by means of temporary short-time working arrangements at specific sites. The proportion of variable remuneration to total remunera- tion increases commensurate to the position within the corporate hierarchy. The BMW Group differs from its com- petitors by setting store on a higher proportion of variable payments in its remuneration system. Thus in 2009 the annual income of a tariff-paid employee fell by the amount of the variable component (approximately 10 %) due to the sharp drop in operating profit, whereas that of a head of division fell by approximately one third. In this age of demographic change, company pensions are becoming an increasingly important aspect of a person’s remuneration package. The BMW Group offers its staff and managers attractive old-age pension models tailored to suit the structures existing on the various local markets. The BMW AG company pension scheme for middle and upper management was restructured during the year un- der report. The new scheme is based on a defined contri- bution system with a guaranteed minimum return that pro- vides the individual with a high degree of flexibility upon reaching retirement age. Under the new system, pension costs are significantly easier to predict. The new pension scheme is appropriate both for the current situation and for the future. Depending on local requirements and the individual’s grade, the BMW Group also offers its employees additional bene- fits such as cars at special conditions, a group accident insurance for managers in Germany and additional health insurance benefits. The remuneration philosophy described in this section, based on a set of defined principles and structures, is an essential contribution towards achieving sustainable hu- man resource policies. The new system has found broad acceptance and appreciation among staff and managers alike. On the one hand, they firmly believe in the long-term success of the BMW Group. On the other, there is a defi- nite consensus of opinion that it is reasonable and neces- sary to base a part of remuneration on the company’s success. 31 Group Management Report Further progress made with sustainability strategy During the first half of 2009 we made further progress in developing our sustainability strategy. The Group’s sustain- ability strategy is directly derived from the Strategy Number ONE and applies across all board divisions worldwide. The primary objective is to instil sustainability in each and every link of the value-added chain and its underlying processes. In order to implement this sustainability strategy we have established a set of core principles and defined fields of action. These include the continued expansion of our efficient drive train technologies and the implementa- tion of concepts for sustainable mobility in metropolitan areas. At production level, we will continue to cut down on the volume of resources used and reduce the impact that production processes have on the environment. As an attractive employer, we want to motivate and increase the sense of satisfaction felt by our employees, while at the same time preparing our specialists and managers for future challenges. We are also endeavouring to embed our ecological and social requirements at all points along the supply chain. As an integral part of society, we are com- mitted to solving challenging social issues with the ulti- mate aim of making a proactive contribution towards shap- ing the overall conditions under which we operate. Using a so-called “environmental radar” that includes ecological and social criteria, engaging in dialogue with stakeholders, taking sustainability into account in all decisions and keep- ing a tight watch over the whole of the value-added chain are key elements of sustainability management. Corporate sustainability measured in balanced scorecard terms (at Group level) was first included as a formal corpo- rate objective at the beginning of 2009. Detailed targets are then derived for each of the divisions within the Group. Nowadays, every project must be measured in terms of corporate sustainability. This involves measuring the con- sumption of resources and emission levels as well as the social and socio-political consequences of the various so- lutions at hand. As part of the process of improving the way in which we measure and manage our corporate sustain- ability activities and taking account more of strategic im- pulses, we continued to expand our sustainability organisa- tion in 2009. The newly established Sustainability Circle, consisting of one representative from each division, is re- sponsible for implementing sustainability activities across the Group. The Circle is headed by the Group Repre- sentative for Sustainability and Environmental Protection. The Sustainability Board, composed of the entire Board of Management, was set up in summer 2009 and is re- sponsible for setting the strategic course with respect to corporate sustainability. Clear guidelines for clean production In keeping with our “clean production” approach, we design our production processes worldwide with the goal of keeping the environmental impact as low as possible and totally eliminating it in the ideal case. The measurable values of energy and water consumption, process waste- water, solvent emissions and waste for disposal – ex- pressed in terms of “waste per vehicle produced” – are in- tegral components of the groupwide target system and are managed accordingly. CO2 emissions per vehicle pro- duced are also measured as a factor of the amount of energy consumed and the energy mix used. Our objectives are clear: by the year 2012 resource consumption and emission levels are to be reduced by 30 % compared to 2006 levels. Using a so-called Environmental Efficiency Figure (EEF) as indicator, reductions in resource consump- tion and emission levels will be measured from all available perspectives. The EEF for 2009 shows that resource Energy consumed per vehicle produced in MWh / vehicle CO2 emissions per vehicle produced in t / vehicle 3.00 2.90 2.80 2.70 2.60 2.50 1.00 0.95 0.90 0.85 0.80 0.75 05 06 07 * 08 09 05 06 07 * 08 09 2.94 2.90 2.78 2.80 2.89 0.99 0.94 0.84 0.82 0.91 * Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich, Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall, Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood, Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang. * Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich, Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall, Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood, Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 32 efficiency was raised by a further 8 percentage points during the 12-month period under report. Greater resource conservation in production Groupwide activities undertaken to raise energy efficiency, coupled with the effect of lower production volumes (– 181,501 automobiles / – 12.6 %), resulted in 400,000 MWh less energy being required in 2009 than in the pre vious year. Energy-saving measures included optimised operat- ing times for technical equipment, increased efficiency of ventilation systems and improved light management. These measures saved approximately euro 9 million in 2009. Energy consumption per vehicle produced, how- ever, rose slightly to 2.89 MWh (2008: 2.80 MWh), partly due to the fact that despite the reduced production volume in 2009 energy is still required, even in production-free times. Secondly, production start-ups for new models such as the BMW 5 Series Gran Turismo and the BMW X1 as well as extensive construction work (for instance at the US plant in Spartanburg), temporarily required two pro- duction lines to be operated simultaneously and additional energy-intensive work to be carried out during production downtimes. However, the newly constructed and more efficient paint shops and assembly lines at the Spartanburg plant will help reduce resource consumption from 2010 onwards. In line with the slight rise in energy consumption, CO2 emissions per vehicle produced also rose to 0.91 tons of CO2 in 2009 (2008: 0.82 tons). In 2009 we did not, however, need to make full use of the CO2 emissions al- lowances allocated to us within the European Emissions Trading System. The Spartanburg plant in the US covers a large part of its energy needs (electricity and heat) by using methane gas collected at a nearby landfill site. In 2009 approximately euro 8.6 million was spent on expanding the capacity and improving the efficiency of this system. Despite the expan- sion of the plant, this investment enables more than 60 % of the plant’s total energy requirements to be covered by methane gas. Savings in the Spartanburg region will in- crease from a current figure of 59,000 tons of CO2 p. a. to approximately 92,000 tons in 2010. This innovative project enables the plant to save approximately euro 5 million p. a. in energy costs. Total water consumption for production was reduced by 460,000 m3 in 2009. At 2.56 m3 per vehicle produced, we again achieved the previous year’s low value. Process wastewater was reduced from 0.64 m3 per vehicle (2008) to 0.62 m3 (2009). Similar to energy consumption, we are continually working on ways of reducing water consump- tion and the amount of process wastewater consumed during production downtimes. The amount of non-recyclable production waste sank by over 28 % in 2009. The amount of waste for disposal per vehicle produced decreased from 14.84 kg in 2008 to 10.63 kg in 2009. We achieved these improvements partly by using new recycling processes and also by en- hancing the quality of waste separation in the production area. We also reduced the amount of solvent used by almost 10 % in 2009. Solvent emissions (VOC) per vehicle pro- duced currently stand at 1.77 kg (2008: 1.96 kg). The in- creased bundling of car bodies of the same colour in the painting process made it possible to reduce the amount of solvent needed for rinsing and cleaning painting equip- ment. We were also able to further reduce the solvent con- centration used in cleaning solutions. A further reduction in surface protection for new cars also contributed to lower emissions during the year under re- port. In 2009, some 91 % of new cars were delivered with- out surface protection such as wax, adhesive films or pro- tective sheaths (2008: 82 %). Water consumption* per vehicle produced in m3 / vehicle Process wastewater per vehicle produced in m3 / vehicle 2.70 2.60 2.50 2.40 2.30 2.20 0.90 0.80 0.70 0.60 0.50 0.40 05 06 07 08 09 05 06 07 * 08 09 2.60 2.56 2.61 2.56 2.56 0.76 0.67 0.64 0.64 0.62 * The indicators for water consumption refer to the production sites of the BMW Group. The water consumption includes the process water input for the production as well as the general water consumption e. g. for sanitation facilities. * Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich, Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall, Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood, Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang. 33 Group Management Report Waste for disposal* per vehicle produced in kg / vehicle 17.5 15.0 12.5 10.0 7.5 5.0 Volatile organic compounds (VOC) per vehicle produced in kg / vehicle 2.75 2.50 2.25 2.00 1.75 1.50 07 08 09 05 06 07 * 08 09 16.17 14.84 10.63 2.07 2.04 2.36 1.96 1.77 * “Waste for disposal per vehicle produced“ became a performance indicator in 2007 * Basis for data expanded in 2007 from ten to 17 locations. Until 2006: Munich, and has been reported since then. Dingolfing, Landshut, Regensburg, Leipzig, Steyr, Rosslyn, Spartanburg, Hams Hall, Oxford. Since 2007: Berlin (brake disc production), Eisenach, Swindon, Goodwood, Rayong (assembly), Chennai (assembly) and BMW Brilliance in Shenyang. Eco-friendly transportation solutions In 2009 we continued to work on ways of reducing the en- vironmental impact of the logistics process. Efficiency was raised by optimising transport networks, including the in- creased capacity utilisation of the various modes of trans- port. Shifts in sales volume by region, however, resulted in changes in the proportion of goods transported by each mode. At 0.2 %, the percentage of goods transported by air remained very low during the year under report (2008: 0.1 %). The decline in sales volumes in the USA and Japan slightly reduced the percentage of goods transported by sea to 78.0 % (2008: 79.1 %). The proportion of goods transported by rail fell slightly (by 0.3 percentage points) to 6.0 % in 2009. The percentage of goods transported by road rose to 15.8 % (2008: 14.5 %) due to the small sales volume increase in Germany. Sales volume performance is also reflected in the distribu- tion of transportation methods for our new cars: overall, 47.0 % of newly produced cars left the Group’s plants by rail, 3.3 percentage points less than in the previous year. Leader in CO2 reduction with Efficient Dynamics At an early stage we adopted a development strategy that is now resulting in tangible benefits for the climate, resources and customers alike. The centrepiece of these activities is our Efficient Dynamics technology package. Efficient Dynamics innovations have been introduced step by step to all series models since March 2007, automatically generating benefits with each unit sold. These include: – optimised engine and drive train engineering (e. g. petrol engines featuring High Precision Injection as well as particularly efficient diesel engines) – lightweight construction and improved aerodynamics (e. g. through the intelligent use of aluminium and high- tensile steels) – energy management (e. g. Brake Energy Regeneration and the Auto Start Stop function) Our main guiding principles throughout are: greater dyna- mism, reduced fuel consumption and lower emissions. These developments have enabled us to reduce the CO2 Roadmap of the BMW Group for sustainable mobility BMW Group cuts fuel consumption in Germany pursuant to VDA agreement of 1990 by 2005 by al- most 30 %. Introduction of Efficient Dynamics measures in nu- merous BMW and MINI models. A fleet of approxi- mately 600 purely electrically driven cars, the MINI E, put to the test in everyday traffic conditions. First BMW Group vehicles with hybrid drive. Use of regenerative hydrogen as fuel in motor traffic. 2005 2006 2007 2008 2009 2010 long-term BMW Hydrogen 7 is presented to the public. About 40 % of the BMW Group’s new vehicles in Europe emitting a maximum of 140 g CO2 / km. More than one million vehicles equipped with Efficient Dynamics. BMW Group is pro- viding vehicles for sustainable mobility in densely populated areas. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 34 Development of CO2 emissions of BMW Group cars in Europe (Index: 1995 = 100; Basis: fleet consumption of newly registered cars in Europe (EU-15) measured on the basis of the New European Driving Cycle in accordance with the ACEA commitment) 105 100 95 90 85 80 75 70 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 * 100.0 101.0 102.4 101.0 98.6 96.7 96.7 92.9 92.9 94.8 90.0 88.6 80.0 73.3 71.4 * measured only on EU-27 basis with effect from 2009 emissions of new cars in Europe (EU-15) by almost 27 % between 1995 and 2008, thereby more than fulfilling the commitment given by the European automotive industry to reduce average CO2 emissions for new fleets of cars by 25 % between 1995 and 2008 (ACEA self-commitment). In 2009 our fleet in Germany recorded an average fuel consumption of 5.9 litres of diesel / 100 km, 6.5 litres of petrol / 100 km and average emissions of 156 g / km of CO2, thus confirming our leading role in the premium segment in Germany. We also lead the field amongst European manu- facturers with CO2 emissions of approximately 150 g / km*. The progress made is also appreciated by our customers. Efficient Dynamics has given us a competitive edge, particularly in markets subject to CO2-based vehicle tax regulations. The cost of running our cars in these markets is significantly lower than those of the competition. Pre- owned cars equipped with Efficient Dynamics also com- mand higher residual prices. Our success in reducing fuel consumption is the result of our wide-ranging goal of achieving lower CO2 emissions. This goal embraces the following statements: – All vehicles manufactured by the BMW Group are seg- ment leaders in terms of the combination of efficiency and dynamics. – Efficient Dynamics technologies are a standard feature of all vehicles. – The BMW Group pursues a policy of fulfilling all emis- sion-related legislation. Making compensation pay- ments instead of investing in the future does not con- stitute a sustainable option capable of encouraging the * 150 g / km internal calculation (EU-27) development of emission-reducing technologies for the benefit of the customer and the environment. In addition to the above points we have also set ourselves a long-term reduction target: from 2008 to 2020 the CO2 emissions of our cars are to be reduced by at least another 25 %. In order to achieve this target and to move even closer to sustainable mobility, we are proceeding in a three- step strategy: 1. We will continue to develop our Efficient Dynamics technology package with great determination. 2. In the medium term we will achieve greater fuel economy through electrifying the drive train and developing hybrid solutions. 3. In the long term, we are committed to electromobility and the use of regeneratively produced hydrogen. The next steps With the BMW Vision EfficientDynamics we presented a concept car at the IAA 2009 that is powered by a three- cylinder turbo diesel engine and two electric motors. With total system output of 262 kW / 356 hp, the fuel con- sumption according to the EU test cycle registered a mere 3.76 l / 100 km and CO2 emissions of only 99 g / km. Environmentally friendly automotive technologies We are constantly working on reducing the environmental impact of our vehicle fleet by adopting a broad range of further innovations designed to reduce the levels of carbon dioxide (CO2) and nitrogen oxide (NOx) as well as noise produced by our fleet of cars to an absolute minimum. In autumn 2009 we already had 90 models that fulfilled the Euro-5 standard governing NOx emissions. This standard will be compulsory for all cars from September 2010 gained, we will be launching a series-built electrically driven car on the market sometime during the first half of the cur- rent decade. Around four million kilometres driven with hydrogen in the tank The drive train technology used in the hydrogen-powered BMW Hydrogen 7 is groundbreaking. Hydrogen is practi- cally carbon-neutral when burnt and emission-free. An ini- tial small-scale series of 100 cars has covered some four million kilometres worldwide since 2007. These tests go to prove the suitability of our hydrogen-powered cars for both series production and everyday use. Regardless of this fact, we continue to work on optimising various system components (for instance on systems suitable for storing hydrogen). Communicating sustainability Our sustainability activities were accompanied during the reporting period by a communication initiative. At events such as the ZEIT Conference at the IAA and the World Climate Summit in Copenhagen, we took the opportunity to elucidate our position as the world’s most sustainable car manufacturer, including discussions held with opinion leaders. Our print campaign “What’s Next?”, mostly ap- pearing in German leading media, also helped to highlight to the general public the lead we are taking in this area. 35 Group Management Report onwards. The introduction of the Euro-6 standard in 2014 will further limit the emission levels allowed for die- sel-powered passenger cars. In September 2008 the BMW 330d with optional BMW BluePerformance tech- nology became the first car to comply with the Euro-6 exhaust emission standard. In 2009, the BMW 730d and the BMW 530d as well as the BMW 320d (2010 model year onwards) became the next diesel models to feature optional BluePerformance technology. Groundbreaking BMW hybrid technology The first hybrid series cars to be manufactured by the BMW Group, the BMW ActiveHybrid X6 and the BMW ActiveHybrid 7, were presented at the IAA in Frankfurt in autumn 2009. These cars combine the advantages of electric motors with those of combustion engines. This technology therefore enables fuel savings of up to 20 % compared to cars powered by conventional combustion engines. In future the BMW Group will be able to provide its customers with a comprehensive hybrid module system that provides the most suitable hybrid solution for each particular model. Field testing for electromobility Project i, originally aimed at the further development of al- ternative drive train systems, was set up in 2007 in con- junction with our Strategy Number ONE. However, this project does not only focus on these systems. Project i thinks several steps ahead – new types of composite material, new car concepts as well as alternative mobility concepts are equally important. Project i embodies a far-reaching initiative to develop completely new vehicle concepts. We are not only working on electrically driven cars, but also on concepts designed to significantly reduce the environmental impact of the car all the way along the value-added chain. In an initial step, approximately 600 fully electrically driven MINI cars were built for a large-scale trial and handed over to both private and business customers in the USA, the UK and Germany. The cars are powered by a 150-kW electric motor fed by highly efficient lithium-ion batteries. The MINI E can reach a top speed of 152 km / h. The energy storage system enables the car to cover up to 250 kilometres and can be recharged within 2.5 hours using its own charging device. That makes us one of the first manufacturers to have handed over electric cars served by lithium-ion technology for wide-scale use on public roads. Field testing in New York, Los Angeles, Lon- don, Berlin and Munich is providing us with important knowledge with respect to everyday use of this technology and helping us in our efforts to further develop the con- cept of electro mobility. We are also making this information available to scientists and policymakers with the aim of creating an efficient and environmentally friendly infrastruc- ture for electromobility. On the basis of the knowledge 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 36 Research and development expenditure reduced The research and development expenditure ratio de- creased by 0.6 percentage points in 2009 to 4.8 %, with total research and development expenditure reduced by 14.5 % to euro 2,448 million. During the year under report we employed approximately 8,900 people throughout our research and innovation net- work at eleven locations in five countries. We underlined our innovative strength again in 2009 with a portfolio of ap- proximately 60,000 patents and other industrial property rights, including more than 800 new applications and ex- tensions added in 2009. Detailed disclosures on research and development work performed are provided in the notes to the Group Financial Statements (Note 9 ). Ongoing improvements to Efficient Dynamics package The BMW Group continued to lead the field in the reduction of CO2 emissions in 2009. This fact was again confirmed by the German Federal Motor Transport Authority (KBA). The latest KBA statistics show average CO2 emission levels of 156 g / km for BMW and MINI brand cars newly registered in Germany in 2009. We are therefore lower than some European volume manufacturers despite the far greater engine performance of our cars and on a par with numerous car manufacturers whose product port- folios include a relatively high proportion of small and supermini cars. We are constantly working on ways of extending that lead en route to our goal of sustainable mobility. At the Inter- national Motor Show (IAA) in Frankfurt we presented a con- cept vehicle, the BMW Vision EfficientDynamics, in which the Efficient Dynamics innovation package has been developed to new levels and combined with the typical sporting flair of a BMW. The car is powered by a new three- cylinder turbo diesel engine and two innovative electric mo- tors mounted on the axles. It can be driven fully electrically, exclusively with the power of the turbo diesel engine or with an infinitely variable combination of all three power sources. This highly innovative concept car is renewed proof of our expertise in developing new ideas. In this vehicle, for example, the electric motor at the rear axle acts as a generator during acceleration or when braking and transmits the electricity to the vehicle’s internal lithium- polymer battery. The recovery of braking energy – a principle incorporated in the latest BMW models – can therefore be realised with far greater efficiency. Lightweight construction is an important aspect of the BMW Vision EfficientDynamics concept car. The chassis is built solely of aluminium, while the roof and the outer skin of the large doors consist almost entirely of a special type of polycarbonate glass. The car therefore only weighs ap- proximately 1,400 kilograms. In order to optimise the aerodynamics of the car as a whole and to keep rolling resistance to an absolute minimum, the BMW Vision EfficientDynamics is equipped with tyres and rims of unusual dimensions for a sports car. Furthermore, the integrated blade profile of the wheel rims improves overall aerodynamics. This package of improvements to the aerodynamics of the car results in very low air resistance values (cx of 0.22). Propulsion and aerodynamics are the most obvious areas in which the concept car presents a small glimpse of the direction in which the Efficient Dynamics development strategy is heading. A further aim is to limit the energy loss that still exists in even the most efficient com- bustion engines at as many points as possible. For this reason, the exhaust system of the BMW Vision Efficient- Dynamics is equipped with an integrated water-cooled thermoelectric generator which converts a considerable amount of the heat energy contained in the exhaust fumes into electricity. The networking of the various system components on board the concept car has made it possible to integrate a forward-thinking energy and heat management system. The on-board computer can, among other things, create a forecast of the driving situation for the road immediately ahead. If, for instance, the driver is about to leave a rural road to enter a motorway, the temperatures of the coolant and oil are reduced in advance in order to provide greater engine performance. During city driving, however, the temperature of the coolant and engine oil is raised because no high loads are anticipated that would require particular cooling. This results in lower internal engine friction and thus greater efficiency. State-of-the-art wind canal technology for realistic measurements The aerodynamics of a car have a direct impact on both its fuel consumption and its emission values. As an essential component in the continued development of the Efficient Dynamics system, we opened the new aerodynamics test- ing centre (AVZ) in June 2009. The centre accommodates two wind canals, one of which is used to analyse various original-sized vehicles while the other is mainly designed for testing models. The BMW Group has invested approxi- mately euro 170 million in the construction and equipping of the aerodynamics testing centre. As a result, we now have the world’s most modern centre of its kind in the field of automotive construction. 37 Group Management Report The advantage of the AVZ is that car models can be ana- lysed in numerous realistic situations at a very early stage in their development. One of the first innovations that can be further developed using the new methods of analysis available at the AVZ is the so-called “air curtain”, a measure designed to reduce air resistance around the wheel hous- ings and wheels. In future, any knowledge gained can be integrated in the development process far more quickly, thus contributing effectively towards improving the aero- dynamics of new models. BMW Group invests in research for the future of road safety Research staff from the BMW Group – working in coopera- tion with Continental Safety Engineering International GmbH, the Fraunhofer Institute for Integrated Circuits, the Technical University of Munich’s ultra-high-frequency technology department and ZENTEC GmbH – have been investigating the potential of so-called Car2X communi- cation as part of the three-year AMULETT research project promoted by the Bavarian Ministry of Economic Affairs, Infrastructure, Transport and Technology. The re- search project, which was concluded in 2009, was aimed at raising safety standards for pedestrians. Vehicles ex- change data by radio with an active RFID-like element (Radio Frequency Identification). In future, this element could, for example, be integrated in a schoolbag or hand- bag. This technology allows individuals to be localised and identified as endangered road users, something the motorist would not normally be aware of in a dangerous situation. The driver is only actually warned (for instance via the head-up display) in the event of real danger. If an acci- dent cannot be avoided in the normal reaction time of the driver, the system automatically actuates the car’s brakes in order to at least minimise the consequences of the accident. AMULETT has proved that the concepts devised are tech- nically feasible. Since September 2009, the project has been continued in the form of the Ko-FAS (Cooperative Vehicle Safety) project, which is being promoted by the Federal Ministry of Economics and Technology. The aim of the project continues to be a significant increase in road safety and hence a reduction in traffic accidents and road casualties. The idea is to achieve this by enabling the vehicle to reliably identify the driving environment, analyse situations comprehensively on the basis of accurate measurements that help to assess the risk of collision and subsequently trigger appropriate preventive measures. BMW Forschung und Technik GmbH is heading two of the three Ko-FAS sub-projects. Numerous other projects carried out by the BMW Group’s research and technology experts have meanwhile found their way into series production cars. The parking assistant or the innovative iDrive operating concept are just two such examples. Numerous awards underpin innovative strength of the BMW Group Again in 2009, we received numerous awards in recogni- tion of our ability to innovate. In January the Federal Minister of Transport, Construction and Urban Development awarded the BMW Group its special prize for innovation for the MINI E at the “Auto der Vernunft” ceremony. The prize was awarded in recognition of the BMW Group’s particular consideration of ecological and economic aspects. The “ÖkoGlobe 2009” also went to the MINI E. This award is presented by various organisations, including the University of Duisburg-Essen, for outstanding innovations in the field of sustainable mobility. The BMW Group again underlined its position as leading engine manufacturer with victories in three different catego- ries at the International Engine of the Year Award. In the most prestigious engine competition worldwide, the V8 en- gine (in the BMW M3), the straight six-cylinder engine fea- turing twin turbo technology (in the BMW 3 Series, 1 Series and the BMW X6) and the four-cylinder twin-scroll turbo engine (in the MINI Cooper S) all achieved top places in their relevant cubic capacity categories. The BMW Group has already won more than 40 trophies in the eleven com- petitions held since 1999. The continuing success in in- ternationally prestigious engine competitions is impressive proof of the BMW Group’s unique expertise in the field of drive train development. Coinciding with its successful launch, the BMW X1 won the “TOPAuto 2010” award of the MID (Motor-Informations- Dienst) engine information service. Over 150 motoring journalists from Germany, Austria and Switzerland took part in the voting. The BMW Vision EfficientDynamics was also voted concept car of the year. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 38 Further improvements in profitability along the value-added chain Our main focus with regard to the purchasing and supplier network in 2009 was to continue the previous year’s ini- tiative of creating the most efficient value-added chain in the automotive industry. Working closely with our suppliers, we made further progress in reducing the cost of materials for vehicle projects both in the development and series production stages. Particular attention was paid to maintaining the high level of quality expected by our customers. The purchasing department was supported in this process by the development team, particularly in its consistent application of modular solutions. The increased use of standardised components enables both time and costs to be reduced across all models. Important milestones were therefore set in 2009 with regards to the future pur- chasing arrangements for the BMW 1 and 3 Series suc- cessor models. Parts supply assured despite difficult market environment The consequences of the worldwide financial and eco- nomic crisis particularly affected the automotive supply in- dustry during the year under report. Declining production volumes coupled with simultaneously decreasing liquidity levels and rising financing costs had a significant impact on the financial stability of the supplier market, resulting in a greater incidence of crisis situations among suppliers at a national and international level. However, a consistent strategy of risk and intervention management enabled the various crises to be successfully mastered without having a lasting detrimental effect on supply security or car pro- duction quality. Increasing internationalisation of the purchasing network We continued to expand our international purchasing network with great determination in 2009. By concentrating on the Asian and NAFTA regions for new purchase vol- umes, we were able to make optimal use of cost advan- tages, while also expanding the scope of so-called “natural hedging” – the strategy of purchasing in foreign curren- cies to minimise exchange risks. With this in mind, re- gional experts with a good understanding of purchasing, quality and logistics issues analyse the various procure- ment markets and suppliers in close cooperation with cen- tralised management functions. This strategy will enable us to achieve cost and currency benefits on purchases for future models. The basis for this was laid in 2009 with the selection of suppliers for the BMW 1 Series and 3 Series models. Regional mix of BMW Group purchase volumes 2009 in %, basis: production material Asia / Australia Africa NAFTA Central and Eastern Europe Rest of Western Europe Germany Germany Rest of Western Europe 47 21 NAFTA Asia / Australia Central and Eastern Europe 12 Africa 10 7 3 Future natural hedging volumes are also increased by placing multi-currency orders (i. e. purchasing individual components in varying currency proportions) – a practise we have employed since 2009. Innovation and technology leadership of BMW in-house component production maintained In the fields of bodywork and interiors, our components plant in Landshut again demonstrated its innovative and technological leadership. At the European SPE Auto- motive Division Award competition held in 2009, the International Plastics Society presented the highest awards in the categories “Exterior” and “Interior” to the BMW Group. Our light metal foundry also confirmed its technological leadership. We will be commissioning the world’s first odourless foundry at our Landshut plant in 2010. The use of environmentally sustainable binding agents will enable us to reduce emissions from combustion residues by 98 %. Greater emphasis on sustainability and innovation in supplier market Our stringent requirements for ecological and social standards are increasingly being applied along the value- added chains within the supplier network. Suppliers and their partners must provide detailed proof of their com- pliance with the required standards for sustainability in order to take part in the tendering procedure. As part of the selection process, our experts check whether pro- spective suppliers are complying with the required standards. 39 Group Management Report The establishment of a joint venture with the SGL Group in autumn 2009 was an important step in gaining access to innovations in the field of lightweight construction. This joint venture has been set up to manufacture carbon fibre and textile semi-finished products for use in automotive construction. A primary selection criterion in this case was our requirement for the use of environmentally friendly sources of energy in both the production and the recycling of carbon fibres. We have also started working with SB Limotive, a joint venture of Bosch and Samsung SDI, thus forming alliances with two further world market leaders in the field of electro- mobility. As supplier of the battery cells that are to power our future project, the “Megacity Vehicle”, SB Limotive offers state-of-the-art technology, bringing together Ger- man automotive expertise and Korean battery-making know-how. Further additions to model range In 2009 we added numerous new models to the existing range. Furthermore, we also presented concept studies for the BMW and MINI brands. After initially introducing the new BMW 7 Series in selected markets at the end of 2008, the model was subsequently launched worldwide at the beginning of 2009. Towards the end of the reporting period we also presented a four- wheel-drive version of the BMW 7 Series. The M versions of the BMW X5 and X6 were launched in autumn. The BMW 5 Series Gran Turismo and the BMW X1 celebrated their world debuts at the International Motor Show (IAA) in September and have been available to customers in Europe since October. We also showcased the BMW ActiveHybrid X6 and the BMW ActiveHybrid 7 at the IAA. The BMW ActiveHybrid X6 first became available in se- lected markets at the end of 2009 and the first delivery of the BMW ActiveHybrid 7 will take place in spring 2010. The low-fuel-consumption BMW 320d Efficient Dynamics Edition was also presented to the public at the IAA and will be available to customers from the beginning of 2010. The new MINI convertible models in the Cooper, Cooper S and John Cooper Works versions have been on the market since the middle of 2009. We also celebrated the 50th birthday of the MINI brand with the launching of some spe- cial limited editions: the MINI 50 Mayfair and the MINI 50 Camden. We now also offer diesel-driven versions of the MINI One Clubman and the MINI One as entry-level models. A new model was also added to the Rolls-Royce brand: the Ghost made its world debut at the IAA, and has been available to customers in selected markets since the end of 2009. We additionally presented two MINI brand concept cars at the IAA: the MINI Coupé Concept and the MINI Roadster Concept. The MINI Countryman is also due to be launched in 2010. Formula One involvement ended Fully in line with the new direction taken in conjunction with the Strategy Number ONE, we decided not to extend our involvement in Formula One beyond the end of the 2009 season. The resources freed up by this move will flow in particular into developing new and innovative drivetrain technologies. The BMW Group remains active in the area of touring car racing and continues to support young tal- ented drivers in Formula BMW. We also remain committed to customer sport with series production cars. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 40 Technological leadership demonstrated at the IAA We also demonstrated our innovative strength and tech- nological leadership during the IAA with the presentation of various concept cars. The BMW Vision EfficientDynamics for instance enabled us to prove that cars can be sporty and still display high fuel economy at the same time. The BMW Vision EfficientDynamics combines the potential benefits of BMW’s ActiveHybrid technology with the in- novative strength of our Efficient Dynamics technology package. The car is powered by a newly developed three- cylinder turbo diesel engine and two innovative electric motors mounted on the axles. Fuel consumption is 3.76 l / 100 km and CO2 emissions of only 99 g / km. of advertising media and the changing ways in which various media are now being used. The BMW brand’s core message of “joy” will play a greater role in our worldwide marketing communication strategy in future. The Efficient Dynamics package and the design of our cars are also being increasingly emphasised. Focusing on these central messages on a worldwide basis will help to strengthen the brand’s strong market position. The prelude to the re- aligned strategy was “The Story of Joy” campaign initiated in Germany in June 2009, which has meanwhile been ex- tended to cover additional markets. Initial market research results show that the new campaign’s messages are being well received and enriching the image of the BMW brand. We are also exploring ways of efficiently utilising waste heat by means of a thermoelectric generator (TEG). The TEG generates electrical energy from the exhaust system, exploiting the difference in temperature between the hot exhaust pipe and the coolant, which can, for instance, be used to power the car’s on-board electrical system. Innovative exhibition stand concept at the IAA We presented all three of the BMW Group’s brands under one roof for the first time at the IAA in Frankfurt. The underlying theme emphasised for the BMW brand was the sheer joy of driving. The new exhibition concept, which included a 280-metre-long track, enabled us to give a demonstration of our cars in real driving situations for the first time. The main focus was on enabling potential cus- tomers to sense the “BMW brand atmosphere” and to ex- perience the values of joy, efficiency and dynamism that are inseparably associated with the BMW brand. The 50th birthday celebrations were the highlight of the MINI brand’s appearance at the IAA. The “birthday studio” formed the centrepiece of the exhibition, where a docu- mentary portraying 50 years of the MINI was shown: a film spanning the history of the MINI from 1959 to 2009. We were able to demonstrate the diversity of the MINI brand, from the original Morris Mini Minor of 1959 to the anniver- sary models and finally the concept studies. The MINI turns 50 In May 2009, 25,000 avid fans from 40 countries cele- brated the 50th birthday of the MINI. Over 10,000 MINI enthusiasts congregated at Silverstone, not far from the Oxford plant where the MINI is produced today. We pre- sented a special limited edition car to celebrate the 50th anniversary of the first Formula One victory of the John Cooper team: the MINI John Cooper Works World Cham- pionship 50 “Character”. New trends in sales network With approximately 3,000 BMW, 1,300 MINI and 80 Rolls-Royce dealerships, the worldwide sales network of the BMW Group’s three brands remained unchanged during the year under report. Although we slightly reduced the number of dealerships in the established markets, the BMW Group’s trade organisation in emerging markets such as China and Russia was expanded further. We suc- cessfully met the challenges presented by the impact of the financial crisis with a set of targeted measures aimed at strengthening the dealership network. The number of customer service centres (Sales and Services) therefore remained at a high level. The main focus of our global retail activities became in- creasingly directed towards the main cities of the world. Altogether, consolidation at some international locations re- sulted in a slight reduction in the total number of branches. The world debut of the Rolls-Royce Ghost was the main focus of Rolls-Royce’s appearance at the IAA. The exhi- bition stand was designed to give the impression of an open building complete with daylight ceiling in which the brand’s range of models was presented. The space used to exhibit vehicles was surrounded with a glass surface, with the publicly accessible Rolls-Royce plaza immediately in front of it. BMW marketing communication realigned Marketing communication for the BMW brand has been realigned to take greater account of the increasing diversity Sales organisation further strengthened During the year under report we continued to promote projects – some of them initiated in 2008 in conjunction with the Strategy Number ONE – designed to strengthen the sales organisation and improve the BMW Group’s customer orientation. In this context, we created a world- wide programme to enable dealers to hone their skills. The programme focuses on individuals and serves as a good way of highlighting potential areas for improvement. It has been very well received by the sales organisation and met with considerable success in a short space of time. The success of this initiative has led us to introduce the project 41 Group Management Report in 2010 in other markets too. Approximately 750 dealers in 15 countries will have participated in this programme by the end of 2010. Customer service and accessories business expanded Customer service and the sale of accessories make an im- portant contribution to business, particularly for the dealer- ships. In view of the growing number of our vehicles on the roads, both lines of business are stability factors in a volatile market environment. In conjunction with the Strategy Number ONE, we carried out numerous projects in 2009 aimed at expanding these lines of business. The sale of BMW and MINI parts, accessories and services represents an important source of earnings. The accesso- ries line of business was accordingly realigned in 2009. One of the measures taken was to include the marketing of accessories in the process of selling new cars. Selected products designed for special models can now also be or- dered directly ex works. In addition, the range of products was revised and streamlined. This has put us in an even better position to provide new market-compatible and sus- tainable products to our customers. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 42 BMW Group – Capital Market Activities in 2009 Volatile year on the stock markets ends with strong gains At the beginning of 2009 the situation was dominated by the worldwide financial and economic crisis. The leading stock market indices recorded their lowest levels for the year as negative expectations prevailed. However, helped by economic stimulus programmes and hopes of a rapid recovery for the global economy, the world’s stock markets recovered well over the course of the year. In 2009 the German stock index, the DAX, moved away from its year’s low of 3,588.89 points and, after a great deal of volatility, closed the year at 5,957.43 points. Compared to the end of 2008, the DAX therefore gained 1,147.23 points or approximately one quarter in value during the year under report. The increase against the year’s low in March was as much as 66 %. Due to one exceptional factor, the Prime Automobile sector index did not perform as well as the DAX. It closed on the final day of trading in 2009 at 542.78 points, only 6.8 % higher than at the end of the previous year. The Dow Jones EURO STOXX 50 ended the stock market year 2009 with a gain of 21.0 %. BMW stock performed well during the reporting period. BMW common stock closed the year at a price of euro 31.80 and hence 47.2 % higher than one year earlier. BMW preferred stock performed even better and gained 66 % compared to the previous year’s closing price, finishing at euro 23.00 on the last day of trading. Authorisation to buy back shares of common stock extended BMW AG purchased treasury shares in 2005 and 2006 and withdrew them from circulation. At the Annual General Meeting on 14 May 2009 the Board of Management was again authorised 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. At the same time, the authori- sation from 8 May 2008 to acquire treasury shares was rescinded. The authorisation from 14 May 2009 is valid until 12 November 2010. There are no current plans to exercise the authorisation. The option of a share buy-back does, however, remain open to BMW AG. Employee share scheme BMW AG has allowed its employees to participate in its success for more than 30 years. Since 1989 this partici- pation has taken the form of an employee share scheme. In total, 831,425 shares of preferred stock were issued to employees in 2009 in conjunction with this scheme. 362,225 of these came from the buy-back of shares of preferred shares in 2008. In addition to this – and in ac- cordance with a resolution taken by the Board of Manage- ment on 24 November 2009 with the approval by the Supervisory Board – the share capital was increased by euro 469,200 from euro 654,191,358 to euro 654,660,558 by the issue of 469,200 new non-voting shares of preferred stock. This increase was executed on the basis of Authorised Capital 2009 in Article 4 (5) of the Articles of Incorporation. The new shares of preferred stock carry the same rights as existing shares of preferred stock and were issued to enable employees to obtain an equity participation in the company. Debt instruments successfully issued under difficult conditions The international debt capital market was very much domi- nated by the knock-on effects of the worldwide financial Development of BMW stock compared to stock exchange indices (Index: 30.12.1999 = 100) 350 300 250 200 150 100 50 00 01 02 03 04 05 06 07 08 09 BMW preferred stock BMW common stock Prime Automobile DAX 43 Group Management Report crisis at the start of 2009. After considerable upheavals, however, the market recovered during the first half of 2009 and remained stable throughout the remainder of the year. The BMW Group was again active on the markets in 2009 as an issuer of bonds, notes and ABS instruments in order to refinance its financial services activities. obtain funds by issuing ABS instruments. Amounts se- curitised included US dollar 2.55 billion in the USA, yen 25 billion in Japan and Australian dollar 350 million in Australia. ABS instruments for Canadian dollar 400 million and South African rand 800 million were also successfully placed. During 2009 the BMW Group successfully issued three euro benchmark bonds and increased the volume of two existing euro benchmark bonds, raising in total more than euro 5 billion on European capital markets. The BMW Group also issued bonds denominated in US dollars, British pounds and Australian dollars with a total volume of approxi- mately euro 760 million. Private placements in various currencies raised a total of euro 3.8 billion. Despite the difficult environment for capital market activi- ties, we were once again able to demonstrate our ability to As in previous years, issues were highly sought after both by institutional and private investors, thanks to our good creditworthiness and continuous communication with the capital markets. Capital markets acknowledge sustainability as value driver We continued to communicate intensively with the capital markets on the subject of Socially Responsible Investment (SRI). The exchange of ideas with sustainability investors and analysts was continued successfully in discussions BMW stock 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 Shares bought back at the reporting date Stock exchange price in euro1 Year-end closing price High Low Key data per share in euro Dividend Common stock Preferred stock Earnings per share of common stock3 Earnings per share of preferred stock4 Cash flow5 Equity 2009 2008 2007 2006 2005 601,995 601,995 601,995 601,995 – – – – 31.80 35.94 17.61 52,665 – 23.00 24.79 11.05 0.302 0.322 0.31 0.33 7.53 21.61 42.73 17.04 52,196 363 13.86 36.51 13.00 0.30 0.32 0.49 0.51 6.84 42.35 50.73 39.81 52,196 – 36.30 47.52 33.64 1.06 1.08 4.78 4.80 9.70 43.51 46.47 35.52 52,196 – 43.52 45.91 31.80 0.70 0.72 4.38 4.40 8.21 622,228 13,488 37.05 39.97 32.04 52,196 – 33.00 33.98 24.48 0.64 0.66 3.33 3.35 9.17 30.42 30.99 33.24 29.24 25.17 1 Xetra closing prices 2 proposed by management 3 annual average weighted amount 4 stock weighted according to dividend entitlements 5 calculated on the basis of operating cash flow: up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities of the Automobiles segment 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 44 held at the IAA in Frankfurt and expanded by the addition of a stakeholder roundtable in Munich. At the beginning of September 2009 the BMW Group once again received the accolade of being industry leader in the Dow Jones Sustainability Index. We have now been the most sustainable car manufacturer in the world for the fifth time in succession. The BMW Group is the only enterprise in the automotive sector to have been represented con- tinuously in this important group of sustainability indices since their creation in 1999. At the end of September 2009 the BMW Group was in- cluded in the Carbon Disclosure Leadership Index, thus confirming from the perspective of the Carbon Disclosure Project (CDP) – a joint initiative of 475 investors with global operations – that we are making an exemplary contribution to climate protection. During the winter of 2009, Sustainalytics assessed the sus- tainability performance of all DAX 30® companies. Scoring 74.3 out of a possible 100 points, the BMW Group received the best mark for sustainability. Important areas in which we excel were identified as the environmental and social standards set for suppliers, sound personnel and social policies for the workforce and a high level of commitment to the wider community. Sustainalytics is an independent, innovative provider of “Responsible Investment Services” and is one of the market leaders in Europe and North America. The BMW Group also won awards in 2009 for its Sustain- able Value Report 2008. The BMW Group Sustainable Value Report 2008 was deemed to be one of the three best sustainability reports of the 150 largest companies in Germany and the best one in the automotive sector. The BMW Group made an impression on the jury in its Sustain- able Value Report, particularly in its pursuit of sustainability strategies and the way it has embedded the idea of sus- tainability at all levels of the business. The competition for the best sustainability reports is promoted by the Federal Ministry of Labour and Social Affairs and by the Council for Sustainable Development. 45 Group Management Report Disclosures pursuant to § 289 (4) HGB and § 315 (4) HGB and Explanatory Report Pursuant to Article 4 (1) of the Articles of Incorporation, BMW AG’s share capital totalling euro 654,660,558 is sub-divided into 601,995,196 shares of common stock and 52,665,362 non-voting shares of preferred stock, each with a par value of euro 1. In accordance with a reso- lution taken by the Board of Management on 24 November 2009 and with the approval of the Supervisory Board, the share capital was increased by euro 469,200 from euro 654,191,358 to euro 654,660,558 by the issue of 469,200 new non-voting shares of preferred stock. This increase was executed on the basis of Authorised Capital 2009 in Article 4 (5) of the Articles of Incorporation. The new shares were issued to employees in conjunction with the existing employee share scheme. The Company’s shares are issued to bearer. The rights and duties of shareholders derive from the German Stock Corporation Act (AktG) in conjunction with the Company’s Articles of Incorporation, the full text of which is available at www.bmwgroup.com. The voting power attached to each share corresponds to its par value. Each euro 1 of par value of share capital repre- sented in a vote entitles the holder to one vote (Article 18 (1) of the Articles of Incorporation). The Company’s shares of preferred stock are non-voting pursuant to § 139 AktG et seq., i. e. they only confer voting rights in exceptional cases stipulated by law such as when the preference amount has not been paid or has not been fully paid within one year or the arrears have not been paid within the subsequent year. With the exception of voting rights, holders of shares of preferred stock are entitled to the same rights as holders of shares of common stock. Article 24 of the Articles of Incorporation confers preferential treatment to the non- voting shares of preferred stock with regard to the appropri- ation of the Company’s unappropriated profit. Accordingly, the unappropriated profit is required to be appropriated in the following order: (c) uniform payment of any other dividends on shares on common and preferred stock, provided the share- holders do not resolve otherwise at the Annual General Meeting. The right of shareholders to have their shares evidenced in writing 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 written notice (in the form prescribed by § 126b of the German Civil Code), either in German or English, of their intention to participate. Share- holders are also required to provide evidence of their en- titlement to participate and exercise their voting rights at the Annual General Meeting. For this purpose, documen- tary evidence of the shareholding, issued by the custodian bank (in the written form prescribed by § 126 b BGB), in either German or English, is required. Voting rights may also be exercised by proxy. The chairperson may determine a reasonable time limit for shareholders to exercise their right to raise questions and speak (Article 19 (2) of the Articles of Association). When the Company issues shares to employees in con- junction with its employee share scheme, the shares are subject to a company-imposed vesting period of four years, measured from the beginning of the calendar year in which the shares are issued. During this time the shares may not be sold. The shares issued in conjunction with the employee share scheme are shares of non-voting preferred stock which are transferred solely and directly to employees. Like all other shareholders, employees exercise their control rights over these shares on the basis of relevant legal provi- sions and the Company’s Articles of Incorporation. (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 Based on the information available to the Company, the following direct or indirect holdings exceeding 10 % of the voting rights at the end of the reporting period were held at the date stated:* Stefan Quandt, Bad Homburg v. d. Höhe, Germany AQTON SE, Bad Homburg v. d. Höhe, Germany Stefan Quandt Verwaltungs GmbH, Bad Homburg v. d. Höhe, Germany Stefan Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany Johanna Quandt, Bad Homburg v. d. Höhe, Germany Johanna Quandt GmbH, Bad Homburg v. d. Höhe, Germany Johanna Quandt GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany Susanne Klatten, Munich, Germany Susanne Klatten Beteiligungs GmbH, Bad Homburg v. d. Höhe, Germany Susanne Klatten GmbH, Bad Homburg v. d. Höhe, Germany Susanne Klatten GmbH & Co. KG für Automobilwerte, Bad Homburg v. d. Höhe, Germany * based on voluntary balance notifications provided by the listed shareholders at 31 December 2008 Direct share of voting rights (%) Indirect share of voting rights (%) 17.4 17.4 17.4 16.3 16.3 12.6 12.6 12.6 17.4 0.4 16.3 12.6 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 46 The voting power percentages disclosed above may have changed subsequent to the stated date if these changes were not required to be reported to the Company. Due to the fact that the Company’s shares are issued to bearer, the Company is generally only aware of changes in share- holdings if such changes are subject to mandatory notifica- tion rules. There are no shares with special rights which confer con- trol rights. Appointments and revocation of appointments of mem- bers of the Board of Management are based on the rules contained in §84 et seq. of the German Stock Corporation Act (AktG) in conjunction with Article 31 of the German Co- Determination Act (MitbestG). 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. Amendments to the Articles of Incorporation must comply with § 179 et seq. AktG. All amendments must be decided upon by the shareholders at the Annual General Meeting (Article 119 (1) no. 5, Article 179 (1) AktG). The Super visory Board is authorised to approve amendments to the Articles of Incorporation which only affect its wording (Article 14 no. 3 of the Articles of Incorporation). It is also authorised to change § 4 of the Articles of Incorporation in line with the relevant amount of Authorised Capital 2009 utilised. Resolutions are passed at the Annual General Meeting by a simple majority of shares unless otherwise explicitly required by binding provisions of law (§ 20 of the Articles of Incorporation). In accordance with the resolution passed at the Annual General Meeting on 14 May 2009, the Board of Manage- ment is authorised, up to 12 November 2010 and subject to the price limits stipulated in the resolution, to acquire shares of common and / or non-voting preferred stock 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 to cancel the shares of common / non-voting preferred stock acquired on the basis of the above-mentioned authorisation or previously acquired shares of common / non-voting preferred stock without further resolution at the Annual General Meeting and to offer and transfer shares of non-voting preferred stock to persons employed by BMW AG or one of its affili- ated companies for an amount of up to euro 2,000,000 of share capital. The subscription right of existing share- holders to the new shares of preferred stock used for the purpose stated above is excluded. Furthermore, the Board of Management is authorised to buy back shares and sell bought-back shares in situations specified in Article 71 AktG, e. g. to avert serious and imminent damage to the Com pany. In accordance with Article 4 (5) of the Articles of Incorporation, the Board of Management is authorised – with the approval of the Supervisory Board – to increase BMW AG’s share capital during the period until 13 May 2014 by up to euro 4,530,800 for the purposes of an em- ployee share scheme by issuing new non-voting shares of preferred stock, which carry the same rights as existing non-voting preferred stock, in return for cash contributions (Authorised Capital 2009). Existing shareholders may not subscribe to the new shares. There is no conditional capital at the reporting date. The BMW AG is party to the following major agreements which contain provisions for the event of a change in control or the acquisition of control as a result of a takeover offer: – An agreement concluded with an international consorti- um of banks relating to a syndicated credit line (which was not being utilised at the balance sheet date) entitles the lending banks to give extraordinary notice to termi- nate the credit line (such that all outstanding amounts, including interest, 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 acquisi- tion 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 production of a new family of small (1 to 1.6 litre) petrol-driven engines entitles each of the cooperation partners to give extra- ordinary notification of termination in the event of a com- petitor acquiring control over the other contractual party and if any concerns of the other contractual party regarding the impact of the change of control on the cooperation arrangements are not allayed during the subsequent discussion process. – BMW AG acts as guarantor for all obligations arising from the joint venture agreement relating to BMW Brilliance Automotive Ltd. in China. This agreement grants an extraordinary right of termination to either joint venture partner in the event that, either directly or indirectly, more than 25 % of the shares of the other party are 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. 47 Group Management Report – Framework agreements are in place with financial institu- tions and banks (ISDA Master Agreements) with respect to trading activities with derivative financial instruments. Each of these agreements includes an extraordinary right of termination which triggers the immediate settle- ment of all current transactions in the event that the creditworthiness of the party involved is materially weaker following a direct or indirect acquisition of beneficially owned equity capital which confers the power to elect a majority of the Supervisory Board of a contractual party or any other ownership interest that enables the acquirer to exercise control over a contractual party or which con- stitutes a merger or a transfer of net assets. – Loan agreements in place with the European Investment Bank (EIB) entitle the EIB to request early repayment of the loan in the event of an imminent or actual change in control at the level of the guarantor, BMW AG, if the EIB has reason to assume – after the change of control has taken place or 30 days after it has requested to discuss the situation – that the change in control could have a significant adverse impact, or if – as stated in one of the contracts – the borrower refuses to hold such discussions. – BMW AG is party to an agreement with SGL Carbon SE, Wiesbaden, relating to the joint ventures SGL Automotive Carbon Fibers LLC, Delaware, USA and SGL Automotive Carbon Fibers GmbH & Co. KG, Munich. The agree- ment includes call and put rights in case – directly or in- directly – 50 % or more of the voting rights relating to the relevant other shareholder of the joint ventures is ac- quired by a third party, or if 25 % of such voting rights is acquired by a third party if that third party is a competitor of the party that has not been affected by the acquisi- tion of the voting rights. In the event of such acquisitions of voting rights by a third party, the non- affected share- holder has the right to purchase the shares of the joint ventures from the affected shareholder or to require the affected party to acquire the other shareholder’s shares. 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. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 48 Analysis of the Group Financial Statements Group Internal Management System Our financial management system is oriented towards the BMW Group’s strategic objectives, measured primarily in terms of profitability and long-term growth in value. One of the prime criteria determining decisions made at project, segment and group levels is the coherent management of capital employed. The rates of return set for the Auto- mobiles, Motorcycles and Financial Services segments all stem from this objective. The Automobiles and Motor- cycles segments are managed on the basis of specific product projects on the one hand and process and infra- structure projects on the other. The credit and lease port- folios of the Financial Services segment are managed primarily from a cash flow and risk perspective. Minimum rates of return as basis for value-based management 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 (WACC) as follows: Cost of equity capital x fair value of equity capital Fair value of equity and debt capital WACC = + Cost of debt capital x fair value of debt capital Fair value of total capital The cost of equity capital is measured using the Capital Asset Pricing Model (CAPM). The cost of debt capital is based partly on the average interest rate paid for long-term external debt and partly on the interest rate applicable for pension obligations. remains effective. Once a positive decision has been reached for a particular project, it is managed over time using a value-based approach. Projects are monitored continuously and resources reallocated according to requirements. The project decision and related project selection are im- portant aspects of our value-based management approach. Project decisions are taken on the basis of rates of return and net present values (NPVs), supplemented by a stand- ardised approach to assessing opportunities and risks. 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 gen- erated by a project decision and comparing the results with competitive market values. Accordingly, the amount a project will contribute to the to- tal value of the segment can be measured when the project decision is taken. Targets and performance are controlled using project-related target NPVs and individual cash-flow- related parameters which have an impact on the targeted rates of return. Return on capital used to measure value on a periodic basis General business conditions relevant for periodic planning have a bearing on how individual product projects and the product programme as a whole are managed. It is impor- tant that period-specific targets are also monitored and managed on a long-term basis. This helps to ensure that Capital employed by BMW Group in euro million Value management in the context of project control Strategic priorities set at a functional level are based on segment-specific strategies and on the project decisions reached in accordance with those strategies. The close link between segment-specific strategies and project objectives ensures that the project development process Group equity + Financial liabilities + Pension provisions Capital employed 2009 2008 20,031 4,658 3,234 27,923 21,766 2,832 3,717 28,315 Return on Capital Employed BMW Group Automobiles Motorcycles Earnings for ROCE purposes in euro million Capital employed in euro million Return on capital employed in % 2009 2008 2009 2008 2009 2008 922 – 265 19 639 690 60 27,923 28,315 13,143 14,056 405 432 3.3 – 4.7 2.3 4.9 13.9 49 Group Management Report Capital employed by Automobiles segment in euro million 2009 2008 Operational assets less: Non-interest bearing liabilities Capital employed 27,659 14,516 13,143 28,867 14,811 14,056 the BMW Group’s earnings performance can develop at a steady pace. Periodic performance is managed in the con- text of defined accounting policies and external financial reporting requirements. We primarily use profit before tax and segment-specific rates of return as the key indicator figures in managing operating performance by reporting period. Capital efficiency is measured within the BMW Group on the basis of the return on capital employed (ROCE). This key indicator shows the amount of capital employed across all lines of business, thus reflecting the overall Group perform- ance. In line with the method applied at Group level, the return on capital employed is also the primary performance indicator used by the Automobiles and Motorcycles seg- ments. In contrast, the performance of the Financial Services segment is measured on the basis of the return on equity (ROE). The ROE performance indicator is important for the value-based management of the Financial Services seg- ment because it focuses on equity as a resource with limited availability and puts the efficient utilisation of capital at the forefront. ROCE Group Profit before interest expense and tax = Capital employed ROCE Automobiles and Motorcycles = Profit before financial result Capital employed ROE Financial Services = Profit before tax Equity capital Return on Equity Group ROCE is measured by dividing earnings for ROCE purposes by the average amount of capital employed. Capital employed is measured at Group level by reference to the equity and liabilities side of the balance sheet and comprises Group equity, pension provisions and the finan- cial liabilities of the Automobiles and Motorcycles seg- ments. The average level of capital employed for a par- ticular year is measured as the average capital employed at the beginning of the year, at quarter-ends and at the end of the year. In line with the computation of employed capi- tal, earnings for ROCE purposes is defined as profit before interest expense incurred in conjunction with the pension provision and the financial liabilities of the Automobiles and Motorcycles segments (profit before interest expense and taxes). The ROCE of the Automobiles and Motorcycles seg- ments is measured as the ratio of the profit before finan- cial result and the average level of capital employed. The latter comprises all current and non-current operational assets after deducting liabilities not subject to interest, e. g. trade payables. Based on the cost of capital as a minimum rate of return and comparisons with competi- tive market values, the target ROCE for the Automobiles and Motorcycles segments has been set at a minimum of 26 %. ROE is defined as the profit before taxes divided by the average amount of equity capital allocated to the Financial Services segment. The target is a minimum return on equity of 18 %. Long-term creation of value The overall target set for earnings is continuous growth; the minimum rate of return required for each line of busi- ness is used as the relevant parameter. These periodic targets are supplementary to project and programme tar- gets. For all project decisions reached, the impact of cash flows on the model rate of return as well as the impact on periodic earnings over the long term are documented. The fact that the performance indicators also take account of periodic financial reporting requirements ensures con- sistency within the target and management model. This Profit before tax in euro million Equity in euro million Return on equity in % 2009 2008 2009 2008 2009 2008 Financial Services 365 – 292 3,978 4,013 9.2 – 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 50 Key performance indicators in % Return on Capital Employed BMW Group Automobiles Motorcycles Return on Equity Financial Services * Capital employed calculated on year-end basis 2009 2008 2007 2006* 2005* 3.3 – 4.7 9.2 2.3 4.9 13.9 – 15.3 24.7 18.0 18.1 16.7 21.7 17.7 17.6 15.1 23.2 17.8 16.9 approach allows an analysis of the effect of each project- based decision on earnings and rates of return. Multi-project planning data resulting from these procedures allows on- going comparison between dynamic multi-period targets and periodic performance. Earnings Performance The BMW Group’s performance in the financial year 2009 was dampened by the impact of the international economic and financial crisis. In addition to sales volume decreases on major markets, reported figures were also adversely affected by an intense level of competition and some model life-cycle factors. The BMW Group recorded a net profit of euro 210 million for the financial year 2009 (2008: euro 330 million). The post-tax return on sales was 0.4 % (2008: 0.6 %). Earnings per share of common and preferred stock were euro 0.31 and euro 0.33 respectively (2008: euro 0.49 and euro 0.51 respectively). Group revenues fell by 4.7 % compared to the previous year. Adjusted for exchange rate factors, revenues would have decreased by 5.1 %. Revenues from the sale of BMW, MINI and Rolls-Royce brand cars fell by 6.0 %, re- flecting the sales volume performance. Motorcycles busi- ness revenues were 13.3 % down on the previous year. Group Income Statement in euro million Revenues Cost of sales* Gross profit Sales and administrative costs Other operating income Other operating expenses Profit before financial result Result from equity accounted investments Interest and similar income Interest and similar expenses Other financial result Financial result Profit before tax Income taxes Net profit * after reclassification of research and development costs to cost of sales 2009 2008 50,681 – 45,356 5,325 – 5,040 808 – 804 289 36 856 –1,014 246 124 413 – 203 210 53,197 – 47,148 6,049 – 5,369 1,428 – 1,187 921 26 685 – 930 – 351 – 570 351 – 21 330 51 Group Management Report Revenues generated with financial services activities edged up by 0.4 %. Revenues attributable to “Other Entities” amounted to euro 1 million. The corresponding figure in 2008 amounted to euro 146 million and related primarily to the Cirquent Group. Revenues generated in the Africa, Asia and Oceania regions grew in total by 16.0 %. This includes the impact of a 46.2 % leap in sales revenue in China. While revenues in Germany rose by 6.5 %, they fell through- out the rest of Europe by 17.9 % and in the Americas re- gion by 6.5 %. Group cost of sales totalled euro 45,356 mil- lion (2008: euro 47,148 million) and fell therefore by 3.8 %. Although fixed costs were lowered, it was not possible to compensate fully for the decrease in revenues. Negative currency and model life-cycle factors had the opposite effect on cost of sales. The gross profit in absolute terms decreased by 12.0 % to euro 5,325 million and the gross profit margin was 10.5 % (2008: 11.4 %). The gross profit margin recorded by the Automobiles segment was 9.4 % (2008: 10.8 %) and that of the Motorcycles segment was 13.5 % (2008: 16.7 %). With effect from the beginning of the finan cial year 2009, research and development costs are reported as cost of sales. Research and develop- ment costs were reduced by 8.4 % to euro 2,587 million. This corresponded to 5.1 % (2008: 5.3 %) of revenues. Research and development costs include amortisation of capitalised development costs amounting to euro 1,226 mil- lion (2008: euro 1,185 million). Total research and develop- ment costs amounted to euro 2,448 million (2008: euro 2,864 million). This figure comprises research costs, de- velopment costs not recognised as assets and capitalised development costs. The research and development ex- penditure ratio for 2009 was 4.8 % (2008: 5.4 %). Sales and administrative costs fell by 6.1 % compared to the previous year. They represented 9.9 % of revenues, and were therefore 0.2 percentage points lower on a year- to-year comparison. Depreciation and amortisation on property, plant and equipment and intangible assets recorded in cost of sales and in sales and administrative costs amounted in total to euro 3,600 million (2008: euro 3,670 million). Due to the adverse factors referred to above, the profit be- fore financial result decreased by euro 632 million to euro 289 million. The financial result improved by euro 694 million, turning from net financial expenses of euro 570 million in 2008 to net financial income of euro 124 million in 2009. Euro 597 million of the improvement relates to the item “Other financial result”. The main reasons for this development were higher positive fair values of stand-alone interest-rate derivatives (up in line with changed interest-rate structure curves) and higher positive fair values of commodities derivatives. Income from investments was up by euro 4 mil- lion. At the same time, the net interest result improved by euro 87 million, mainly as a result of lower write-downs on marketable securities. The result from investments ac- counted for using the equity method improved by euro 10 million to euro 36 million. This includes the Group’s share of the result of BMW Brilliance Auto motive Ltd., Shenyang, and that of the Cirquent Group. Including the impact of the changes in financial result de- scribed above, the Group pre-tax profit went up by 17.7 % to euro 413 million. The pre-tax return on sales was 0.8 % (2008: 0.7 %). The Group net profit was euro 120 million or 36.4 % down on the previous year. The sharp increase in the effective tax rate was partly due to the lower level of tax-exempt in- come. In addition, tax expenses incurred for prior years in conjunction with a tax field audit at the level of BMW AG, mostly relating to intragroup transfer pricing arrangements, had an impact. Corresponding reimbursement claims at the level of foreign subsidiaries did not fully offset the tax expense incurred due to differences in tax rates in the tax jurisdictions involved. The Automobiles segment recorded a 10.4 % decrease in sales volume and a 10.3 % decrease in revenues. Due to the adverse factors described above, the segment result fell by euro 906 million, turning into a loss of euro 588 million. Revenues of the Motorcycles segment fell by 13.1 % while the number of units sold was down by 14.1 %. Difficult business conditions caused the segment profit to drop by 78.4 % to euro 11 million. The positive net amount from other operating income and expenses decreased by euro 237 million due to the higher level of income from the reversal of provisions recorded in the previous year. Financial Services segment revenues edged up by 0.5 % to euro 15,798 million. The segment result improved by euro 657 million to become a profit of euro 365 mil- 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis Internal Management System 48 Earnings Performance 50 52 Financial Position 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 52 Revenues by segment in euro million Profit / loss before tax by segment in euro million 2009 2008 2009 2008 Automobiles Motorcycles Financial Services Other Entities Eliminations Group 43,737 1,069 15,798 3 – 9,926 50,681 48,782 1,230 15,725 191 – 12,731 53,197 Automobiles Motorcycles Financial Services Other Entities Eliminations Group – 588 11 365 51 574 413 318 51 – 292 295 – 21 351 lion, mainly reflecting the lower level of expense for risk provision. downs on leased products (down by euro 1,287 million to euro 5,476 million). The segment profit for the Other Entities segment was euro 51 million (2008: euro 295 million). The decrease here was mainly due to higher income from the reversal of provisions in the previous year and a gain on the partial sale of the Cirquent Group, also recognised in the previous year. The result from inter-segment eliminations improved to a positive amount of euro 574 million (2008: negative amount of euro 21 million), mainly as a result of the lower volume of new leasing business. Financial Position The cash flow statements of the BMW Group and the Automobiles and Financial Services segments show the sources and applications of cash flows for the financial years 2008 and 2009, classified into cash flows from operating, investing and financing activities. Cash and cash equivalents in the cash flow statement correspond to the amount disclosed in the balance sheet. Cash flows from operating activities are determined indi- rectly starting with the Group net profit. By contrast, cash flows from investing and financing activities are based on actual payments and receipts. Operating activities of the BMW Group generated a posi- tive cash flow of euro 10,271 million in 2009, a decrease of euro 601 million or 5.5 % compared to the previous year. Changes in working capital and other operating assets and liabilities during 2009 generated a cash inflow of euro 908 million (2008: euro 411 million). The increase was more than offset by the decrease in depreciation and write- The cash outflow for investing activities amounted to euro 11,328 million and was therefore euro 7,324 million lower than in 2008. Capital expenditure for intangible assets and property, plant and equipment resulted in the cash outflow for investing activities decreasing by euro 733 million on a year-on-year comparison. The cash outflow for the net investment in leased products and receivables from sales financing decreased by euro 8,692 million to euro 5,700 million as a result of the lower level of new business and the fact that an exceptional item in the previous year was not repeated (buy-back in 2008 of previously off-balance- sheet vehicle portfolio of a leasing company). Financing activities generated a cash inflow of euro 1,352 million in 2009 (2008: euro 12,904 million). Cash inflows from the issue of bonds totalled euro 9,762 million (2008: euro 9,959 million), and euro 6,440 million (2008: euro 5,080 million) was used to repay bonds. The dividend pay- ment for the financial year 2009 amounted to euro 197 million. The cash outflow for other financial liabilities and Commercial Paper was euro 1,562 million (2008: cash in- flow of euro 9,041 million). 90.7 % (2008: 58.3 %) of the cash outflow for investing activities was covered by the cash inflow from operating activities. The cash flow statement for the Automobiles segment shows that the cash inflow from operating activities fell short of the cash outflow for investing activi- ties by euro 754 million (2008: euro 81 million). Adjusted for purchases of marketable securities amounting to euro 2,210 million (mainly in connection with the further exter- nalisation of pension obligations), there would have been a surplus of euro 1,456 million or 142.0 %. Due to the 53 Group Management Report Change in cash and cash equivalents in euro million 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Cash and cash equivalents 31.12. 2008 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. 2009 7,454 + 10,271 – 11,328 + 1,352 + 18 7,767 lower level of investment in leased products and receivables from sales financing, the cash flow statement of the Finan- cial Services segment shows coverage of 115.8 % (2008: shortfall of 39.4 %). amounting to a net positive amount of euro 18 million (2008: net negative amount of euro 63 million), the various cash flows resulted in an increase in cash and cash equiv- alents of euro 313 million (2008: euro 5,061 million). After adjustment for the effects of exchange-rate fluctua- tions and changes in the composition of the BMW Group Net financial assets of the Automobiles segment comprise the following: in euro million 31. 12. 2009 31. 12. 2008 Cash and cash equivalents Marketable securities and investment funds Intragroup net financial receivables Financial assets Less: external financial liabilities* Net financial assets * excluding derivative financial instruments 4,331 1,129 8,272 13,732 – 4,770 8,962 5,073 557 8,185 13,815 – 4,769 9,046 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis Internal Management System 48 Earnings Performance 50 Financial Position 52 Net Assets Position 54 Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 54 Net Assets Position The Group balance sheet total increased by euro 867 mil- lion (+ 0.9 %) to euro 101,953 million compared to 31 De- cember 2008. Adjusted for changes in exchange rates, the balance sheet total would have decreased by 0.9 %. Receivables from sales financing were up by 6.6 % to euro 40,594 million due to higher business volumes. Of this amount, retail customer and dealer financing ac- counted for euro 31,971 million (+ 8.5 %) and finance leases accounted for euro 8,623 million (+ 0.3 %). The main factors behind the increase on the assets side were the increased level of receivables from sales financ- ing (+ 6.6 %), other assets (+ 24.9 %) and deferred taxes (+ 46.2 %). Leased products (– 7.9 %) and inventories (– 10.1 %) decreased. On the equity and liabilities side of the balance sheet, the increase was due to the increase in financial liabilities (+ 1.6 %) and trade payables (+ 21.9 %). There were decreases in pension provisions (– 10.3 %) and equity (– 1.8 %). At euro 5,379 million, intangible assets were euro 262 mil- lion lower than at the end of the previous reporting period. Within intangible assets, capitalised development costs went down by 2.7 % to euro 4,934 million. Development costs recognised as assets during the year under report amounted to euro 1,087 million (– 11.2 %), equivalent to a capitalisation ratio of 44.4 % (2008: 42.7 %). The lower level of additions to capitalised development costs in 2009 was attributable cost and process efficiencies during the series development phase. The corresponding amortisa- tion expense was euro 1,226 million (2008: euro 1,185 mil- lion). The carrying amount of property, plant and equipment in- creased slightly by 0.8 % to euro 11,385 million. Capital expenditure of euro 2,334 million was 18.5 % lower than in the previous year. The main focus was on product in- vestments for production start-ups and infrastructure im- provements. Depreciation on property, plant and equip- ment totalled euro 2,260 million (– 4.8 %). Balances brought forward for subsidiaries being consolidated for the first time amounted to euro 48 million. Total capital ex- penditure as a percentage of revenues was 6.8 % (2008: 7.9 %). Leased products decreased by euro 1,551 million or 7.9 %. Excluding the effect of exchange rate fluctuations, leased products would have decreased by 7.7 %. The decrease was attributable to the lower volume of new lease business in 2009 and the impact of an exceptional item in 2008. The carrying amount of other investments decreased by 28.0 % to euro 232 million, mainly reflecting the sale of the BMW Sauber Group and the first-time inclusion of pre- viously unconsolidated subsidiaries. Inventories decreased by euro 735 million or 10.1 % to euro 6,555 million as a result of the higher sales volume in the fourth quarter 2009 and lower inventories of goods for resale and work in progress. Trade receivables were 19.4 % lower than at 31 December 2008. Financial assets decreased by 7.4 % to euro 4,734 million mainly as a result of the expiry in 2009 of currency deriva- tives with positive fair values. Liquid funds increased by 16.1 % to euro 9,415 million. Within that item, marketable securities and investment fund shares rose by euro 995 million. Liquid funds com- prise cash and cash equivalents as well as marketable securities and investment fund shares (the last two items reported as financial assets). Cash and cash equivalents went up by euro 313 million to euro 7,767 million. On the equity and liabilities side of the balance sheet, equity decreased by euro 358 million to euro 19,915 mil- lion. This was primarily a result of the payment of the dividend (euro 197 million), actuarial losses on pension obligations due to lower interest rates and a changed as- sumption for future inflation rates, totalling euro 1,198 mil- lion. Group equity increased due to translation differences (+ euro 318 million), the fair value measurement of deriva- tive financial instruments (+ euro 295 million), the fair value measurement of marketable securities (+ euro 4 mil- lion) and the net profit for the period (+ euro 210 million). Deferred taxes on fair value gains and losses recognised directly in equity increased equity by euro 190 million. Treasury shares (preferred stock) held at the end of the previous financial year were issued to employees in 2009 in conjunction with an employee share scheme, increas- ing equity by euro 10 million. In addition, the Authorised Capital created at the Annual General Meeting held on 14 May 2009 was partially used during the financial year under report to issue shares of preferred stock to employees, increasing subscribed capital by euro 1 million. An amount of euro 10 million was transferred to capital reserves in conjunction with this share capital increase. Other items reduced equity by euro 1 million. 55 Group Management Report Balance sheet structure – Group in euro billion Non-current assets 61 % 62 % 20 % 20 % Equity 41 % 44 % Non-current provisions and liabilities Current assets 39 % 38 % 39 % 36 % Current provisions and liabilities thereof cash and cash equivalents 8 % 7 % 2009 2008 2008 2009 102 101 101 102 Balance sheet structure – Automobiles segment in euro billion Non-current assets 44 % 44 % 42 % 42 % Equity Current assets 56 % 56 % 26 % 18 % Non-current provisions and liabilities 40 % Current provisions and liabilities 32 % thereof cash and cash equivalents 8 % 10 % 2009 2008 2008 2009 53 53 53 53 The equity ratio of the BMW Group fell overall by 0.6 per- centage points to 19.5 %. The equity ratio of the Auto- mobiles segment was 41.7 % (2008: 42.3 %) and that of the Financial Services segment was 6.0 % (2008: 5.4 %). Pension provisions went down by 10.3 % to euro 2,972 million. In the case of pension plans with fund assets, the fair value of fund assets is offset against the defined benefit obligation. The decrease was mainly due to the transfer of pension obligations to BMW Trust e. V., Munich, in conjunction with a Contractual Trust Arrangement (CTA). This was only partly offset by the increase in pension provisions caused by lower interest rates and a changed assumption for future inflation rates. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis Internal Management System 48 Earnings Performance 50 Financial Position 52 Net Assets Position 54 Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 56 Other provisions went down by 2.4 % to euro 4,764 million, primarily reflecting lower personnel-related obligations. component of value added which, in the allocation state- ment, is treated as internal financing. Net value added by the BMW Group in 2009 decreased by 0.3 % to euro 10,441 million. Lower cost of materials and depreciation / amortisation expense could not fully offset the impact of lower revenues and higher other expenses. The bulk of the net value added (61.2 %) is applied to employees. The amount applied to providers of finance increased to 31.1 % mainly as a result of the higher funding volume required for financial services business. The govern- ment / public sector (including deferred tax expense) ac- counted for 5.7 %. The proportion of net value added ap- plied to shareholders, at 1.9 %, was similar to the previous year’s level. Financial liabilities increased by 1.6 % to euro 61,325 mil- lion, mainly in conjunction with the refinancing of financial services business. Within financial liabilities, bonds in- creased by 11.8 % to euro 27,017 million and deposit lia- bilities (from banking) rose by 21.0 % to euro 9,933 million. Working in the opposite direction, liabilities to banks de- creased by 17.7 % to euro 9,174 million and asset-backed- financing liabilities were down by 10.2 % to euro 7,812 mil- lion. Trade payables amounted to euro 3,122 million and were thus 21.9 % higher than one year earlier. Other liabilities decreased by euro 31 million to euro 6,250 million at 31 December 2009. Overall, thanks to the measures implemented, the BMW Group succeeded in limiting the negative impact of the economic and financial crisis on its earnings, financial and net assets position. Compensation Report The compensation of the Board of Management com- prises a fixed and a variable component. In addition, bene- fits are also payable at the end of members’ mandates, primarily in the form of pension benefits. Further details, in- cluding an analysis of remuneration by individual, are dis- closed in the Compensation Report which can be found in the Corporate Governance section of the Annual Report on page 151 et seq. 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 net assets of the BMW Group. Value Added Statement The value added statement shows the value of work per- formed less the value of work bought in by the BMW Group during the financial year. Depreciation and amortisa- tion, cost of materials and other expenses are treated as bought-in costs in the value added calculation. The alloca- tion statement applies value added to each of the partici- pants involved in the value added process. It should be noted that the gross value added treats depreciation as a 57 Group Management Report BMW Group Value added statement 2009 in euro million 2009 in % 2008 in euro million 2008 in % Change in % Work performed Revenues Financial income and expenses Other income Total 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 50,681 488 808 51,977 27,399 6,845 34,244 17,733 7,292 10,441 6,395 3,243 593 197 7 6 97.5 0.9 1.6 100.0 52.7 13.2 65.9 34.1 14.0 20.1 61.2 31.1 5.7 1.9 0.1 – 53,197 – 410 1,428 54,215 30,648 5,447 36,095 18,120 7,651 10,469 6,781 2,823 535 197 127 6 98.1 – 0.7 2.6 100.0 56.5 10.1 66.6 33.4 14.1 19.3 64.8 27.0 5.1 1.9 1.2 – 10,441 100.0 10,469 100.0 – 4.1 – 5.1 – 2.1 – 0.3 – 5.7 14.9 10.8 – – 94.5 – – 0.3 * including expenses incurred to downsize the workforce BMW Group Value added 2009 in % Depreciation and amortisation Other expenses Net value added Cost of materials Net value added Cost of materials 20.1 52.7 Depreciation and amortisation 14.0 Other expenses 13.2 61.2 % Employees 31.1 % Providers of finance 5.7 % 1.9 % 0.1 % Government / public sector Shareholders Group 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position 56 56 58 59 Internal Control System Risk Management Subsequent Events Report Value Added Statement Key Performance Figures Comments on BMW AG 63 64 70 Outlook 58 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 Automobiles Financial Services Coverage of intangible assets, property, plant and equipment by equity Return on capital employed Group Automobiles Motorcycles Return on equity Financial Services Cash inflow from operating activities Cash outflow from investing activities Coverage of cash outflow from investing activities by cash inflow from operating activities Net financial assets Automobiles segment * after reclassification of research and development costs to cost of sales 2009 2008 % % % % % % % % % % % % % % % euro million euro million % euro million 10.5 7.7 0.6 0.8 0.4 2.0 1.0 19.5 41.7 6.0 118.8 3.3 – 4.7 9.2 10,271 11,328 90.7 8,962 11.4 8.6 1.7 0.7 0.6 1.6 1.5 20.1 42.3 5.4 119.7 2.3 4.9 13.9 – 10,872 18,652 58.3 9,046 59 Group Management Report Comments on 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 Commercial Code (HGB). Where it is permitted and considered sensible, the princi- ples 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 statements of BMW AG differ from those applied in the Group Financial State- ments. The main differences relate to the recognition of intangible assets, depreciation and amortisation methods, the measurement of inventories and provisions as well as the treatment of financial instruments. BMW AG develops, manufactures and sells cars and motor- cycles manufactured by itself and foreign 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 2009 decreased by 12.6 % to 1,258,417 units. The workforce of BMW AG decreased by 1,373 to 70,223 employees at 31 December 2009, due primarily to natural employee fluctuation, pre-retirement part-time working arrangements and voluntary employment contract termina- tion agreements. Consumer reluctance to spend in the face of the current finan cial crisis as well as model life-cycle factors caused a reduction in the number of cars sold by BMW AG. As a consequence, revenues fell by 14.3 % in 2009. Sales to group sales companies accounted for euro 26.6 billion or approximately 70.0 % of the total revenues of euro 38.0 billion. The decrease in cost of sales was slightly less pro- nounced than the decrease in revenues. Gross profit fell by euro 1.2 billion (– 18.2 %) and amounted to euro 5.3 billion. Adverse currency factors relating to the US dollar and Japanese yen as well as continued intense competition on the automobile markets had a negative impact on BMW AG’s earnings. A tax expense was recognised in the financial year 2009 in conjunction with a tax field audit covering prior years. The back-taxes were primarily related to the issue of intragroup pricing arrangements. The resulting threat of a double taxation charge at Group level is being avoided primarily by initiating bilateral appeal proceedings. Capital expenditure on intangible assets and property, plant and equipment amounted to euro 1,667 million (2008: euro 2,064 million). The 19.2 % decrease was pri- marily due to the lower level of infrastructure investments. De preciation and amortisation amounted to euro 1,505 million. In order to secure obligations resulting from pre-retirement part-time work arrangements and a part of the Company’s pension obligations, an amount of euro 3,088 million was transferred to BMW Trust e. V., Munich, in conjunction with a Contractual Trust Arrangement (CTA). Equity rose by euro 16 million to euro 5,354 million. The existing authorisation to acquire treasury shares was not exercised during the financial year 2009. 362,225 of the 363,130 shares of preferred stock held as treasury shares were used for the employee share scheme; the remaining 905 shares were sold on the capital market. The equity ratio fell from 22.9 % to 21.7 %. Long-term external capital (registered profit-sharing certificates, pension provisions, the liability to the BMW Unterstützungsvereins e. V. and liabilities due after one year) decreased by 23.4 % to euro 4,638 million, reflecting the fact that some loan lia- bilities fall due for payment in 2010. In view of the turmoil on the financial markets, funds were shifted into money market funds in order to secure the liquidity position of BMW AG. The decrease in other operating expenses had a positive effect on the profit from ordinary activities which increased from euro 395 million to euro 605 million. The Financial Reporting Modernisation Act (BilMoG) will be applied with effect from the beginning of the financial year 2010. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position 56 56 58 59 Internal Control System Risk Management Subsequent Events Report Value Added Statement Key Performance Figures Comments on BMW AG 63 64 70 Outlook 60 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 Total assets Equity and liabilities Subscribed capital Capital reserves Revenue reserves Unappropriated profit available for distribution Equity Registered profit-sharing certificates Special untaxed reserves Pension provisions Other provisions Provisions Liabilities to banks Trade payables Liabilities to subsidiaries Other liabilities Liabilities Deferred income Total equity and liabilities 2009 2008 145 5,536 1,303 6,984 2,620 690 6,197 882 4,987 2,195 143 5,404 1,096 6,643 2,586 982 6,098 623 2,360 3,970 17,571 16,619 92 24,647 54 23,316 655 2,001 2,501 197 5,354 34 – 4,586 6,323 10,909 2,488 1,548 2,409 1,902 8,347 3 24,647 654 1,991 2,496 197 5,338 34 13 3,791 6,142 9,933 3,049 1,276 2,311 1,338 7,974 24 23,316 61 Group Management Report 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 Financial result Profit from ordinary activities Income taxes Other taxes Net profit Transfer to revenue reserves Unappropriated profit available for distribution 2009 2008 37,980 – 32,679 5,301 – 3,105 –1,379 – 2,451 1,243 1,084 – 88 605 – 393 – 10 202 – 5 197 44,313 – 37,833 6,480 – 3,085 –1,366 – 2,646 – 641 1,807 –154 395 3 –14 384 –187 197 Revenues from the sale of vehicles to car rental companies are not recognised when there is an obligation to take back the vehicles. In accordance with the draft financial reporting pronouncement “Specific Issues relating to the Transfer of Beneficial Ownership and Profit Realisation in accordance with HGB” (IDW ERS HFA 13 revised version dated 29 November 2006) issued by the German Institute of Public Accountants (IDW), vehicles remain on the bal- ance sheet, measured at amortised cost, because, on the basis of the criteria set out in the pronouncement, benefi- cial ownership has not been transferred to the car rental companies. 62 KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, has issued an unqualified audit opinion on the financial state- ments of BMW AG, of which the balance sheet and the in- come statement are presented here. The BMW AG financial statements for the financial year 2009 will be submitted to the operator of the electronic version of the German Federal Gazette and can be obtained via the Company Register website. These financial statements are available from BMW AG, 80788 Munich, Germany. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position 56 56 58 59 Internal Control System Risk Management Subsequent Events Report Value Added Statement Key Performance Figures Comments on BMW AG 63 64 70 Outlook 63 Group Management Report Internal Control System The internal control system of the BMW Group is aimed at ensuring the effectiveness of operations. It makes an important contribution towards ensuring compliance with the BMW Group’s applicable laws as well as providing assurance on the propriety and reliability of internal and external financial reporting. It is therefore a significant fac- tor in the management of process risks. The principal features of the internal control system, as far as they relate to individual entity and Group financial re- porting processes, are described below. The risk manage- ment system is an integral part of the internal control system and is therefore not referred to in this section. Information and communication One of the elements of the internal control system is the area of “Information and Communication”, which ensures that all information necessary to achieve the objectives set for the internal control system is made available in an appropriate and timely manner to those responsible. The requirements relating to the provision of information rele- vant for financial reporting at the level of BMW AG, other consolidated Group entities and the BMW Group are prima- rily set out in organisational manuals, in guidelines cover- ing internal and external financial reporting issues and in accounting manuals. These instructions, which can be ac- cessed at all levels via the BMW Group’s intranet system, provide the framework for ensuring that the relevant rules are applied consistently across the Group. The quality and relevance of these instructions is ensured by regular review as well as by continuous communication between the relevant departments. Organisational measures All financial reporting processes (including Group financial reporting processes) are structured in organisational terms in accordance with the principle of segregation of duties. These structures as well as rigorous application of the principle of dual control allow errors to be identified at an early stage and prevent potential wrongdoing. Regular comparison of internal forecasts and external financial re- ports improves the quality of financial reporting. The inter- nal audit department serves as a process-independent function, testing and assessing the effectiveness of the in- ternal control system and proposing improvements when appropriate. Controls Extensive controls are carried out by management in all finan cial reporting processes at an individual entity and Group level to ensure that legal requirements and internal guidelines are complied with and that all business trans- actions are properly executed. Controls are also carried out with the aid of IT applications, thus reducing the incidence of process risks. IT authorisations All IT applications used in financial reporting processes throughout the BMW Group are subject to access restric- tions. As a result, only authorised persons can gain access on a controlled basis to systems and data, depending on the nature of the work being performed. In addition, IT processes are designed and authorisations allocated using the dual control principle, as a result of which, for in- stance, requests cannot be submitted and approved by the same person. Internal control training for employees All employees are appropriately trained to carry out their duties and kept informed of any changes in regulations or processes that affect them. Managers and staff also have access to detailed best-practice descriptions relating to risks and controls in the various processes, thus increasing risk awareness at all levels. As a consequence, the internal control system can be evaluated regularly and further improved as necessary. Employees can, at any time and independently, deepen their understanding of control methods and design using an information platform that is accessible groupwide. Evaluation of effectiveness of the internal control system Responsibilities for ensuring the effectiveness of the in- ternal control system in relation to individual entity and Group financial reporting processes are clearly defined and allocated to the relevant managers and process owners. The BMW Group assesses the design and effec- tiveness of the internal control system on the basis of in- ternal review procedures on the one hand (e. g. manage- ment self-audits, internal audit findings) and the findings of external auditors on the other. Audits performed at regular intervals show that the internal control system in place throughout the BMW Group is both appropriate and effective. Continuous revision and further development of the internal control system ensures its continued effec- tiveness. Group entities are required to confirm regularly as part of their reporting duties that the internal control system is functioning properly. Effective measures are implemented whenever weaknesses are identified and reported. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 64 Risk Management Risk management in the BMW Group As a globally operating organisation, the BMW Group is exposed to a variety of risks, arising in part from the in- creasing internationalisation of business activities and ever-greater competition. Price fluctuations on the global currency, money, capital and commodities markets as well as shorter innovation cycles result in increasing com- plexity, all of which place great demands on enterprises with international operations. The international financial and economic crisis and its knock-on effects have shown quite clearly, particularly during the financial year 2009, that effective and efficient risk management is an essential aspect of safeguarding the going-concern status of the Group in the long term on the one side and help us to achieve our business objec- tives on the other. Consciously taking calculated risks and making full use of the opportunities relating to them has long been the basis for our corporate success. As part of the risk reporting system, the Board of Manage- ment and the Supervisory Board are regularly informed about risks which could have a significant impact on busi- ness performance. Risk reporting within the BMW Group is based on an integrated risk management approach. Business decisions are reached after consideration of in- depth project analyses which show both potential risks and potential opportunities. In addition, as part of long-term planning, annual budget and short-term forecasts, the risks and opportunities attached to specific business activi- ties are evaluated and used as the basis for implementing measures to mitigate risks and achieve targets. The risk management process is applied throughout the Group and comprises the early identification of risks and opportuni- ties, their measurement and the use of suitable instruments to manage and monitor risks. Our risk management system comprises a wide range of organisational and methodo- logical components that are all finely tuned to each other. The system’s decentralised structure also encourages a balanced approach to risks at all organisational levels. The Group reporting system provides decision makers with comprehensive, up-to-date information on performance against targets and on new developments with regard to the market and competitors. Critical success factors are monitored continuously to ensure that unfavourable devel- opments are identified at an early stage to enable appro- priate counter measures to be taken and business oppor- tunities exploited accordingly. We see risk management as a continuous process, given the fact that changes in the legal, economic or regulatory environment or those within the company itself could lead to new risks or to known risks being differently assessed. Standardised rules and procedures consistently applied throughout the BMW Group form the basis for an organisa- tion that is permanently learning. By regularly sharing ex- periences with other companies, we ensure that innovative ideas and approaches flow into the risk management system and that risk management is subjected to continual improvement. Regular basic and further training as well as information events are invaluable ways of preparing employees for new or additional requirements with regard to the processes in which they are involved. Overall risk management within the BMW Group is managed centrally and reviewed for appropriateness and effectiveness by the Group’s internal audit department. In addition, knowledge gained from external audits also provides a good basis for further improvements. At present, no risks have been identified which could threaten the going concern status of the BMW 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. The main aspects of risk management activities are de- scribed below. Additional comments on risks in conjunc- tion with financial instruments are provided in Note 39 of the Group Financial Statements. Risks relating to the general economic environment As a globally operating enterprise, the BMW Group is affected by economic conditions worldwide. The interna- tional economic crisis and its impact on financial, goods and services markets had a significant bearing on Group revenues and earnings in 2009. The sale of vehicles out- side the European Currency Union gives rise to currency exposures, in particular with regard to the US dollar, the Japanese yen, the British pound and the Chinese renminbi. These four currencies accounted for approximately two thirds of our total foreign currency exposure in 2009. Cash- flow-at-risk models and scenario analyses are used to measure exchange rate risks. These instruments also serve as part of the process of currency management for the purpose of taking business decisions. 65 Group Management Report We manage currency risks both at a strategic and at an operating level. At a strategic level (medium and long term), foreign exchange risks are managed by natural hedging, in other words by increasing the volume of purchases denominated in foreign currency or increasing the volume of local production. For operating purposes (short and medium term), currency risks are hedged on the financial markets. Hedging transactions are entered into only with financial partners with a good credit standing. The ongoing financial crisis has, however, resulted in a deterioration in the creditworthiness of many financial institutions and set in motion a process of consolidation within the banking sector. We take account of these circumstances by adjust- ing counterparty limits as appropriate and by applying strict counterparty risk management procedures. The nature and scope of such measures are set out in Group guide- lines. Standard & Poor’s (S & P), we were not fully able to extri- cate ourselves from the difficulties facing the automotive sector in the wake of the financial and economic crisis. On 5 November 2008, S & P issued a long-term rating of A with stable outlook (previously A+ with stable outlook) and changed the outlook from stable to negative on 27 Febru- ary 2009. In the face of unfavourable macro-economic con- ditions and persisting doubts about whether the principal sales markets would recover quickly, BMW AG’s long-term rating was downgraded on 13 November 2009 to A – with negative outlook. In conjunction with this downgrade, S & P also changed its short-term rating to A-2. After putting BMW AG’s rating to “under review for possible downgrade” on 18 February 2009, Moody’s changed its long-term rating on 3 April 2009 to A3 with negative out- look (previously A2 with stable outlook) and downgraded BMW AG’s short-term rating from P-1 to P-2. We also reduce currency risk by refinancing credit and lease business as a general rule in the currency of the relevant market. Interest-rate risks are managed by employing derivative finan cial instruments. Interest-rate risks are measured and limited both at country and Group level on the basis of a value-at-risk approach. The risk-return ratio is also meas- ured regularly using simulated computations in conjunction with a present-value-based interest rate management system. Sensitivity analyses, which contain stress scenarios and show the potential impact of interest-rate changes on earnings, are also used as tools to manage interest-rate risks. The deposit business operated by the Financial Services segment, credit lines with various banks and the use of other financing instruments ensure that sufficient liquid funds are available to the Group. The finely tuned use of a wide range of capital market instruments has proven its worth, particularly in the midst of the difficult business environment caused by the banking and financial crisis. Liquidity risk is continuously monitored at a separate entity level. A cash flow requirements and sourcing forecast system is also implemented throughout the Group to docu- ment and manage liquidity risk. Most of the Financial Services segment’s credit and lease business is refinanced on the capital markets. Compared to previous years, when the BMW Group was able to benefit from first-class short-term ratings issued by Moody’s and With ratings of A– (S & P) and A3 (Moody’s), the agencies continued to confirm BMW AG’s solid creditworthiness for financial liabilities with a term of more than one year. If challenges remain persistent or if the economy takes another downturn, there is a risk that ratings for the whole of the automotive sector deteriorate again. Irrespective of the above developments, securities issued by BMW Group entities continue to enjoy a level of credit- worthiness that is comparatively high for the automotive sector. Access to the capital markets remains good, with a diversified range of refinancing opportunities available to us. After deteriorating during the second half of 2008 in response to the financial crisis, refinancing conditions eased in terms of credit spreads in 2009, enabling us to raise debt capital at better conditions. Changes on the international raw materials markets also have an impact on the business development of the BMW Group. In order to safeguard the supply of production materials and to minimise the cost risk, all relevant com- modities markets are closely monitored. The economic crisis and the related slump in demand on raw materials markets enabled us to benefit from more favourable raw materials price levels in 2009. We used the situation on the market to hedge the price of precious metals (such as platinum, palladium and rhodium) and of non-ferrous metals for the current and future years using derivative in- struments. Changes in the price of crude oil, which is an important basic material in the manufacture of compo- nents, have an indirect impact on our production costs. 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 66 Moreover, the price of crude oil also directly influences the purchasing behaviour of drivers when fuel prices change. An escalation of political tensions and / or terrorist activities, natural catastrophes or possible pandemics could all have a negative impact on the economic situation, the interna- tional capital markets and hence the business performance of the BMW Group. Sector risks The future price of fuel – influenced both by market factors and governmental fiscal policies – as well as increasingly stringent requirements to reduce vehicle fuel consumption and emissions remain the main challenges for our engine and product development activities. Our Efficient Dynamics concept is generating visible benefits in terms of cutting consumption and emissions. Requirements over the medium and long term have been put in place in Europe, North America, Japan, China and other countries with respect to vehicle fuel consumption and CO2 emissions. Europe has set a target of achieving an average of 130 g / km for all new vehicles by 2015. EU regulations set targets for CO2 emissions based on vehicle weight. For our product range, a target of below 140 g / km has been derived on the basis of the new rules. A new regulation for fuel consumption and CO2 emissions is cur- rently being discussed in the USA for the model years 2012 to 2016. Starting with a step-by-step reduction in model year 2012, the new vehicle fleets of all manufac- turers are expected to come down to an average value of 250 g of CO2 per mile (equivalent to 155 g / km CO2) in model year 2016. The Japanese government has also set ambitious consumption targets, including statutory regulations for 2010 and 2015. The government in China is currently discussing the possibility of introducing con- sumption requirements – planned to come into force in 2012 – that are more stringent than the current ones. We are addressing these challenges by putting our tech- nological expertise and innovative strength to best use, working with determination to reduce the CO2 emissions of our vehicles. The need to reduce consumption and emissions is fully integrated in our product innovation process. We are therefore working with the interplay of energy management, aerodynamics, lightweight construc- tion, drive performance and CO2 emissions. The Efficient Dynamics concept was adopted at an early stage: A com- bination of highly efficient engines, improved aerodynamics, lightweight construction and energy management re- duces the average fuel consumption and emissions of the vehicle fleet. In the medium term, the BMW Group is working on achieving additional fuel economy by a wide range of measures from electrification of the drivetrain through to hybrid solutions. Solutions for sustainable mo- bility in densely populated areas are also being worked on. As one example, large-scale field trials are currently being carried out with the MINI E in the USA, the UK and Germany. The practical experience gained from these trials will be incorporated in the further development of electric vehicles. The use of hydrogen gained from various renewable sources to power engines remains an important component of our strategy for sustainable mobility. New and generally more stringent regulations that have already been made law have found their way into the BMW Group’s Efficient Dynamics strategy. There is a risk that these statutory regulations will be further tightened. Operating risks The flexible nature of our production network and working time models generally help to reduce operating risks. In addition, risks arising from business interruptions and loss of production are also insured up to economically rea- sonable levels with insurance companies of good credit standing. An evaluation of technical competence and financial strength is taken into account as part of the process of se- lecting suppliers. Before a contractual relationship comes into being, supplier relationship management procedures – which also cover social and ecological aspects – help to reduce risk exposure. Close cooperation between manufacturers and suppliers is usual in the automotive sector and whilst this provides economic benefits, it also creates a degree of mutual de- pendence. Partly reflecting increasing consolidation within the automotive supply industry, certain suppliers have become extremely important for the BMW Group. Delivery delays, delivery cancellations, strikes or poor quality can lead to production stoppages and thus have a negative impact on profitability. The prevailing adverse business cli- mate is also affecting the supply industry. Revenue con- traction in the automotive sector clearly has an impact on the earnings of suppliers. The availability of capital is be- coming increasingly critical for suppliers with high levels of debt. In cooperation with other car manufacturers, we maintain close contact with our suppliers in order to identify 67 Group Management Report problems as early as possible and find appropriate solu- tions. Despite the fact that a number of suppliers filed for insolvency, this did not result in any significant loss of pro- duction for us. Risks relating to the provision of financial services As a result of the worldwide recession, the risk profile has also changed in the important area of financial services. Risks are identified, measured, monitored, evaluated and managed on the basis of recognised standards and regu- lations that generally apply worldwide in this line of busi- ness. A global Risk Committee, which serves as the highest decision-making body within the Financial Services seg- ment, is in place to decide upon the overall strategy. It also approves internal guidelines and process descriptions that are required to be followed internationally. The main categories of risk relating to the provision of finan cial services are credit risk, residual value risk, interest rate risk, liquidity risk and operating risks. Internal method- ologies and techniques that comply with national and in- ternational standards and regulatory requirements such as Basel II have been developed to measure credit, residual value and interest rate risks on the one hand and operational risks on the other. Internal guidelines are also in place to manage liquidity risk and ensure compliance with regulatory requirements. Credit risks on the retail (leasing, credit financing) and com- mercial lines of business (dealers, fleet customers, im- porters) are monitored continuously on the basis of projec- tions and stress tests and measured and evaluated using a value-at-risk approach. Further measures are taken to minimise risk when considered appropriate, including the requirement for customers to provide additional collateral or make higher up-front payments. Various risk methods are used to measure risk, ranging from scoring techniques in the area of retail customer business and the use of credit rating or prudent measurement of collateral in the area of commercial financing business. These methods are docu- mented in guidelines that are required to be applied across the Group. Close contact with borrowers, a good understanding of the leased or financed vehicles involved and prudent measurement of collateral all help to minimise risk. Local and centralised credit audits are also regularly performed to test compliance with prescribed rules and to check the effectiveness of processes and IT systems. For risk management purposes, the BMW Group reverts to normal good banking practices, such as the use of maximum unsecured risks for each rating category or risk-based up- front payments. Risk criteria such as arrears and bad debt ratios are analysed regularly. The results of these analyses are used as the basis for the proactive management of the credit portfolio, ultimately aimed at improving portfolio quality. The information provided to management along with appropriate recommendations for action serve as the basis for decision-making. Measures implemented in this vein in 2009 therefore partially countered increased credit risk exposures. The credit decision process comprises three phases. 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 global credit committees for approval. The principles of dual con- trol and segregation of duties apply worldwide and are rigor- ously implemented. In order to minimise risk further, the BMW Group is continuously making efforts to standardise its credit-decision processes and the quality of credit appli- cations as well as to ensure that uniform and transparent rating systems are in place worldwide. Allowances are rec- ognised in the balance sheet to cover identified risks. Any negative impact on the credit risk portfolio is generally re- flected in higher payment arrears and bad debts with retail customers or dealers. The drop in sales caused by the in- ternational economic crisis has had an adverse impact on the financial situation of the dealer network and increased the risk of insolvency within the dealer organisation. These developments in 2009 necessitated higher risk provisions in the areas of retail customer and dealer financing busi- ness. In the case of vehicles which remain with the Group at the end of a lease (leases and credit financing arrangements with option of return), there is a risk that the originally calcu- lated residual value may not be recovered when the ve- hicle is sold (residual value risk). The volatility of pre-owned car prices on the major sales markets has intensified as a consequence of the financial crisis, thus increasing the re- sidual value risk. Residual values are calculated uniformly throughout the BMW Group in accordance with mandatory guidelines. The residual values of our vehicles on used car markets are continuously monitored over long periods and future developments projected. External market observa- tions are also used in this context. The overall risk position is measured by comparing forecasted market values and contractual values by model and market. The return ratio for lease vehicles is also computed. The risk of unexpected loss is measured using a value-at-risk approach. The 45 48 Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management 63 64 70 Outlook 68 resulting revaluation of the portfolio of vehicles exposed to residual value risks and losses incurred selling pre-owned cars had an additional negative impact on the earnings of the Financial Services and Automobiles segments. Expected risks are covered in the balance sheet either by provisions or by write-downs on the lease vehicles concerned. The BMW Group strives to mitigate declining residual values by actively managing the life-cycles of current models, op- timising reselling processes on international markets and implementing targeted price and volume measures. Re- sidual values in the leasing business are reviewed regularly and adjusted to take account of the latest market conditions and expected future developments. Interest rate risks are measured initially at country level and then aggregated at Group level. Maximum risk exposures are also initially managed at country level in the form of risk limits. The overall exposure from interest rate risks is managed at Group level. Operational risks relating to financial services business in- clude the risk of damage caused by inappropriate or failed internal procedures and systems, human error or external factors. The scope of procedures applied in each country to manage operational risks is set out in a Group manual which, amongst other things, addresses the requirements of Basel II. This manual stipulates the rules for identifying and measuring potential risk scenarios and for computing key risk indicators on an ongoing basis. It also sets out the Group’s systematic approach to recording losses and the nature of any agreed risk-mitigation measures. Both qualitative and quantitative aspects need to be taken into account in the decision process. The latter is backed up by various system-based solutions, all of which follow the principles of operational risk management, such as segre- gation of duties, dual control, the documentation of system changes and transparency. In addition, the effectiveness and efficiency of the internal control system are tested regularly. Legal risks The BMW Group is not currently involved in any court or arbitration proceedings which could have a significant im- pact on its financial condition. Compliance with the law is one of the basic prerequisites for our success. Current law provides the binding frame- work for our wide range of activities around the world. The growing international scale of business and the huge number of complex legal regulations increase the risk of laws being broken, simply because they are not known or fully understood. We therefore take all necessary measures to ensure that our management bodies, managers and staff always act in compliance with the law. It is essential for all employees to know and to comply with current legal regulations. The extent of those regulations is set out in corporate guidelines and in the BMW Group’s stated set of core principles. However, wrongdoing by individuals can never be entirely ruled out. Our objective is to keep such risks to a minimum and to systematically uncover any cases of corruption, bribery or blackmail. Further information on compliance within the BMW Group is included in the “Com- pliance Report” on page 158 et seq. Like all enterprises, we are exposed to the risk of warranty claims. Adequate provisions have been recognised in the balance sheet to cover such claims. Part of the risk, espe- cially where the American market is concerned, has been insured externally up to economically acceptable levels. The high quality of our products, additionally ensured by regular quality audits and ongoing 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 impair our sales volume, revenues and earnings performance in individual markets or in individual economic regions. Further informa- tion is given in the section on sector-specific risks. Personnel risks As an attractive employer, we have for many years enjoyed a favourable position in the intense competition for quali- fied technical and management staff. A high level of em- ployee satisfaction helps to minimise the risk of know-how drift. An international trainee programme will start again in spring 2010, aimed at finding well-trained staff and de- veloping their skills further. A bachelor programme will also be offered that will create a wealth of opportunities for high school leavers who have achieved top marks and for those who have finished their apprenticeships and gone on to qualify to attend a university. The ageing and shrinking population in Germany will have a lasting impact on the conditions prevailing in the labour, product, services and financial markets. Demographic change will give rise to risks and opportunities which will affect enterprises more and more in the coming years. We see demographic change as one of the main challenges and are taking an active approach to planning for its effect on operations. The focus is on the following areas of action, Security Standard ISO / IEC 27001. Staff, process design and information technology each play a role in the overall security concept. The requirement to apply uniform stand- ards across the Group is embedded in our core principles and documented in detailed working instructions which require employees to handle information appropriately and ensure that information systems are properly used. Pur- poseful communication and training measures create a high degree of security awareness on the part of the em- ployees involved. Employees also receive training from the Group’s Compliance Organisation to ensure compliance with legal and regulatory requirements. The technical data protection procedures we use primarily involve process-specific security measures. Standard activities such as virus scanners, firewall systems, access controls at both operating system and application level, internal testing procedures and the regular backing up of data are also employed. A security network is in place groupwide to ensure compliance with security specifica- tions. Regular analyses and rigorous security management ensure high-quality protection. This includes the activities of our Security Operations Center, which is responsible for the security of internal network communications. Protecting BMW Group-specific know-how is also treated as a major issue as far as cooperation arrangements and relationships with partner companies are concerned. We protect our intellectual property by stipulating clear instructions with regard to data protection and the use of information tech- nology. Information underlying key areas of expertise is subject to particularly stringent security measures. 69 Group Management Report aimed at creating and retaining a motivated workforce in the long term: (1) the creation of a working environment for the future, (2) promotion and maintenance of the workforce’s ability to perform with the appropriate set of skills, (3) appropriate qualifications, (4) increasing employees’ awareness of their responsibility to make personal provisions for their future and (5) individual employee working life-time models. Risks relating to pension obligations 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 payments are discounted by reference to market yields on high-quality corporate bonds. These yields are subject to market fluctuation and influence the level of pen- sion obligations. Furthermore, changes in other factors, such as rising inflation rates and longer life expectancies, also have an impact on pension obligations. In the United Kingdom, the USA and a number of other countries, funds intended to cover the pension benefits of our employees are held in pension funds which are kept separate from corporate assets and invested in fixed-income securities (with a high level of creditworthiness), equities, property and other investment classes. In 2009, a further part of the pension obligations arising in Germany has been ex- ternalised by transferring assets to the external fund, BMW Trust e. V. The process of externalising pension obligations will be continued in the future. Risk indicators (e. g. value-at-risk) are regularly computed in order to identify risks at an early stage and used to de- velop measures to mitigate risk. Risks affecting pension funds are monitored continuously and managed from a risk and yield perspective. Regular asset-liability studies are performed and used to match the maturities of inter- est-generating investments with future pension payments, thereby reducing the interest rate risk relating to pensions. Investments are broadly spread in order to reduce risk. In addition, risk limits for investment activities have been defined for each pension fund and are monitored contin- uously. Information and IT risks We attach great importance to the protection of data, busi- ness secrets and innovative development to safeguard against unauthorised access, damage and misuse. The protection of information and data is an integral compo- nent of our business processes and based on International Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management Outlook 45 48 63 64 70 70 Outlook The economic environment in 2010 The general trend towards a global economic upturn is likely to continue. The first positive signs emerged during the second half of 2009. Levels of activity seen before the finan- cial crisis are, however, not to be expected and the trend could be subject to the occasional setback. Although the US property market stabilised towards the end of 2009, any upswing in this area is likely to be modest. The restructuring of the US banking system also seems likely to drag on indefinitely considering the huge levels of write-downs still being recorded on the mortgage credit market. In previous periods of recovery, US consumer spending acted as an important driving force. In 2010, however, given the high level of debt in private households and the sharp increase in unemployment, it is only likely to have a minor impact on domestic demand. On the other hand, a stronger export performance on the back of a weak US dollar will have a positive effect. Moderate economic recovery is expected in Europe in 2010. While the German economy would benefit most from a recovery in world trade, consumer spending, which only made a small impact in 2009 despite government support, is only likely to stagnate in 2010. A significant fac- tor here could be rising unemployment figures. The French economy should see an upward trend in 2010, whereas growth in Italy is likely to be weak. Due to the impact of developments on the property and employment markets, Spain will again be the only major European economy to continue contracting in 2010. In the United Kingdom, the ongoing upheavals on the property market and a hike in the value-added tax rate with effect from the beginning of 2010 suggest that any recovery is likely to be modest. Due to its strong focus on exports, Japan is likely to benefit as world trade picks up again. It will, however, con- tinue to be held back by structural weaknesses in the consumer sector, one of the factors behind many years of deflation. The Japanese economy is predicted to grow roughly in line with the long-term trend rate of 1.3 %. The main impetus for world economic growth is again likely to come from the emerging markets in 2010. China will continue to create momentum for the global economy. High levels of investment in expanding public infrastruc- ture in pre viously undeveloped provinces of the country’s interior are enabling an increasing percentage of the popu- lation to participate in China’s economic growth. India’s dynamic growth is also expected to continue. The same applies to Brazil, but to a lesser extent. Russia, however, will grow much more slowly in 2010 than in the years prior to the finan cial crisis. High volatility expected on currency markets The US dollar is likely to remain highly volatile in the fore- seeable future. The fiscal problems facing a number of countries in the euro zone and anticipation of faster interest rate rises in the USA could have the effect of strengthen- ing the US dollar in 2010. However, the increase in public debt and the widening current account deficit in the USA seem to suggest a weaker US dollar. The British pound is also likely to remain under pressure against the euro in 2010. Its value will probably not win back lost ground until a sustainable economic upturn sets in. The Japanese yen is likely to tread water in 2010. High public debt and the Japanese Reserve Bank’s zero interest policy give little reason to suggest that the yen’s value will improve. As the worldwide economic recovery gradually gains momen- tum, the emerging economies can expect their currencies to gain in value against the US dollar and the euro. Car markets in 2010 With the global economy showing the first signs of a re- covery, the international car markets also appear to have bottomed out of the recession. In the light of these de- velopments the car markets can also expect some growth in 2010, albeit in the low single-digit percentage range. However, since the slump experienced over the last two years was so extreme, it will take some considerable time for the world’s car markets to return to the levels seen before the start of the crisis. China, the world’s largest automo- tive market, is likely to see its growth rate slow down some- what in 2010 after several years of strong growth. After the historic slump on the US car market, demand for cars should now begin to pick up again in the USA. The recovery will not, however, be sufficient to surpass China as the world’s largest car market. By contrast, the total market in the European Union is ex- pected to contract in 2010, largely due to lower demand now that the scrappage bonus scheme has come to an end in Germany. Car markets in the United Kingdom, France and Italy are also expected to shrink moderately now that their respective scrappage bonus schemes have been discontinued. In Spain, 2010 should at least see some stabilisation as the overall market has plummeted by half since 2006. Markets in the new EU member countries of Central and Eastern Europe are also expected to stagnate at a low level. 71 Group Management Report The car scrappage scheme in Japan is due to be discon- tinued in spring 2010. At best, the market is only likely to see a small improvement over the full year. Continued growth is forecast for the emerging economies of India and Brazil in 2010. In Russia, where demand for cars halved in 2009, the market as a whole is forecast to stabi- lise following the announcement that a scrappage scheme will be introduced in 2010. Motorcycle markets in 2010 Despite the first signs of an economic recovery, we do not expect the international motorcycle markets in the 500 cc plus class relevant for the BMW Group to make more than a very modest recovery in 2010. The world market should settle down at a level slightly higher than that of 2009. The financial services market in 2010 The prospects for slightly improved economic conditions are looking up worldwide. However, a rise in the number of unemployed and the continuing use of short-time work- ing arrangements are dampening consumer spending in major sales markets. The volatility of the international money and capital markets has noticeably reduced. This, in turn, is resulting in better conditions for providers of financial services. Now that credit spreads have narrowed again, especially in the second half of 2009, fluctuation is expected to be less extreme in 2010. Future inflation rate expectations are also a cause of uncer- tainty for the financial services sector. The monetary and fiscal measures adopted in various parts of the world to manage the economic and financial crisis could result in first adjustments to the European Central Bank’s reference interest rate during the second half of 2010. The US Reserve Bank is expected to make a similar move at a later stage. Interest rates in the medium-term maturity segment would then change accordingly. The process of consolidation at dealership level continues unabated. Further bad debt losses in the sector cannot be ruled out for 2010. Europe. Taking all factors into consideration, a rapid re- covery on international used car markets is unlikely in 2010. Outlook for the BMW Group in 2010 The first encouraging signs are emerging to suggest that the current economic crisis has passed its lowest point and that the moderate recovery in global economic activity seen in the second half of 2009 should continue. Growth rates are, however, unlikely to reach the levels registered in the years before the outbreak of the financial crisis in the foreseeable future. Temporary setbacks could still arise and it is still too early to assume that the recovery is sustain- able. Taking all these factors into account, it is still difficult to make reliable forecasts for 2010. We have asserted our position well during this crisis-ridden period. We began at an early stage to realign strategies to enable us to meet the challenges created by a slump in demand across key sales markets on the one hand and problems stemming from the volatility of the international financial and commodities markets on the other. At the same time, we have kept on track with the Strategy Number ONE to realign the BMW Group despite the onset of recessionary conditions. We have used the crisis conditions prevailing in 2009 to strengthen the BMW Group by im- proving efficiency through better use of resources, thereby ensuring that the BMW Group will be able to perform well both in 2010 and beyond. Moreover, the BMW Group con- tinues to enjoy a solid liquidity base. With effect from the beginning of the financial year 2010, additional momentum for profitable growth will come from our renewed and rejuvenated model range. We also ex- pect to achieve significantly higher sales volumes in China. The US market is likely to make further progress on the road to recovery. The worldwide launch of the BMW X1 and BMW 5 Series Gran Turismo was completed at the beginning of 2010. These two innovative models open up entirely new segments, a unique market selling point in itself. Customers and trade press alike have been ex- tremely positive about the introduction of both models. The Rolls-Royce Ghost will become available worldwide over the course of 2010. It is particularly difficult at present to predict how used car markets will develop, given that influencing factors are working to some extent in opposite directions. However, now that prices for pre-owned cars have stabilised in the USA, Canada and the United Kingdom, the situation is also likely to settle down at a low level in Continental The new BMW 5 Series, one of the most successful models in our range of vehicles, will be launched this spring. The new 5 Series Sedan and the new 5 Series Touring (to be launched before the end of 2010) will both help to boost the competitiveness of our model range. The new model has aroused a great deal of interest. The trade press has Group Management Report A Review of the Financial Year 12 12 14 General Economic Environment 18 42 Internal Management System Earnings Performance Financial Position Review of Operations BMW Group – Capital Market Activities Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 Net Assets Position Subsequent Events Report 56 Value Added Statement 56 58 Key Performance Figures 59 Comments on BMW AG Internal Control System Risk Management Outlook 45 48 63 64 70 72 written very highly of the new model. The real benefit will be felt from the second half of 2010 onwards, after the BMW 5 Series Sedan has become available worldwide. We will continue to revitalise our range over the course of 2010 with more worldwide firsts and model revisions. These include the BMW ActiveHybrid 7 and the model re- visions of the BMW X5 as well as the BMW 3 Series Con- vertible and Coupé. The new MINI Countryman is also due to be launched during the current year. The services and spare parts business is of great strategic importance to us. Putting our worldwide initiatives into action is enabling us to systematically exploit further profit- able growth potential in this field. Rigorous cost management will be continued in 2010 as part of our overall endeavour to improve efficiency and productivity, a key element in the strategic reorientation of the BMW Group. Measures taken to date are already having a marked effect. A good example of this is the new BMW 5 Series, the first major production model to be developed fully in line with our modular strategy. The use of identically constructed parts in all of the main models allows us to derive greater benefit from the significantly higher volumes produced. The new BMW 5 Series there- fore signalises the beginning of a new, efficient develop- ment strategy. Future BMW, MINI and Rolls-Royce brand models will also be increasingly developed with the use of modular and industrial standards in mind, enabling us to reduce production costs significantly over the coming years. The modular approach fits in entirely with profita- bility targets set in conjunction with the Strategy Number ONE. Customers also benefit from this approach as many high-value items of equipment and options will no longer be exclusively available to the major series production models. We have continued to make progress in managing and re- ducing fixed costs. Stringent working capital management is a further key parameter for managing the business. During the year under report, for instance, we successfully reduced inventory levels, which we will endeavour to con- tinue in the current year. Further improvements in produc- tivity will also bring benefits in 2010. Whilst continuing to implement measures to bring us closer to the profitability levels targeted in our Strategy Number ONE, our main focus will be on developing new vehicles and technologies for the future. The BMW Vision EfficientDynamics concept car – presented on the world stage for the first time at the International Motor Show (IAA) in Frankfurt in September – includes a whole array of technological innovations developed in conjunction with the Efficient Dynamics measures package. The outcome is a vehicle with the CO2 emission values of a compact car and the dynamism of a sports car. This concept car sets new standards and is further proof of our outstanding inno- vative and technological expertise. We remain committed to the use of state-of-the-art tech- nologies to reduce the fuel consumption and emissions of combustion engines. At an early stage we recognised the pressure being brought to bear within society towards down-sized, more efficient drive systems that can never- theless deliver powerful performance as well as the trend towards CO2-emissions-based taxation. We evaluated the impact of these changes on our model range and planned accordingly. With framework conditions becoming clearer, we can now go on to sharpen the innovative edge we have gained through our Efficient Dynamics strategy. We will continue to invest in the future of the BMW Group and extend our competitive lead. One aspect of this strategy will be to develop alternative drive systems and innovative mobility concepts in line with our forward-looking “project i”. Our MINI E fleet now comprises some 600 test cars. Field trials are currently being performed under real conditions in the USA, the UK and Germany and are helping us gain valuable knowledge with respect to electromobility. The BMW Concept ActiveE, a purely electrically driven concept study based on the BMW 1 Series Coupé, is also demonstrating that electromobility is a real possibility in keeping with the flair of the BMW brand. Based on this con- cept study, we will be handing over another fleet of elec- trically powered cars to customers for testing in 2011, en- abling us to gain further important knowledge about the use of electrically driven BMW vehicles for everyday pur- poses. This concept vehicle will also be used to test the electric drivetrain of the Megacity Vehicle at a pre-series stage. This groundwork is seen as an important factor in our efforts to open up new opportunities in the medium and long term. It will also enable us to fulfil the future needs of customers with our premium products and premium services. The knock-on impact of the international economic and finan cial crisis will continue to be felt in 2010. However, of market interest rates is also creating more favourable refinancing conditions. We expect fair values of pre-owned cars in North America and the United Kingdom to continue stabilising in 2010. We also expect markets in Continental Europe to level out. Given the slow pace of economic recovery in most main sales markets, the bad debt risk situation is unlikely to ease significantly in the field of retail customer and dealer finan- cing. Rising unemployment could also inhibit an upswing. Thus, further bad debt losses cannot be entirely ruled out for 2010. Alongside the reviving fortunes of the car markets world- wide, we also forecast that earnings will develop positively in the Financial Services segment. Profitability targets for 2012 confirmed We will continue with great determination to implement our Strategy Number ONE in 2010. This includes working towards the profitability targets already announced for the year 2012. Based on these strategies, we plan to achieve a return on capital employed (ROCE) of more than 26 % and an EBIT margin of 8 to 10 % in our Automobiles seg- ment. Originally announced in 2007, the Strategy Number ONE is proving to be an appropriate and forward-looking entrepreneurial decision for realigning the BMW Group. By applying a rigorous value-added approach to business, we will succeed in achieving the challenging targets we have set ourselves. 73 Group Management Report emerging signs of stability in certain sales markets should benefit our performance. Ongoing productivity improve- ment measures will also have a positive impact on earnings. We therefore aim to achieve a Group pre-tax profit (EBT) in 2010 that is significantly higher than in 2009 and which will represent an important step towards achieving the targets set down in our Strategy Number ONE. If the macroeconomic environment revives in 2011, we ex- pect to achieve another increase in business volumes and a corresponding improvement in earnings. Our renewed and rejuvenated model range will make a major contribu- tion during this period. Automobiles segment In the light of a moderate economic recovery and with de- mand gradually increasing on some major sales markets, we forecast a sales volume growth rate for 2010 in the sin- gle-digit range. We are also confident of again being able to assert our strong position as the world’s leading premium manufacturer in 2010 by expanding our product range and purposefully strengthening our position on the world’s growth markets. The gradual renewal of our vehicle port- folio from 2010 onwards will create additional momentum for sales volume growth, particularly in the second half of the year. We will also benefit from further efficiency im- provements and cost reductions. Taking all of these fac- tors into account, we are aiming for an EBIT margin in the low single-digit percentage range for the Automobiles segment. Motorcycles segment We entered the supersport bikes segment for the first time in December 2009 with the market launch of the S 1000 RR. We expect this move to create additional impe- tus for business, helping us to achieve our aim of beating the past year’s sales volume figure in 2010. Revenues and earnings will also improve accordingly. Financial Services segment The effects of the economic and financial crisis continued to be felt sharply in the Financial Services segment during the year under report. We nevertheless succeeded in stabilising business volumes further by focusing on the key areas of process efficiency and profitability. With this in mind, we will also be taking a close look at the progress being made in our various lines of business and take measures to improve performance in terms of profitability. An additional factor is that confidence in the financial markets is generally picking up again. The current low level 74 Group Financial Statements BMW Group Income Statements for Group and Segments Statement of Comprehensive Income for Group Income Statements for Group and Segments in euro million Note Group Automobiles Motorcycles Financial Services Other Entities Eliminations 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 50,681 53,197 43,737 48,782 – 45,356 – 47,148 – 39,616 – 43,505 5,325 6,049 4,121 5,277 1,069 – 925 144 1,230 –1,024 206 15,798 15,725 –14,880 –15,332 918 393 – 9,926 –12,731 Revenues 10,065 12,858 Cost of sales* 139 127 Gross profit – 5,040 808 – 804 289 36 856 –1,014 246 124 – 5,369 1,428 –1,187 921 26 685 – 930 – 351 – 570 – 4,329 – 4,572 –126 –147 443 – 500 – 265 42 560 559 – 574 690 25 766 –1,055 –1,036 130 – 323 –127 – 372 413 351 – 588 318 365 – 292 574 – 21 Profit / loss before tax 2 –1 19 – 3 –11 – – 8 11 – 3 8 – 8 3 – 2 60 – 1 –10 – – 9 51 –14 37 – 37 – 560 41 – 44 355 – 3 – 8 15 10 –147 218 – 218 – 583 31 – 57 – 216 – 2 – 8 – 70 – 76 131 –161 – –161 3 – 3 –16 352 – 309 30 – 6 1,778 –1,852 101 21 51 13 64 – 64 191 –145 46 – 57 891 – 607 273 1 2,102 –1,927 –154 22 295 –16 279 – 279 – 9 – 30 50 150 –10 – 56 Sales and administrative costs Other operating income 53 Other operating expenses 114 Profit / loss before financial result – – Result from equity accounted investments – 1,488 – 2,186 Interest and similar income 1,912 2,051 Interest and similar expenses – 424 – Other financial result –135 Financial result – 30 Income taxes – 51 Net profit / loss – 215 359 – 359 – Attributable to minority interest – 51 Attributable to shareholders of BMW AG Earnings per share of common stock in euro Earnings per share of preferred stock in euro 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 Revenues Cost of sales* Gross profit Sales and administrative costs Other operating income Other operating expenses Profit / loss before financial result Result from equity accounted investments Interest and similar income Interest and similar expenses Other financial result Financial result Profit / loss before tax Income taxes Net profit / loss Attributable to minority interest Attributable to shareholders of BMW AG Earnings per share of common stock in euro Earnings per share of preferred stock in euro * after reclassification of research and development costs to cost of sales 8 9 10 11 11 12 13 13 14 15 16 16 Statement of Comprehensive Income for Group in euro million Net profit Available-for-sale securities Financial instruments used for hedging purposes Exchange differences on translating foreign operations Actuarial gains / losses relating to defined benefit pension and similar plans Deferred taxes relating to components of other comprehensive income Other comprehensive income for the period after tax 18 Total comprehensive income Total comprehensive income attributable to minority interests Total comprehensive income attributable to shareholders of BMW AG – 203 210 6 204 0.31 0.33 – 21 330 6 324 0.49 0.51 Note 149 – 439 6 – 445 – 92 226 6 220 2009 2008 210 330 4 295 318 –1,198 190 – 391 –7 – 624 – 807 161 188 –1,089 –181 –759 6 –187 5 –764 75 Group Financial Statements Income Statements for Group and Segments in euro million Revenues Cost of sales* Gross profit Sales and administrative costs Other operating income Other operating expenses Profit / loss before financial result Result from equity accounted investments Interest and similar income Interest and similar expenses Other financial result Financial result Income taxes Net profit / loss Attributable to minority interest Attributable to shareholders of BMW AG Earnings per share of common stock in euro Earnings per share of preferred stock in euro * after reclassification of research and development costs to cost of sales 8 9 10 11 11 12 13 13 14 15 16 16 Note Group Automobiles Motorcycles Financial Services Other Entities Eliminations 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 50,681 53,197 43,737 48,782 – 45,356 – 47,148 – 39,616 – 43,505 5,325 6,049 4,121 5,277 1,069 – 925 144 1,230 –1,024 206 15,798 15,725 –14,880 –15,332 918 393 – 4,329 – 4,572 –126 –147 2 –1 19 – 3 –11 – – 8 11 – 3 8 – 8 3 – 2 60 – 1 –10 – – 9 51 –14 37 – 37 – 5,040 808 – 804 289 –1,014 36 856 246 124 – 203 210 6 204 0.31 0.33 – 5,369 1,428 –1,187 921 26 685 – 930 – 351 – 570 – 21 330 6 324 0.49 0.51 –1,055 –1,036 443 – 500 – 265 42 560 130 – 323 149 – 439 6 – 445 559 – 574 690 25 766 –127 – 372 – 92 226 6 220 – 560 41 – 44 355 – 3 – 8 15 10 – 583 31 – 57 – 216 – 2 – 8 – 70 – 76 365 – 292 –147 218 – 218 131 –161 – –161 3 – 3 –16 352 – 309 30 – 6 1,778 –1,852 101 21 51 13 64 – 64 191 –145 46 – 57 891 – 607 273 1 2,102 –1,927 –154 22 295 –16 279 – 279 – 9,926 –12,731 10,065 12,858 Revenues Cost of sales* 139 127 Gross profit – 9 – 30 50 150 –10 – 56 Sales and administrative costs Other operating income 53 Other operating expenses 114 Profit / loss before financial result – – Result from equity accounted investments – 1,488 – 2,186 Interest and similar income 1,912 2,051 Interest and similar expenses – 424 – Other financial result –135 Financial result 574 – 21 Profit / loss before tax – 215 359 – 359 – 30 Income taxes – 51 Net profit / loss – Attributable to minority interest – 51 Attributable to shareholders of BMW AG Earnings per share of common stock in euro Earnings per share of preferred stock in euro Profit / loss before tax 413 351 – 588 318 76 BMW Group Balance Sheets for Group and Segments at 31 December Assets in euro million 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 Note Group Automobiles Motorcycles Financial Services Other Entities 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 Eliminations Assets 20 21 22 23 23 24 25 26 27 28 29 24 25 26 27 30 5,379 11,385 17,973 137 232 23,478 1,519 1,266 640 5,641 11,292 19,524 111 322 22,192 1,808 866 660 62,009 62,416 6,555 1,857 17,116 3,215 950 2,484 7,767 39,944 7,290 2,305 15,871 3,306 602 1,842 7,454 38,670 5,230 11,181 187 114 2,678 – 475 1,514 2,114 23,493 6,289 1,608 – 1,666 789 14,863 4,331 29,546 5,403 11,074 268 82 2,693 – 238 1,346 2,144 23,248 7,005 2,070 – 1,401 358 14,028 5,073 29,935 20,608 22,590 – 2,822 – 3,334 Leased products 23,478 22,192 – Receivables from sales financing – 7,834 – 7,744 Other investments – Investments accounted for using the equity method – – Intangible assets Property, plant and equipment 110 20 – 8 28 575 1,375 46,202 9 123 924 28 4,071 2,803 25,074 123 25 – 25 424 485 9 122 839 39 1,961 47,825 3,034 2,053 21,967 17,116 15,871 – – – 23 5,380 – 1,186 355 10,389 17,333 – 3 – 916 133 27,179 633 28,864 64 – – 29 5,348 – 1,381 160 14,055 21,037 – 4 – 1,481 205 328 23,127 –170 –1,178 –13,238 – 25,242 – 235 Financial assets –1,125 Deferred tax –17,500 Other assets – 29,938 Non-current assets –1 –1 Inventories – – Trade receivables Receivables from sales financing – 291 – 415 Financial assets – Current tax 21,109 – 43,629 – 36,329 Other assets – 43,921 – 36,745 Current assets – Cash and cash equivalents Total assets 101,953 101,086 53,039 53,183 71,276 69,792 46,197 44,164 – 69,163 – 66,683 Total assets Equity and liabilities in euro million 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 Current provisions and liabilities Note Group Automobiles Motorcycles Financial Services Other Entities Eliminations 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 31 31 31 31 31 31 32 33 34 35 36 33 34 35 37 36 655 1,921 20,426 – 3,100 – 13 654 1,911 20,419 – 2,709 –10 8 19,915 20,273 22,101 22,481 – – 4,268 3,752 4,118 4,883 –10,572 –10,843 Equity 2,972 2,706 2,769 34,391 2,281 45,119 2,058 836 26,934 3,122 3,969 36,919 3,314 2,757 2,757 30,497 2,201 41,526 2,125 633 29,887 2,562 4,080 39,287 1,652 2,295 1,694 259 3,401 9,301 1,759 650 4,736 2,556 11,936 21,637 2,847 2,412 1,931 2,685 3,986 13,861 1,795 468 2,599 2,029 9,950 16,841 24 311 3,191 10,848 10,455 24,829 274 85 13,673 385 27,762 42,179 28 252 3,096 10,030 14,128 27,534 311 105 15,207 364 22,519 38,506 1,222 32 9 23,454 133 24,850 1 101 8,816 14 8,297 17,229 317 30 18 18,018 586 18,969 2 60 9 7,746 20,312 – – Pension provisions Other provisions – 2,127 –170 – 2,290 Deferred tax – 236 Financial liabilities –11,965 –16,751 Other liabilities –14,262 –19,277 Non-current provisions and liabilities – 4 Other provisions – Current tax 12,495 – 291 – 414 Financial liabilities – 44,041 – 36,145 Other liabilities – Trade payables – 44,329 – 36,563 Current provisions and liabilities Equity and liabilities Subscribed capital Capital reserves Revenue reserves Accumulated other equity Treasury shares Minority interest Total equity and liabilities 101,953 101,086 53,039 53,183 604 630 71,276 69,792 46,197 44,164 – 69,163 – 66,683 Total equity and liabilities 39 184 – – – – – – – – – – – – 223 258 123 381 604 74 68 2 – 257 401 21 – – 167 15 203 51 193 – – – – – – – – – – – – 244 277 109 386 630 122 63 2 – 252 439 21 – – 160 10 191 – – – – – – – – – – 3 – – 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 77 Group Financial Statements Note Group Automobiles Motorcycles Financial Services Other Entities Eliminations Assets 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 5,230 11,181 187 114 2,678 – 475 1,514 2,114 23,493 6,289 1,608 – 1,666 789 14,863 4,331 29,546 5,403 11,074 268 82 2,693 – 238 1,346 2,144 23,248 7,005 2,070 – 1,401 358 14,028 5,073 29,935 39 184 – – – – – – – 223 258 123 – – – – – 381 604 51 193 – – – – – – – 244 277 109 – – – – – 386 630 110 20 123 25 20,608 22,590 – 8 – 25 23,478 22,192 28 575 1,375 46,202 9 123 424 485 1,961 47,825 9 122 17,116 15,871 924 28 4,071 2,803 25,074 839 39 3,034 2,053 21,967 – – – 23 5,380 – 1,186 355 10,389 17,333 – 3 – 916 133 27,179 633 28,864 64 – – 29 5,348 – 1,381 160 14,055 21,037 – 4 – 1,481 205 – – – – Intangible assets Property, plant and equipment – 2,822 – 3,334 Leased products – – Investments accounted for using the equity method – 7,834 – 7,744 Other investments – – Receivables from sales financing –170 –1,178 –13,238 – 25,242 – 235 Financial assets –1,125 Deferred tax –17,500 Other assets – 29,938 Non-current assets –1 – – – 291 – –1 Inventories – – Trade receivables Receivables from sales financing – 415 Financial assets – Current tax 21,109 – 43,629 – 36,329 Other assets 328 23,127 – – Cash and cash equivalents – 43,921 – 36,745 Current assets 71,276 69,792 46,197 44,164 – 69,163 – 66,683 Total assets 101,953 101,086 53,039 53,183 Note Group Automobiles Motorcycles Financial Services Other Entities Eliminations 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 Equity and liabilities Subscribed capital Capital reserves Revenue reserves Accumulated other equity Treasury shares Minority interest 19,915 20,273 22,101 22,481 – – 4,268 3,752 4,118 4,883 –10,572 –10,843 Equity 1,652 2,295 1,694 259 3,401 9,301 1,759 650 4,736 2,556 11,936 21,637 2,847 2,412 1,931 2,685 3,986 13,861 1,795 468 2,599 2,029 9,950 16,841 74 68 2 – 257 401 21 – – 167 15 203 122 63 2 – 252 439 21 – – 160 10 191 24 311 3,191 10,848 10,455 24,829 274 85 13,673 385 27,762 42,179 28 252 3,096 10,030 14,128 27,534 311 105 15,207 364 22,519 38,506 1,222 32 9 23,454 133 24,850 1 101 8,816 14 8,297 17,229 317 30 18 18,018 586 18,969 2 60 12,495 9 7,746 20,312 – – – 2,127 –170 – – Pension provisions Other provisions – 2,290 Deferred tax – 236 Financial liabilities –11,965 –16,751 Other liabilities –14,262 –19,277 Non-current provisions and liabilities 3 – – 291 – – 4 Other provisions – Current tax – 414 Financial liabilities – Trade payables – 44,041 – 36,145 Other liabilities – 44,329 – 36,563 Current provisions and liabilities Total equity and liabilities 101,953 101,086 53,039 53,183 604 630 71,276 69,792 46,197 44,164 – 69,163 – 66,683 Total equity and liabilities Investments accounted for using the equity method Assets in euro million Intangible assets Property, plant and equipment Leased products Other investments Receivables from sales financing Financial assets Deferred tax Other assets Non-current assets Receivables from sales financing Inventories Trade receivables Financial assets Current tax Other assets Cash and cash equivalents Current assets Total assets Equity and liabilities in euro million Subscribed capital Capital reserves Revenue reserves Accumulated other equity Treasury shares Minority interest Equity Pension provisions Other provisions Deferred tax Financial liabilities Other liabilities Other provisions Current tax Financial liabilities Trade payables Other liabilities Non-current provisions and liabilities Current provisions and liabilities 20 21 22 23 23 24 25 26 27 28 29 24 25 26 27 30 31 31 31 31 31 31 32 33 34 35 36 33 34 35 37 36 62,009 62,416 5,379 11,385 17,973 137 232 23,478 1,519 1,266 640 6,555 1,857 17,116 3,215 950 2,484 7,767 39,944 655 1,921 20,426 – 3,100 – 13 2,972 2,706 2,769 34,391 2,281 45,119 2,058 836 26,934 3,122 3,969 36,919 5,641 11,292 19,524 111 322 22,192 1,808 866 660 7,290 2,305 15,871 3,306 602 1,842 7,454 38,670 654 1,911 20,419 – 2,709 –10 8 3,314 2,757 2,757 30,497 2,201 41,526 2,125 633 29,887 2,562 4,080 39,287 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 78 BMW Group Cash Flow Statements for Group and Segments in euro million Net profit / loss Note Group 2009 20081 Automobiles Financial Services 2009 20081 2009 20081 210 330 – 439 226 218 –161 Net profit / loss Reconciliation between net profit / loss and cash inflow from operating activities Reconciliation between net profit / loss and cash inflow from operating activities Current tax Other interest and similar income / expenses 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 working capital Change in inventories Change in trade receivables Change in trade payables Change in current other operating assets and liabilities Change in non-current other operating assets and liabilities Income taxes paid Interest received Cash inflow from operating activities 40 338 –113 5,476 3,603 1 – 95 17 – 35 – 36 855 506 441 129 –1,023 – 349 346 10,271 75 –169 6,763 3,676 – 332 – 51 424 – 21 – 26 37 385 – 972 – 548 1,509 – 448 240 10,872 Investment in intangible assets and property, plant and equipment – 3,471 – 4,204 – 3,409 – 4,114 –10 – 31 Investment in intangible assets and property, plant and equipment – 294 52 6,591 26 62 192 163 1 – 1 – 47 – 227 60 – 695 – 74 – 2 – – – – – – 251 255 7 3,502 42 – 448 –170 – 29 – 43 871 513 422 335 –121 – 369 342 4,921 98 – 261 33 –197 271 – 2,787 577 – 5,675 – – 6 7 – – –197 – 76 180 – 874 964 10 379 –113 6 3,567 – 515 – 213 94 – 22 – 25 9 401 – 746 1,853 – 340 – 281 191 4,471 177 – 319 2 – 353 333 – – – 5,317 5,039 – 4,552 –10 – – 694 –127 – – 2,786 2,858 – 868 3,945 152 42 5,732 25 93 69 307 – 438 747 – 99 – 2 6,817 1 – – – 6 2 – – – – – – 2 722 – 351 – – 201 Current tax Other interest and similar income / expenses Depreciation of leased products Change in provisions Change in deferred taxes Depreciation and amortisation of tangible, intangible and investment assets 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 working capital Change in inventories Change in trade receivables Change in trade payables Change in current other operating assets and liabilities Change in non-current other operating assets and liabilities Income taxes paid Interest received 5,603 Cash inflow from operating activities Proceeds from the disposal of intangible assets and property, plant and equipment Expenditure for investments Proceeds from the disposal of investments –10,236 –14,811 Investment in leased products 6,215 5,507 Disposals of leased products – 49,629 – 61,630 Additions to receivables from sales financing 47,847 –121 43 56,562 Payments received on receivables from sales financing – 75 260 Cash payments for the purchase of marketable securities Cash proceeds from the sale of marketable securities Issue / Buy-back of treasury shares Payments into equity Payment of dividend for the previous year – 2 Interest paid 658 1,129 Proceeds from the issue of bonds –1,230 –1,412 Repayment of bonds 3,768 6,405 Internal financing Change in other financial liabilities – Change in commercial paper 9,890 Cash inflow / outflow from financing activities 169 – 53 15 177 –142 2 –10,433 –15,164 6,515 5,840 – 49,629 – 61,630 47,847 – 2,908 620 56,562 – 5,392 5,299 40 –11,328 –18,652 – 5,889 –14,218 Cash outflow from investing activities Proceeds from the disposal of intangible assets and property, plant and equipment Expenditure for investments Proceeds from the disposal of investments Investment in leased products Disposals of leased products Additions to receivables from sales financing Payments received on receivables from sales financing Cash payments for the purchase of marketable securities Cash proceeds from the sale of marketable securities Cash outflow from investing activities Issue / Buy-back of treasury shares Payments into equity Payment of dividend for the previous year Interest paid Proceeds from the issue of bonds Repayment of bonds Internal financing Change in other financial liabilities Change in commercial paper 6 7 –197 – 224 9,762 –10 – – 694 – 312 9,959 – 6,440 – 5,080 – –1,307 – 255 1,352 – 9,050 – 9 12,904 Cash inflow / outflow from financing activities 40 Effect of exchange rate and changes in composition of Group on cash and cash equivalents 40 18 – 63 2 – 40 23 –11 on cash and cash equivalents Effect of exchange rate and changes in composition of Group Change in cash and cash equivalents 313 5,061 – 742 3,824 750 1,264 Change in cash and cash equivalents Cash and cash equivalents as at 1 January Cash and cash equivalents as at 31 December 40 7,454 7,767 2,393 7,454 5,073 4,331 1,249 5,073 2,053 2,803 789 Cash and cash equivalents as at 1 January 2,053 Cash and cash equivalents as at 31 December 1 Previous year’s figures adjusted as a result of a change in presentation of other operating assets and liabilities 2 Interest relating to financial services business is classified as revenues / cost of sales. 79 Group Financial Statements Reconciliation between net profit / loss and cash inflow from operating activities Reconciliation between net profit / loss and cash inflow from operating activities 210 330 – 439 226 218 –161 Net profit / loss Note Group 2009 20081 Automobiles Financial Services 2009 20081 2009 20081 251 255 7 3,502 42 – 448 –170 – 29 – 43 871 513 422 335 –121 – 369 342 4,921 379 –113 6 3,567 – 515 – 213 94 – 22 – 25 9 401 – 746 1,853 – 340 – 281 191 4,471 152 42 5,732 25 93 69 307 1 – – – 6 – 438 747 – 99 – 2 6,817 – 294 52 6,591 26 62 192 163 1 – 1 – 47 – 227 60 – 695 – 74 – 2 Current tax Other interest and similar income / expenses 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 working capital Change in inventories Change in trade receivables Change in trade payables Change in current other operating assets and liabilities Change in non-current other operating assets and liabilities Income taxes paid Interest received 5,603 Cash inflow from operating activities Investment in intangible assets and property, plant and equipment – 3,471 – 4,204 – 3,409 – 4,114 –10 – 31 Investment in intangible assets and property, plant and equipment 98 – 261 33 –197 271 – – – 2,787 577 – 5,675 6 7 –197 – 76 – – 180 – 874 964 10 177 – 319 2 – 353 333 – – – 5,317 5,039 – 4,552 –10 – – 694 –127 – – 2,786 2,858 – 868 3,945 2 – – – – – Proceeds from the disposal of intangible assets and property, plant and equipment Expenditure for investments Proceeds from the disposal of investments –10,236 –14,811 Investment in leased products 6,215 5,507 Disposals of leased products – 49,629 – 61,630 Additions to receivables from sales financing 47,847 –121 43 56,562 Payments received on receivables from sales financing – 75 260 Cash payments for the purchase of marketable securities Cash proceeds from the sale of marketable securities – 5,889 –14,218 Cash outflow from investing activities – – – – 2 – – – – 2 Issue / Buy-back of treasury shares Payments into equity Payment of dividend for the previous year Interest paid 658 1,129 Proceeds from the issue of bonds –1,230 –1,412 Repayment of bonds 722 – 351 – – 201 3,768 6,405 Internal financing Change in other financial liabilities – Change in commercial paper 9,890 Cash inflow / outflow from financing activities Cash inflow from operating activities 40 10,872 in euro million Net profit / loss Current tax Other interest and similar income / expenses 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 working capital Change in inventories Change in trade receivables Change in trade payables Change in current other operating assets and liabilities Change in non-current other operating assets and liabilities Income taxes paid Interest received Proceeds from the disposal of intangible assets and property, plant and equipment Expenditure for investments Proceeds from the disposal of investments Investment in leased products Disposals of leased products Additions to receivables from sales financing Payments received on receivables from sales financing Cash payments for the purchase of marketable securities Cash proceeds from the sale of marketable securities Cash outflow from investing activities Issue / Buy-back of treasury shares Payments into equity Payment of dividend for the previous year Interest paid Proceeds from the issue of bonds Repayment of bonds Internal financing Change in other financial liabilities Change in commercial paper 338 –113 5,476 3,603 1 – 95 17 – 35 – 36 855 506 441 129 –1,023 – 349 346 10,271 169 – 53 15 75 –169 6,763 3,676 – 332 – 51 424 – 21 – 26 37 385 – 972 – 548 1,509 – 448 240 177 –142 2 40 –11,328 –18,652 –10,433 –15,164 6,515 5,840 – 49,629 – 61,630 47,847 – 2,908 620 56,562 – 5,392 5,299 6 7 –197 – 224 9,762 – –1,307 – 255 1,352 –10 – – 694 – 312 9,959 – 9,050 – 9 12,904 – 6,440 – 5,080 Cash inflow / outflow from financing activities 40 Effect of exchange rate and changes in composition of Group on cash and cash equivalents 40 18 – 63 2 – 40 23 –11 Effect of exchange rate and changes in composition of Group on cash and cash equivalents Change in cash and cash equivalents 313 5,061 – 742 3,824 750 1,264 Change in cash and cash equivalents Cash and cash equivalents as at 1 January Cash and cash equivalents as at 31 December 40 7,454 7,767 2,393 7,454 5,073 4,331 1,249 5,073 2,053 2,803 789 Cash and cash equivalents as at 1 January 2,053 Cash and cash equivalents as at 31 December 1 Previous year’s figures adjusted as a result of a change in presentation of other operating assets and liabilities 2 Interest relating to financial services business is classified as revenues / cost of sales. 80 BMW Group Group Statement of Changes in Equity in euro million Subscribed capital Capital reserves Revenue reserves Accumulated other equity Treasury shares Minority interest Total lation dif- ferences Trans- Securities Derivative financial instru- ments Pension obliga- tions 31 December 2007 654 1,911 20,789 –1,259 35 438 – 835 – 11 21,744 Acquisition of treasury shares Dividends paid Comprehensive income 31 December 2008 Other Changes – – – – – – – – – – 694 – – – – – – 324 – 806 –18 – 393 – – – 17 – 45 – – 129 – –10 – – – – – 5 – 8 –10 – 694 –759 – 8 – 706 –10 8 20,273 31 December 2008 654 1,911 20,419 – 2,065 Issue of treasury shares Subscribed share capital increase out of authorised capital Premium arising on capital increase relating to preferred stock Dividends paid Comprehensive income 31 December 2009 Other Changes – 1 – – – – – – 10 – – – – – – –197 – – – – 204 – 318 – – – – – 3 – – – – – – – – – 164 – 876 – – 10 – – – – – – – – – 10 1 10 –197 6 – 1 –181 – 1 31 December 2009 655 1,921 20,426 –1,747 20 209 –1,582 – 13 19,915 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 81 Group Financial Statements BMW Group Notes to the Group Financial Statements Accounting Principles and Policies 1 Basis of preparation The consolidated financial statements of Bayerische Motoren Werke Aktiengesellschaft (“BMW Group Financial Statements” or “Group Financial Statements”) at 31 De- cember 2009 have been drawn up in accordance with In- ternational Financial Reporting Standards (IFRSs) as en- dorsed by the EU. The designation “IFRSs” also includes all valid International Accounting Standards (IASs). All In- terpretations of the International Financial Reporting Inter- pretations Committee (IFRIC) mandatory for the financial year 2009 are also applied. The Group Financial Statements comply with § 315 a of the German Commercial Code (HGB). This provision, in conjunction with the Regulation (EC) No. 1606 / 2002 of the European Parliament and Council of 19 July 2002, re- lating to the application of International Financial Reporting Standards, provides the legal basis for preparing consoli- dated financial statements in accordance with international standards in Germany and applies to financial years be- ginning on or after 1 January 2005. The BMW Group and segment income statements are presented using the cost of sales method. The Group and segment balance sheets correspond to the classification provisions contained in IAS 1 (Presentation of Financial Statements). In order to improve clarity, various items are aggregated in the income statement and balance sheet. These items are disclosed and analysed separately in the notes. Following adoption of the revised version of IAS 1 (Presen- tation of Financial Statements), a Statement of Compre- hensive Income has been presented at Group level with effect from the first quarter 2009, replacing the previously presented Statement of Income and Expenses Recognised in Equity. Furthermore, in order to improve comparability, research and development costs have been reported with effect from the beginning of the first quarter 2009 as cost of sales and not, as in the previous year, as a separate item in the income statement. Research and development costs in 2009 totalled euro 2,587 million (2008: euro 2,825 million). 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 services activities of the Group therefore has an impact on the Group Financial Statements. In order to provide a better insight into the net assets, finan- cial position and performance of the BMW Group and going beyond the requirements of IFRS 8 (Operating Seg- ments), the Group Financial Statements also include bal- ance sheets and income statements for the Automobiles, Motorcycles, Financial Services and Other Entities seg- ments. The Group Cash Flow Statement is supplemented by statements of cash flows for the Automobiles and Finan- cial Services segments. Inter-segment transactions – relating primarily to internal sales of products, the provision of funds and the related in- terest – are eliminated in the “Eliminations” column. Fur- ther information regarding the allocation of activities of the BMW Group to segments and a description of the seg- ments is provided in the explanatory notes to segment in- formation on page 133 et seq. 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 re- ceivables is a well established instrument used by industrial companies. These transactions usually take the form of asset-backed financing transactions involving the sale of a portfolio of receivables to a trust which, in turn, issues mar- ketable securities to refinance the purchase price. The BMW Group continues to “service” the receivables and re- ceives an appropriate fee for these services. In accordance with IAS 27 (Consolidated and Separate Financial State- ments) and the interpretation contained in SIC-12 (Con- solidation – 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 re- moved from the Group balance sheet on transfer of the related significant risks and rewards. The balance sheet value of the assets sold at 31 December 2009 totalled euro 7.8 billion (2008: euro 8.7 billion). In addition to credit financing and leasing contracts, the Finan cial Services segment also brokers insurance busi- ness via cooperation arrangements entered into with local insurance companies. These activities are not material to the BMW Group as a whole. The Group currency is the euro. All amounts are disclosed in millions of euros (euro million) unless stated otherwise. 82 Bayerische Motoren Werke Aktiengesellschaft has its seat in Munich, Petuelring 130, and is registered in the Com- mercial Register of the District Court of Munich under the number HRB 42243. All consolidated subsidiaries with the exception of BMW India Private Limited, New Delhi, (year-end 31 March 2009) have the same year-end as BMW AG. The Group Financial Statements, drawn up in accordance with § 315 a HGB, and the Management Report for the finan cial year 2009 will be submitted 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 Manage- ment Report can be downloaded from the BMW Group website at www.bmwgroup.com/ir. The Board of Management authorised the Group Financial Statements for issue on 19 February 2010. 2 Consolidated companies The BMW Group Financial Statements include, besides BMW AG, all material subsidiaries, six special purpose securities funds and 23 special purpose trusts (almost all used for asset-backed financing transactions). Included at 31 December 2008 Included for the first time in 2009 No longer included in 2009 Included at 31 December 2009 The number of subsidiaries, special purpose securities funds and other special purpose trusts included in the Group Financial Statements changed in 2009 as follows: Germany Foreign Total 31 2 1 32 153 8 12 149 184 10 13 181 53 subsidiaries (2008: 54), either dormant or generating a negligible volume of business, are not included. These subsidiaries were not consolidated because the resulting impact on the Group Financial Statements would not in- fluence the economic decisions of users taken on the basis of the financial statements. Non-inclusion of operating subsidiaries reduces total Group revenues by 0.6 % (2008: 1.1 %). The joint venture BMW Brilliance Automotive Ltd., Shen- yang, and the investment in Cirquent GmbH, Munich, are accounted for using the equity method. 15 (2008: 14) par- ticipations are not consolidated using the equity method on the grounds of immateriality. They are included in the balance sheet in the line “Other investments”, measured at cost less, where applicable, accumulated impairment losses. A separate “List of Group Investments” pursuant to § 313 (4) HGB will be submitted to the operator 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 at www.bmwgroup.com/ir. LARGUS Grundstücks-Verwaltungsgesellschaft mbH, Grünwald, LARGUS Grundstücks-Verwaltungsgesellschaft mbH & Co. KG, Grünwald, BMW Polska Sp. z o. o., Warsaw, BMW India Private Limited, New Delhi, and BMW Extended Services Corporation, Hilliard, were consolidated in the BMW Group Financial Statements for the year ended 31 De- cember 2009 for the first time. Alphabet Fuhrparkmanagement GmbH, Munich, ceased to be a consolidated company following its merger with LHS Leasing- und Handelsgesellschaft Deutschland mbH, Stuttgart. BMW Lease S. N. C., Guyancourt, and BMW Location S. N. C., Guyancourt, also ceased to be consoli- dated companies following their merger with BMW Finance S. N. C., Guyancourt. BMW Financial Services Ibérica, 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 83 Group Financial Statements E. F. C., S. A., Madrid, was merged with BMW Bank GmbH, Munich, and therefore also ceased to be a consolidated company. The companies Rover South Africa (Pty) Ltd., Cape Town, and Sociedade Anglo-Portugese de Automoveis Sarl, Lisbon, also ceased to be consolidated companies. The BMW Group reporting entity also changed by com- parison to the previous year as a result of the first-time consolidation of five special purpose trusts and the de- consolidation of six special purpose securities funds and one special purpose trust. LHS Leasing- und Handelsgesellschaft Deutschland mbH, Stuttgart, changed its name to Alphabet Fuhrparkmanage- ment GmbH, Munich. The changes are not material because the resulting impact on the Group Financial Statements would not influence the economic decisions of users taken on the basis of the financial statements. 3 Business acquisitions With effect from 1 January 2009, BMW Anlagen Verwal- tungs GmbH, Munich, acquired all of the shares of LARGUS Grundstücks-Verwaltungsgesellschaft, Grünwald, and, in- directly, 94.5 % of the shares of that company’s subsidiary, LARGUS Grundstücks-Verwaltungsgesellschaft mbH & Co. KG, Grünwald. The acquisition of LARGUS Grund- stücks-Verwaltungsgesellschaft mbH & Co. KG, Grünwald, gave rise to a credit difference on consolidation (excess of fair value of acquired net assets over purchase price) of euro 2 million which was recognised as other operating income in the first quarter 2009. 4 5 Consolidation principles The equity of subsidiaries is consolidated in accordance with IFRS 3 (Business Combinations). IFRS 3 requires that all business combinations are accounted for using the purchase method with identifiable assets and liabilities acquired measured initially at their fair value. The excess of the Group’s interest in the net fair value of the identifiable assets and liabilities acquired over cost is recognised as goodwill and is subjected to a regular review for impairment. Goodwill of euro 91 million which arose prior to 1 January 1995 remains netted against reserves. The companies LARGUS Grundstücks-Verwaltungsgesellschaft mbH, Grünwald, LARGUS Grundstücks-Ver wal tungs gesell- schaft mbH & Co. KG, Grünwald, BMW Polska Sp. z o.o., Warsaw, and BMW India Private Limited, New Delhi, were consolidated for the first time with effect from 1 January 2009. The equivalent date for BMW Extended Services Corporation, Hilliard, was 1 October 2009. Receivables, liabilities, provisions, income and expenses and profits between consolidated companies (intragroup profits) are eliminated on consolidation. Under the equity method, investments are measured at the BMW 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 invest- ment and the Group’s share of equity is accounted for in accordance with the purchase method. Investments in other companies are accounted for as a general rule 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). Foreign currency translation The financial statements of consolidated companies which are drawn up in a foreign currency are translated us- ing the functional currency concept (IAS 21, The Effects of Changes in Foreign Exchange Rates) and the modified closing rate method. The functional currency of a sub- sidiary is determined as a general rule of the basis on the primary economic environment in which it operates and corresponds therefore to the relevant local currency. In- come 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 translated at the closing rate. Exchange differences arising from the translation of shareholders’ equity are offset directly against accumulated other equity. Exchange differences arising from the use of different exchange rates to trans- late 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 subsidiaries 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. 84 The exchange rates of those currencies which have a material impact on the Group Financial Statements were as follows: US Dollar British Pound Chinese Renminbi Japanese Yen Closing rate Average rate 31.12. 2009 31.12. 2008 2009 2008 1.43 0.89 9.78 1.40 0.95 9.54 1.39 0.89 9.52 133.17 126.74 130.37 1.47 0.80 10.23 152.29 6 Accounting principles The financial statements of BMW AG and of its subsidiaries in Germany and elsewhere have been prepared for con- solidation purposes using uniform accounting policies in accordance with IAS 27. Revenues from the sale of products are recognised 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, settle- ment discount and rebates. Revenues also include lease rentals and interest income from financial services. If the sale of products includes a determinable amount for subsequent services (multiple-component contracts), the related revenues are deferred and recognised as in- come over the period of the contract. Amounts are nor- mally recognised as income by reference to the 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. In addition to directly attributable material and production costs, it also includes research costs and development costs not recognised as assets, the amortisation of capitalised de- velopment costs as well as overheads (including deprecia- tion of property, plant and equipment and amortisation of other intangible assets relating to production) 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 busi- ness, including the expense of risk provisions and write- downs, are reported in cost of sales. 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 conditions 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 accordance with IAS 33 (Earnings per Share). Undiluted earnings per share are calculated for common and preferred stock by dividing the net profit after minority interests, 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 outstand- ing 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 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 85 Group Financial Statements 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 recovera- bility and their carrying amounts are reduced to the re- coverable amount in the event of impairment. Development costs for vehicle and engine projects are capitalised at manufacturing 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 development expenditure will generate future economic benefits. Capitalised development costs com- prise all expenditure that can be attributed directly to the in years Factory and office buildings, distribution facilities and residential buildings Plant and machinery Other equipment, factory and office equipment development process, including development-related overheads. Capitalised development costs are amortised on a systematic basis, following the commencement of production, over the estimated product life which is gen- erally seven years. All items of property, plant and equipment are subject to operational use. Depreciable assets are recognised at acquisition or manufacturing cost less scheduled depreci- ation based on their 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. Components of items of property, plant and equipment with different useful lives are depre- ciated separately. Systematic depreciation is based on the following useful lives, applied throughout the BMW Group: 8 to 50 4 to 21 3 to 10 For machinery used in multiple-shift operations, depre- ciation 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 social costs. As a general rule, borrowing costs are not included in ac- quisition or manufacturing cost. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are recognised as a part of the cost of that asset in accordance with IAS 23 (Borrowing Costs). 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 pro- duced by the Group, as lessor. 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 instal- ments are recognised as financial liabilities. Where Group products are recognised by BMW Group leasing companies as leased assets under operating leases, they are measured at manufacturing 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. Residual value provisions are treated as write-downs and offset against leased products on the assets side of the balance sheet. 86 The recoverability of the carrying amount of intangible as- sets (including capitalised development costs and good- will) and property, plant and equipment is tested regularly for impairment in accordance with IAS 36 (Impairment of Assets) on the basis of cash generating units. This relates primarily to capitalised development costs and property, plant and equipment connected with vehicle projects. If there is no indication of impairment during the year, an an- nual impairment test is carried out at the year-end. An im- pairment loss is recognised 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. The value in use is determined on the basis of a present value computation. 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 amortised cost. Investments accounted for using the equity method are measured at the Group’s share of equity taking account of fair value adjustments on acquisition unless the invest- ment is impaired. Investments in non-consolidated group subsidiaries re- ported in other investments are measured at cost or, if lower, at their fair value. Participations are measured at their quoted market price or fair value. When, in individual cases, these values are not available or cannot be determined reliably, participations are measured at cost. Non-current marketable securities are measured accord- ing to the category of financial asset to which they are classified. No held-for-trading financial assets 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 transaction costs. Subsequent to initial recognition, available-for-sale and held-for-trading financial assets are measured at fair value. When market prices are not available, the fair value of available-for-sale financial assets is measured using appro- priate valuation techniques e. g. discounted cash flow analysis based on market information available at the bal- ance sheet date. Available-for-sale assets include financial assets, securities and investment fund shares. This category includes all non-derivative financial assets which are not classified as “loans and receivables” or “held-to-maturity investments” or as items measured “at fair value through profit and loss”. Loans and receivables which are not held for trading, held- to-maturity financial investments and all financial assets for which published price quotations in an active market are not available and whose fair value cannot be determined reliably, are measured, to the extent that they have a fixed term, at amortised cost, using the effective interest method. When the financial assets do not have a fixed term, they are measured at acquisition cost. In accordance with IAS 39 (Financial Instruments: Recog- nition and Measurement), assessments are made regularly as to whether there is any objective evidence that a finan- cial 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 previously recognised in equity is included in net profit or loss for the period. With the exception of derivative financial instruments, all receivables and other current assets relate to loans and receivables which are not held for trading and they are measured at amortised cost. Receivables with maturities of over one year which bear no or a lower-than-market in- terest rate are discounted. Appropriate impairment losses are recognised to take account of all identifiable risks. Receivables from sales financing comprise receivables from retail customer, dealer and lease financing. Impairment losses on receivables relating to financial services business are recognised using a uniform meth- odology that is applied throughout the Group and meets the requirements of IAS 39. This methodology results in the recognition of impairment losses on individual assets and groups of assets. If there is objective evidence of im- pairment, the BMW Group recognises impairment losses on the basis of individual assets. Within the retail cus- tomer business, the existence of overdue balances or the incidence of similar events in the past are examples of 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 87 Group Financial Statements such objective evidence. In the event of overdue receiv- ables, impairment losses are always recognised individually based on the length of period of the arrears. In the case of dealer financing receivables, the allocation of the dealer to a corresponding rating category is also deemed to repre- sent objective evidence of impairment. If there is no objec- tive evidence of impairment, impairment losses are recog- nised on financial assets using a portfolio approach based on similar groups of assets. Company-specific loss proba- bilities and loss ratios, derived from historical data, are used to measure impairment losses on similar groups of assets. nised initially directly in accumulated other equity. Any such gains or losses are recognised subsequently in the income statement when the hedged item (usually external revenue) is recognised in the income statement. 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 finan- cial instruments are recognised immediately in the income statement. The recognition of impairment losses on receivables re- lating to industrial business is also, as far as possible, based on the same process applied to financial services business. Impairment losses (write-downs and allowances) on re- ceivables are always recorded on separate accounts and derecognised at the same time the corresponding re- ceivables are derecognised. 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 order to reduce cur- rency, interest rate, fair value and market price risks from operating activities and related financing requirements. All derivative financial instruments (such as interest, currency and combined interest / currency swaps as well as forward currency and commodities 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 the income statement or directly in equity under accumulated other equity, depending on whether the transactions are classi- fied as fair value hedges or cash flow hedges. In the case of fair value hedges, the results of the fair value measure- ment of the derivative financial instruments and the related hedged items are recognised in the income statement. In the case of fair value changes in 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 instrument are recog- In accordance with IAS 12 (Income Taxes), deferred taxes are recognised on all temporary differences between the tax and accounting bases of assets and liabilities and on consolidation procedures. Deferred tax assets also include claims to future tax reductions which arise from the ex- pected usage of existing tax losses available for carryforward (where future usage is probable). Deferred taxes are com- puted using enacted or planned tax rates which are ex- pected to apply in the relevant national jurisdictions when the amounts are recovered. Inventories of raw materials, supplies and goods for resale are stated at the lower of average acquisition cost and net realisable value. Work in progress and finished goods are stated at the lower of average manufacturing cost and net realisable value. Manufacturing cost comprises all costs which are directly attributable to the manufacturing process and an appro- priate proportion of production-related overheads. This includes production-related depreciation and an appro- priate proportion of administrative and social costs. Borrowing costs are not included in the acquisition or manufacturing cost of inventories. Provisions for pensions and similar obligations are recog- nised using the projected unit credit method in accord- ance 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 in- dependent actuarial valuation which takes into account all relevant biometric factors. 88 Actuarial gains and losses are recognised, net of deferred tax, directly in equity. lease payments and disclosed under other financial lia- bilities. The expense related to the reversal of discounting on pen- sion 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 allocated to costs by function in the income statement. Other provisions are recognised when the BMW Group has an obligation to a third party, an outflow of resources 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 dis- counted to the present value of the expenditures expected to settle the obligation at the end of the reporting period. Financial liabilities are measured on first-time recogni- tion at cost, which is equivalent to the fair value of the con- sideration given. Transaction costs are included in this initial measurement. Subsequent to initial recognition, lia- bilities are, with the exception of derivative financial instru- ments, measured 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 The preparation of the Group Financial Statements in ac- cordance with IFRSs requires management to make cer- tain assumptions and estimates that affect the reported amounts of assets and liabilities, revenues and expenses and contingent liabilities. The assumptions and estimates relate principally to the groupwide determination of eco- nomic useful lives, the measurement of inventories, the recognition and measurement of provisions and the re- coverability of future tax benefits. All assumptions and estimates are based on factors known at the end of the reporting period. They are determined on the basis of the most likely outcome of future business developments. This includes the situation in the automotive sector and the general business environment. Estimates and under- lying assumptions are checked regularly. Actual amounts could differ from those assumptions and estimates if business conditions develop differently to the Group’s ex- pectations at the end of the reporting period. Where new information comes to light, differences are reflected in the income statement and assumptions changed accord- ingly. As a result of improvements in use of estimation to measure the manufacturing cost of inventories, an addi- tional expense of euro 174 million was recognised in 2009 in cost of sales. 7 New financial reporting rules (a) Financial reporting rules applied for the first time in the financial year 2009 The following Standards and Revised Standards were applied for the first time in the financial year 2009: Standard / Interpretation Date of mandatory application Endorsed by EU at 31. 12. 2009 Impact on BMW Group IFRS 1 and IAS 27 IFRS 2 IFRS 7 Acquisition cost of subsidiaries, joint and associated entities Share-based remuneration: Vesting conditions and cancellations Improved disclosures on financial instruments 1. 1. 2009 1. 1. 2009 1. 1. 2009 IAS 1 Presentation of Financial Statements 1. 1. 2009 Yes Yes Yes Yes None None Significant in principle: extended disclosures on the fair value measurement of financial instruments and on liquidity risks Significant in principle: Change in presentation of financial statements and extended notes disclosures 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 89 Group Financial Statements Standard / Interpretation Date of mandatory application Endorsed by EU at 31. 12. 2009 IAS 23 Borrowing Costs 1. 1. 2009 IAS 32 and IAS 1 Puttable Financial Instruments and Obligations Arising on Liquidation Improvements to IFRSs IFRIC 9 and IAS 39 Reassessment of Embedded Derivatives (in the case of reclassified financial instruments) IFRIC 13 IFRIC 15 IFRIC 16 Customer Loyalty Programmes Agreements for the Construction of Real Estate Hedges of a Net Investment in a Foreign Operation 1. 1. 2009 1. 1. 2009* 1. 1. 2009 1. 1. 2009 1. 1. 2010 1. 1. 2010 Yes Yes Yes Yes Yes Yes Yes * Unless otherwise specified, the amendments are effective for annual periods beginning on or after 1 January 2009. Impact on BMW Group Significant in principle: Increase in amount recognised in the balance sheet for qualifying asset Insignificant Insignificant None None None None (b) New financial reporting rules issued in the financial year 2009 The following Standards and Interpretations, which had been issued by the IASB by the end of the financial year 2009, but which were not mandatory for the reporting period, have not been applied by the BMW Group in the financial year 2009: Standard / Interpretation Date of issue by IASB Date of mandatory application Endorsed by EU at 31. 12. 2009 Expected impact on on BMW Group IFRS 1 IFRS 2 Additional Exceptions for First-time Adopters Share-based Payment: Accounting for Cash-settled Share-based Payments within the Group 23. 7. 2009 1. 1. 2010 18. 6. 2009 1. 1. 2010 IFRS 9 Financial instruments 12. 11. 2009 1. 1. 2013 IAS 24 IAS 32 Related Party Disclosures Classification of Subscription Rights IFRS for Small and Medium Sized-entities Improvements to IFRSs IFRIC 14 IFRIC 18 IFRIC 19 Upfront-payments in conjunction with Minimum Funding Requirements Transfers of Assets from Customers Extinguishing Financial Liabilities with Equity Instruments 4. 11. 2009 8. 10. 2009 9. 7. 2009 16. 4. 2009 26. 11. 2009 29. 1. 2009 26. 11. 2009 1. 1. 2011 1. 1. 2011 9. 7. 2009 1. 1. 2010* 1. 1. 2011 1. 1. 2010 1. 1. 2011 * Unless otherwise specified, the amendments are effective for annual periods beginning on or after 1 January 2010. No No No No Yes No No No Yes No None None Significant in principle: Classification and measurement of financial assets could change. Insignificant None None Insignificant Insignificant None None 90 BMW Group Notes to the Group Financial Statements Notes to the Income Statement 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 2009 2008 36,126 5,641 5,294 2,582 1,038 50,681 38,652 5,544 4,997 2,943 1,061 53,197 An analysis of revenues by operating segment and geographical region is shown in the segment information on page 133 et seq. 9 Cost of sales Cost of sales comprises: in euro million Manufacturing costs Research and development costs Warranty expenditure Cost of sales directly attributable to financial services Interest expense relating to financial services business Expense for risk provisions and write-downs for financial services business Other cost of sales Cost of sales * adjusted as a result of the change in presentation of research and development costs 2009 2008* 24,930 2,587 996 10,092 2,879 1,310 2,562 45,356 26,727 2,825 990 9,634 2,666 1,697 2,609 47,148 Cost of sales include euro 14,281 million (2008: euro 13,997 million) relating to financial services business. and reduced consumption-based taxes amounting to euro 27 million (2008: euro 23 million). Manufacturing costs do not contain any impairment losses on intangible assets and property, plant and equipment (2008: euro 3 million). Cost of sales is reduced by public- sector subsidies in the form of reduced taxes on assets 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 expenditure 2009 2008 2,587 –1,226 1,087 2,448 2,825 –1,185 1,224 2,864 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 91 Group Financial Statements 10 Sales and administrative costs Sales costs amounted to euro 3,647 million (2008: euro 4,047 million) and comprise mainly marketing, advertising and sales personnel costs. Administrative costs amounted to euro 1,393 million (2008: euro 1,322 million) and comprised expenses for adminis- tration not attributable to development, production or sales functions. 11 Other operating income and expenses in euro million Exchange gains Income from the reversal of provisions Income from the reversal of impairment losses and write-downs Gains on the disposal of assets Sundry operating income Other operating income Exchange losses Expense for additions to provisions Expenses for impairment losses and write-downs Sundry operating expenses Other operating expenses Other operating income and expenses 2009 2008 455 84 16 84 169 808 482 78 85 159 804 4 827 278 8 50 265 1,428 748 113 52 274 1,187 241 Other operating income includes public-sector grants of euro 14 million (2008: euro 32 million). 12 Result from equity accounted investments The profit from equity accounted investments of euro 36 million (2008: euro 26 million) includes the Group’s share of the results of the joint venture BMW Brilliance Automotive Ltd., Shenyang, and the investment in Cirquent GmbH, Munich. In the previous year, the result relating to the investment in Cirquent GmbH, Munich, was only recognised for the final three months of the year. 13 Net interest result in euro million Expected return on plan assets Other interest and similar income* thereof from subsidiaries: euro 6 million (2008: euro 10 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 Other interest and similar expenses* thereof to subsidiaries: euro – million (2008: euro 1 million) Interest and similar expenses Net interest result 2009 2008 379 477 856 – 532 –115 – 3 – 364 360 325 685 – 550 – 96 –123 –161 –1,014 – 930 –158 – 245 * Interest income and expenses relating to stand-alone derivatives are netted within the net interest result. Interest expenses include net interest expenses of euro 241 million (2008: net interest expenses of euro 102 million) relating to stand-alone derivatives. 92 14 Other financial result in euro million Income from investments thereof from subsidiaries: euro 4 million (2008: euro 4 million) Expense of assuming losses under profit and loss transfer agreements thereof from subsidiaries: euro – million (2008: euro – 1 million) Impairment losses on investments in subsidiaries Result on investments Losses and gains relating to financial instruments Sundry other financial result Other financial result 2009 2008 4 – – 3 1 245 245 246 4 –1 – 6 – 3 – 348 – 348 – 351 Sundry other financial result includes in particular gains on stand-alone interest rate derivatives (the fair values of which improved primarily due to changes in interest rate structures) and gains on commodities derivatives. 15 Income taxes Taxes on income comprise the following: in euro million Current tax expense Deferred tax expense Income taxes 2009 2008 338 –135 203 75 – 54 21 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 uniform corporation tax rate of 15.0 % applies in Germany. After taking account of the average multiplier rate (Hebesatz) of 410.0 % for municipal trade tax and the solidarity charge of 5.5 %, the overall tax rate for BMW companies in Germany is 30.2 % (2008: 30.2 %). The tax rates for companies out- side Germany range from 12.5 % (2008: 12.5 %) to 46.9 % (2008: 46.9 %). A valuation allowance is recognised on deferred tax assets when recoverability is uncertain. In de- termining the level of the valuation allowance, all positive and negative factors 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 taxes tax assets and liabilities by position at 31 December is shown on the next page: 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 93 Group Financial Statements 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 taxes Net Deferred tax assets Deferred tax liabilities 2009 2008 2009 2008 1 38 443 5 2,175 1,838 1,388 3,316 1,564 10,768 – 550 – 8,952 1,266 1 43 573 3 1,796 1,438 1,197 2,945 1,736 9,732 – 513 – 8,353 866 1,490 410 4,281 8 3,559 – 47 1,444 482 11,721 1,541 454 4,137 5 3,196 – 75 1,296 406 11,110 – – – 8,952 – 8,353 2,769 1,503 2,757 1,891 “Netting” relates to the offset of deferred tax assets and liabilities within individual separate entities or tax groups. Deferred tax assets on tax losses available for carryforward and on capital losses increased on a net basis. Tax losses available for carryforward, which for the most part can be carried forward without restriction, totalled euro 5.2 billion at the end of the reporting period (2008: euro 3.8 billion). A valuation allowance of euro 31 million (2008: euro 30 mil- lion) was recognised in 2009 on deferred tax assets relat- ing to tax losses available for carryforward. Capital losses in the United Kingdom increased in 2009 to euro 1.9 billion (2008: euro 1.7 billion) as a result of exchange rate factors. As in previous years, deferred tax assets recognised on these tax losses – amounting to euro 519 million at the end of the reporting period (2008: euro 483 million) – were fully written down since they can only be utilised against future capital gains. Capital losses are not connected to ongoing business operations. Deferred tax assets were recognised in 2009 for entities which recorded tax losses in either 2009 or 2008. These deferred tax assets exceed deferred tax liabilities by euro 618 million (2008: euro 185 million). De- ferred tax assets are recognised on the basis of manage- ment’s assessment of whether it is probable that the rele- vant entities will generate sufficient taxable profits against which deductible temporary differences can be offset. Deferred taxes recognised directly in equity amounted to euro 493 million (2008: euro 303 million), an increase of euro 190 million (2008: euro 188 million) compared to the previous year. The change also includes a euro 12 million (2008: euro 39 million) reduction in deferred taxes arising on foreign currency translation. Changes in net deferred tax assets and liabilities during the reporting period can be summarised as follows: in euro million Net deferred tax liabilities at 1 January Deferred tax expenses recognised through income statement Change in deferred taxes recognised directly in equity Exchange rate impact and other changes* Net deferred tax liabilities at 31 December * including impact of first-time consolidation and deconsolidation 2009 2008 1,891 –135 – 202 – 51 1,503 1,994 – 54 – 227 178 1,891 94 Deferred taxes are not recognised on retained profits of euro 15.9 billion (2008: euro 15.6 billion) of foreign sub- sidiaries, as it is intended to invest these profits to main- tain and expand the business volume of the relevant com- panies. A computation was not made of the potential impact of income taxes on the grounds of disproportionate expense. The tax returns of BMW Group entities are checked regu- larly by German and foreign tax authorities. Taking account of a variety of factors – including existing interpretations, commentaries and legal decisions taken relating to the various tax jurisdictions and the BMW Group’s past ex- perience – adequate provision has, as far as identifiable, been made for potential future tax obligations. The actual tax expense for the financial year 2009 of euro 203 million (2008: euro 21 million) is euro 79 million higher (2008: euro 85 million lower) than the expected tax ex- pense of euro 124 million (2008: euro 106 million) which would theoretically arise if the tax rate of 30.2 % (2008: 30.2 %), 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 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 2009 2008 124 38 68 – 26 –1 203 106 24 – 49 – 60 – 21 Non-deductible expenses include the impact of non-re- coverable withholding taxes. The item “Tax expense (+) / benefits (–) for prior periods” includes tax income resulting from rulings made by the European Court of Justice with regard to German tax legislation. Working in the opposite direction, tax expenses incurred for prior years in conjunc- tion with a tax field audit at the level of BMW AG, mostly relating to intragroup transfer pricing arrangements, also had an impact. The resulting threat of a double taxation charge is being avoided by initiating bilateral appeal pro- ceedings. Corresponding reimbursement claims at the level of foreign subsidiaries did not fully offset the tax ex- pense incurred due to differences in tax rates in the tax jurisdictions involved. The item “Other variances” includes the impact of the reduction in tax expense as a result of utilising tax losses brought forward for which deferred assets had not pre- viously been recognised and tax credits, also not pre- viously recognised, amounting to euro 3 million (2008: euro 4 million). Moreover, the tax expense was increased by euro 26 million (2008: reduced by euro 9 million) as a result of deferred taxes on previously unrecognised temporary differences. The tax income for the valuation allowance on deferred tax assets relating to tax losses available for carryforward and temporary differences and their reversal amounted to euro 10 million (2008: euro – million). 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 95 Group Financial Statements 16 Earnings per share Net profit for the year after minority interest euro million 203.6 324.3 Profit attributable to common stock Profit attributable to preferred stock euro million euro million 186.5 17.1 297.9 26.4 Average number of common stock shares in circulation Average number of preferred stock shares in circulation number 601,995,196 601,995,196 number 51,833,937 51,296,162 2009 2008 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 euro euro euro 0.31 0.33 0.30 0.32 0.49 0.51 0.30 0.32 Earnings per share of preferred stock are computed 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 Wages and salaries Social security, retirement and welfare costs thereof retirement costs: euro 744 million (2008: euro 811 million) Personnel costs 2009 2008 5,299 1,267 6,566 5,991 1,245 7,236 Personnel costs include euro 171 million (2008: euro 455 million) of expenditure incurred to reduce the size of the workforce. The average number of employees during the year was: Employees Apprentices and students gaining work experience 2009 2008 90,755 5,452 96,207 95,699 6,034 101,733 96 For information regarding the number of employees at the year-end, reference is made to page 27 et seq. in the Group Management Report. Wirtschaftsprüfungsgesellschaft and its affiliated entities, pursuant to § 314 (1) no. 9 HGB amounted to euro 11 mil- lion (2008: euro 7 million) and consists of the following: The fee expense recognised in the financial year 2009 for the auditors of the Group Financial Statements, KPMG AG in euro million Audit-related services Tax advisory services Other services 2009 2008 4 4 3 11 3 3 1 7 The various line items include expenses incurred by BMW AG and its domestic subsidiaries as well as in the United Kingdom, Switzerland, Spain, Belgium, and the Netherlands. The previous year’s figure only included fees for the BMW AG and its domestic subsidiaries and in the United Kingdom, Switzerland and Spain. 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 97 Group Financial Statements BMW Group Notes to the Group Financial Statements Notes to the Statement of Comprehensive Income 18 Disclosures relating to the statement of total comprehensive income Other comprehensive income for the period after tax comprises the following: in euro million 2009 2008 Available-for-sale securities Gains / losses in the period Amounts reclassified to income statement Financial instruments used for hedging purposes Gains / losses in the period Amounts reclassified to income statement Exchange differences on translating foreign operations Actuarial gains / losses relating to defined benefit pension and similar plans Deferred taxes relating to components of other comprehensive income Other comprehensive income for the period after tax Deferred taxes on components of other comprehensive income are as follows: in euro million Available-for-sale securities Financial instruments used for hedging purposes Exchange differences on translating foreign operations Actuarial gains / losses relating to defined benefit pension and similar plans Other comprehensive income 2009 Deferred taxes –1 –131 – Before tax 4 295 318 11 – 7 4 358 – 63 295 318 – 1,198 190 – 391 – 27 20 – 7 3 – 627 – 624 – 807 161 188 –1,089 2008 After tax Before tax Deferred taxes After tax 3 164 318 – 7 – 624 – 807 –11 231 – – 32 188 –18 – 393 – 807 129 –1,089 –1,198 – 581 322 190 – 876 161 – 391 –1,277 98 BMW Group Notes to the Group Financial Statements Notes to the Balance Sheet 19 Analysis of changes in Group tangible, intangible and investment assets 2009 in euro million 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 8,855 972 9,827 6,939 21,672 2,075 1,121 31,807 – 3 3 36 85 11 – 4 128 1,087 50 1,137 154 1,662 77 441 2,334 Leased products 25,407 3 8,646 Investments accounted for using the equity method 111 Investments in non-consolidated subsidiaries Participations Non-current marketable securities Other investments 375 8 23 406 – – – – – 41 38 – – 38 1 including gross balances brought forward for entities consolidated for the first time in the financial year 2 including assets under construction of euro 418 million Analysis of changes in Group tangible, intangible and investment assets 2008 in euro million 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 8,479 1,020 9,499 6,623 20,430 2,062 1,019 30,134 – –11 –11 –127 – 330 – 22 5 – 474 1,224 115 1,339 255 1,535 179 896 2,865 Leased products 20,860 – 22 12,376 Investments accounted for using the equity method 63 Investments in non-consolidated subsidiaries Participations Non-current marketable securities Other investments 261 8 21 290 – –1 – – 5 – 6 48 158 – 7 165 1 including gross balances brought forward for entities consolidated for the first time in the financial year 2 including impairment losses of euro 3 million 3 including assets under construction of euro 727 million 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 1. 1. 20091 Translation differences Additions Reclassi- fications Disposals 31. 12. 2009 1. 1. 20091 Translation differences Current year Disposals 31. 12. 2009 31. 12. 2009 31. 12. 2008 Acquisition and manufacturing cost Depreciation and amortisation Carrying amount – – – 287 676 23 – 986 – – – – – – – 1,247 166 1,413 76 1,380 130 6 1,592 8,695 859 9,554 7,340 22,715 2,056 566 32,677 9,639 24,417 5,883 – 5 3,689 3,123 6,444 17,973 19,524 Leased products 15 106 – 19 125 137 307 8 4 319 3,782 401 4,183 2,745 16,150 1,574 1 20,470 – 79 5 – 84 3,445 378 3,823 2,626 14,783 1,549 1 18,959 – 76 5 – 81 – – – 19 58 10 – 87 – – – – – – 2 – 2 – 4 – 58 – 214 –18 – – 290 – – – – – 1,226 114 1,340 213 1,885 162 – 2,260 – 3 – – 3 1,185 110 1,295 202 2,002 171 – 2,3752 6 – – 1,247 101 1,348 41 1,361 123 – 1,525 – – – – – 846 92 938 52 423 130 – 605 3 – – 3,761 414 4,175 2,936 16,732 1,623 1 21,292 – 82 5 – 87 3,782 394 4,176 2,718 16,148 1,572 1 20,439 – 79 5 – 84 5,073 Development costs 568 Other intangible assets 5,641 Intangible assets Land, titles to land, buildings, including buildings on 4,157 5,518 third party land Plant and machinery 497 Other facilities, factory and office equipment 1,120 Advance payments made and construction in progress 11,385 11,292 Property, plant and equipment 111 Investments accounted for using the equity method 296 Investments in non-consolidated subsidiaries 3 23 Participations Non-current marketable securities 322 Other investments 5,034 Development costs 636 Other intangible assets 5,670 Intangible assets Land, titles to land, buildings, including buildings on 3,945 5,635 third party land Plant and machinery 510 Other facilities, factory and office equipment 1,018 Advance payments made and construction in progress 11,292 11,108 Property, plant and equipment 4,934 445 5,379 4,404 5,983 433 5652 137 225 3 4 232 5,073 568 5,641 4,157 5,518 497 1,1203 111 296 3 23 322 – 13 13 266 471 32 – 782 –13 – – – – – – 848 175 1,023 142 440 182 17 781 8,855 962 9,817 6,875 21,666 2,069 1,121 31,731 7,807 25,407 3,847 28 3,975 1,967 5,883 19,524 17,013 Leased products – 43 – – 43 111 375 8 23 406 – – 63 Investments accounted for using the equity method 6 3 185 Investments in non-consolidated subsidiaries 3 21 Participations Non-current marketable securities 209 Other investments 1. 1. 20081 Translation differences Additions Reclassi- fications Disposals 31. 12. 2008 1. 1. 20081 Translation differences Current year Disposals 31. 12. 2008 31. 12. 2008 31. 12. 2007 Acquisition and manufacturing cost Depreciation and amortisation Carrying amount 99 Group Financial Statements 1. 1. 20091 Translation differences Additions Disposals 31. 12. 2009 Reclassi- fications 1. 1. 20091 Translation differences Current year Disposals 31. 12. 2009 31. 12. 2009 31. 12. 2008 Acquisition and manufacturing cost Depreciation and amortisation Carrying amount 3,782 401 4,183 2,745 16,150 1,574 1 20,470 – – – 19 58 10 – 87 1,226 114 1,340 213 1,885 162 – 2,260 1,247 101 1,348 41 1,361 123 – 1,525 3,761 414 4,175 2,936 16,732 1,623 1 21,292 4,934 445 5,379 4,404 5,983 433 5652 5,073 Development costs 568 Other intangible assets 5,641 Intangible assets 4,157 5,518 Land, titles to land, buildings, including buildings on third party land Plant and machinery 497 Other facilities, factory and office equipment 1,120 Advance payments made and construction in progress 11,385 11,292 Property, plant and equipment Leased products 25,407 3 8,646 9,639 24,417 5,883 – 5 3,689 3,123 6,444 17,973 19,524 Leased products – 79 5 – 84 – – – – – – 3 – – 3 – – – – – – 82 5 – 87 137 225 3 4 232 111 Investments accounted for using the equity method 296 Investments in non-consolidated subsidiaries 3 23 Participations Non-current marketable securities 322 Other investments 1. 1. 20081 Translation differences Additions Disposals 31. 12. 2008 Reclassi- fications 1. 1. 20081 Translation differences Current year Disposals 31. 12. 2008 31. 12. 2008 31. 12. 2007 Acquisition and manufacturing cost Depreciation and amortisation Carrying amount 3,445 378 3,823 2,626 14,783 1,549 1 18,959 – 2 – 2 – 4 – 58 – 214 –18 – – 290 1,185 110 1,295 202 2,002 171 – 2,3752 846 92 938 52 423 130 – 605 3,782 394 4,176 2,718 16,148 1,572 1 20,439 5,073 568 5,641 4,157 5,518 497 1,1203 5,034 Development costs 636 Other intangible assets 5,670 Intangible assets 3,945 5,635 Land, titles to land, buildings, including buildings on third party land Plant and machinery 510 Other facilities, factory and office equipment 1,018 Advance payments made and construction in progress 11,292 11,108 Property, plant and equipment Leased products 20,860 – 22 12,376 7,807 25,407 3,847 28 3,975 1,967 5,883 19,524 17,013 Leased products – 76 5 – 81 – – – – – – – 6 – – 3 – – 6 3 – 79 5 – 84 111 296 3 23 322 63 Investments accounted for using the equity method 185 Investments in non-consolidated subsidiaries 3 21 Participations Non-current marketable securities 209 Other investments in euro million Development costs Other intangible assets Intangible assets third party land Plant and machinery Land, titles to land, buildings, including buildings on Other facilities, factory and office equipment Advance payments made and construction in progress Property, plant and equipment 8,855 972 9,827 6,939 21,672 2,075 1,121 31,807 375 8 23 406 8,479 1,020 9,499 6,623 20,430 2,062 1,019 30,134 261 8 21 290 – 3 3 36 85 11 – 4 128 – – – – – – –11 –11 –127 – 330 – 22 5 – 474 – –1 – – 5 – 6 1,087 50 1,137 154 1,662 77 441 2,334 41 38 – – 38 1,224 115 1,339 255 1,535 179 896 2,865 48 158 – 7 165 – – – 287 676 23 – 986 – – – – – – – – 13 13 266 471 32 – 782 –13 – – – – – – 1,247 166 1,413 76 1,380 130 6 1,592 15 106 – 19 125 848 175 1,023 142 440 182 17 781 – 43 – – 43 8,695 859 9,554 7,340 22,715 2,056 566 32,677 137 307 8 4 319 8,855 962 9,817 6,875 21,666 2,069 1,121 31,731 111 375 8 23 406 Investments accounted for using the equity method 111 Investments in non-consolidated subsidiaries Participations Non-current marketable securities Other investments 1 including gross balances brought forward for entities consolidated for the first time in the financial year 2 including assets under construction of euro 418 million in euro million Development costs Other intangible assets Intangible assets third party land Plant and machinery Land, titles to land, buildings, including buildings on Other facilities, factory and office equipment Advance payments made and construction in progress Property, plant and equipment Investments accounted for using the equity method 63 Investments in non-consolidated subsidiaries Participations Non-current marketable securities Other investments 1 including gross balances brought forward for entities consolidated for the first time in the financial year 2 including impairment losses of euro 3 million 3 including assets under construction of euro 727 million 100 20 Intangible assets Intangible assets mainly comprise capitalised develop- ment costs on vehicle and engine projects as well as sub- sidies for tool costs, licences, purchased development projects and software. Amortisation on intangible assets is presented in cost of sales, administrative costs and other operating expenses. In addition, intangible assets include a brand-name right amounting to euro 40 million (2008: euro 37 million) and goodwill with an indefinite useful life of euro 111 million, unchanged from the previous year. The latter comprises goodwill arising on the acquisition of DEKRA SüdLeasing Services GmbH, Stuttgart, and its subsidiaries and on the acquisition of SimeLease (Malaysia) Sdn Bhd, Kuala Lumpur, and its subsidiary SimeCredit (Malaysia) Sdn Bhd, Kuala Lumpur. 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 in- tangible assets. As in the previous year, there were no reversals of impair- ment losses on intangible assets. No borrowing costs were recognised as a cost component of intangible assets during the year under report. Changes in intangible assets during the year are shown in the analysis of changes in Group tangible, intangible and investment assets on page 98 et seq. 21 Property, plant and equipment No borrowing costs were recognised as a cost compo- nent of property, plant and equipment during the year un- der report. A break-down of the different classes of property, plant and equipment disclosed in the balance sheet and changes during the year are shown in the analysis of changes in Group tangible, intangible and investment assets on page 98 et seq. Property, plant and equipment include a total of euro 57 mil- lion (2008: euro 68 million) relating to operational buildings used by BMW AG as well as leased plant, machinery and other facilities, factory and office equipment used primarily at the Oxford and Hams Hall production plants. Due to the nature of the lease arrangements (finance leases), economic ownership of these assets is attributable to the BMW Group. The leases for buildings, with a carrying amount of euro 48 million (2008: euro 50 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 facilities, factory and office equipment at the Oxford plant, with a carrying amount of euro 4 million (2008: euro 6 million) at 31 December 2009, run for periods up to 2011 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 machinery and other facilities, factory and office equipment at the Hams Hall production plant, with a carrying amount of euro 1 million (2008: euro 10 million) 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. 2009 31. 12. 2008 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 75 166 117 358 7 25 36 68 68 141 81 290 67 202 157 426 9 27 49 85 58 175 108 341 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 101 Group Financial Statements 22 Leased products The BMW Group, as lessor, leases out assets (predomi- nantly own products) as part of its financial services busi- ness. Minimum lease payments of euro 7,686 million (2008: euro 8,515 million) from non-cancellable operating leases fall due as follows: in euro million within one year between one and five years later than five years Leased products 31. 12. 2009 31. 12. 2008 4,257 3,428 1 7,686 4,589 3,925 1 8,515 Contingent rents of euro 39 million (2008: euro 30 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 tangible, intangible and investment assets on page 98 et seq. 23 Investments accounted for using the equity method and other investments Investments accounted for using the equity method comprise the Group’s interests in the joint venture BMW Brilliance Automotive Ltd., Shenyang, and the invest- ment in Cirquent GmbH, Munich. The disclosures relating to the previous year’s income statement include the in- come and expenses of Cirquent GmbH, Munich, after deconsolidation of the Cirquent Group. The aggregated interests of the Group are as follows: in euro million 31. 12. 2009 31. 12. 2008 Disclosures relating to the income statement Income Expenses Disclosures relating to the balance sheet Non-current assets Current assets Equity Non-current liabilities Current liabilities 835 797 222 287 164 15 330 627 603 139 234 126 31 216 Other investments relate primarily to investments in non- consolidated subsidiaries, participations and non-current marketable securities. New Delhi, and BMW Polska Sp. z o.o., Warsaw, as well as the sale of BMW Sauber AG, Hinwil, BMW Sauber Engi- neering AG, Hinwil, and BMW Sauber Holding AG, Vaduz. Additions to investments in subsidiaries relate mainly to the foundation of BMW Automotive Finance (China) Co., Ltd., Beijing, and BMW Financial Services Singapore Pte Ltd., Singapore. Disposals of investments in subsidiaries arise as a result of the first-time consolidation of BMW India Private Limited, Impairment losses on investments in subsidiaries relate to Westchester BMW, Inc., Wilmington, Del. A break-down of the different classes of other investments disclosed in the balance sheet and changes during the year are shown in the analysis of changes in Group tangible, intangible and investment assets on page 98 et seq. 102 24 Receivables from sales financing Receivables from sales financing, totalling euro 40,594 mil- lion (2008: euro 38,063 million), comprise euro 31,971 mil- lion (2008: euro 29,470 million) for credit financing for retail customers and dealers and euro 8,623 million (2008: euro 8,593 million) for finance leases. Finance leases are ana- lysed as follows: in euro million 31. 12. 2009 31. 12. 2008 Gross investment in finance leases 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 Unrealised interest income 3,477 6,269 28 9,774 3,056 5,542 25 8,623 1,151 3,315 6,357 29 9,701 2,932 5,634 27 8,593 1,108 Contingent rents recognised as income (generally relating to the distance driven) amounted to euro 3 million (2008: euro 5 million). Write-downs on finance leases amounting to euro 58 million (2008: euro 52 million) were measured and recognised on the basis of specific credit risks. Un- guaranteed residual values which will fall to the benefit of the lessor amounted to euro 3 million (2008: euro 1 mil- lion). Receivables from sales financing include euro 23,478 mil- lion (2008: euro 22,192 million) with a remaining term of more than one year. Allowance for impairment and credit risk in euro million Gross carrying amount Allowance for impairment Net carrying amount 31. 12. 2009 31. 12. 2008 41,950 –1,356 40,594 39,116 –1,053 38,063 Allowances for impairment on receivables from sales financing developed as following during the year under report: 2009 in euro million Balance at 1 January Allocated / reversed Utilised Exchange rate impact and other changes Balance at 31 December 2008 in euro million Balance at 1 January* Allocated / reversed Utilised Exchange rate impact and other changes Balance at 31 December * including entities consolidated for the first time during the financial year Allowance for impairment recognised on a group basis specific item basis 938 682 – 444 19 1,195 115 50 –10 6 161 Allowance for impairment recognised on a group basis specific item basis 672 543 – 262 –15 938 125 10 –14 – 6 115 Total 1,053 732 – 454 25 1,356 Total 797 553 – 276 – 21 1,053 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 103 Group Financial Statements At the end of the reporting period, impairment allowances of euro 161 million (2008: euro 115 million) were recognised on a group basis on gross receivables from sales financing totalling euro 19,509 million (2008: euro 17,274 million). Impairment allowances of euro 1,195 million (2008: euro 938 million) were recognised at 31 December 2009 on a specific item basis on gross receivables from sales financ- ing totalling euro 10,581 million (2008: euro 7,755 million). The estimated fair value of collateral received for receiv- ables on which impairment losses were recognised totalled euro 15,600 million (2008: euro 14,570 million) at the end of the reporting period. This collateral related primarily to vehicles. The carrying amount of assets held as collateral and taken back as a result of payment default amounted to euro 40 million (2008: euro 44 million). Receivables from sales financing which were not overdue at the end of the reporting period amounted to euro 11,860 million (2008: euro 14,087 million). No impairment losses were recognised for these balances. As at the end of the previous year, there were no receiv- ables from sales financing at the balance sheet date which have been renegotiated and which were otherwise over- due or otherwise required recognition of an impairment loss. 25 Financial assets Financial assets comprise: in euro million Derivative instruments Marketable securities and investment funds Loans to third parties Credit card receivables Other Financial assets thereof non-current thereof current 31. 12. 2009 31. 12. 2008 2,433 1,648 23 266 364 4,734 1,519 3,215 3,449 653 13 253 746 5,114 1,808 3,306 The change in the line item “Derivative instruments” relates primarily to the expiry in 2009 of currency derivatives with positive fair values. The increase in marketable securities and investment funds resulted from investments made in conjunction with liquidity management. were transferred in the past to BMW Trust e. V., Munich, as part of a Contractual Trust Arrangement (CTA) and are there- fore netted against the corresponding settlement arrears for pre-retirement part-time work arrangements. The amount by which the value of the investment funds exceeds these obligations amounting to euro 28 million (2008: euro 35 million) is reported under other financial assets. Investment funds are held to secure obligations relating to pre-retirement part-time work arrangements. These funds Marketable securities and investment funds relate to avail- able-for-sale financial assets and comprise: in euro million Stocks Fixed income securities Sundry marketable securities Marketable securities and investment funds 31. 12. 2009 31. 12. 2008 – 1,647 1 1,648 32 620 1 653 104 The contracted maturities of debt securities are as follows: in euro million Fixed income securities due within three months due later than three months Sundry marketable securities due within three months due later than three months Debt securities Allowance for impairment and credit risk Receivables relating to credit card business comprise the following: in euro million Gross carrying amount Allowance for impairment Net carrying amount 31. 12. 2009 31. 12. 2008 302 1,345 – 1 1,648 – 620 1 – 621 31. 12. 2009 31. 12. 2008 283 –17 266 268 –15 253 Allowances for impairment losses on receivables relating to credit card business developed as following during the year under report: 2009 in euro million Balance at 1 January Allocated / reversed Utilised Exchange rate impact and other changes Balance at 31 December 2008 in euro million Balance at 1 January Allocated / reversed Utilised Exchange rate impact and other changes Balance at 31 December Allowance for impairment recognised on a group basis specific item basis 15 35 – 32 –1 17 – – – – – Allowance for impairment recognised on a group basis specific item basis 1 28 –15 1 15 6 – 5 –1 – – Total 15 35 – 32 – 1 17 Total 7 23 – 16 1 15 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 105 Group Financial Statements 26 Income tax assets Income tax assets can be analysed as follows: 31 December 2009 in euro million Deferred tax Current tax Income tax assets 31 December 2008 in euro million Deferred tax Current tax Income tax assets 27 Other assets Other assets comprise: in euro million Other taxes Receivables from subsidiaries Receivables from other companies in which an investment is held Prepayments Collateral receivables Sundry other assets Other assets thereof non-current thereof current Maturity within one year Maturity later than one year – 452 452 1,266 498 1,764 Maturity within one year Maturity later than one year – 498 498 866 104 970 Total 1,266 950 2,216 Total 866 602 1,468 31. 12. 2009 31. 12. 2008 445 485 171 898 507 618 373 425 103 848 291 462 3,124 2,502 640 2,484 660 1,842 Receivables from subsidiaries include trade receivables of euro 70 million (2008: euro 139 million) and financial receivables of euro 415 million (2008: euro 286 million). They include euro 145 million (2008: euro 43 million) with a remaining term of more than one year. Prepayments of euro 898 million (2008: euro 848 million) relate mainly to prepaid interest, development costs not eligible for capitalisation as non-current assets, insurance premiums and rent. Prepayments of euro 568 million (2008: euro 483 million) have a maturity of less than one year. Receivables from other companies in which an investment is held are all due within one year. Collateral receivables comprise mainly customary collateral arising on the sale of receivables. 106 28 Inventories Inventories comprise the following: in euro million 31. 12. 2009 31. 12. 2008 Raw materials and supplies Work in progress, unbilled contracts Finished goods and goods for resale Inventories 536 542 5,477 6,555 596 803 5,891 7,290 At 31 December 2009, inventories measured at their net realisable value amounted to euro 355 million (2008: euro 426 million) and are included in total inventories of euro 6,555 million (2008: euro 7,290 million). Write-downs to net realisable value amounting to euro 58 million (2008: euro 47 million) were recognised in 2009. 29 Trade receivables Trade receivables amounting in total to euro 1,857 million (2008: euro 2,305 million) include euro 40 million due later than one year (2008: euro 40 million). Allowance for impairment and credit risk in euro million Gross carrying amount Allowance for impairment Net carrying amount 31. 12. 2009 31. 12. 2008 1,942 – 85 1,857 2,373 – 68 2,305 Allowances on trade receivables developed as following during the year under report: 2009 in euro million Balance at 1 January* Allocated / reversed Utilised Exchange rate impact and other changes Balance at 31 December * including entities consolidated for the first time during the financial year 2008 in euro million Balance at 1 January Allocated / reversed Utilised Exchange rate impact and other changes Balance at 31 December Allowance for impairment recognised on a group basis specific item basis 62 31 –17 – 76 7 3 – 2 1 9 Allowance for impairment recognised on a group basis specific item basis 38 32 – 8 – 62 7 2 – 2 –1 6 Total 69 34 –19 1 85 Total 45 34 –10 –1 68 As at the end of the previous year, there were no trade re- ceivables at the balance sheet date which have been rene- gotiated and which were otherwise overdue or otherwise required recognition of an impairment loss. 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 107 Group Financial Statements Some trade receivables were overdue for which an impairment loss was not recognised. Overdue balances are analysed into the following time windows: in euro million 1 – 30 days overdue 31 – 60 days overdue 61 – 90 days overdue 91 – 120 days overdue More than 120 days overdue 31. 12. 2009 31. 12. 2008 149 49 26 28 69 321 301 81 3 6 43 434 Receivables that are overdue by between 1 and 30 days do not normally result in bad debt losses since the overdue nature of the receivables is primarily attributable to the timing of receipts around the month-end. In the case of trade receivables, collateral is generally held in the form of vehicles documents and bank guarantees so that the risk of bad debt loss is extremely low. 30 Cash and cash equivalents Cash and cash equivalents of euro 7,767 million (2008: euro 7,454 million) comprise cash on hand and at bank, all with a maturity of under three months. 31 Equity Number of shares issued At 31 December 2009, 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 52,665,362 shares with a par value of one euro. 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 additional dividend of euro 0.02 per share. In 2009, 831,425 shares of non-voting preferred stock were sold to employees at a reduced price of euro 15.56 per share in conjunction with an employee share scheme. These shares are entitled to receive dividends with effect from the financial year 2010. 362,225 treasury shares held at the end of the previous year were used in this context: the remaining 905 treasury shares held at the end of the previous year were sold on the capital market. BMW AG did not hold any treasury shares at 31 December 2009. The Authorised Capital created at the Annual General Meeting on 14 May 2009 amounting to euro 5 million in total was used to issue a further 469,200 shares of pre- ferred stock to employees. As a result, BMW AG’s issued share capital increased by euro 0.5 million. The Authorised Capital can be issued up to 13 May 2014 and amounted to euro 4.5 million at the end of the reporting period. The effect of applying IFRS 2 (Share-Based Payments) to the employee share scheme is not material for the Group. At the Annual General Meeting of BMW AG on 14 May 2009, the shareholders again authorised the Board of Management 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 those shares from circulation without any further resolution by the Annual General Meeting. At the same time, the authori- sation from 8 May 2008 to acquire treasury shares was rescinded. The authorisation from 14 May 2009 is valid until 12 November 2010. The authorisation was not exer- cised in 2009. It has not yet been decided whether or the extent to which the authorisation will be used in the future. Capital reserves Capital reserves include premiums arising from the issue of shares and totalled euro 1,921 million (2008: euro 1,911 mil- lion). The change related to the share capital increase fol- lowing the issue of shares of preferred stock to employees. Revenues reserves Revenue reserves comprise the post-acquisition and non- distributed earnings of consolidated companies. In addi- tion, revenue reserves include both positive and negative goodwill arising on the consolidation of Group companies prior to 31 December 1994. 108 Revenue reserves increased during the year to euro 20,426 million. The figure was increased in 2009 by the amount of the net profit attributable to shareholders of BMW AG (euro 204 million) and was reduced by the pay- ment of the dividend for 2008 (euro 197 million). Capital management disclosures The BMW Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in the long-term and to provide an adequate return to shareholders. The unappropriated profit of BMW AG of euro 197 million for 2009 will be proposed to the Annual General Meeting for distribution. The proposed distribution must be au- thorised by the shareholders at the Annual General Meeting of BMW AG. It is therefore not recognised as a liability in the Group Financial Statements. Accumulated other equity Accumulated other equity consists of all amounts recog- nised directly in equity resulting from the translation of the financial statements of foreign subsidiaries, the effects of recognising changes in the fair value of derivative finan- cial instruments and marketable securities directly in equity, and actuarial gains and losses relating to defined benefit pension plans and similar obligations. It also in- cludes deferred taxes on items recognised directly in equity. Minority interests Equity attributable to minority interests amounted to euro 13 million (2008: euro 8 million). This includes a minority interest of euro 6 million (2008: euro 6 million) in the results for the year. The BMW Group manages the capital structure and makes adjustments to it in the light of changes in eco- nomic conditions and the risk profile of the underlying assets. In order to manage its capital structure, the BMW Group uses various instruments including the amount of dividends paid to shareholders and share buy-backs. The BMW Group manages the structure of debt capital on the basis of a target debt ratio. An important aspect of the selection of financial instruments is the objective to achieve matching maturities for the Group’s financing re- quirements. In order to reduce non-systematic risk, the BMW Group uses a variety of financial instruments available on the world’s capital markets to achieve optimal diversi- fication. The capital structure at the end of the reporting period was as follows: in euro million 31. 12. 2009 31. 12. 2008 Equity attributable to shareholders of BMW AG Proportion of total capital Non-current financial liabilities Current financial liabilities Total financial liabilities Proportion of total capital Total capital 19,902 24.5 % 34,391 26,934 61,325 75.5 % 81,227 20,275 25.1 % 30,497 29,887 60,384 74.9 % 80,659 Equity attributable to shareholders of BMW AG decreased during the financial year by 0.6 percentage points, mainly as a result of changes in accumulated actuarial gains and losses on pension obligations recognised directly in equity. The increase in the proportion of financial liabilities mainly reflects higher financing requirements for financial services business. The BMW AG is officially rated by the rating agencies, Standard & Poor’s (S & P) and Moody’s. In previous years the BMW AG benefited from first-class short-term ratings issued by Moody’s and S & P. In 2009, the BMW AG was not fully able to avoid the impact of adverse developments in the automotive sector caused by the financial and eco- nomic crisis. 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 109 Group Financial Statements On 5 November 2008 S & P issued a long-term rating of A with stable outlook (previously A+ with stable outlook) and changed the outlook on 27 February 2009 from “stable” to “negative”. In the face of unfavourable micro- economic conditions and persisting doubts about whether the principal markets would recover quickly, BMW AG’s long-term rating was downgraded on 13 No- vember 2009 to A– with negative outlook. In conjunction with this downgrade, S & P also changed its short-term rat- ing to A-2. After putting BMW AG’s rating to “under review for possi- ble downgrade” on 18 February 2009, Moody’s changed its long-term rating on 3 April 2009 to A3 with negative outlook (previously A2 with stable outlook) and downgraded BMW AG’s short-term rating from P-1 to P-2. Non-current financial liabilities Current financial liabilities Outlook Moody’s Standard & Poor’s A3 P-2 negative A – A -2 negative With ratings of A– (S & P) and A3 (Moody’s), the agencies continued to confirm BMW AG’s solid creditworthiness for liabilities with a term of more than one year. The BMW Group continues to have access to competitive re- financing conditions for short-term debt. 32 Pension provisions Pension provisions are recognised as a result of commit- ments to pay future vested pension benefits and current pensions to present and former employees of the BMW Group and their dependants. Depending on the legal, eco- nomic and tax circumstances prevailing in each country, various pension plans are used, based generally on the length of service, final salary and remuneration structure of the employees involved. Due to similarity of nature, the obligations of BMW Group companies in the USA and of BMW (South Africa) (Pty) Ltd., Pretoria, for post-employ- ment medical care are also disclosed as pension provisions. The provision for these pension-like obligations amounts to euro 70 million (2008: euro 66 million) and is measured, similar to pension obligations, in accordance with IAS 19. In the case of post-employment medical care, it is assumed that the 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 2009 was euro 7 mil- lion (2008: euro 7 million). contribution plans, an enterprise pays 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 amounted to euro 387 million (2008: euro 412 million). This includes employer contributions paid to state pension insurance schemes amounting to euro 356 million (2008: euro 376 million). Under defined benefit plans, the enterprise is required to pay the benefits granted to present and past employees. Defined benefit plans may be funded or unfunded, the latter sometimes covered by accounting provisions. Most of the pension commitments of the BMW Group in Ger- many relate to BMW AG. In 2009 BMW AG transferred a further portion of its pension obligations to BMW Trust e. V., Munich, in conjunction with a Contractual Trust Arrange- ment (CTA). Obligations not covered by assets held by the fund are covered by pension provisions. The main other countries with funded plans were the UK, the USA, Switzer- land, the Netherlands, Belgium and Japan. Post-employment benefit plans are classified as either de- fined contribution or defined benefit plans. Under defined Pension obligations are computed on an actuarial basis at the level of the defined benefit obligation. This computation 110 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: 31 December in % Discount rate Salary level trend Pension level trend Germany 2009 2008 United Kingdom 2009 2008 Other 2009 2008 5.30 3.25 2.30 6.00 3.25 2.25 5.40 4.00 3.38 6.01 4.01 3.11 5.54 3.45 1.96 5.44 3.58 1.86 The salary level trend refers to the expected rate of salary increase which is estimated annually depending on in- flation and career development of employees within the Group. In the case of externally funded plans, the defined benefit obligation is offset against plan assets measured at their fair value. Where the plan assets exceed the pension obli- gations and the enterprise has a right of reimbursement or a right to reduce future contributions, the surplus amount is recognised as an asset in accordance with IAS 19 and presented within other financial assets. In the case of ex- ternally funded plans, a liability is recognised under pen- sion provisions where the benefit obligation exceeds fund assets. Actuarial gains or losses may result from increases or de- creases 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 ex- pected return on plan assets. Past service cost arises where a BMW Group company introduces a defined bene- fit plan or changes the benefits payable under an existing plan. Based on the measurement principles contained in IAS 19, the following funding status applies to the Group’s pen- sion plans: 31 December in euro million Germany United Kingdom Other Total 2009 2008 2009 2008 2009 2008 2009 2008 Present value of pension benefits covered by accounting provisions 3 31 – – 70 131 73 162 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 Present value of funded pension benefits 4,616 3,817 5,743 4,403 Defined benefit obligations Fair value of plan assets Net obligation Past service cost not yet recognised Amount not recognised as an asset because of the limit in IAS 19.58 4,619 3,848 5,743 4,403 3,144 1,155 4,487 4,059 1,475 2,693 1,256 – – – – – 3 Balance sheet amounts at 31 December 1,475 2,693 1,259 thereof pension provision thereof pension assets (–) 1,475 2,693 1,259 – – – 499 569 346 223 4 7 406 10,858 8,626 537 10,931 8,788 277 260 7,977 5,491 2,954 3,297 4 9 4 4 10 10 234 273 2,968 3,311 238 – 4 276 2,972 3,314 – 3 – 4 – 3 344 – 1 345 345 – 111 Group Financial Statements Pension provisions relating to pension plans in other coun- tries amounted to euro 238 million (2008: euro 276 mil- lion). This includes euro 168 million (2008: euro 145 million) relating to externally funded plans. ticular the gain in value of the British pound, had a signifi- cant impact on the present value of pension obligations and fund assets. The change in the defined benefit obligations was attribut- able mainly to changes in the discount rates used in the actuarial computation. Changes in exchange rates, in par- The changes in the pension provision and the pension asset (reimbursement claims or right to reduce future con- tributions to the funds) as disclosed in the balance sheet can be derived as follows: in euro million 2009 2008 2009 2008 2009 2008 2009 2008 Germany United Kingdom Other Total Balance sheet amounts at 1 January 2,693 3,849 345 647 273 127 3,311 4,623 Deconsolidation effects Expense from pension obligations – 237 – 4 293 – 77 4 76 – 43 – 30 – 357 – 399 Pension payments or transfers to external funds –1,746 –1,471 – 99 – 98 – 58 –14 –1,903 –1,583 Actuarial gains (–) and losses (+) on defined benefit obligations 522 – 271 946 – 647 Actuarial gains (–) and losses (+) on plan assets – 234 278 – 40 Employee contributions Translation differences and other changes 2 1 20 –1 – 30 486 – –123 Balance sheet amounts at 31 December 1,475 2,693 1,259 345 thereof pension provision thereof pension assets (–) 1,475 2,693 1,259 – – – 345 – – 4 –15 – – 5 234 238 – 4 –1 104 – 27 1,464 – 919 – 289 2 26 868 20 – 97 273 2,968 3,311 276 2,972 3,314 – 3 – 4 – 3 The defined benefit plans of the BMW Group give rise to an expense from pension obligations in the financial year 2009 of euro 357 million (2008: euro 399 million), com- prising the following components: in euro million Current service cost Expense from reversing the discounting of pension obligations Past service cost Expected return on plan assets (–) Expense from pension obligations Germany United Kingdom Other Total 2009 2008 2009 2008 2009 2008 2009 2008 103 228 – – 94 237 117 209 –1 52 275 7 59 316 4 – 32 – 257 – 303 293 77 76 33 29 – –19 43 31 25 –1 188 532 7 207 550 2 – 25 – 370 – 360 30 357 399 The expense from reversing the discounting of pension obligations and the income from the expected return on plan assets are reported as part of the financial result. All other components of pension expense are included in the relevant income statement under costs by function. Depending on the risk structure of the pension obligations involved, pension plan assets are invested in various in- vestment classes, the most predominant one being bonds. Other equity instruments, property and alternative invest- ments are also considered. The expected rate of return is derived on the basis of the specific investment strategy applied to each individual pension fund. This is determined on the basis of the rates of return from the individual in- vestment classes taking account of costs and unplanned risks. 112 This approach resulted in the following expected rates of return on plan assets (disclosed on the basis of weighted averages). in % Germany 2009 2008 United Kingdom 2009 2008 Other 2009 2008 Expected rate of return on plan assets 6.12 5.43 6.03 5.93 6.55 6.99 Compared to the expected return of euro 370 million (2008: euro 360 million), fund assets actually increased in the financial year 2009 by euro 659 million (2008: decrease in fund assets of euro 508 million). This gave rise to actuarial gains on fund assets of euro 289 million (2008: actuarial losses of euro 868 million). The actuarial gains on fund assets compare with actuarial losses of euro 1,464 million (2008: actuarial gains of euro 919 million) on benefit obli- gations. These actuarial losses were attributable primarily to lower discount rates and higher inflation rate expectations in Germany and the United Kingdom. The level of the pension obligations differs depending 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 arrange- ments 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: Germany in euro million Defined benefit obligation Plan assets Net obligation 2009 2008 2009 2008 2009 2008 1 January Deconsolidation effects Expense from pension obligations and expected return on plan assets Payments to external funds Employee contributions (deferred remuneration retirement scheme) Payments on account and pension payments Actuarial gains (–) and losses (+) Translation differences and other changes 3,848 3,849 –1,155 – – 4 – – – 2,693 3,849 – – 4 331 – 27 –111 325 – 49 – 99 522 – 271 2 –1 – 94 – 32 237 293 –1,642 –1,375 –1,642 –1,375 – 25 – 29 7 – 234 –1 3 278 – 2 –104 288 1 20 – 96 7 –1 31 December 4,619 3,848 – 3,144 –1,155 1,475 2,693 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 United Kingdom in euro million 1 January Deconsolidation effects Expense from pension obligations and expected return on plan assets Payments to external funds Employee contributions Payments on account and pension payments Actuarial gains (–) and losses (+) Translation differences and other changes Defined benefit obligation Plan assets Net obligation 2009 2008 2009 2008 2009 2008 4,403 6,327 – 4,059 – 5,686 – – 24 – 28 334 379 – 257 – 303 – 1 – 13 – 264 946 323 – 285 – 647 –1,360 – 99 –1 264 – 40 – 98 –13 285 486 – 295 1,242 344 – 641 4 77 76 – 99 – 98 – – 906 28 1,256 – – –161 –118 344 31 December 5,743 4,403 – 4,487 – 4,059 113 Group Financial Statements Other in euro million 1 January Effects of first-time consolidation Deconsolidation effects Expense from pension obligations and expected return on plan assets Payments to external funds Employee contributions Payments on account and pension payments Actuarial gains (–) and losses (+) Translation differences and other changes 31 December Defined benefit obligation Plan assets Net obligation 2009 2008 2009 2008 2009 2008 537 – – 62 – 2 –19 – 4 – 9 569 455 1 –1 55 – 1 –17 –1 44 537 – 277 – 343 – – –19 – 54 – 2 15 –15 6 – – – 25 – 8 –1 11 104 –15 – 346 – 277 260 – – 43 – 54 – – 4 –19 – 3 223 112 1 –1 30 – 8 – – 6 103 29 260 Plan assets in Germany, the United Kingdom and other countries comprised the following: Components of plan assets in euro million 2009 2008 2009 2008 2009 2008 2009 2008 Germany United Kingdom Other countries Total Equity instruments Debt securities Real estate Other 31 December 1,020 1,835 – 289 379 641 – 135 823 642 2,951 2,620 315 398 278 519 3,144 1,155 4,487 4,059 165 142 20 19 346 151 101 7 18 277 2,008 4,928 335 706 1,172 3,362 285 672 7,977 5,491 A substantial portion of plan assets is invested in debt se- curities in order to minimise the effect of capital market fluctuations. Other investment classes, such as stocks and shares, serve to generate higher rates of return. This is ne- cessary to cover risks (such as changes in morbidity tables) not taken into account in the actuarial assumptions applied. The present value of the defined benefit obligations and the fair values of fund assets – as well as the actuarial adjustments made for those two items – have developed as follows over the last five years: in euro million 2009 2008 2007 2006 2005 Defined benefit obligation Fair value of plan assets Net obligation Actuarial gains (–) and losses (+) on defined benefit obligations Actuarial gains (–) and losses (+) on plan assets 10,931 7,977 2,954 1,464 – 289 8,788 5,491 3,297 – 919 868 10,631 6,029 4,602 – 557 44 11,430 6,432 4,998 – 400 –117 11,237 6,017 5,220 1,131 – 424 Experience adjustments for pension plans are not dis- closed since the amounts involved are immaterial. Actuarial gains on fund assets are primarily attributable to experience adjustments. 114 33 Other provisions Other provisions comprise the following items: in euro million 31. 12. 2009 31. 12. 2008 Obligations for personnel and social expenses Obligations for ongoing operational expenses Other obligations Other provisions Total 960 2,816 988 4,764 thereof due within one year 445 1,031 582 2,058 Total 1,241 2,790 851 4,882 thereof due within one year 603 1,081 441 2,125 Provisions for obligations for personnel and social expenses comprise mainly performance-related remuneration com- ponents, pre-retirement part-time working arrangements and employee long-service awards. Provisions for other obligations cover numerous specific risks and obligations of uncertain amount. Other provisions changed during the year as follows: Provisions for obligations for on-going operational expenses comprise primarily warranty obligations. in euro million 1.1. 20091 Translation differences Additions Reversal of discounting Utilised2 Reversed 31. 12. 2009 Obligations for personnel and social expenses Obligations for ongoing operational expenses Other obligations Other provisions 1,243 2,792 867 4,902 3 21 20 44 590 1,151 480 2,221 5 – 586 102 –1,091 8 115 – 248 –1,925 – 295 –159 –139 – 593 960 2,816 988 4,764 1 including entities consolidated for the first time during the financial year 2 including entities deconsolidated during the financial year Of the amount shown as reversed, euro 509 million (2008: euro 263 million) are included in costs by function in the income statement. 34 Income tax liabilities 31 December 2009 in euro million Deferred tax Current tax Income tax liabilities 31 December 2008 in euro million Deferred tax Current tax Income tax liabilities Maturity within one year Maturity later than one year – 595 595 2,769 241 3,010 Maturity within one year Maturity later than one year – 265 265 2,757 368 3,125 Total 2,769 836 3,605 Total 2,757 633 3,390 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 115 Group Financial Statements Current tax liabilities of euro 836 million (2008: euro 633 million) comprise euro 197 million (2008: euro 97 million) for taxes payable and euro 639 million (2008: euro 536 million) for tax provisions. In 2009, tax provisions of euro 60 million were reversed (2008: euro 141 million). 35 Financial liabilities Financial liabilities include all liabilities of the BMW Group at the relevant balance sheet dates relating to financing activities. Financial liabilities comprise the following: 31 December 2009 in euro million Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Other Financial liabilities 31 December 2008 in euro million Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Other Financial liabilities Maturity within one year Maturity between one and five years Maturity later than five years 4,483 6,534 7,212 5,213 2,086 549 857 18,320 1,840 2,700 – 5,726 532 145 4,214 800 21 – – 12 81 Total 27,017 9,174 9,933 5,213 7,812 1,093 1,083 26,934 29,263 5,128 61,325 Maturity within one year Maturity between one and five years Maturity later than five years 6,685 6,365 6,402 5,471 3,439 762 763 11,787 3,879 1,785 – 5,263 796 207 5,687 900 22 – – 63 108 Total 24,159 11,144 8,209 5,471 8,702 1,621 1,078 29,887 23,717 6,780 60,384 Issue volume in relevant currency (ISO-Code) Weighted average maturity period (in years) Weighted average effective interest rate (in %) 116 Bonds comprise: Issuer BMW Finance N. V., The Hague BMW (UK) Capital plc, Bracknell BMW US Capital, LLC, Wilmington, Del. Interest variable variable variable variable fixed fixed fixed fixed fixed fixed fixed variable variable variable fixed fixed variable variable variable variable fixed fixed fixed fixed 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 JPY 10,000 million SKK 768 million EUR 1,733 million USD 50 million AUD 250 million EUR 12,666 million USD 1,250 million GBP 300 million SEK 1,000 million NOK 450 million RON 44 million JPY 47,100 million CZK 1,080 million SEK 500 million GBP 500 million JPY 27,000 million USD 278 million EUR 100 million CAD 100 million MXN 405 million EUR 5,000 million USD 1,476 million MXN 1,725 million CHF 1,150 million Rolls-Royce Motor Cars Limited, Bracknell variable GBP 46 million Other variable variable variable variable variable fixed fixed fixed JPY 19,600 million EUR 480 million NOK 200 million SEK 1,451 million USD 200 million JPY 76,000 million CHF 250 million EUR 80 million 2.0 3.0 3.8 3.0 4.0 5.3 4.5 7.0 2.0 4.0 3.0 3.8 3.0 1.0 6.0 4.7 3.9 3.0 3.0 5.0 6.0 6.8 4.4 4.4 7.0 2.8 1.7 1.0 1.2 3.0 15.0 5.0 1.5 0.8 3.0 2.0 0.7 7.3 5.0 4.9 5.3 5.0 5.8 11.4 0.3 1.5 0.5 5.6 2.5 0.3 0.7 0.4 4.9 4.9 5.2 7.8 2.9 0.8 0.4 0.7 2.1 0.5 1.8 2.5 3.0 2.1 117 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 Finance N. V., The Hague BMW Malta Finance Ltd., St. Julians BMW (UK) Capital plc, Bracknell BMW US Capital, LLC, Wilmington, Del. EUR 1,717 million EUR 1,924 million EUR 385 million EUR 100 million EUR 1,551 million 46.3 62.0 47.9 11.0 14.5 36 Other liabilities Other liabilities comprise the following items: 31 December 2009 in euro million Other taxes Social security Advance payments from customers Deposits received Payables to subsidiaries Payables to other companies in which an investment is held Deferred income Other Other liabilities 31 December 2008 in euro million Other taxes Social security Advance payments from customers Deposits received Payables to subsidiaries Payables to other companies in which an investment is held Deferred income Other Other liabilities Maturity within one year Maturity between one and five years Maturity later than five years 473 44 395 124 34 11 1,109 1,779 3,969 22 18 22 78 1 – 1,795 101 2,037 – 7 – – – – 230 7 244 Maturity within one year Maturity between one and five years Maturity later than five years 335 30 327 88 44 28 1,262 1,966 4,080 – 8 19 177 1 – 1,675 29 1,909 – 6 – – – – 244 42 292 0.7 0.7 0.7 1.7 0.4 Total 495 69 417 202 35 11 3,134 1,887 6,250 Total 335 44 346 265 45 28 3,181 2,037 6,281 118 Deferred income comprises the following items: in euro million 31. 12. 2009 31. 12. 2008 Deferred income from lease financing Deferred income relating to service contracts Grants Other deferred income Deferred income Total 1,082 1,602 276 174 3,134 thereof due within one year 658 345 46 60 1,109 Total 1,068 1,615 303 195 3,181 thereof due within one year 654 485 56 67 1,262 Deferred income relating to service contracts relates to service and repair work to be provided under commit- ments given at the time of the sale of a vehicle (multi- component arrangements). Grants comprise primarily public 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 re- late. Other deferred income includes primarily the effects of the initial measurement of financial instruments. 37 Trade payables 31 December 2009 in euro million Maturity within one year Maturity between one and five years Maturity later than five years Total Trade payables 3,106 16 – 3,122 31 December 2008 in euro million Maturity within one year Maturity between one and five years Maturity later than five years Total Trade payables 2,525 37 – 2,562 The total amount of financial liabilities, other liabilities and trade payables with a maturity later than five years amounts to euro 5,372 million (2008: euro 7,072 million). 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 119 Group Financial Statements BMW Group Notes to the Group Financial Statements Other Disclosures 38 Contingent liabilities and other financial commitments Contingent liabilities No provisions were recognised for the following contingent liabilities (stated at their nominal amount) since an outflow of resources is not considered to be probable: in euro million Guarantees Performance guarantees Other Contingent liabilities 31. 12. 2009 31. 12. 2008 158 10 64 232 83 8 60 151 Contingent liabilities relate primarily to non-group entities. Guarantees include an amount of euro 8 million (2008: euro 5 million) in respect of non-consolidated subsidiaries. Several liability applies in the case of investments in general partnerships. The usual commercial guarantees have been given in rela- tion 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 buildings, plant and machinery, tools, office and other facilities. The leases run for periods of one to 93 years and in some cases contain extension and / or purchase options. In 2009 an amount of euro 199 million (2008: euro 230 million) was recognised as expense in conjunction with other financial commit- ments. The total of future minimum lease payments under non- cancellable leases can be analysed by maturity as follows: in euro million 31. 12. 2009 31. 12. 2008 Nominal total of future minimum lease payments due within one year due between one and five years due later than five years Other financial obligations 208 598 697 1,503 222 619 695 1,536 The above amounts include euro 1 million (2008: euro 7 mil- lion) in respect of non-consolidated subsidiaries and euro 1 million (2008: euro 1 million) for back-to-back operating leases. Purchase commitments for property, plant and equipment amount to euro 1,697 million (2008: euro 1,891 million). Sundry other financial commitments amount to euro 140 million (2008: euro 158 million). 120 39 Financial instruments The carrying amounts and fair values of financial instruments are analysed below to IAS 39 categories, cash funds, cash flow hedges and fair value hedges: 31 December 2009 in euro million Cash funds Loans and receivables Held-to-maturity investments Other liabilities Available- for-sale Fair value option Held for trading Cash flow hedges Fair value hedges Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Carrying amount* Carrying amount* Carrying amount* Carrying amount* Carrying amount* Assets Other investments Receivables from sales financing Financial assets Derivative instruments Marketable securities and investment funds Loans to third parties Credit card receivables Other financial assets – – – – – – – – – – – – – – Cash and cash equivalents 7,767 7,767 Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other * Carrying amount corresponds to fair value. – – – 507 – – – – – – – – – – – – – – – 507 – – – – – – – – – – – – – – 41,177 40,594 – – 23 266 364 – – – 23 266 364 – 1,857 1,857 485 171 – 325 – – – – – – – – – – – 485 171 – 325 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 734 619 1,080 Derivative instruments Marketable securities and investment funds – – – – – – – – – – – – – 9,165 9,946 5,214 7,803 – 1,082 3,122 35 11 27,246 27,017 2,081 2,081 – – – – – – – – – – – – – 9,174 9,933 5,213 7,812 – 1,083 3,122 35 11 232 – 1,648 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Assets Other investments Receivables from sales financing Financial assets Loans to third parties Credit card receivables Other financial assets Cash and cash equivalents Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other – – – – – – – – – – – – – – – – – – – – – – 490 321 282 Derivative instruments 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 121 Group Financial Statements 31 December 2009 in euro million Cash funds Loans and receivables Held-to-maturity investments Other liabilities Available- for-sale Fair value option Held for trading Cash flow hedges Fair value hedges Fair value Fair value Fair value Carrying amount Carrying amount Carrying amount Fair value Carrying amount Carrying amount* Carrying amount* Carrying amount* Carrying amount* Carrying amount* Cash and cash equivalents 7,767 7,767 1,857 1,857 Marketable securities and investment funds Assets Other investments Receivables from sales financing Financial assets Derivative instruments Loans to third parties Credit card receivables Other financial assets Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other * Carrying amount corresponds to fair value. 507 – 507 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 41,177 40,594 – – 23 266 364 – 485 171 – 325 – – – – – – – – – – – – – 23 266 364 – 485 171 – 325 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 27,246 27,017 9,165 9,946 5,214 7,803 – 1,082 3,122 35 11 9,174 9,933 5,213 7,812 – 1,083 3,122 35 11 2,081 2,081 232 – – 1,648 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Assets Other investments Receivables from sales financing Financial assets 734 619 1,080 Derivative instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Marketable securities and investment funds Loans to third parties Credit card receivables Other financial assets Cash and cash equivalents Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions 490 321 282 Derivative instruments – – – – – – – – – – – – – – – Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other 122 31 December 2008 in euro million Cash funds Loans and receivables Held-to-maturity investments Other liabilities Available- for-sale Fair value option Held for trading Cash flow hedges Fair value hedges Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Carrying amount* Carrying amount* Carrying amount* Carrying amount* Carrying amount* Assets Other investments Receivables from sales financing Financial assets Derivative instruments Marketable securities and investment funds Loans to third parties Credit card receivables Other financial assets – – – – – – – – – – – – – – Cash and cash equivalents 7,454 7,454 Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other * Carrying amount corresponds to fair value. – – – 291 – – – – – – – – – – – – – – – 291 – – – – – – – – – – – – – – 37,839 38,063 – – 13 253 711 – – – 13 253 711 – 2,305 2,305 425 103 – 186 – – – – – – – – – – – 425 103 – 186 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 836 817 1,796 Derivative instruments Marketable securities and investment funds – – – – – – – – – – – – – – – – – – – – – – – – – – 24,280 11,120 8,263 5,473 8,615 – 1,097 2,562 45 28 24,159 11,144 8,209 5,471 8,702 – 1,078 2,562 45 28 1,931 1,931 322 – – 653 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Assets Other investments Receivables from sales financing Financial assets Loans to third parties Credit card receivables Other financial assets Cash and cash equivalents Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other – – – – – – – – – – – – – – – – – – – – – – 610 637 374 Derivative instruments 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 123 Group Financial Statements 31 December 2008 in euro million Cash funds Loans and receivables Held-to-maturity investments Other liabilities Available- for-sale Fair value option Held for trading Cash flow hedges Fair value hedges Fair value Fair value Fair value Carrying amount Carrying amount Carrying amount Fair value Carrying amount Carrying amount* Carrying amount* Carrying amount* Carrying amount* Carrying amount* Cash and cash equivalents 7,454 7,454 2,305 2,305 Marketable securities and investment funds Assets Other investments Receivables from sales financing Financial assets Derivative instruments Loans to third parties Credit card receivables Other financial assets Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other * Carrying amount corresponds to fair value. 291 – 291 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 37,839 38,063 – – 13 253 711 – 425 103 – 186 – – – – – – – – – – – – – 13 253 711 – 425 103 – 186 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 24,280 11,120 8,263 5,473 8,615 – 1,097 2,562 45 28 24,159 11,144 8,209 5,471 8,702 – 1,078 2,562 45 28 1,931 1,931 322 – – 653 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Assets Other investments Receivables from sales financing Financial assets 836 817 1,796 Derivative instruments – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Marketable securities and investment funds Loans to third parties Credit card receivables Other financial assets Cash and cash equivalents Trade receivables Other assets Receivables from subsidiaries Receivables from companies in which an investment is held Collateral receivables Other Liabilities Financial liabilities Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions 610 637 374 Derivative instruments – – – – – – – – – – – – – – – Other financial liabilities Trade payables Other liabilities Payables to subsidiaries Payables to other companies in which an investment is held Other 124 Fair value measurement of financial instruments The fair values shown are computed using market informa- tion available at the end of the reporting period on the ba- sis of prices quoted by the counterparties or using appro- priate measurement methods, e. g. discounted cash flow models. In the latter case, amounts were discounted at 31 December 2009 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 0.5 0.9 2.9 3.7 0.3 0.6 3.1 4.2 0.6 0.9 3.5 4.3 0.5 0.7 0.7 1.5 Interest rates taken from interest rate structure curves were adjusted, where necessary, to take account of the credit quality and risk of the underlying financial instrument. Financial instruments measured at fair value are allocated to different measurement levels in accordance with IFRS 7. This includes financial instruments that are Derivative financial instruments are measured at their fair value. The fair values of derivative financial instruments are determined using measurement models, as a consequence of which there is a risk that the amounts calculated on the basis of those models could differ from realisable market prices on disposal. Market price spreads (for liquidity and credit risks for instance) remain wide as a result of the finan- cial market crisis, therefore also affecting the measurement of derivatives. 1 measured at their fair values in an active market for iden- tical financial instruments (level 1), 2 measured at their fair values in an active market for com- parable financial instruments or using measurement models whose main input factors are based on observ- able market data (level 2) or 3 using input factors not based on observable market data (level 3). The following table shows the mounts allocated to each measurement level at 31 December 2009: in euro million Level hierarchy in accordance with IFRS 7 Level 2 Level 3 Level 1 Marketable securities and investment fund shares – available-for-sale Derivatives (assets) – held for trading Derivatives (liabilities) – held for trading 543 – 1 1,105 734 489 – – – Other investments (available-for-sale) amounting to euro 232 million are measured at amortised cost since quoted market prices are not available or cannot be determined reliably. These are therefore not included in the level hierarchy shown above. There were no significant reclassifications within the level hierarchy during the financial year 2009. 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 125 Group Financial Statements Gains and losses on financial instruments The following table shows the net gains and losses arising for each of the categories of financial instrument defined by IAS 39: in euro million Held for trading 2009 2008 Gains / losses from the use of derivative instruments 338 – 208 Available-for-sale Gains and losses on sale and fair value measurement of marketable securities held for sale (including investments in subsidiaries and participations measured at cost) Income from investments Accumulated other equity Balance at 1 January Total change during the year of which recognised in the income statement during the period under report Balance at 31 December Loans and receivables Impairment losses / reversals of impairment losses Other income / expenses Other liabilities Income / expenses – 23 4 17 3 – 7 20 – 801 – 49 –195 4 35 –18 20 17 – 610 – 41 –113 –109 Gains/losses from the use of derivatives relate primarily to fair value gains or losses arising on stand-alone derivatives. Write-downs of euro 3 million (2008: euro 123 million) on available-for-sale securities, for which fair value changes were previously recognised directly in equity, were recog- nised as expenses in 2009. There were no reversals of write-downs on current marketable securities recognised directly in equity (2008: euro 5 million). The disclosure of interest income resulting from the un- winding of interest on future expected receipts would nor- mally only be relevant for the BMW Group where assets have been discounted as part of the process of determining impairment losses. However, as a result of the assumption that most of the income that is subsequently recovered is received within one year and the fact that the impact is not material, the BMW Group does not discount assets for the purposes of determining impairment losses. Cash flow hedges The effect of cash flow hedges on accumulated other equity was as follows: in euro million Balance at 1 January Total changes during the year of which recognised in the income statement during the period under report Balance at 31 December 2009 2008 45 164 – 63 209 438 – 393 – 627 45 During the period under report, an expense of euro 44 mil- lion (2008: income of euro 32 million) was recognised in the income statement to reflect forecast errors and the resulting over-hedging. At 31 December 2009 the BMW Group held derivative in- struments with terms of up to 46 months (2008: 48 months) to hedge currency risks attached to future transactions. It is expected that euro 187 million of net gains, recognised 126 in equity at the end of the reporting period, will be recog- nised in the income statement in 2010. Cash flow hedges are generally used to hedge cash flows arising in conjunction with the supply of vehicles to sub- sidiaries. At 31 December 2009 the BMW Group held derivative in- struments with terms of up to 84 months (2008: 96 months) to hedge interest-rate risks attached to future transactions. It is expected that euro 45 million of net losses, recog- nised in equity at the end of the reporting period, will be recognised in the income statement in 2010. Fair value hedges The following table shows gains and losses on hedging instruments and hedged items which are deemed to be part of a fair value hedge relationship: in euro million 31. 12. 2009 31. 12. 2008 Gains / losses on hedging instruments designated as part of a fair value hedge relationship Gains / loss from hedged items – 398 446 48 386 – 405 –19 The difference between the gains / losses on hedging instruments and the result recognised on hedged items represents the ineffective portion of fair value hedges. Fair value hedges are mainly used to hedge the market prices of bonds and other financial liabilities. previously accepted as collateral is acquired, it undergoes a multi-stage process of repossession and disposal in accordance with the legal situation prevailing in each rele- vant market. The assets involved are generally vehicles which can be converted into cash at any time via the dealer organisation. Credit risk Notwithstanding the existence of collateral accepted, the carrying amounts of financial assets generally take account of the maximum credit risk arising from the possibility that the counterparties will not be able to fulfil their contractual obligations. The maximum credit risk for irrevocable credit commitments relating to credit card business amounts to euro 1,513 million (2008: euro 1,570 million). The equiva- lent figure for dealer financing is euro 12,634 million (2008: euro 12,490 million). Impairment losses are recorded as soon as credit risks are identified on individual financial assets, using a meth- odology specifically designed by the BMW Group. More detailed information regarding this methodology is provided in the section on accounting policies. The use of comprehensive rating and scoring techniques and credit monitoring procedures ensures the recovera- bility of the value of receivables from sales financing which are neither overdue nor impaired. In the case of performance relationships underlying non- derivative financial instruments, collateral will be required, information on the credit-standing of the counterparty obtained or historical data based on the existing business relationship (i.e. payment patterns to date) reviewed in order to minimise the credit risk, all depending on the na- ture and amount of the exposure that the BMW Group is proposing to enter into. Within the financial services business, the financed items (e. g. vehicles, equipment and property) in the retail cus- tomer and dealer lines of business serve as first-ranking collateral with a recoverable value. Security is also put up by customers in the form of collateral asset pledges, asset assignment and first-ranking mortgages, supplemented where appropriate by warranties and guarantees. If an item The credit risk relating to derivative financial instruments is minimised by the fact that the Group only enters into such contracts with parties of first-class credit standing. The general credit risk on derivative financial instruments utilised by the BMW Group is therefore not considered to be sig- nificant. A concentration of credit risk with particular borrowers or groups of borrowers has not been identified. In the context of the current climate for financing, it must be reckoned with that assessments of individual contractual partners’ creditworthiness may need to be amended. Further disclosures relating to credit risk, in particular impair- ment losses recognised, are provided in the notes to the rel- evant category of receivables on pages 102 et seq. and 106. 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 127 Group Financial Statements Liquidity risk The following table shows the maturity structure of contractual cash flows (undiscounted and expected) for financial liabilities: 31 December 2009 in euro million Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Trade payables Other financial liabilities 31 December 2008 in euro million Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial paper Asset backed financing transactions Derivative instruments Trade payables Other financial liabilities Maturity within one year Maturity between one and five years – 5,694 – 6,882 –7,834 – 5,251 – 2,246 – 86 – 3,106 – 859 – 31,958 – 22,951 – 2,075 – 2,759 – – 6,278 264 –16 –162 – 33,977 Maturity within one year Maturity between one and five years – 7,755 – 6,434 – 6,639 – 5,504 – 3,670 349 – 2,525 – 766 – 32,944 –13,690 – 4,236 –1,866 – – 5,405 383 – 37 – 218 – 25,069 Maturity later than five years – 4,488 – 841 – 24 – – –176 – –118 – 5,647 Maturity later than five years – 5,900 – 945 – 26 – – –106 – –145 – 7,122 Total – 33,133 – 9,798 –10,617 – 5,251 – 8,524 2 – 3,122 –1,139 –71,582 Total – 27,345 –11,615 – 8,531 – 5,504 – 9,075 626 – 2,562 –1,129 – 65,135 The cash flows shown comprise principal repayments and the related interest. The amounts disclosed for derivative instruments include all cash flows relating to derivatives that have a negative fair value at the balance sheet date as well as all cash flows relating to derivatives that have a positive fair value at the balance sheet date but which are part of a hedging relationship with a financial liability. Solvency is assured at all times by managing and monitor- ing the liquidity situation on the basis of a rolling cash flow forecast. The resulting funding requirements are secured by a variety of instruments placed on the world’s financial markets. The objective is to minimise risk by matching ma- turities for the Group’s financing requirements within the framework of the target debt ratio. Despite rating down- grades in 2009 due to the financial market and economic crisis and the resulting adverse impact on the automotive sector, the long-term ratings published by Standard & Poor’s (S & P) and Moody’s of A– and A3 respectively ensure that sufficient refinancing funds can still be raised at competitive conditions. Short-term liquidity is managed primarily by issuing money market instruments (commercial paper). Competitive conditions could also be achieved in this area despite the fact that S & P and Moody’s downgraded their short-term ratings to A-2 and P-2 respectively. Also reducing liquidity risk, additional secured and unse- cured lines of credit are in place with first-class international banks. Intragroup cash flow fluctuations are evened out by the use of daily cash pooling arrangements. Market risks The principal market risks to which the BMW Group is ex- posed are currency risk and interest rate risk. 128 Protection against such risks is provided in the first instance though natural hedging which arises when the values of non-derivative financial instruments have matching maturi- ties and amounts (netting). Derivative financial instruments are used to reduce the risk remaining after netting. Finan- cial instruments are only used to hedge underlying posi- tions or forecast transactions. The scope of permitted transactions, responsibilities, finan- cial reporting procedures and control mechanisms used for financial instruments are set out in internal guidelines. This includes, above all, a clear separation of duties be- tween trading and processing. Currency and interest rate risks are managed at a corporate level. Further disclosures relating to risk management are pro- vided in the Group Management Report. risks arise. Since a significant portion of Group revenues are generated outside the euro currency region and the procurement of production material and funding is also organised on a worldwide basis, the currency risk is an ex- tremely important factor for Group earnings. At 31 December 2009, derivative financial instruments were in place to hedge exchange rate risks, in particular for the currencies US dollar, British pound, Japanese yen and Chinese renminbi. The hedging contracts comprise mainly option and forward currency contracts. A description of how these risks are managed is provided in the Group Management Report on page 64 et seq. The BMW Group measures currency risks using a cash-flow- at-risk model. Currency risk As an enterprise with worldwide operations, business is conducted in a variety of currencies, from which currency The starting point for analysing currency risk with this model is the identification of forecast foreign currency transac- tions or “exposures”. At the end of the reporting period, the principal exposures for the coming year were as follows: in euro million Euro / US Dollar Euro / Chinese Renminbi Euro / British Pound Euro / Japanese Yen 31. 12. 2009 31. 12. 2008 3,696 3,119 2,446 902 3,631 1,712 2,291 835 In the next stage, these exposures are compared to all hedges that are in place. The net cash flow surplus repre- sents an uncovered risk position. The cash-flow-at-risk approach involves allocating the impact of potential ex- change rate fluctuations to operating cash flows on the basis of probability distributions. Volatilities and correlations serve as input factors to assess those relevant probability distributions. The potential negative impact on earnings for the current period is computed on the basis of current market prices and exposures to a confidence level of 95 % for each cur- rency. Aggregation of these results creates a risk reduc- tion effect due to correlations between the various port- folios. The following table shows the potential negative impact for the BMW Group – measured on the basis of the cash- flow-at-risk approach – attributable at the balance sheet date to unfavourable changes in exchange rates for the principal currencies. in euro million Euro / US Dollar Euro / Chinese Renminbi Euro / British Pound Euro / Japanese Yen 31. 12. 2009 31. 12. 2008 174 201 188 17 39 29 56 54 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 129 Group Financial Statements The BMW Group’s currency risk relates primarily to the currencies shown. Interest rate risk 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 in- terest rates. These risks arise when funds with differing fixed-rate periods or differing terms are borrowed and invested. All items subject to, or bearing, interest are exposed to inter- est rate risk. Interest rate risks can affect either side of the balance sheet. The fair values of the Group’s interest rate portfolios for the three principal currencies were as follows at the end of the reporting period: in euro million Euro US Dollar British Pound 31. 12. 2009 31. 12. 2008 5,514 6,628 2,031 6,241 5,646 1,860 Interest rate risks can be managed by the use of interest rate derivatives. The interest rate contracts used for hedging purposes comprise mainly swaps which are accounted for on the basis of whether they are designated as a fair value hedge or as a cash flow hedge. A description of how inter- est rate risk is managed is provided in the Group Manage- ment Report on page 65. As stated there, the BMW Group applies a value-at-risk approach for internal reporting purposes and to manage interest rate risks. This is based on a state-of-the-art his- torical simulation, in which the potential future fair value losses of the interest rate portfolios are compared across the Group with expected amounts measured on the basis of a holding period of three months and a confidence level of 99 %. Aggregation of these results creates a risk reduction effect due to correlations between the various portfolios. In the following table the potential volume of fair value fluc- tuations – measured on the basis of the value-at-risk approach – are compared with the expected value for the interest rate relevant positions of the BMW Group for the three principal currencies: in euro million Euro US Dollar British Pound 31. 12. 2009 31. 12. 2008 47 139 10 52 119 7 Other risks The BMW Group is exposed to raw material price risks. A description of how these risks are managed is provided in the Group Management Report on page 65 et seq. In order to reduce these risks, derivative financial instruments are used that serve to hedge purchase price fluctuations agreed with suppliers with respect to the raw material con- tent of purchases. Changes in the fair values of these de- rivatives, which generally track the quoted market prices of the raw material being hedged, gives rise to market price risks for the Group. If the market prices of hedged raw materials had been 10 % higher (lower) at 31 December 2009, the Group profit before tax would have been euro 110 million higher (euro 110 million lower). A further exposure relates to the residual value risk on vehicles returned to the Group at the end of finance lease contracts. The risks from financial instruments used in this context were not material to the Group in the past and at the end of the reporting period. A description of how these risks are managed is provided in the Group Manage- ment Report on pags 64 et seq. Information regarding the residual value risk from operating leases is provided in the section on accounting policies. 130 40 Explanatory notes to the cash flow statements The cash flow statements show how the cash and cash equivalents of the BMW Group and of the Automobiles and Financial Services segments have changed in the course of the year as a result of cash inflows and cash out- flows. In accordance with IAS 7 (Cash Flow Statements), cash flows are classified into cash flows from operating, in- vesting and financing activities. The cash flow statements of the BMW Group are presented on page 78 et seq. Cash and cash equivalents included in the cash flow state- ment comprise cash in hand, cheques, and cash at bank, to the extent that they are available within three months and are subject to an insignificant risk of changes in value. The positive impact of changes in cash and cash equiva- lents due to the effect of exchange rate fluctuations in 2009 was euro 40 million (2008: negative impact of euro 44 million). The cash flows from investing and financing activities are based on actual payments and receipts. By contrast, the cash flow from operating activities is derived indirectly from the net profit / loss for the year. Under this method, changes in assets and liabilities relating to operating activities are adjusted for currency translation effects and changes in the composition of the Group. The changes in balance sheet positions shown in the cash flow state- ment do not therefore agree directly with the amounts shown in the Group and segment balance sheets. If the BMW Group acts as the lessor in a finance lease, the relevant cash flows are reported in the cash flow state- ments as part of the cash flow from investing activities. If the BMW Group acts as the lessee in a finance lease, the cash flows are reported as part of the cash flows from operating and investing activities. If the BMW Group acts as the lessee in an operating lease, cash flows are reported as part of the cash flow from in- vesting activities. In the final case, where the BMW Group acts as the lessee in an operating lease, cash flows are reported as part of the cash flow from operating activities. The entities of the BMW Sauber Group, Hinwil, were sold to Peter Sauber AG, Pfäffikon, in 2009. The cash inflow in 2009 relating to the sales price amounted to euro 15 mil- lion and is presented in the Group and Automobiles seg- ment cash flow statements as part of the cash inflow from investing activities in the line item “Proceeds from the dis- posal of investments”. Cash outflows for taxes on income and cash inflows for interest are classified as cash flows from operating activi- ties in accordance with IAS 7.31 and IAS 7.35. Cash out- flows for interest are presented on a separate line within cash flows from financing activities. Cash flows from dividends received amounted to euro 4 mil- lion (2008: euro 4 million). 41 Related party relationships In accordance with IAS 24 (Related Party Disclosures), related individuals or entities which have the ability to con- trol the BMW Group or which are controlled by the BMW Group, must be disclosed unless such parties are not al- ready 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 financial and operating policies of the management of the Group. In addition, the disclosure requirements of IAS 24 also cover transactions with participations, joint ventures and indivi- duals that have the ability to exercise significant in fluence over the financial and operating policies of the BMW Group. This also includes close relatives and intermediaries. Sig- nificant influence over the financial and operating policies of the BMW Group can arise when a party holds 20 % or more of the shares of BMW AG or is a member of the Board of Management or Supervisory Board of BMW AG. For the financial year 2009, the disclosure requirements contained in IAS 24 only affect the BMW Group with re- gard to business relationships with affiliated, non-consoli- dated entities, joint ventures and participations as well as with members of the Board of Management and Super- visory Board of BMW AG. The BMW Group maintains normal business relationships with affiliated, non-consolidated entities. Transactions with these entities are small in scale, arise in the normal course of business and are conducted on the basis of arm’s length principles. Transactions of BMW Group companies with the joint venture, BMW Brilliance Automotive Ltd., Shenyang, all 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 131 Group Financial Statements arise in the normal course of business and are conducted on the basis of arm’s length principles. Group companies sold goods and services to BMW Brilliance Automotive Ltd., Shenyang, during 2009 for an amount of euro 532 million (2008: euro 406 million). At 31 December 2009, receivables of Group companies from BMW Brilliance Automotive Ltd., Shenyang, amounted to euro 170 million (2008: euro 102 million). As in the previous year, there were no payables from Group companies to BMW Brilliance Automotive Ltd., Shenyang, at the end of the reporting period. BMW INTEC Beteiligungs GmbH, Munich, and SGL Tech- nologies GmbH, Wiesbaden, founded SGL Automotive Carbon Fibers Verwaltungs GmbH, Munich, on 3 Decem- ber 2009 and SGL Automotive Carbon Fibers GmbH & Co. KG, Munich, on 10 December 2009 as joint ventures. There were no business transactions between BMW Group entities and the joint ventures in 2009. Business transactions between BMW Group entities and participations all arise in the normal course of business and are conducted on the basis of arm’s length principles. With the exception of Cirquent GmbH, Munich, business relationships with such entities are on a small scale. The BMW Group companies purchased services and goods from Cirquent GmbH, Munich, amounting to euro 52 mil- lion in 2009. At 31 December 2009, liabilities of Group companies to Cirquent GmbH, Munich, totalled euro 10 mil- lion (2008: euro 28 million). Receivables of Group com- panies from Cirquent GmbH, Munich, amounted to euro 1 million (as at the end of the previous year). Stefan Quandt is a shareholder and Deputy Chairman of the Supervisory Board of BMW AG. He is also sole share- holder and Chairman of the Supervisory Board of DELTON AG, Bad Homburg v. d. H., which, via its subsidiaries, per- formed logistics services for the BMW Group during the financial year 2009. In addition, companies of the DELTON Group acquired vehicles from the BMW Group, mostly in the form of leasing contracts. These service and sales contracts, which are not material for the BMW Group, all arise in the normal course of business and are conducted, without exception on the basis of arm’s length principles. 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, Wesel, which purchased vehicles from the BMW Group during the financial year 2009. Susanne Klatten also holds shares (and is member of the Supervisory Board) in SGL Carbon SE, Wiesbaden, whose subsidiaries supplied com- ponents to the BMW Group during the financial year 2009. In addition she holds shares in Nordex AG, Norderstedt. The corresponding sales contracts are not material for the BMW Group, arise in the course of ordinary activities and are made, without exception, on the basis of arm’s length principles. Apart from these transactions, companies of the BMW Group did not enter into any contracts with members of the Board of Management or Supervisory Board of BMW AG. The same applies to close members of the families of those persons. 42 43 Declaration with respect to the Corporate Governance Code The Board of Management and the Supervisory Board of Bayerische Motoren Werke Aktiengesellschaft have issued the Declaration of Compliance pursuant to § 161 of the Ger- Shareholdings of members of the Board of Management and Supervisory Board The members of the Supervisory Board of BMW AG hold in total 27.68 % of the issued common and preferred stock shares, of which 16.11 % relates to Stefan Quandt, Bad Homburg v. d. H. and 11.57 % to Susanne Klatten, Munich. man Stock Corporation Act. The Declaration of Compliance is reproduced on page 141 and is also available to shareholders on the BMW Group website at www.bmwgroup.com/ir. The shareholding of the members of the Board of Manage- ment of BMW AG is, in total, less than 1 % of the issued stock shares. 132 44 Compensation of members of the Board of Management and Supervisory Board The compensation of current members of the Board of Management and Supervisory Board amounted to euro 13.0 mil- lion (2008: euro 13.3 million) and comprised the following: in euro million Short-term employment benefits Post-employment benefits Compensation 2009 2008 12.3 0.7 13.0 12.5 0.8 13.3 The total remuneration of the members of the Board of Management for the financial year 2009 amounted to euro 10.7 million (2008: euro 10.9 million). This comprised fixed components of euro 3.7 million (2008: euro 3.1 mil- lion) and variable components of euro 7.0 million (2008: euro 7.8 million). In addition, an amount of euro 0.7 million (2008: euro 0.8 million) has been granted to current members of the Board of Management after the end of their employment relationship. This relates to the expense for allocations to pension provisions (service cost). The remuneration of former members of the Board of Management and their surviving dependants amounted to euro 3.8 million (2008: euro 3.1 million). Pension obligations to former members of the Board of Management and their surviving dependants are fully cov- ered by pension provisions amounting to euro 46.7 million (2008: euro 44.3 million), computed in accordance with IAS 19. The compensation of the members of the Supervisory Board for the financial year 2009 amounted to euro 1.6 mil- lion and, as in the previous year comprises only fixed com- ponents. The compensation systems for members of the Board of Management and the Supervisory Board do not include any stock options, value appreciation rights comparable to stock options or any other stock-based compensation components. No advances and loans were granted to members of the Board of Management and the Supervisory Board, nor were any contingent liabilities entered into on their behalf. Further details about the remuneration of current mem- bers of the Board of Management and the Supervisory Board can be found in the Compensation Report on page 151 et seq. The compensation report is part of the Group Management Report. The names of the members of the Supervisory Board and of the Board of Management are disclosed on page 142 et seq. 45 Application of exemptions pursuant to § 264 (3) – BMW M GmbH Gesellschaft für individuelle Automobile, and § 264 b HGB A number of companies and incorporated partnerships (as defined by § 264a HGB) which are affiliated, consolidated entities of BMW AG and for which the consolidated finan- cial statements of BMW AG represent exempting consoli- dated financial statements, apply the exemptions available in § 264 (3) and § 264b HGB with regard to the drawing up of a management report. The exemptions have been ap- plied by: Munich – BMW Vertriebs GmbH & Co. oHG, Dingolfing – Rolls-Royce Motor Cars GmbH, Munich In addition, the following entities apply the exemption avail- able in § 264 (3) and § 264b HGB with regard to publica- tion: – Bavaria Wirtschaftsagentur GmbH, Munich – BMW Fuhrparkmanagement Beteiligungs GmbH, Stutt- – Bavaria Wirtschaftsagentur GmbH, Munich – BMW Fahrzeugtechnik GmbH, Eisenach – BMW Fuhrparkmanagement Beteiligungs GmbH, Stutt- gart – BMW Hams Hall Motoren GmbH, Munich – BMW Ingenieur-Zentrum GmbH + Co., Dingolfing gart – BMW Hams Hall Motoren GmbH, Munich – BMW Ingenieur-Zentrum GmbH + Co., Dingolfing – BMW INTEC Beteiligungs GmbH, Munich – BMW Vertriebs GmbH & Co. oHG, Dingolfing – Rolls-Royce Motor Cars GmbH, Munich 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 133 Group Financial Statements BMW Group Notes to the Group Financial Statements Segment Information 46 Explanatory notes to segment information Information on reportable segments For the purposes of presenting segment information, the activities of the BMW Group are divided into operating segments in accordance with the rules contained in IFRS 8 (Operating Segments). Operating segments are identified on the same basis that is used internally to manage and report on performance and takes account of the organisa- tional structure of the BMW Group based on the various products and services of the reportable segments. The activities of the BMW Group are broken down into the operating segments Automobiles, Motorcycles, Financial Services and Other Entities. The Automobiles segment develops, manufactures, as- sembles and sells cars and off-road vehicles, under the brands BMW, MINI and Rolls-Royce as well as spare parts and accessories. BMW and MINI brand products are sold in Germany through branches of 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 companies. Rolls-Royce brand vehicles are sold in the USA via a sub- sidiary com pany and elsewhere by independent, authorised dealers. The BMW Motorcycles segment develops, manufactures, assembles and sells BMW brand motorcycles as well as spare parts and accessories. The Financial Services segment focuses primarily on car leasing, fleet business, retail customer and dealer financing, customer deposit business and insurance activities. Holding and Group financing companies are included in the Other Entities segment. This segment also includes operating companies – BMW Services Ltd., Bracknell, BMW (UK) Investments Ltd., Bracknell, Bavaria Lloyd Reisebüro GmbH, Munich, and MITEC Mikroelektronik Mikrotechnik Informatik GmbH, Dingolfing, – which are not allocated to one of the other segments. In the previous year, it also included the income and expenses recorded by the Cirquent Group in first nine months of 2008. Eliminations comprise the effects of eliminating business relationships between the operating segments. Internal management and reporting Segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the Group Financial Statements. There were no changes in accounting policies compared to previous periods. In- ter-segment receivables and payables, provisions, income, expenses and profits are eliminated in the column “Elimi- nations”. Inter-segment sales take place at arm’s length prices. The role of “chief operating decision maker” with respect to resource allocation and performance assessment of the reportable segment is embodied in the full Board of Management. In order to assist the decision-taking process, various measures of segment profit or loss and of seg- ment assets have been set for the various operating seg- ments. The Automobiles and Motorcycles segments are managed on the basis of the profit before financial result. Capital em- ployed is the corresponding measure of segment assets used to determine how to allocate resources. Capital em- ployed comprises all current and non-current operational assets of the segment, after deduction of liabilities used operationally which are not subject to interest. The performance of the Financial Services segment is measured on the basis of profit or loss before tax. Net assets, defined as all assets less all liabilities, are used as the basis for assessing the allocation of resources. The performance of the Other Entities segment is assessed on the basis of profit or loss before tax. The corresponding measure of segment assets used to manage the Other Entities segment is total assets less tax-related assets and other investments. 134 Segment information by operating segment is as follows: Segment information by operating segment in euro million External revenues Inter-segment revenues Total revenues Segment result Capital expenditure on non-current assets Depreciation and amortisation on non-current assets * including impairment losses of euro 3 million Automobiles Motorcycles Financial Services Other Entities Reconciliation to Group figures Group 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 35,613 8,124 43,737 – 265 3,606 3,509 37,877 10,905 48,782 690 4,467 3,567 1,059 10 1,069 19 52 73 1,222 8 1,230 60 55 70* 14,008 1,790 15,798 365 10,246 5,757 13,952 1,773 15,725 – 292 14,842 6,339 1 2 3 51 – – 146 45 191 295 4 13 – – 9,926 – 9,926 243 – 1,787 – 2,050 –12,731 –12,731 – 402 – 2,788 – 2,344 – 50,681 53,197 External revenues – – Inter-segment revenues 50,681 53,197 Total revenues 413 12,117 7,289 351 Segment result 16,580 Capital expenditure on non-current assets 7,645 Depreciation and amortisation on non-current assets in euro million Segment assets Automobiles Motorcycles Financial Services Other Entities Reconciliation to Group figures Group 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 11,887 14,367 389 423 4,268 3,752 40,400 38,548 45,009 43,996 101,953 101,086 Segment assets 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 135 Group Financial Statements Segment information by operating segment in euro million External revenues Inter-segment revenues Total revenues Segment result Capital expenditure on non-current assets Depreciation and amortisation on non-current assets * including impairment losses of euro 3 million Automobiles Motorcycles Financial Services Other Entities Reconciliation to Group figures Group 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 35,613 8,124 43,737 – 265 3,606 3,509 37,877 10,905 48,782 690 4,467 3,567 1,059 10 1,069 19 52 73 1,222 8 1,230 60 55 70* 14,008 1,790 15,798 365 10,246 5,757 13,952 1,773 15,725 – 292 14,842 6,339 1 2 3 51 – – 146 45 191 295 4 13 – – 9,926 – 9,926 243 – 1,787 – 2,050 – 50,681 53,197 External revenues –12,731 –12,731 – 402 – 2,788 – 2,344 – – Inter-segment revenues 50,681 53,197 Total revenues 413 12,117 7,289 351 Segment result 16,580 Capital expenditure on non-current assets 7,645 Depreciation and amortisation on non-current assets in euro million Segment assets Automobiles Motorcycles Financial Services Other Entities Reconciliation to Group figures Group 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 31. 12. 2009 31. 12. 2008 11,887 14,367 389 423 4,268 3,752 40,400 38,548 45,009 43,996 101,953 101,086 Segment assets 136 Interest and similar income of the Financial Services seg- ment totalling euro 3 million (2008: euro 2 million) are in- cluded in segment result. Interest and similar expenses of the Financial Services segment amounted to euro 8 mil- lion (2008: euro 8 million). The Other Entities segment result includes interest and similar income amounting to euro 1,778 million (2008: euro 2,102 million) and interest and similar expenses amounting to euro 1,852 million (2008: euro 1,927 million). Also included in the Other Entities segment result is the loss from equity accounted investments amounting to euro 6 million in 2009 (2008: profit of euro 1 million). in euro million Reconciliation of segment result Total for reportable segments Financial result of Automobiles segment and Motorcycles segment Elimination of inter-segment items Group profit before tax Reconciliation of capital expenditure on non-current assets Total for reportable segments Elimination of inter-segment items Total Group capital expenditure on non-current assets Reconciliation of depreciation and amortisation on non-current assets Total for reportable segments Elimination of inter-segment items Total Group depreciation and amortisation on non-current assets 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 Reconciliation of segment assets Total for reportable segments Non-operating assets – Other Entities segment Operating liabilities – Financial Services segment Interest-bearing assets – Automobiles segment Liabilities of Automobiles and Motorcycles segments not subject to interest Elimination of inter-segment items Total Group assets Segment assets of the Other Entities segment at 31 De- cember 2009 included investments accounted for using the equity method amounting to euro 23 million (2008: euro 29 million). The information disclosed for capital expenditure and de- preciation and amortisation relates to property, plant and equipment, intangible assets and leased products. Segment figures can be reconciled to the corresponding Group figures as follows: 2009 2008 170 – 331 574 413 13,904 –1,787 12,117 9,339 – 2,050 7,289 56,944 5,797 67,008 25,826 15,541 – 69,163 101,953 753 – 381 – 21 351 19,368 – 2,788 16,580 9,989 – 2,344 7,645 57,090 5,616 66,040 24,849 14,174 – 66,683 101,086 137 Group Financial Statements In the case of information by geographical region, external sales are based on the location of the customer’s regis- tered office. Revenues with major customers were not material overall. The information disclosed for non-current assets relates to property, plant and equipment, intan- gible assets and leased products. The reconciling item disclosed for non-current assets relates to leased products. Information by region in euro million Germany USA United Kingdom Rest of Europe Africa / Asia / Oceania Rest of the Americas Eliminations Group External revenues Non-current assets 2009 2008 2009 2008 11,436 10,628 4,078 12,911 9,823 1,805 – 10,739 11,349 4,913 15,780 8,471 1,945 – 50,681 53,197 21,136 9,836 1,596 3,155 1,246 590 – 2,822 34,737 21,916 11,081 1,739 3,337 549 1,169 – 3,334 36,457 Munich, 19 February 2010 Bayerische Motoren Werke Aktiengesellschaft The Board of Management 138 Responsibility Statement by the Company’s Legal Representatives Statement pursuant to § 37y No. 1 of the Securities Trading Act (WpHG) in conjunction with § 297 (2) sentence 3 and § 315 (1) sentence 6 of the German Commercial Code (HGB) “To the best of our knowledge, and in accordance with the applicable reporting principles, the Consolidated Financial Statements give a true and fair view of the assets, liabilities, financial position and profit of the Group, and the Group Management Report includes a fair review of the develop- ment and performance of the business and the position of the Group, together with a description of the principal op- portunities and risks associated with the expected develop- ment of the Group.” Munich, 19 February 2010 Bayerische Motoren Werke Aktiengesellschaft The Board of Management 74 74 74 76 78 80 81 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes 81 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 90 97 98 119 133 139 Group Financial Statements BMW Group Auditors’ Report We have audited the consolidated financial statements prepared by Bayerische Motoren Werke Aktiengesellschaft, comprising the income statement and statement of com- prehensive income, the balance sheet, cash flow state- ment, statements of changes in equity and the notes to the consolidated financial statements and its report on the po- sition of the Company and the Group for the business year from 1 January to 31 December 2009. The preparation of the consolidated finan cial statements and Group Manage- ment Report in accordance with IFRS, as adopted by the EU, and the additional requirements of German commercial law pursuant to § 315 a (1) HGB are the responsibility of the parent company’s management. Our responsibility is to express an opinion on the consolidated financial state- ments and on the Group Management Report based on our audit. economic and legal environment of the Group and ex- pectations 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 in the Group Management Report are examined primarily on a test basis within the framework of the audit. The audit also includes assessing the annual financial statements of those entities included in consolidation, the determination of entities to be included in consolidation, the accounting and con- solidation principles used and significant estimates made by the Board of Management, as well as evaluating the overall presentation of the consolidated financial statements and Group Management Report. We believe that our audit provides a reasonable basis for our opinion. 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 Wirtschafts- prüfer (IDW). Those standards require that we plan and perform the audit such that material misstatements materially affecting the presentation of the net assets, financial position and results of operations in the con- solidated 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 Our audit has not led to any reservations. In our opinion, based on the findings of our audit, the con- solidated financial statements comply with IFRSs, as adopted by the EU, the additional requirements of German commercial law pursuant to § 315 a (1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Group. The Group Management Report is consistent with the consolidated financial state- ments and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development. Munich, 26 February 2010 KPMG AG Wirtschaftsprüfungsgesellschaft Prof. Dr. Schindler Wirtschaftsprüfer Pastor Wirtschaftsprüfer 140 Statement on Corporate Governance Corporate governance – acting in accordance with the principles of responsible management aimed at increasing the value of the business on a sustainable basis – is an all- embracing issue for the BMW Group affecting all areas of the enterprise. The corporate culture within the BMW Group is founded on transparent reporting and corporate com- munication, a policy of corporate governance aimed at the interests of stakeholders, a fair and open approach be- tween the Board of Management, the Supervisory Board, employees and compliance with the law. The Board of Management reports in this statement, also on behalf of the Supervisory Board, on important aspects of corpo- rate governance pursuant to § 289 a HGB and section 3.10 GCGC. The statement is part of the Group Management Report. Information on the Company’s Governing Constitution The designation “BMW Group” comprises Bayerische Mo- toren Werke Aktiengesellschaft (BMW AG) and its Group entities. BMW AG is a stock corporation (Aktiengesellschaft) based on the German Stock Corporation Act (Aktienge- setz). It has three representative bodies: the Annual General Meeting, the Supervisory Board and the Board of Manage- ment. The duties and authorities of those bodies derive from the Stock Corporation Act and the Articles of Incorpo- ration of BMW AG. Shareholders, as the owners of the business, exercise their rights at the Annual General Meet- ing. The Annual General Meeting decides in particular on the utilisation of unappropriated profit, the ratification of the acts of the members of the Board of Management and of the Supervisory Board, the appointment of the external auditor, changes to the Articles of Incorporation, specified capital measures and elects the shareholders’ repre- sentatives to the Supervisory Board. The Board of Manage- ment manages the enterprise under its own responsibility. Within this framework, it is monitored and advised by the Supervisory Board. The Supervisory Board appoints the members of the Board of Management and can, at any time, revoke an appointment if there is an important reason. The Board of Management keeps the Super visory Board informed of all significant matters regularly, without delay and comprehensively, following the principles of conscien- tious and faithful accountability and in accordance with pre- vailing law and reporting duties allocated to it by the Super- visory Board. The Board of Management requires the approval of the Supervisory Board for certain major trans- actions. The Supervisory Board is not, however, authorised to undertake management measures itself. In accordance with the regulations contained in the Ger- man Co-determination Act, BMW AG’s Supervisory Board comprises ten shareholder representatives (elected by the Annual General Meeting) and ten employee representatives (elected by employees). The close interaction between the Board of Management and the Supervisory Board in the interests of the enterprise as described above is also known as a “two-tier board structure”. The composition of the Board of Management and the Supervisory Board and of sub- committees set up by the Supervisory Board is disclosed on page 142 et seq. of this Annual Report. Further informa- tion on work procedures of the Board of Management and the Supervisory Board can be found on page 146 et seq. 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 Cor- poration Act) to report once a year whether the officially published and relevant recommendations issued by the “German Government Corporate Governance Code Com- mission”, as valid at the date of the declaration, have been, and are being, complied with. Companies affected are also required to state which of the recommendations of the Code have not been or are not being applied and the rea- son why not. The Board of Management and Supervisory Board of BMW AG believe that the recommendations and sugges- tions contained in the German Corporate Governance Code (GCGC) contribute to an enhancement of the finan- cial markets in Germany, in particular for international in- vestors. At the joint meeting held in December 2009, the Board of Management and Supervisory Board of BMW AG issued the declaration of compliance with the new version of the GCGC valid from 5 August 2009 and posted it to the BMW Group’s website. In addition, the Board of Management and the Supervisory Board have, in past years, developed the BMW Group’s own Corporate Governance Code based on the GCGC in order to provide shareholders and other stakeholders with a comprehensive and stand-alone document covering the corporate governance practices applied by the BMW Group. The BMW Group’s Corporate Governance Code has been revised in conjunction with the new ver- sion of the GCGC. A coordinator responsible for all cor- porate governance issues reports directly and on a regu- lar basis to the Board of Management and the Supervisory Board. The Corporate Governance Code for the BMW Group, to- gether with the Declaration of Compliance, Articles of Incor- poration and other information, can be viewed / downloaded on the BMW Group’s website at www.bmwgroup.com/ir under the menu item “Corporate Facts” and “Corporate Governance”. The full text of the declaration is also provided on page 141 of this Annual Report. 140 140 141 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 141 Statement on Corporate Governance Declaration by the Board of Management and the Supervisory Board of Bayerische Motoren Werke Aktiengesellschaft regarding the Recommendations of the German Government Corporate Governance Code Commission in accordance with 161 German Stock Corporation Act The Board of Management and the Supervisory Board of Bayerische Motoren Werke Aktiengesellschaft (“BMW AG”) declare the following regarding the recommendations of the German Government Corporate Governance Code Commission: 1. During the period since filing the last declaration of December 2008 up until 5 August 2009 BMW AG com plied with all of the recommendations published on 8 August 2008 in the electronic Federal Gazette (Code version of 6 June 2008), except for the divergence from section 4.2.2 paragraph 1 German Corporate Govern ance Code already declared and explained in December 2008. That divergence ceased to apply on 5 August 2009 because, with effect from that date, the full Super visory Board became responsible for the adoption of resolutions relating to the Board of Management re muneration system and for the regular review of the re muneration system in accordance with the new legal situation. 2. BMW AG will in future comply with all of the recommen dations published on 5 August 2009 in the electronic Federal Gazette (Code version of 18 June 2009) except for only one deviation from the recommendation under section 3.8 paragraph 3 German Corporate Governance Code: In view of the differing financial circumstances and incomes within the Supervisory Board we consider it proper to differentiate between the amount of excess under a D & O liability insurance policy for the members of the Board of Management on the one hand and the members of the Supervisory Board on the other hand and we consider the excess agreed to date for the mem bers of the Supervisory Board to still be appropriate. Munich, December 2009 Bayerische Motoren Werke Aktiengesellschaft Supervisory Board Board of Management 142 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 and Nomination Committee; member of Audit Committee and the Mediation Committee Mandates Bertelsmann AG FESTO AG SAP AG ZF Friedrichshafen AG Deere & Company Manfred Schoch* Deputy Chairman Chairman of the General Works Council Industrial Engineer Member of the Presiding Board, Personnel Committee, Audit Committee and Mediation Committee Stefan Quandt Deputy Chairman Entrepreneur Member of the Presiding Board, Personnel Committee, Audit Committee, Nomination Committee and Mediation Committee Mandates DELTON AG (Chairman) Karlsruher Institut für Technologie (KIT) (since 01. 10. 2009) AQTON SE (Chairman of the Administrative Board) DataCard Corp. Stefan Schmid * Deputy Chairman Chairman of the Works Council, Dingolfing Member of the Presiding Board, Personnel Committee, Audit Committee and Mediation Committee Prof. Dr. Jürgen Strube Deputy Chairman Former Chairman of the Supervisory Board of BASF SE Chairman of the Audit Committee and Independent Finance Expert; member of the Presiding Board, Personnel Committee and Nomination Committee Mandates Allianz Deutschland AG (until 02. 04. 2009) BASF SE (Chairman) (until 30. 04. 2009) Bertelsmann AG (Deputy Chairman) Fuchs Petrolub AG (Chairman) Hapag-Lloyd AG (until 17. 03. 2009) Ulrich Eckelmann* (until 14. 05. 2009) Head of the Industry, Technology and Environment section IG Metall Executive Board Mandates VOITH AG Bertin Eichler* Executive Member of the Executive Board of IG Metall Mandates BGAG Beteiligungsgesellschaft der Gewerkschaften GmbH (Chairman) ThyssenKrupp AG (Deputy Chairman) * Employee representative Membership of other statutory supervisory boards Membership of equivalent national or foreign boards of business enterprises 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 143 Statement on Corporate Governance Franz Haniel Engineer, MBA Mandates DELTON AG (Deputy Chairman) Franz Haniel & Cie. GmbH (Chairman) Heraeus Holding GmbH Metro AG (Chairman) secunet Security Networks AG Giesecke & Devrient GmbH Prof. Dr. rer. nat. Dr. h. c. Reinhard Hüttl Chairman of the Executive Board of Helmholtz-Zentrum Potsdam Deutsches GeoForschungsZentrum – GFZ University professor Susanne Klatten Entrepreneur Mandates ALTANA AG (Deputy Chairman) SGL Carbon SE (since 25. 11. 2009) UnternehmerTUM GmbH (Chairman) Dr. jur. Karl-Ludwig Kley Chairman of the Executive Management of Merck KGaA Mandates Bertelsmann AG 1. FC Köln GmbH & Co. KGaA (Chairman) Prof. Dr. rer. pol. Renate Köcher Director of Institut für Demoskopie Allensbach Gesellschaft zum Studium der öffentlichen Meinung mbH Mandates Allianz SE Infineon Technologies AG MAN SE Dr. h. c. Robert W. Lane (since 14. 05. 2009) Chairman and former Chief Executive Officer of Deere & Company Mandates Deere & Company (Chairman) General Electric Company Northern Trust Corp. Verizon Communications Inc. Horst Lischka* (since 14. 05. 2009) General Representative of IG Metall Munich Mandates KraussMaffei AG MAN Nutzfahrzeuge AG Willibald Löw* Chairman of the Works Council, Landshut Prof. Dr. rer. nat. Dr. h. c. mult. Hubert Markl (until 14. 05. 2009) Former President of Max-Planck-Gesellschaft zur Förderung der Wissenschaften e. V. Professor of Biology (retired) Mandates Münchener Rückversicherungs-Gesellschaft AG (until 22. 04. 2009) Georg von Holtzbrinck GmbH 144 Wolfgang Mayrhuber Chairman of the Board of Management of Deutsche Lufthansa AG Mandates Fraport AG Lufthansa Technik AG Münchener Rückversicherungs-Gesellschaft AG Austrian Airlines AG (since 14. 07. 2009) HEICO Corp. SN Brussels Airlines NV (since 24. 06. 2009) SWISS International Air Lines AG (until 19. 10. 2009) Werner Neugebauer* Regional Executive Officer of IG Metall Bavaria Mandates ZF Sachs AG Franz Oberländer* Member of the Works Council, Munich Anton Ruf * Head of Development for the “Small Classes” Product Line Maria Schmidt* Member of the Works Council, Dingolfing Werner Zierer* Chairman of the Works Council, Regensburg 140 141 140 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 142 145 151 157 146 * Employee representative Membership of other statutory supervisory boards Membership of equivalent national or foreign boards of business enterprises 145 Statement on Corporate Governance Members of the Board of Management Dr.-Ing. Norbert Reithofer Chairman Frank-Peter Arndt Production Mandates BMW Motoren GmbH (Chairman) BMW (South Africa) (Pty) Ltd. (Chairman) Leipziger Messe GmbH Dr.-Ing. Herbert Diess Purchasing and Supplier Network Dr.-Ing. Klaus Draeger Development Dr. Friedrich Eichiner Finance Mandates Allianz Deutschland AG BMW Brilliance Automotive Ltd. (Deputy Chairman) BMW (US) Holding Corp. (until 31. 03. 2009) Harald Krüger Human Resources, Industrial Relations Director Mandates BMW Brilliance Automotive Ltd. (until 31. 01. 2009) Ian Robertson Sales and Marketing Mandates Rolls-Royce Motor Cars Limited (Chairman) General Counsel: Dr. Dieter Löchelt Membership of other statutory supervisory boards Membership of equivalent national or foreign boards of business enterprises 146 Information on Work Procedures of the Management Board and the Supervisory Board and on the Com- position and Work Procedures of its Committees The Board of Management of BMW AG A summary of the seven members of the Board of Manage- ment and their areas of responsibility is shown on page 145. The Board of Management manages the enterprise under its own responsibility, acting in the interests of the BMW Group with the aim of achieving sustainable growth in value. The interests of shareholders, employees and other stakeholders are also taken into account in the pursuit of this aim. The Board of Management determines the strategic orien- tation of the enterprise, agrees upon it with the Supervisory Board and ensures its implementation. The Board of Management is responsible for ensuring that all provisions of law and internal regulations are complied with. Further information relating to compliance within the BMW Group can be found on page 158 et seq. The Board of Manage- ment is also responsible for ensuring that appropriate risk management and risk controlling systems are in place throughout the Group. During their period of service for BMW AG, members of the Board of Management are bound by a comprehen- sive non-competition clause. They are required to act in the enterprise’s best interests and may not pursue personal interests in their decisions or take advantage of business opportunities intended for the enterprise. They may only undertake ancillary activities, in particular supervisory board mandates outside the BMW Group, with the approval of the Supervisory Board’s Personnel Committee. Each member of the Board of Management of BMW AG is obliged to disclose conflicts of interest to the Supervisory Board without delay and inform the other members of the Board of Management accordingly. Following the appointment of a new member to the Board of Management, the BMW Corporate Governance Officer informs the new member of the context in which the board member’s duties are to be carried out – in particular those emanating from the BMW Group Corporate Governance Code – as well as the duty to cooperate when a transaction or event triggers reporting requirements or requires the approval of the Supervisory Board. The Board of Management consults and takes decisions as a collegiate body at the following types of board meeting; General Board, Product Board, Sustainability Board, Opera- tions Committee and Committee for Executive Manage- ment Matters. At its general meetings, the Board of Management defines the overall framework for business strategies and the use of resources, takes decisions re- garding the implementation of strategies and deals with issues of particular importance to the BMW Group which are not directly related to a specific product or product line. The Board of Management and its committees may, as required and depending on the subject matters being discussed, invite non-voting advisers to participate at meetings. Terms of reference approved by the Board of Management contain a planned allocation of divisional responsibilities between the individual board members. These terms of reference also incorporate the principle that the full Board of Management bears joint responsibility for all matters of particular import and scope. In addition, each member of the Board of Management manages the relevant port- folio of duties under his responsibility, whereby case-by- case rules can be put in place for cross-divisional projects. Board members continually provide the Chairman of the Board of Management with all information regarding major transactions and developments within their area of respon- sibility. The Chairman of the Board of Management coordi- nates cross-divisional matters with the overall targets and plans of the BMW Group, involving other board members to the extent that divisions within their area of responsibility are affected. The Board of Management takes its decisions at meetings generally held on a weekly basis which are convened, coordinated and headed by the Chairman of the Board of Management. At the request of the Chairman, decisions can also be taken outside of board meetings if none of the board members objects to this procedure. A meeting is quorate if all Board of Management members are invited to the meeting in good time. Members unable to attend any meeting are entitled to vote in writing, by e-mail / telex / fax or by phone. Votes cast by phone must be subsequently confirmed in writing. Except in urgent cases, matters relat- ing to a division for which the responsible board member is not present will only be discussed and decided upon with that member’s consent. Unless stipulated otherwise by law or in BMW AG’s statutes, the Board of Management makes decisions on the basis of a simple majority of votes cast at meetings. Outside of board meetings, decisions are taken on the basis of a sim- ple majority of board members. In the event of a tied vote, the Chairman of the Board of Management has the casting 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 147 Statement on Corporate Governance vote. Any changes to the board’s terms of reference must be passed unanimously. A board meeting is only held if more than half of the board members are present. In the event that the Chairman of the Board of Management is not present or is unable to attend a meeting, the Mem- ber of the Board responsible for Finances will represent him. Minutes are taken of all meetings and the Board of Manage- ment’s resolutions and signed by the Chairman. Decisions taken by the Board of Management are binding for all em- ployees. The rules relating to meetings and resolutions taken by the full Board of Management are also applicable for its com- mittees. Members of the Board of Management not represented in a committee are provided with the agendas and minutes of committee meetings. Committee matters are dealt with in full board meetings if the committee considers it neces- sary or at the request of the member concerned. The secretariat for Board of Management matters assists the Chairman and other board members with the prepara- tion and follow-up work connected with board meetings. At Product Board meetings (generally held twice a month), the full board takes decisions at a basic policy level relating to the Group’s automobile product strategies and product projects inasmuch as these are relevant for all brands. Resources are authorised and approved at Product Board meetings. At meetings of the Operations Committee (generally held twice a month), decisions are reached in connection with automobile product projects, based on the strategic orientation and decision framework stipulated at Product Board meetings. The Operations Committee comprises the members of the Board of Management responsible for Development (Dr.-Ing. Klaus Draeger, who also chairs the meetings), Purchasing and Supplier Network (Dr.-Ing. Herbert Diess), Production (Frank-Peter Arndt), and Sales and Marketing (Ian Robertson). In the event that the com- mittee chairman is not present or unable to attend a meeting, the Member of the Board responsible for Produc- tion represents him. Resolutions taken at meetings of the Operations Committee are made online. The full board usually convenes twice a year in its function as Sustainability Board in order to define strategy with regard to sustainability and decide upon measures to im- plement that strategy. The Head of Group Communication and the Group Representative for Sustainability and Envi- ronmental Protection participate in these meetings in an advisory capacity. The Board’s Committee for Executive Management Mat- ters has the overall responsibility for BMW Group manage- ment matters, such as organisational structure, the availa- bility of suitable people for existing and future management positions and other general human resources issues. This committee has, on the one hand, an advisory and prepara- tory role e. g. making suggestions for promotions to the two remuneration groups below board level and preparing decisions to be taken at board meetings with regard to human resources principles (with the emphasis on execu- tive management issues). It also takes decisions itself such as those regarding appointments to senior management positions and promotions to higher remuneration groups or the wording of human resources principles decided on by the full board. The Committee for Executive Manage- ment Matters comprises the Chairman of the Board of Management, Dr.-Ing. Norbert Reithofer (who also chairs the meetings) and the board member responsible for Human Resources, Harald Krüger. They hold their meet- ings jointly and take decisions unanimously. The Head of Human Resources, Personnel Network and Human Re- sources International and the Head of Senior Management also participate in an advisory function. Between five and ten meetings are held each year. The Board of Management is represented by its Chairman in its dealings with the Supervisory Board. The Chairman of the Board of Management maintains regular contact with the Chairman of the Supervisory Board and keeps him well informed of all important matters. The Supervisory Board has passed a resolution specifying the information and reporting duties of the Board of Management. As a general rule, in the case of reports required by dint of law, the Board of Management submits its reports to the Super- visory Board in writing. To the extent possible, documents required as a basis for taking decisions are sent to the mem- bers of the Supervisory Board in good time before the rele- vant meeting. Regarding transactions of fundamental im- portance, the Supervisory Board has stipulated specific transactions which require the approval of the Supervisory Board. Whenever necessary, the Chairman of the Board of Management obtains the approval of the Supervisory Board and ensures that reporting duties to the Supervisory Board are complied with. In order to fulfil these tasks, the Chairman is supported by all members of the Board of Management. The fundamental principle followed when 148 reporting to the Supervisory Board is that the latter should be kept informed regularly, without delay and comprehen- sively of all significant matters relating to planning, busi- ness performance, risk exposures, risk management and compliance as well as any major variances between actual and budgeted figures. The Supervisory Board of BMW AG An overview of the members of the Supervisory Board is shown on page 142 et seq. As a basic rule, resolutions are passed by the Supervisory Board by simple majority. The German Co-determination Act contains specific requirements with regard to majority voting and technical procedures, particularly with regard to the appointment and revocation of appointment of man- agement board members and the election of a supervisory board chairman or deputy chairman. In the event of a tied vote in the Supervisory Board, the Chairman of the Super- visory Board has two votes in a renewed vote, even if this also results in a tied vote. BMW AG’s Supervisory Board, comprising ten shareholder representatives (elected by the Annual General Meeting) and ten employee representatives (elected by employees in accordance with the German Co-determination Act), has the task of advising and supervising the Board of Management in its governance of the BMW Group. It is in- volved in all decisions of fundamental importance for the BMW Group. The Supervisory Board appoints the mem- bers of the Board of Management and decides upon the level of compensation they are to receive. The Supervisory Board can revoke appointments for important reasons. Together with the Board of Management, it ensures that long-term successor planning is in place. In practice, resolutions are taken by the Supervisory Board and its committees at the relevant meetings. A Super- visory Board member who is not present at a meeting can have his / her vote cast by another Supervisory Board mem- ber if an appropriate request has been made in writing, by fax or in electronic form. This rule also applies to the casting of the second vote by the Chairman of the Super- visory Board. The Chairman of the Supervisory Board can also accept the retrospective casting of votes by any mem- bers not present at a meeting if this is done within the time limit previously set. In special cases, resolutions may also be taken outside of meetings, i.e. in writing, by fax or by electronic means. The Supervisory Board holds a minimum of two meetings per calendar year. Normally, five plenary meetings are held per calendar year, as was the case in 2009. One meeting each year is planned to cover a number of days and is used, among other things, to enable an in-depth exchange on strategic and technological matters. In line with the suggestion contained in the German Cor- porate Governance Code, the shareholder representatives and employee representatives prepare the Supervisory Board meetings separately and, if necessary, together with members of the Board of Management. The Chairman of the Supervisory Board coordinates work within the Supervisory Board, chairs its meetings, handles the external affairs of the Supervisory Board and repre- sents it in its dealings with the Board of Management. Minutes are taken of each meeting and any resolutions made signed by the Chairman of the Supervisory Board. After its meetings, the Supervisory Board is generally pro- vided information on new vehicle models in the form of a short presentation. Following the election of a new Supervisory Board mem- ber, the BMW Corporate Governance Officer informs the new member of the principal issues affecting his or her duties – in particular those enshrined in the BMW Group Corporate Governance Code – including the duty to co- operate when a transaction or event triggers reporting re- quirements or are subject to the approval of the Super- visory Board. New Supervisory Board members are also given the opportunity to become better acquainted with the business outside of Supervisory Board meetings by means of an information programme. The Supervisory Board is quorate if all members have been invited to the meeting and at least half of its members par- ticipate in the vote on a particular resolution. A resolution re- lating to an agenda item not included in the invitation is only valid if none of the members of the Supervisory Board who were present at the meeting object to the resolution and a minimum of two thirds of the members are present. All members of the Supervisory Board of BMW AG are required to ensure that they have sufficient time to per- form their duties. If members of the Supervisory Board of BMW AG are also members of the Board of Management of a listed company, they may not accept more than a total of three non-BMW Group supervisory board mandates for listed companies. 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 149 Statement on Corporate Governance The Supervisory Board examines the efficiency of its ac- tivities on a regular basis. Joint discussions are also held at plenum meetings, prepared on the basis of a questionnaire previously devised by and distributed to the members of the Supervisory Board. The Chairman of the Supervisory Board is open to suggestions for improvement at all times. Based on this year’s self-evaluation by the Supervisory Board, the information programme and the two-day strategy meeting held in September were considered particularly useful. Each member of the Supervisory Board is bound to act in the enterprise’s best interests. Members of the Supervisory Board may not pursue personal interests in their decisions or take advantage of business opportunities intended for the benefit of the enterprise. Members of the Supervisory Board are obliged to inform the full Supervisory Board of any conflicts of interest which may result from a consultant or directorship function with clients, suppliers, lenders or other business partners, en- abling the Supervisory Board to report to the shareholders at the Annual General Meeting on how it has dealt with such issues. Material conflicts of interest and those which are not merely temporary in nature result in the termination of the mandate of the relevant Supervisory Board member. With regard to nominations for the election of members of the Supervisory Board, care is taken that the Supervisory Board always consists of members who possess the re- quired knowledge, skills and expert experience to perform their tasks in a proper manner. Regard is also given to the international activities of the BMW Group, potential con- flicts of interest and the age limit stipulated for members of the Supervisory Board as well as maintaining sufficient diversity. The ability of the Supervisory Board to supervise and advise the Board of Management independently is also assisted by the fact that the Supervisory Board is required, based on its own assessment, to have a sufficient number of independent members. Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. Joachim Milberg is the only person on the Supervisory Board to have previously served on the Board of Manage- ment, of which he ceased to be a member in 2002. Super- visory Board members do not exercise directorships or similar positions or undertake advisory tasks for important competitors of the BMW Group. Taking into account the specific circumstances of the BMW Group and the number of board members, the Super- visory Board has set up a Presiding Board and four com- mittees, namely the Personnel Committee, the Audit Committee, the Nomination Committee and the Mediation Committee. Such committees serve to raise the efficiency of the Supervisory Board’s work and facilitate the handling of complex issues. The establishment and function of a Mediation Committee is prescribed by law. The person chairing a committee reports in detail on its work at each plenum meeting. The composition of the Presiding Board and the commit- tees is based on legal requirements, BMW AG’s Articles of Incorporation, terms of reference and corporate govern- ance principles. The expertise and technical skills of its members are also taken into account. According to the relevant terms of reference, the Chairman of the Supervisory Board is, in this capacity, automatically a member of the Presiding Board, the Personnel Commit- tee and the Nomination Committee, and chairs these com- mittees. The number of meetings held by the Presiding Board and the committees depends on current requirements. The Presiding Board, the Personnel Committee and the Audit Committee normally hold several meetings in the course of the year. During 2009 there were five meetings of the Presiding Board, five meetings and three telephone con- ferences of the Audit Committee, five meetings of the Per- sonnel Committee and two meetings of the Nomination Committee. The Mediation Committee did not need to meet in 2009. In line with the terms of reference for the activities of the plenum, the Supervisory Board has also set terms of reference for the Presiding Board and the various commit- tees. The committees are only quorate if all members are present. Resolutions taken by the committees are passed by simple majority unless stipulated otherwise by law. Minutes are also taken at the meetings and for the resolutions of the committees and the Presiding Board, and signed by the person chairing the particular meeting. This person also represents the committee in any deal- ings it may have with the Board of Management or third parties. Members of the Supervisory Board may not delegate their duties. The Supervisory Board, the Presiding Board and committees may call on experts and other suitably informed persons to attend meetings to give advice on specific matters. 150 The Supervisory Board, the Presiding Board and the committees also meet without the Board of Management if necessary. BMW AG ensures that the Supervisory Board and its com- mittees are sufficiently equipped to carry out its duties. This includes the services provided by a centralised secre- tariat to support the chairmen in coordinating the work of the Supervisory Board. In accordance with the relevant terms of reference, the Presiding Board comprises the Chairman of the Super- visory Board and board deputies. The Presiding Board prepares Supervisory Board meetings, including the annual Declaration of Compliance with the German Corporate Governance Code and the Supervisory Board’s efficiency examination. The following are members of the Presiding Board: Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. Joachim Milberg (Chairman of the Supervisory Board), Manfred Schoch (Deputy Chairman of the Supervisory Board), Stefan Quandt (Deputy Chairman of the Supervisory Board), Stefan Schmid (Deputy Chairman of the Supervisory Board), Prof. Dr. Jürgen Strube (Deputy Chairman of the Supervisory Board). The Personnel Committee prepares the decisions of the Supervisory Board with regard to the appointment and revocation of appointment of members of the Board of Management. In conjunction with the assessment of po- tential Board of Management members, care is taken to ensure an impartial process when preparing recommenda- tions to the Supervisory Board, based on the interests of the business and with due regard to diversity. The Person- nel Committee also prepares the decisions of the Super- visory Board with regard to the Board of Management’s compensation and the Supervisory Board’s regular review of the Board of Management’s compensation system. In conjunction with the resolutions taken by the Supervisory Board regarding the compensation of the Board of Manage- ment, the Personnel Committee is responsible for drawing up, amending and revoking service / employment con- tracts or, when necessary, other relevant contracts with members of the Board of Management. In specified cases, the Personnel Committee also has the authority to give the necessary approval for a particular transaction (instead of the Supervisory Board). This includes loans to mem- bers of the Board of Management or Supervisory Board, specified contracts with members of the Supervisory Board (in each case taking account of the consequences of related party transactions), as well as other activities of members of the Board of Management, including the acceptance of non-BMW Group supervisory mandates. Members of the Personnel Committee: Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E.h. Joachim Milberg (Chairman), Manfred Schoch, Stefan Quandt, Stefan Schmid, Prof. Dr. Jürgen Strube. The Audit Committee deals in particular with issues relating to the supervision of the financial reporting process, the effectiveness of the internal control system, the risk man- agement system, internal audit arrangements, compliance, auditor independence, the engagement of the external auditor and the compliance of the audit engagement, the determination of specific areas of audit emphasis and the fee agreements with the auditor. The Audit Committee prepares the Supervisory Board’s resolution relating to the Company and Group Financial Statements and discusses interim reports with the Board of Management before publication. Members of the Audit Committee: Prof. Dr. Jürgen Strube (Chairman), Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. Joachim Milberg, Manfred Schoch, Stefan Quandt, Stefan Schmid. In line with the recommendations of the German Corporate Governance Code, the Chairman of the Audit Committee is independent and not a former Chairman of the Board of Management. He is required to have specific know-how and experience in applying financial reporting standards and internal control procedures. Alongside other members of the Supervisory Board, he also fulfils the requirements of being an independent financial expert as defined by § 100 (5) and § 107 (4) AktG. The Nomination Committee is charged with the task of finding suitable candidates for election to the Supervisory Board (as shareholder representatives) and for inclusion in the Supervisory Board’s proposals for election at the Annual General Meeting. In line with the recommen- dations of the German Corporate Governance Code, the Nomination Committee comprises only shareholder representatives. Members of the Nomination Committee: Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. Joachim Milberg (Chair- man), Stefan Quandt, Prof. Dr. Jürgen Strube. The establishment and composition of a Mediation Com- mittee are required by the German Co-determination Act. The Mediation Committee has the task of making pro- posals to the Supervisory Board if a resolution for the ap- pointment of a member of the Board of Management has not been carried by the necessary two thirds majority of members’ votes. The Mediation Committee comprises the 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 151 Statement on Corporate Governance Chairman and Deputy Chairman of the Supervisory Board and one member each selected by shareholder repre- sentatives and employee representatives. Members of the Mediation Committee: Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. Joachim Milberg, Manfred Schoch, Stefan Quandt, Stefan Schmid. Compensation Report The BMW Group supports the endeavours of the German Corporate Governance Code (GCGC) to increase trans- parency in the disclosure of the components of compensa- tion. 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 dis- cussing 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 Manage- ment and the Supervisory Board is disclosed by name and analysed into components. 1. Compensation of the Board of Management Responsibilities Following the coming into force of the German Act on the Appropriateness of Management Board Remuneration (VorstAG) on 5 August 2009, supervisory boards became responsible in Germany for determining and regularly ex- amining the compensation of management boards. Pre- viously, these tasks had been carried out within the BMW Group by the Supervisory Board’s Personnel Committee, which reported on its work at regular intervals and in detail to the Supervisory Board. The Personnel Committee now plays a preparatory role in the process of determining and examining the remuneration of the Board of Management. The Supervisory Board’s terms of reference have been amended accordingly to take account of the change in al- location of duties between the Personnel Committee and the full Supervisory Board. Principles of compensation The Supervisory Board familiarised itself with the details of the new act (VorstAG) in 2009 and fully supports the ob- jective set out therein to bring about compensation struc- tures that promote sustainable and long-term oriented business performance. The compensation model used for the management boards should be attractive in the con- text of the competitive environment for highly qualified executives. All compensation components should be ap- propriate, both individually and in total, and should not encourage an enterprise to take inappropriate risks. The compensation of members of BMW AG’s Board of Management is determined by the full Supervisory Board on the basis of performance criteria and after taking into account any remuneration received from Group compa- nies. The Supervisory Board sets demanding and relevant targets as the basis for variable compensation. The prin cipal criteria for determining the appropriateness of compen- sation are the nature of the tasks allocated to each member of the Board of Management, an assessment of the per- formance of those tasks and of the economic situation and future prospects of the BMW Group, comparable levels of compensation in the relevant sector and the compensation structure in place elsewhere within the organisation. Upper limits for compensation apply for all Board of Manage- ment members. The Supervisory Board reviews the com- pensation system at regular intervals, with regard to both the structure and amount of the compensation. In doing so, it takes note of compensation studies conducted by ex- ternal experts and considers – as it always has done in the past – the compensation structures and the levels of com- pensation of staff and managers within the BMW Group. The Personnel Committee and the Supervisory Board engaged external experts to test the compatibility of the compensation system for the Board of Management with the latest legal requirements. This review reached the con- clusion that the system in place at that stage was already compatible with the changed requirements brought about by the new VorstAG rules. This was most evident in the fact that variable compensation was already based on a period stretching over several years, during which both positive and negative developments were taken into ac- count. The Supervisory Board passed a resolution in 2009 setting out new bases of measurement for variable com- pensation components during the period 2010 – 2012. These bases of measurement will not be changed during the period stated. Compensation system, compensation components The compensation of the Board of Management comprises fixed and variable remuneration. Board of Management members are also entitled to receive retirement benefits. Under certain circumstances, the members of the Board of Management are entitled to receive so-called “transi- tional payments” until their retirement. In terms of the overall compensation of current members of the Board of Management, the Supervisory Board sets a compensation target and a compensation framework with a high variable proportion, taking into account the overall situation and forecasts of the BMW Group. 152 Fixed remuneration comprises a base salary (paid monthly) and other remuneration elements. Other remuneration elements comprise mainly the use of company cars as well as the payment of insurance premiums, contributions to- wards security systems and an annual medical check-up. The salaries of members of the Board of Management were raised with effect from 1 January 2009 after regular monitoring showed that they no longer fell within the target corridor for comparable sector and DAX 30 companies (2008 basis) considered appropriate by the Supervisory Board. The salary of each member of the Board of Manage- ment is euro 420,000 p. a. during the first term of appoint- ment and euro 480,000 p. a. from the beginning of the second term. The salary of the Chairman of the Board of Management is euro 840,000 p. a. The variable compensation of the Board of Management is made up of two components, each equally weighted, namely a corporate earnings-related bonus and a personal performance-related bonus. The Supervisory Board may also, in justified cases, decide to pay an additional special bonus on a voluntary basis. The target bonus (100 %) for a Board of Management member (i. e. covering both com- ponents of variable compensation) totals euro 1.5 million p. a. for the first term of appointment and euro 1.75 million p. a. with effect from the second. The equivalent figure for the Chairman of the Board of Management is euro 3 mil- lion p. a. Upper limits are in place for all Board of Manage- ment members (150 % of the relevant target bonus). The total target compensation for a Board of Management member (i. e. salary and target bonus) is therefore euro 1.92 million p. a. for the first term of appointment and euro 2.23 million p. a. with effect from the second. The equiva- lent figure for the Chairman of the Board of Management is euro 3.84 million p. a. If the target bonus is fully achieved, the ratio of salary and variable compensation is then approximately 20 % : 80 %. The corporate earnings-related bonus is based on the BMW Group’s net profit and post-tax return on sales (which are combined into a single earnings factor) and the level of the dividend (common stock). The corporate earn- ings-related bonus is derived by multiplying the target amount fixed for each member of the Board of Manage- ment by the earnings factor and by the dividend factor. In exceptional circumstances, for instance when there have been major acquisitions or disposals, the Supervisory Board may adjust the level of the corporate earnings-related bonus. An earnings and dividend factor of 1.00 gives rise to a cor- porate earnings-related bonus of euro 0.75 million for a member of the Board of Management during the first period of appointment and one of euro 0.875 million with effect from the second. The equivalent bonus for the Chair- man of the Board of Management is euro 1.5 million. The earnings factor is 1.00 in the event of a Group net profit of euro 3.1 billion and a post-tax return on sales of 5.6 %. The dividend factor is 1.00 in the event that the dividend paid on the shares of common stock is between 100 and 110 euro cents. If the Group net profit is below euro 1 billion or if the post- tax return on sales is less than 2 %, the earnings factor will be zero. In these cases, no corporate earnings-related bonus will be paid. Based on the principle of consistency, this rule is also applicable in determining the corporate earnings-related variable compensation components of all managers and staff of BMW AG (see also page 29 et seq.). The personal performance-related bonus is derived by multiplying the target amount set for each member of the Board of Management by a performance factor. The Supervisory Board sets the performance factor on the basis of its assessment of the contribution of the relevant Board of Management member to sustainable and long- term oriented business development. In setting the factor, consideration is given equally to personal performance and decisions taken in previous forecasting periods, key decisions affecting the future development of the business, the effectiveness of measures taken in response to chang- ing external conditions as well as other activities aimed at safeguarding the future viability of the business to the ex- tent not included directly in the basis of measurement. The methodology for determining variable compensation of the Board of Management, including target bonuses and the key figures used to determine the corporate earn- ings-related bonus, has been fixed for the three financial years during the period from 1 January 2010 to 31 De- cember 2012. Targets and other parameters may not be changed retrospectively during this period. All current members of the Board of Management have agreed to the corresponding changes in their contracts with effect from 1 January 2010. The compensation system does not include any stock options, value appreciation rights, and other share-based components incorporating other long-term incentives. 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 153 Statement on Corporate Governance The Supervisory Board carries out an annual review of the appropriateness of the total compensation of the Board of Management; in horizontal terms, this is done by com- paring compensation paid by DAX 30 companies and, in vertical terms, by comparing board compensation with the salaries of senior management (below board level) and with average salaries of employees. et seq.). Given the fact that board members already have a legal right to receive the benefits already promised to them, they have been given the option to choose between the previous system and the new one. All current members of the Board of Management have agreed to the correspond- ing changes in their contracts with effect from 1 January 2010. In the event of the termination of mandate, current mem- bers of the Board of Management are entitled to receive certain defined benefits. Pensions are paid to former mem- bers of the Board of Management who have either reached the age of 65, or, if their mandate was terminated earlier and not extended, to members who have either reached the age of 60 or who are unable to work due to ill-health or accident, or who have entered into early retirement in accordance with a special arrangement. The amount of the pension comprises, unchanged from the previous year, 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 becoming a member of the Board of Management plus between euro 400 and euro 600 for each full year of service on the board (up to a maximum of 15 years). Pension pay- ments are adjusted by analogy to the rules applicable for the adjustment of civil servants’ pensions: the pensions of members of the Board of Management are adjusted ac- cordingly when the civil servants remuneration level B6 (excluding allowances) is increased by more than 5 % or increased in accordance with the Company Pension Act. If a mandate is ended early before the member of the Board of Management reaches the age of 60, a transitional pay- ment amounting to two-thirds 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 member of the Board of Management, this is considered appropriate on the basis of an objective evalua- tion of all circumstances. Arrangements are in place con- cerning the offsetting of other income against pensions and transitional payments. With effect from financial years beginning on or after 1 Jan- uary 2010, the provision of retirement and surviving de- pendants’ benefits for existing and future members of the Board of Management has been changed to a defined contribution system with a guaranteed minimum return (similar to the switch to a defined contribution system for middle and senior management in 2009 – see page 29 If a mandate is terminated after 1 January 2010, the new system provides entitlements which can be paid either (a) in the case of death or invalidity as a one-off amount or over a maximum of ten years or (b) on retirement – depend- ing on the wish of the ex-board member concerned – in the form of a life-long monthly pension, as a one-off amount , over a maximum of ten years, or in a combined form (e. g. a combination of a one-off payment and a proportionately reduced life-long monthly pension). Pensions are paid to former members of the Board of Management who have either reached the statutory retirement age for the state pension scheme in Germany, or if their mandate had ter- minated earlier and had not been extended, to members who have either reached the age of 60 or are permanently unable to work, or who have entered into early retirement in accordance with a special arrangement. In addition, following the death of a retired board member who has elected to receive a life-long pension, 60 % of that amount is paid as a life-long widow’s pension. The amount of the retirement pension to be paid is deter- mined on the basis of the amount accrued in each board member’s individual pension savings account. The amount on this account arises from annual contributions paid by the Company plus interest earned based on the type of investment. The annual contribution to be paid for each member of the Board of Management amounts to euro 240,000 for 2010, euro 270,000 for 2011 and euro 300,000 from 2012 on- wards. The equivalent figures for the Chairman of the Board of Management are euro 425,000, euro 475,000 and euro 525,000. The contributions are credited, along with interest earned, to the personal savings accounts of board members on a monthly basis. The guaranteed minimum rate of return p. a. corresponds to the maximum interest rate used to calculate insurance reserves for life insurance policies (guaranteed interest on life insurance policies) which currently stands at 2.25 %. In the case of invalidity or death, a minimum of 60 % of the potential annual contributions will be paid until the person 154 concerned would have reached the age of 60. At the changeover to the new system, current members of the Board of Management will be credited with a starting bal- ance of equivalent value to entitlements already vested. The starting balance and all contributions subsequently credited to board members under the new scheme are externally financed in conjunction with a trust model that is also used to fund pension obligations to employees. Compensation of the Board of Management for the finan cial year 2009 (total) The total remuneration of the current members of the Board of Management of BMW AG for the financial year 2009, subject to approval by the Supervisory Board, amounted to euro 10.7 million (2008: euro 10.9 million). This com- prises fixed components (including other remuneration) of euro 3.7 million (2008: euro 3.1 million) and variable com- ponents of euro 7.0 million (2008: euro 7.8 million). Pensions are increased annually by at least 1 %. in euro million 2009 2008 Income earned on an employed or a self-employed basis up to the age of 63 is offset against the pension entitle- ment. In addition, certain circumstances have been speci- fied in the event of which the Company no longer has any obligation to pay benefits. In such cases, no transitional payments are made either. In the case of a board member’s mandate being terminat- ed early without important reason, there are no contractual commitments to pay compensation. Similarly, there are no commitments to pay compensation for early termination in the event of a change of control or a takeover offer. No members of the Board of Management received any pay- ments or benefits from third parties in 2009 on account of their activities as the members of the Board of Management of BMW AG. Amount Proportion in % Amount Proportion in % 28.4 71.6 Fixed remuneration Variable remuneration 3.7 7.0 34.6 65.4 3.1 7.8 Total remuneration 10.7 100.0 10.9 100.0 In addition, an expense of euro 0.7 million (2008: euro 0.8 million) was recognised for current members of the Board of Management for the period after the end of their service relationship. This relates to the expense for allo- cations to pension provisions (service cost). The amount paid to former members of the Board of Management and their surviving dependants was euro 3.8 million (2008: euro 3.1 million). Pension obligations to former members of the Board of Management and their Compensation of the individual members of the Board of Management for the financial year 2009 (2008) 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 in euro Norbert Reithofer Frank-Peter Arndt Herbert Diess Klaus Draeger Friedrich Eichiner Harald Krüger Ian Robertson Total2 Fixed compensation Other compensation 16,215 (16,271) 23,591 (19,708) 13,773 (29,762) 74,237 (26,276) 93,785 (23,516) 78,028 (2,777) 54,993 (102,938) Salary 840,000 (600,000) 440,000 (300,000) 420,000 (300,000) 430,000 (300,000) 420,000 (300,000) 420,000 (25,000) 420,000 (240,323) Total 856,215 (616,271) 463,591 (319,708) 433,773 (329,762) 504,237 (326,276) 513,785 (323,516) 498,028 (27,777) 474,993 (343,261) Variable Compensation Total compensation Allocation for year to pension provision1 1,725,000 (1,650,000) 910,417 (825,000) 862,500 (825,000) 886,458 (825,000) 862,500 (825,000) 862,500 (68,750) 862,500 (660,887) 2,581,215 (2,266,271) 1,374,007 (1,144,708) 1,296,273 (1,154,762) 1,390,696 (1,151,276) 1,376,285 (1,148,516) 1,360,528 (96,527) 1,337,493 (1,004,148) 131,815 (124,912) 73,233 (69,327) 93,685 (89,930) 74,495 (70,871) 86,612 (81,547) 51,300 (4,616) 189,682 (133,533) 700,822 (819,331) 3,390,000 354,622 3,744,622 6,971,875 10,716,497 (2,801,775) (304,134) (3,105,909) (7,814,570) (10,920,479) 1 includes service cost 2 Figures for the previous year include the remuneration of members of the Board of Management who left office during the financial year 2008. 155 Statement on Corporate Governance surviving dependants are fully covered by pension provi- sions amounting to euro 46.7 million (2008: euro 44.3 mil- lion), computed in accordance with IAS 19. 2. Compensation of the Supervisory Board Responsibilities, regulation pursuant to Articles of Incorporation The compensation of the Supervisory Board is determined by shareholders’ resolution at the Annual General Meeting. The compensation regulation valid for the financial year 2009 is the result of the shareholders’ resolutions taken at the Annual General Meeting on 8 May 2008 and § 15 of the Articles of Incorporation of BMW AG. The Articles of Incorporation of BMW AG can be viewed / downloaded at www.bmwgroup.com/ir under the menu item “Corporate Facts” and “Corporate Governance”. Compensation principles, compensation components In line with the recommendations of the German Corporate Governance Code, the members of the Supervisory Board receive fixed as well as performance-related compensation. Each member of the Supervisory Board receives, in addi- tion to the reimbursement of expenses, a fixed amount of euro 55,000 (payable at the end of the year) as well as a corporate earnings related compensation of euro 220 for each full euro 0.01 by which the earnings per share (EPS) of common stock reported in the Group Financial State- ments for the relevant financial year (remuneration year) exceeds a minimum amount of euro 2.30 (payable after the Annual General Meeting held in the following year). An upper limit of euro 110,000 is in place for the corporate earnings related compensation. Since the minimum EPS was not achieved in 2009, no corporate earnings related compensation is payable for the financial year 2009. The German Corporate Governance Code also recom- mends that the exercising of chair and deputy chair posi- tions in the Supervisory Board as well the chair and mem- bership of committees should also be considered when determining the level of compensation. Accordingly, the Articles of Incorporation of BMW AG stipulate that the Chairman of the Supervisory Board re- ceives three times the amount and each Deputy Chair- man receives twice the amount of the remuneration of a Super visory Board member. Provided the relevant com- mittee convened for meetings on at least three days during the financial year, each chairman of the Supervisory Board’s committees receives twice the amount and each member of a committee receives one and a half times the amount of the remuneration of a Supervisory Board member. If a member of the Supervisory Board exercises more than one of the functions referred to above, the com- pensation is measured only on the basis of the function which is remunerated with the highest amount, thus avoid- ing amounts accumulating when more than one function is exercised. In addition, each member of the Supervisory Board receives an attendance fee of euro 2,000 for each full meeting of the Supervisory Board (Plenum) which the member has attended (payable at the end of the financial year). Attend- ance at more than one meeting on the same day is not remunerated separately. The Company also reimburses to each member of the Supervisory Board any value added tax arising on their remuneration. The amounts disclosed below are net amounts. Compensation of the Supervisory Board for the financial year 2009 (total) In accordance with § 15 of the Articles of Incorporation, the compensation of the Supervisory Board for activities dur- ing the financial year 2009 amounted to euro 1.6 million (2008: euro 1.6 million). This comprises fixed compensation of euro 1.6 million (2008: euro 1.6 million). No variable com- pensation is payable for the financial year 2009 (2008: –) since the conditions stipulated in the Articles of Incorpora- tion (minimum EPS of euro 2.30) were not met. in euro million 2009 2008 Amount Proportion in % Amount Proportion Fixed compensation Variable compensation 1.6 – 100.0 – 1.6 – Total compensation 1.6 100.0 1.6 100.0 Supervisory Board members did not receive any further compensation or benefits from the BMW Group for services performed by them, in particular advisory and agency services. During the financial year 2009 BMW AG concluded a contract with the market research organisa- tion – Institut für Demoskopie Allensbach, Gesellschaft zum Studium der öffentlichen Meinung mit beschränkter Haftung, Allensbach – pertaining to the performance of a market research study into the German premium segment for cars in return for a total fee of euro 79,600. Since Prof. Dr. Renate Köcher is a member of BMW AG’s Supervisory Board and a Director of the Allensbach Institute, the Board of Management obtained approval for the contract from the Supervisory Board’s Personnel Committee be- fore signing the contract. in % 100.0 – 156 Compensation of the individual members of the Supervisory Board for the financial year 2009 (2008) in euro Fixed compensation Attendance fee Variable compensation Joachim Milberg (Chairman) Manfred Schoch (Deputy Chairman) Stefan Quandt (Deputy Chairman) Stefan Schmid (Deputy Chairman) Jürgen Strube (Deputy Chairman) Ulrich Eckelmann1 Bertin Eichler Franz Haniel Reinhard Hüttl Susanne Klatten Karl-Ludwig Kley Renate Köcher Robert W. Lane2 Horst Lischka3 Willibald Löw Hubert Markl 4 Wolfgang Mayrhuber Werner Neugebauer Franz Oberländer Anton Ruf Maria Schmidt Werner Zierer Total 140 141 140 142 145 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices 158 Compliance in the BMW Group 151 157 146 165,000 (165,000) 110,000 (110,000) 110,000 (110,000) 110,000 (99,180) 110,000 (90,765) 20,192 (55,000) 55,000 (55,000) 55,000 (55,000) 55,000 (35,765) 55,000 (55,000) 55,000 (35,765) 55,000 (35,765) 34,959 (–) 34,959 (–) 55,000 (55,000) 20,192 (55,000) 55,000 (55,000) 55,000 (55,000) 55,000 (55,000) 55,000 (55,000) 55,000 (42,377) 55,000 (55,000) 10,000 (10,000) 10,000 (10,000) 10,000 (10,000) 10,000 (10,000) 10,000 (10,000) 2,000 (10,000) 10,000 (8,000) 8,000 (8,000) 10,000 (8,000) 10,000 (8,000) 8,000 (4,000) 10,000 (8,000) 6,000 (–) 8,000 (–) 10,000 (10,000) 2,000 (8,000) 8,000 (10,000) 8,000 (8,000) 4,000 (10,000) 10,000 (10,000) 10,000 (8,000) 10,000 (10,000) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) – (–) Total5 175,000 (175,000) 120,000 (120,000) 120,000 (120,000) 120,000 (109,180) 120,000 (100,765) 22,192 (65,000) 65,000 (63,000) 63,000 (63,000) 65,000 (43,765) 65,000 (63,000) 63,000 (39,765) 65,000 (43,765) 40,959 (–) 42,959 (–) 65,000 (65,000) 22,192 (63,000) 63,000 (65,000) 63,000 (63,000) 59,000 (65,000) 65,000 (65,000) 65,000 (50,377) 65,000 (65,000) 1,430,302 (1,420,982) 184,000 (184,000) – (–) 1,614,302 (1,604,982) 1 Member of the Supervisory Board until 14 May 2009. 2 Member of the Supervisory Board from 14 May 2009. 3 Member of the Supervisory Board until 14 May 2009. 4 Member of the Supervisory Board from 14 May 2009. 5 Figures for the previous year include the remuneration of members of the Supervisory Board who left office during the financial year 2008. 157 Statement on Corporate Governance 3. Other No loans or advances were granted by the BMW Group on favourable conditions to members of the Board of Man- agement or the Supervisory Board. scheme is to be continued. Further information can be found on page 42. Information on Corporate Governance Practices Applied Beyond Mandatory Requirements Reportable securities transactions (“Directors’ Dealings”) Members of the Board of Management and the Super- visory Board and related persons of those members, are required, pursuant to § 15 a of the German Securities Trading Act (WpHG), to give notice of any of their trans- actions with BMW stock or related financial instruments if the total sum of such transactions exceeds the amount of euro 5,000 during the calendar year. BMW AG gives notice of any transaction reported to it on its website at www.bmwgroup.com/ir and in its Annual Document pur- suant to § 10 (1) of the German Securities Prospectus Act. Shareholdings of members of the Board of Management and the Supervisory Board The members of the Supervisory Board of BMW AG hold in total 27.68 % of the Company’s issued common and preferred stock shares, of which 16.11 % relates to Stefan Quandt, Bad Homburg v. d. H. and 11.57 % to Susanne Klatten, Munich. The aggregated shareholdings of the members of the Board of Management total less than 1 % of the issued shares. Employee share scheme Since 1989 BMW AG has also allowed its employees to participate in the success of the business in the form of an employee share scheme. In 2009 employees were able, at their own discretion, to acquire up to 35 shares of non- voting preferred stock at a discounted price. All employees of BMW AG and its wholly owned German subsidiaries (if agreed to by the directors of those entities) were entitled to participate in the scheme. Employees were required to have been in an uninterrupted employment relationship with BMW AG or the relevant subsidiary for at least one year at the date on which the the allocation for the year was announced. Shares of preferred stock acquired in conjunction with the employee share scheme are subject to a vesting period of four years, starting from 1 January of the year in which the shares were acquired. In total, 831,425 shares of preferred stock were acquired by employees under the scheme in 2009. The Board of Management of BMW AG decides each year whether the Core principles Within the BMW Group, the Board of Management, the Supervisory Board and the employees base their actions on twelve core principles which are the cornerstone of the success of the BMW Group: Customer focus The success of our company is determined by our cus- tomers. They are at the heart of everything we do. The results of all our activities must be measured in terms of the benefits they will generate for our customers. Peak performance We aim to be the best – a challenge to which all of us must rise. Each and every employee must be prepared to deliver peak performance. We strive to be among the elite, but without being arrogant. It is the company and its products that count – and nothing else. Responsibility Every BMW Group employee has the personal responsi- bility for the company’s success. In team work, every em- ployee must assume personal responsibility for his or her actions. We are fully aware that we are working to achieve the company’s goals. For this reason, we work together in the best interests of the company. Effectiveness The only results that count for the company are those which have a sustainable impact. In assessing leadership, we must consider the effectiveness of performance on results. Adaptability In order to ensure our long-term success we must adapt to new challenges with speed and flexibility. We therefore see change as an opportunity – and adaptability as essen- tial to be able to capitalise on it. Frankness As we strive to find the best solution, it is each employee’s duty to express any opposing opinions they may have. 158 The solutions agreed upon will then be consistently imple- mented by all those involved. Respect, trust, fairness We treat each other with respect. Leadership is based on mutual trust. Trust is rooted in fairness and reliability. Employees People make companies. Our employees are the strongest factor in our success, which means our personnel decisions will be amongst the most important we ever make. Leading by example Every manager must lead by example. Sustainability In our view, sustainability constitutes a lasting contribution to the success of the company. This is the basis upon which we assume ecological and social responsibility. Society Social responsibility is an integral part of our corporate self- image. Independence We secure the corporate independence of the BMW Group through sustained profitable growth. The core principles are also available at www.bmwgroup. com under the menu items “Responsibility” and “Em- ployees”. Social responsibility towards employees and along the supplier chain Questions relating to the issue of corporate social respon- sibility are raised with each new day. The corporate culture of the BMW Group combines the drive to be successful with a will to be open-minded, trusting and transparent. The BMW Group is very much aware of its responsibilities towards society. The BMW Group’s models for sustainable social responsibility towards employees and for ensuring compliance with international social standards are based on various internationally recognised guidelines. The BMW Group is committed to adhering to the OECD’s guidelines for multinational companies and the contents of the ICC Business Charter for Sustainable Development. Details of the contents of these guidelines and other relevant informa- tion can be found at www.oecd.org and www.iccwbo.org. The Board of Management signed the United Nations Global Compact in 2001 and, in 2005, in conjunction with employee representatives, issued a Joint Declaration on Human Rights and Working Conditions in the BMW Group. With these two documents, we have given our commit- ment to abide worldwide by the International Labour Or- ganization’s (ILO) fundamental working standards, princi- ples and labour rights. The most important of these are freedom of employment, the prohibition of discrimination, the prohibition of child labour, the right to appropriate re- muneration, regulated working times and compliance with work and safety regulations. The complete text of the UN Global Compact and the recommendations of the ILO and other relevant information can be found at www.unglobal- compact.org and www.ilo.org; the Joint Declaration on Human Rights and Working Conditions in the BMW Group can be found at www.bmwgroup.com under the menu item “Responsibility”. It goes without saying that the BMW Group abides by these fundamental principles and rights worldwide. Activi- ties can only be sustainable, however, if they encompass the entire value-added chain. That is why the BMW Group not only makes high demands of itself but also expects its suppliers and partners to meet the ecological and social standards it sets. The relevant sustainability criteria there- fore play an integral part in all aspects of purchasing terms and conditions. Potential suppliers must submit a full dis- closure when completing BMW’s sustainability question- naire, an inherent component of the acceptance procedure for potential new suppliers. The BMW Group also insists that its suppliers ensure that their sub-contractors comply with set standards. Purchasing terms and conditions and other information relating to purchasing can be found in the publicly available section of the BMW Group Partner Portal at https://b2b.bmw.com. Compliance in the BMW Group Responsible and lawful conduct is fundamental to the success of the BMW Group. This approach is an integral part of our corporate culture and is the reason why cus- tomers, shareholders, business partners and the general public place their trust in us. The Board of Management and the employees of the BMW Group are obliged to act responsibly and in compliance with applicable laws and regulations. This principle has been embedded in BMW’s internal “Rules of Conduct” for many years now. In order to ensure protection against compliance-related and reputational 140 140 141 142 145 146 151 157 158 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices Compliance in the BMW Group 159 Statement on Corporate Governance risks, the Board of Management established a Compliance Committee in 2007 mandated to introduce a worldwide Compliance Organisation throughout the BMW Group. Compliance Committee operates through the Compliance Committee Office, which is organisationally allocated to the Chairman of the Board of Management. The BMW Group Compliance Committee comprises the heads of the following departments: Legal and Patents, Corporate Communication and Governmental Affairs, Group Internal Audit, Group Financial Reporting, Organi- sational Development and Group Human Resources. It manages and monitors activities necessary to avoid non- compliance with the law (Legal Compliance). These ac- tivities include training, information and communication measures, following up cases on non-compliance and im- plementing compliance requirements. The Compliance Committee reports regularly to the Board of Management on all compliance-related issues, including the progress made in setting up the Compliance Organi- sation, details of investigations performed, identified cases of non-compliance, sanctions imposed and corrective / preventative measures implemented. The BMW Group Compliance Committee BMW AG Board of Management Annual Status Report Compliance Committee Identification and monitoring Code of conduct Reporting Compliance Committee Office Communi- cation Compliance contact Training Implementation with appropriate personnel The Chairman of the Compliance Committee keeps the Audit Committee (i.e. a part of the Supervisory Board) informed on the current status of compliance activities within the BMW Group, both on a regular and a case-by- case basis as the need arises. The process of implementing the BMW Group Com- pliance Organisation was begun in 2008 and has been carried out in two steps. Implementation at BMW AG and at a large number of the Group’s German subsidiaries was completed in June 2009. At an international level, implementation at a total of 69 entities worldwide within the BMW Group was completed in November 2009. The Compliance Organisation comprises the entire set of measures taken to ensure that the BMW Group, its repre- sentative bodies, its managers and its staff act in a lawful manner. It is supplemented by a whole range of internal principles, guidelines and instructions, which in part reflect the applicable law. The various elements of the BMW Group Compliance Organisation are shown in the diagram on the left and are applicable for all BMW Group entities worldwide. To the extent that additional compliance requirements apply to individual countries or specific lines of business, these are covered by local compliance measures. The BMW Group Legal Compliance Code is at the core of the Compliance Organisation. This document explains the significance of legal compliance and provides an overview of the various areas relevant for the BMW Group. The Legal Compliance Code is available as a printed brochure and for download in German and English. In addition, translations into eight other languages (French, Spanish, Italian, Portuguese, Russian, Japanese, Thai and Korean) have been made available since 2009. Managers in particular bear a high degree of responsibility and must set a good example in the process of avoiding incidences of non-compliance. All managers are required to inform the staff working for them of the content and sig- nificance of the Legal Compliance Code and to make them aware of legal risks. Managers must, at regular intervals and on their own initiative, check compliance with the law 160 and communicate regularly with staff on this issue. Any indication of non-compliance with the law must be rigor- ously investigated. tive entities, identified legal risks and incidences of non- compliance as well as corrective or preventative measures implemented. In the course of implementation, more than 10,000 man- agers and staff received training worldwide in com pliance essentials up to the end of November 2009. The training material is available on an internet-based training platform in German and English and includes a final test. Success- ful participation in the training programme, which is docu- mented by a certificate, is mandatory for all BMW Group managers. After completion of the implementation phase, new HR processes have been introduced in order to en- sure that all newly recruited managers and promoted staff are required to undertake compliance training. This basic training is supplemented by training programmes on spe- cific compliance issues for selected target groups. In order to avoid legal risks, all members of staff are ex- pected to discuss matters with their managers and with the relevant departments within the BMW Group, in par- ticular the Legal Department, the Group Internal Audit Department and the Group Security Department. As a further point of contact (telephone or e-mail), the BMW Group Compliance Contact has also been set up both for employees and non-employees to answer any questions that may arise regarding compliance. This also applies if weaknesses or circumstances have been identified which could result in non-compliance with the law. Information can also be provided anonymously if so desired. Compliance-related queries and all matters to which at- tention has been drawn are documented and followed up by the BMW Group Compliance Committee Office using an electronic case management system. If necessary, Group Internal Audit, Group Security and the legal depart- ments may be called upon to assist in the investigation process. A reporting system is currently being established for the Compliance Organisation which will enable compliance- relevant issues to be reported to the Compliance Com- mittee on a regular basis, and, if necessary, on an ad hoc basis. To this end, a current total of 132 Compliance Managers (at 31 December 2009) report on compliance matters covering all areas of the BMW Group. This in- cludes reporting on the compliance status of the respec- Compliance with and implementation of the Legal Com- pliance Code is reviewed regularly by Group Internal Audit and Group Security. For this purpose, the Group Internal Audit Department also performs on-site audits and inter- views employees. It is essential that employees are aware of and comply with applicable legal regulations. The BMW Group does not tolerate violations of law by its employees. Culpable vio- lations of law may result in labour law sanctions and per- sonal liability for the employee involved. In order to avoid this, the BMW Group’s employees are kept fully informed of the tools and measures used by the Compliance Organisation via various internal channels. The central means of communication is the Compliance website within the BMW Group’s intranet where em- ployees can find compliance-related information and also have access to training materials in both German and English. Employees can use the website to access fre- quently asked questions (and answers) on compliance- related issues. A special service area was added to the website in 2009 where various practical tools and aids are made available to employees, which help them to deal with typical compliance-related matters. Compliance is also an important factor in terms of safe- guarding the future of the BMW Group’s workforce. For that reason, in June 2009 the Board of Management and the national and international employee representative bodies of the BMW Group signed a set of Joint Principles for Lawful Conduct. In doing so, all parties involved gave a commitment to the principles contained in the BMW Group Legal Compliance Code and to a trustful coopera- tion in all matters relating to compliance. In the interest of investor protection and in order to ensure that the BMW Group complies with regulations relating to potential insider information, as early as 1994 the Board of Management appointed an Ad-hoc Committee con- sisting of representatives of various specialist departments and whose members examine the relevance of issues for ad-hoc disclosure purposes. All persons working on behalf 140 140 141 142 145 146 151 157 158 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board Compensation Report Information on Corporate Governance Practices Compliance in the BMW Group 161 Statement on Corporate Governance of the enterprise who have access to insider information in accordance with existing rules have been, and continue to be, included in a corresponding, regularly updated list and informed of the duties arising from insider rules. The full text of the BMW Group’s Legal Compliance Code can be viewed / downloaded at www.bmwgroup.com under the menu items “Company” and “Company Portrait”. 162 Other Information BMW AG Principal Subsidiaries Principal subsidiaries of BMW AG at 31 December 2009 Domestic1 BMW INTEC Beteiligungs GmbH, Munich3 BMW Bank GmbH, Munich3 BMW Finanz Verwaltungs GmbH, Munich BMW Ingenieur-Zentrum GmbH + Co., Dingolfing BMW Maschinenfabrik Spandau GmbH, Berlin BMW Leasing GmbH, Munich3 BMW Hams Hall Motoren GmbH, Munich4 BMW Fahrzeugtechnik GmbH, Eisenach3 BMW M GmbH Gesellschaft für individuelle Automobile, Munich3 Equity in euro million Net result in euro million Capital investment in % 3,549 404 211 47 44 16 15 11 5 – – 5 65 2 – – – – 100 100 100 100 100 100 100 100 100 1 In the case of German subsidiaries, based on financial statements drawn up in accordance with HGB. 2 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. 3 profit and loss transfer agreement with BMW AG 4 profit and loss transfer agreement with a subsidiary of BMW AG 5 below euro 500,000 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts 163 Other Information Principal subsidiaries of BMW AG at 31 December 2009 Foreign2 BMW Österreich Holding GmbH, Steyr BMW Motoren GmbH, Steyr BMW China Automotive Trading Ltd., Beijing BMW Russland Trading OOO, Moscow BMW Austria Gesellschaft m. b. H., Salzburg BMW Holding B. V., The Hague BMW Australia Finance Ltd., Melbourne, Victoria BMW (South Africa) (Pty) Ltd., Pretoria BMW (Schweiz) AG, Dielsdorf BMW Italia S. p. A., Milan BMW Finance N. V., The Hague BMW Overseas Enterprises N. V., Willemstad BMW Japan Corp., Tokyo BMW Japan Finance Corp., Tokyo BMW Belgium Luxembourg S. A. / N. V., Bornem BMW France S. A., Montigny le Bretonneux BMW Canada Inc., Whitby BMW Australia Ltd., Melbourne, Victoria BMW Portugal Lda., Lisbon BMW Korea Co., Ltd., Seoul BMW Hellas Trade of Cars SA, Athens BMW New Zealand Ltd., Auckland BMW Sverige AB, Stockholm BMW Automotive (Ireland) Ltd., Dublin BMW Nederland B. V., The Hague 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., St. Julians BMW Malta Finance Ltd., St. Julians 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 Corp., Wilmington, Del. BMW Manufacturing, LLC, Wilmington, Del. BMW Financial Services NA, LLC, Wilmington, Del. BMW of North America, LLC, Wilmington, Del. BMW US Capital, LLC, Wilmington, Del. Equity in euro million Net result in euro million Capital investment in % 1,219 741 472 71 50 266 140 405 – 53 – 5 5,165 1,428 477 444 409 390 337 65 273 350 211 191 142 70 49 29 25 24 23 21 – 2 497 983 637 222 153 1,055 833 592 365 303 3 1,186 577 440 342 276 25 71 21 76 1 1 5 20 19 58 73 19 – 3 6 –1 5 – 3 – 3 –12 –14 119 – 119 38 40 83 43 5 5 41 1 8 – 105 96 15 49 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 164 BMW Group Ten-year Comparison Deliveries to customers Automobiles3 Motorcycles4 Production Automobiles3 Motorcycles5 Financial Services 2009 2008 2007 2006 2005 20041 2003 20022 2001 2000 units units units units 1,286,310 1,435,876 1,500,678 1,373,970 1,327,992 1,208,732 1,104,916 1,057,344 87,306 101,685 102,467 100,064 97,474 92,266 92,962 92,599 1,258,417 1,439,918 1,541,503 1,366,838 1,323,119 1,250,345 1,118,940 1,090,258 82,631 104,220 104,396 103,759 92,012 93,836 89,745 93,010 905,657 84,713 1,011,874 74,614 Automobiles3 Motorcycles4 Deliveries to customers 946,730 90,478 1,026,775 74,397 Production Automobiles3 Motorcycles5 Contract portfolio Business volume (based on balance sheet carrying amounts)6 contracts 3,085,946 3,031,935 2,629,949 2,270,528 2,087,368 1,843,399 1,623,425 1,443,236 1,297,702 1,317,150 Contract portfolio euro million 61,202 60,653 51,257 44,010 40,428 32,556 28,647 26,505 25,306 24,958 Business volume (based on balance sheet carrying amounts)6 Income Statement Revenues Gross profit margin Group7 Profit before financial result Profit before tax Return on sales (earnings before tax / revenues) Income taxes Effective tax rate Net profit for the year Balance Sheet Non-current assets Current assets Equity Equity ratio Group Non-current provisions and liabilities Current provisions and liabilities Balance sheet total Cash Flow Statement Cash and cash equivalents at balance sheet date Operating cash flow 8 Capital expenditure Capital expenditure ratio (capital expenditure / revenues) Personnel Workforce at the end of year9 Personnel cost per employee Dividend Dividend total euro million 50,681 53,197 56,018 48,999 46,656 44,335 41,525 42,411 38,463 37,226 Revenues % euro million euro million % euro million % euro million euro million euro million euro million % euro million euro million 10.5 289 413 0.8 203 49.2 210 62,009 39,944 19,915 19.5 45,119 36,919 11.4 921 351 0.7 21 6.0 330 62,416 38,670 20,273 20.1 41,526 39,287 euro million 101,953 101,086 euro million euro million euro million % 7,767 4,921 3,471 6.8 7,454 4,471 4,204 7.9 21.8 4,212 3,873 6.9 739 19.1 3,134 56,619 32,378 21,744 24.4 33,469 33,784 88,997 2,393 6,246 4,267 7.6 23.1 4,050 4,124 8.4 1,250 30.3 2,874 50,514 28,543 19,130 24.2 31,372 28,555 79,057 1,336 5,373 4,313 8.8 22.9 3,793 3,287 7.0 1,048 31.9 2,239 47,556 27,010 16,973 22.8 29,509 28,084 74,566 1,621 6,184 3,993 8.6 23.2 3,774 3,583 8.1 1,341 37.4 2,242 40,822 26,812 16,534 24.4 26,517 24,583 67,634 2,128 6,157 4,347 9.8 22.7 3,353 3,205 7.7 1,258 39.3 1,947 36,921 24,554 16,150 26.3 22,090 23,235 61,475 1,659 4,970 4,245 10.2 22.8 3,505 3,297 7.8 1,277 38.7 2,020 34,667 20,844 13,871 25.0 20,028 21,612 55,511 2,333 4,553 4,042 9.5 25.3 3,356 3,242 8.4 1,376 42.4 1,866 31,282 19,977 10,770 21.0 19,223 21,266 51,259 2,437 4,304 3,516 9.1 euro 96,230 72,349 100,041 75,612 107,539 76,704 106,575 76,621 105,798 75,238 105,972 73,241 104,342 73,499 101,395 69,560 97,275 66,711 93,624 Workforce at the end of year9 63,548 Personnel cost per employee euro million 197 197 694 458 41910 419 392 351 350 310 Dividend total Dividend per share of common stock / preferred stock euro 0.30 / 0.32 0.30 / 0.32 1.06 / 1.08 0.70 / 0.72 0.64 / 0.66 0.62 / 0.64 0.58 / 0.60 0.52 / 0.54 0.52 / 0.54 0.46 / 0.48 Dividend per share of common stock / preferred stock Financial Services Income Statement Gross profit margin Group7 Profit before financial result Profit before tax 22.8 2,065 2,032 5.5 823 Income taxes 40.5 Effective tax rate 1,209 Net profit for the year Balance Sheet 30,079 Non-current assets 19,261 Current assets 9,432 Equity 19.1 Equity ratio Group Return on sales (earnings before tax / revenues) 17,386 Non-current provisions and liabilities 22,522 Current provisions and liabilities 49,340 Balance sheet total Cash Flow Statement Cash and cash equivalents at balance sheet date 2,927 3,966 2,781 Operating cash flow 8 Capital expenditure 7.5 Capital expenditure ratio (capital expenditure / revenues) Personnel Dividend 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts 1 adjusted for new accounting treatment of pension obligations 2 reclassified after harmonisation of internal and external reporting systems 3 including Rover Cars up to 9 May 2000 and Land Rover up to 30 June 2000 4 excluding C1, sales volume to 2003: 32,859 units, excluding Husqvarna Motorcycles (13,052 motorcycles) 5 from 2006 including BMW G 650 X assembly by Piaggio S. p. A. / excluding C1 production by Bertone, production volume C1 up to 2002: 33,489 units, excluding Husqvarna Motorcycles (10,612 motorcycles) 6 amount computed on the basis of balance sheet figures: until 2007 from the Group balance sheet, from 2008 onwards from the Financial Services segment balance sheet 7 research and development costs included in cost of sales with the effect from 2008 8 Figures are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from operating activities of the Automobiles segment. 9 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners. 10 adjustment to dividend due to buy-back of treasury shares 165 Other Information 2009 2008 2007 2006 2005 20041 2003 20022 2001 2000 1,286,310 1,435,876 1,500,678 1,373,970 1,327,992 1,208,732 1,104,916 1,057,344 87,306 101,685 102,467 100,064 97,474 92,266 92,962 92,599 1,258,417 1,439,918 1,541,503 1,366,838 1,323,119 1,250,345 1,118,940 1,090,258 82,631 104,220 104,396 103,759 92,012 93,836 89,745 93,010 905,657 84,713 1,011,874 74,614 Deliveries to customers Automobiles3 Motorcycles4 946,730 90,478 1,026,775 74,397 Production Automobiles3 Motorcycles5 Business volume (based on balance sheet carrying amounts)6 euro million 61,202 60,653 51,257 44,010 40,428 32,556 28,647 26,505 25,306 24,958 contracts 3,085,946 3,031,935 2,629,949 2,270,528 2,087,368 1,843,399 1,623,425 1,443,236 1,297,702 1,317,150 euro million 50,681 53,197 56,018 48,999 46,656 44,335 41,525 42,411 38,463 37,226 Deliveries to customers Automobiles3 Motorcycles4 Production Automobiles3 Motorcycles5 Financial Services Contract portfolio Income Statement Revenues Gross profit margin Group7 Profit before financial result Profit before tax Income taxes Effective tax rate Net profit for the year Balance Sheet Non-current assets Current assets Equity Equity ratio Group Return on sales (earnings before tax / revenues) Non-current provisions and liabilities Current provisions and liabilities Balance sheet total Cash Flow Statement Cash and cash equivalents at balance sheet date Operating cash flow 8 Capital expenditure Capital expenditure ratio (capital expenditure / revenues) Personnel Workforce at the end of year9 Personnel cost per employee Dividend Dividend total units units units units % % % euro million euro million euro million euro million euro million euro million euro million % euro million euro million euro million euro million euro million % 10.5 289 413 0.8 203 49.2 210 62,009 39,944 19,915 19.5 45,119 36,919 7,767 4,921 3,471 6.8 11.4 921 351 0.7 21 6.0 330 62,416 38,670 20,273 20.1 41,526 39,287 7,454 4,471 4,204 7.9 21.8 4,212 3,873 6.9 739 19.1 3,134 56,619 32,378 21,744 24.4 33,469 33,784 88,997 2,393 6,246 4,267 7.6 23.1 4,050 4,124 8.4 1,250 30.3 2,874 50,514 28,543 19,130 24.2 31,372 28,555 79,057 1,336 5,373 4,313 8.8 euro million 101,953 101,086 1 adjusted for new accounting treatment of pension obligations 2 reclassified after harmonisation of internal and external reporting systems 3 including Rover Cars up to 9 May 2000 and Land Rover up to 30 June 2000 4 excluding C1, sales volume to 2003: 32,859 units, excluding Husqvarna Motorcycles (13,052 motorcycles) 5 from 2006 including BMW G 650 X assembly by Piaggio S. p. A. / excluding C1 production by Bertone, production volume C1 up to 2002: 33,489 units, excluding Husqvarna Motorcycles (10,612 motorcycles) 6 amount computed on the basis of balance sheet figures: until 2007 from the Group balance sheet, from 2008 onwards from the Financial Services segment balance sheet 7 research and development costs included in cost of sales with the effect from 2008 8 Figures are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from 9 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners. operating activities of the Automobiles segment. 10 adjustment to dividend due to buy-back of treasury shares 22.9 3,793 3,287 7.0 1,048 31.9 2,239 47,556 27,010 16,973 22.8 29,509 28,084 74,566 1,621 6,184 3,993 8.6 23.2 3,774 3,583 8.1 1,341 37.4 2,242 40,822 26,812 16,534 24.4 26,517 24,583 67,634 2,128 6,157 4,347 9.8 22.7 3,353 3,205 7.7 1,258 39.3 1,947 36,921 24,554 16,150 26.3 22,090 23,235 61,475 1,659 4,970 4,245 10.2 22.8 3,505 3,297 7.8 1,277 38.7 2,020 34,667 20,844 13,871 25.0 20,028 21,612 55,511 2,333 4,553 4,042 9.5 25.3 3,356 3,242 8.4 1,376 42.4 1,866 31,282 19,977 10,770 21.0 19,223 21,266 51,259 2,437 4,304 3,516 9.1 euro 96,230 72,349 100,041 75,612 107,539 76,704 106,575 76,621 105,798 75,238 105,972 73,241 104,342 73,499 101,395 69,560 97,275 66,711 Financial Services Contract portfolio Business volume (based on balance sheet carrying amounts)6 Income Statement Revenues Gross profit margin Group7 Profit before financial result Profit before tax Return on sales (earnings before tax / revenues) Income taxes 22.8 2,065 2,032 5.5 823 40.5 Effective tax rate 1,209 Net profit for the year Balance Sheet 30,079 Non-current assets 19,261 Current assets 9,432 Equity 19.1 Equity ratio Group 17,386 Non-current provisions and liabilities 22,522 Current provisions and liabilities 49,340 Balance sheet total 2,927 3,966 2,781 Cash Flow Statement Cash and cash equivalents at balance sheet date Operating cash flow 8 Capital expenditure 7.5 Capital expenditure ratio (capital expenditure / revenues) 93,624 Personnel Workforce at the end of year9 63,548 Personnel cost per employee Dividend Dividend per share of common stock / preferred stock euro 0.30 / 0.32 0.30 / 0.32 1.06 / 1.08 0.70 / 0.72 0.64 / 0.66 0.62 / 0.64 0.58 / 0.60 0.52 / 0.54 0.52 / 0.54 0.46 / 0.48 Dividend per share of common stock / preferred stock euro million 197 197 694 458 41910 419 392 351 350 310 Dividend total 166 BMW Group Locations — R — R — R — S — S — S — R — P — S — S — S — S — S — A — P — R — S — S — S — R — S — A — S — A — S — A — S — S — A — P — S — S — S — S — S — S — S — A — P — P — S — P — S — R — H — P — P — R — P — P — P — S — C — P — R — S — S — S — S — S — P — S — S — S — S — S — S — S — P — P — P — P — S — S — S — S — S The BMW Group is present in the world markets with 24 production and assembly plants, 43 sales subsidiaries and a research and development network. — H Headquarters — R Research and Development BMW Group Research and Innovation Centre (FIZ), Munich BMW Group Forschung und Technik, Munich BMW 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 Entwicklung Japan, Tokyo, Japan BMW Group Entwicklung China, Beijing, China BMW Group Entwicklung USA, Woodcliff Lake, USA 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts 167 Other Information — S — S — S — S — P — P — P — P — P — P — P — P — S — S — S — S — S — S — S — S — S — S — S — S — S — S — R — R — P — P — R — R — R — R — R — R — S — S — S — S — S — S — P — P — R — R — S — S — S — S — S — R — S — R — A — A — S — S — S — S — A — A — S — S — A — A — S — A — S — S — A — S — A — A — S — S — S — S — P — P — S — S — S — S — S — S — S — S — S — S — S — S — A — A — P — P — S — S — S — P — P — S — P — P — S — S — P — R — R — P — P — R — P — S — P — P — C — S — C — P — P — P — P — P — R — R — R — H — H — P — S — S — S — S — S — P — P — S — S — S — S — S — S — S — S — S — S — S — S — S — S — S — S — S — P Production — C Contract production — S Sales subsidiary markets 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 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 Wackersdorf plant Husqvarna Motorcycles S. r. l., Cassinetta di Biandronno, Italy Magna Steyr Fahrzeugtechnik, Austria — A Assembly plants CKD production Cairo, Egypt CKD production Chennai, India CKD production Jakarta, Indonesia CKD production Kaliningrad, Russia CKD production Kulim, Malaysia CKD production Rayong, Thailand Slovakia Slovenia South Africa South Korea Spain Sweden Switzerland Thailand USA Argentina Australia Austria Belgium Brazil Bulgaria China Canada Czech Republic Denmark Dubai Finland France Germany Great Britain Greece Hungary India Indonesia Ireland Italy Japan Malaysia Malta Mexico Netherlands New Zealand Norway Panama Poland Portugal Romania Russia Singapore 168 Glossary Accident frequency Shows the number of reportable industrial accidents per one million hours worked. Definition of industrial accident in accordance with the German Social Code: Industrial accidents are accidents involving insured individuals and resulting from the pursuit of their insured activity on the industrial site. Accidents are events of limited duration that impact the body externally, leading to damage to health or death. ACEA Abbreviation for “Association des Constructeurs Européens d’Automobiles” (European Automobile Manufacturers Association). Common stock Stock with voting rights (cf. preferred stock). Cost of materials Comprises all expenditure to purchase raw materials and supplies. DAX Abbreviation for “Deutscher Aktienindex”, the German Stock Index. The index is based on the weighted market prices of the 30 largest German stock corporations (by stock market capitalisation). Deferred taxes Accounting for deferred taxes is a method of allocating tax expense to the appropriate accounting period. Derivatives Financial products, whose measurement is derived princi- pally from market price, market price fluctuations and ex- pected market price changes of the underlying instrument (e. g. indices, stocks or bonds). DJSI World Abbreviation for “Dow Jones Sustainability Index World”. A family of indexes created by Dow Jones and the Swiss investment agency SAM Sustainability Group for com- panies with strategies based on a sustainability concept. The BMW Group has been one of the leading companies in the DJSI since 1999. 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, Depre- ciation and Amortisation”. The profit before income taxes, minority interest, financial result and depreciation / amor- tisation. Effectiveness The degree to which offsetting changes in fair value or cash flows attributable to a hedged risk are achieved by the hedging instrument. Efficient Dynamics The aim of Efficient Dynamics is to reduce consumption and emissions whilst simultaneously increasing dynamics and performance. This involves a holistic approach to achieving optimum automobile potential, ranging from efficient engine technologies and lightweight construction to comprehensive energy and heat management inside the vehicle. Equity ratio The proportion of equity (= subscribed capital, reserves, accumulated other equity and minority interest) to the balance sheet total. Free cash flow Free cash flow corresponds to the cash inflow from operat- ing activities of the Automobiles segment less the cash outflow for investing activities of the Automobiles segment. Gross margin Gross profit as a percentage of revenues. IFRSs International Financial Reporting Standards, intended to ensure global comparability of financial reporting and con- sistent 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. ISO 14001 An internationally recognised standard for environmental management systems. Operating cash flow Cash inflow from the operating activities of the Automobiles segment. 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts 169 Other Information Preferred stock Stock which receives a higher dividend than common stock, but without voting rights. Production network The BMW Group production network consists worldwide of 17 plants, six assembly plants and one contract produc- tion plant. Within this network, the plants supply one an- other with systems and components and are all character- ised by a high level of productivity, agility and flexibility. Rating Standardised evaluation of a company’s credit standing which is widely accepted on the global capital markets. Ratings are published by independent rating agencies, e. g. Standard & Poor’s or Moody’s, based on their analysis of a company. Return on sales Pre-tax: Post-tax: Profit as a percentage of revenues. Profit before tax as a percentage of revenues. Risk management An integral component of all business processes. Follow- ing enactment of the German Law on Control and Trans- parency within Businesses (KonTraG), all companies listed on a stock exchange in Germany are required to set up a risk management system. The purpose of this system is to identify risks at an early stage which could have a signifi- cant adverse effect on the assets, liabilities, financial posi- tion 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 appro- priate system, to document that system and monitor it reg- ularly with the aid of the internal audit department. Sales locations Sales locations include separate legal entities, non-sepa- rate entities and regional offices. In addition, 105 markets are serviced by 97 importers. Subscribed capital The share capital of a company is computed by multiplying the nominal value of the shares by the number of shares. Subsidiaries Subsidiaries are those enterprises which, either directly or indirectly, are under the uniform control of the manage- ment 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 shareholder – has control (directly or indirectly) over another enterprise on the basis of a control agreement or a provision in the statutes of that enterprise. Supplier relationship management Supplier relationship management (SRM) uses focused procurement strategies to organise networked supplier relationships, optimise processes for supplier qualification and selection, ensure the application of uniform standards throughout the Group and create efficient sourcing and procurement processes along the whole value added chain. Sustainability Sustainability, or sustainable development, gives equal consideration to ecological, social and economic develop- ment. In 1987 the United Nations “World Commission on Environment and Development” defined sustainable de- velopment as development that meets the needs of the present without compromising the ability of future genera- tions to meet their own needs. The economic relevance of corporate sustainability to the BMW Group is evident in three areas: resources, reputation and risk. 170 Index 59, 81, 84 A Accounting principles Annual General Meeting 107 – 108, 140, 148 – 150, 155 Application of § 264 (3) and § 264b of the German Commercial Code (HGB) Apprentices 27, 95 132 09 – 10, 13, 42, 45 – 46, 54, B Balance sheet structure Board of Management 56, 64, 82, 107, 130 – 133, 137 – 141, 144 – 160, 169 43, 52, 56, 69, 79, 111, 126, 168 Bonds 55 07 – 11, 13, 29, 31, 42, 45 – 47, 05, 13, 52 – 55, 78 – 79, 81, 130, 05, 13, 52, 54, 59, 135 – 136, 165 52 – 55, 60, 77, 79, 107, 05, 13, 42, 48, 52 – 55, 65, 79, 86 – 87, 08 – 09, 11, 68 – 69, 131, 140, 150, 07, 22 – 23, 31 – 34, 36, 40, 66 08 – 09, 56, 132, 151 C Capital expenditure Cash and cash equivalents 121, 123, 130, 165 Cash flow 120 – 121, 123 – 127, 130, 139, 165, 168 – 169 Cash flow statement 139, 165 CO2 emissions Compensation Report Compliance 158 – 161 Consolidated companies 107, 130 – 131, 140, 150, 158 – 161 Consolidation principles 139 – 140, 150, 158 – 161 Contingent liabilities 131 – 132, 140, 150, 158 – 161 Corporate Governance 148, 150 – 151, 155, 157 Cost of materials Cost of sales 100, 165 Current assets 135 – 137, 165 Current provisions and liabilities Current taxes 76 – 79, 92, 105, 114 – 115 56 – 57, 168 55, 77, 165 08 – 09, 11, 68 – 69, 88, 119, 08, 56, 131, 140 – 141, 146, 55, 60, 77, 79, 85 – 86, 93, 101, 105, 08 – 09, 11, 68 – 69, 83, 131, 08 – 09, 11, 68 – 69, 82 – 83, 50, 51, 58 – 59, 61, 75, 79, 81, 84, 88, 90, 131 D 42, 44, 152 – 153, 168 DAX 67, 126 Dealer organisation Declaration with respect to the Corporate Governance Code Deferred taxes Development 42, 44, 46, 48, 50 – 51, 54, 58, 61, 63 – 70, 72, 75, 81, 84 – 86, 88, 90 – 91, 99 – 100, 105, 108, 110, 138 – 139, 144 – 147, 151 – 152, 158 – 159, 165 – 166, 169 Dividend 107 – 108, 130, 152, 165, 169 Dow Jones Sustainability Index World 54, 74, 79, 87, 92 – 94, 97, 108, 168 07 – 08, 11, 13, 16, 27, 29 – 30, 33 – 38, 13, 29, 43, 45 – 46, 52, 54, 79 – 80, 84, 95, 03, 44, 168 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts 43, 50, 75, 95 11, 33 – 34, 36, 39 – 40, 66, 72, 168 E Earnings per share Efficient Dynamics Employees 05, 09, 11, 22, 27 – 31, 42, 45, 47, 54, 56 – 57, 59, 63, 68 – 69, 95 – 96, 107, 109 – 110, 140, 146 – 148, 153 – 154, 157 – 158, 160, 165 Equity 25, 42 – 43, 47 – 51, 54 – 55, 58 – 60, 75, 77, 79 – 83, 86 – 89, 91, 93, 99, 101, 107 – 108, 111, 113, 125 – 126, 136, 139, 162 – 163, 165, 168 Exchange rates Explanatory notes to the cash flow statements 54, 83, 84, 111, 128 130 47, 53 – 54, 59, 64 – 65, 86 – 89, 53 – 54, 58, 77, 86 – 87, 89, 103, 110, F Financial assets 121, 123, 126 Financial instruments 92, 108, 118, 120, 124 – 126, 128 – 129, 157 Financial liabilities 88, 108 – 109, 115, 118, 121, 123, 126 – 127 Financial result 133, 136, 165, 168 Financial Services 65, 67 – 68, 73, 79, 81 – 82, 101, 130, 133, 136, 163, 165 Fleet consumption Foreign currency translation 48 – 49, 52 – 54, 56, 65, 77, 79, 85, 07 – 09, 12, 25 – 27, 48 – 53, 55, 58, 04 – 05, 12, 49 – 51, 61, 75, 88, 92, 111, 83, 93 34 G Group tangible, intangible and investment assets 100 – 101 98, 114 62, 81, 83, 87 – 88, 93, 95, 97, 101, 50, 61, 75, 79, 87, 92, 94, 165, 168 I Income statement 111, 114, 125 – 126, 139 Income tax assets 105 Income taxes Income tax liabilities Intangible assets 84 – 86, 90, 93, 99, 100, 136 – 137 Internal financing Inventories Investments 79, 82 – 83, 86, 91 – 93, 99, 101, 103, 111, 119, 121, 123 – 125, 129 – 130, 133, 136 Investments accounted for using the equity method and other investments 26, 54, 59 – 60, 77, 79, 84, 87 – 88, 106 13, 51 – 52, 54, 58 – 59, 66, 77, 79, 13, 21, 23, 50 – 51, 54, 59 – 61, 69, 75, 77, 51, 86, 101 56, 79 K Key data per share 43 L Lease business Leased products 136 – 137 Locations 12, 25, 54, 65 52, 54, 77, 79, 85, 93, 99, 101, 28, 31 – 33, 36, 40, 166, 169 171 Other Information M Mandates of members of the Board of Management Mandates of members of the Supervisory Board Marketable securities 101, 103 – 104, 108, 121, 123 – 125 Motorcycles 73, 75, 77, 81, 133, 135 – 136, 165, 167 143 51 – 54, 60, 79, 81, 86, 91, 99, 05, 08, 12, 16, 23 – 24, 27, 48 – 52, 58 – 59, 145 05, 13, 29, 50 – 52, 54, 61, 74 – 75, 79, 84, 86, N Net profit 95, 108, 130, 152, 165 New financial reporting rules Non-current assets 165 Non-current provisions and liabilities 88 – 89 55, 77, 79, 85, 101, 105, 135 – 137, 55, 77, 165 50 – 51, 75, 92 O Other disclosures relating to the income statement Other financial result Other investments Other operating expenses Other operating income Other provisions Outlook 50, 59, 75, 91, 100 50 – 51, 61, 75, 83, 91 56, 60, 77, 88, 114 65, 70 – 71, 109 54, 77, 82, 86, 99, 101, 121, 123 – 124 95 04 – 05, 12, 49 – 50, 52, 129, 136, 165, 05, 08, 21 – 24, 28, 30 – 33, 35, 37 – 39, 46, 60, 105 162 – 163 28, 91, 95 21, 30, 66, 169 04 – 05, 12, 49 – 51, 133, 48 – 49, 54 – 55, 59 – 60, 77, 88, P Pension provisions 109 – 111, 132, 154 – 155 Personnel costs Prepayments Principal subsidiaries Production 54, 65 – 67, 72, 84 – 85, 87, 91, 100, 118, 128, 145, 147, 165 – 167, 169 Production network Profit before financial result 165 Profit before tax 169 Property, plant and equipment 77, 79, 84 – 86, 90, 93, 100, 119, 136 – 137 Purchases 38, 52, 65, 129 R Rating Receivables from sales financing 102 – 103, 121, 123, 126 Related party relationships Remuneration System Report of the Supervisory Board Research 155, 165 – 166 Research and development costs 81, 90, 165 Result from equity accounted investments 91 65, 67, 87, 108 – 109, 126 – 127, 169 130 28 – 30, 141 52, 54, 77, 79, 86, 06 – 11 50 – 51, 58, 61, 75, 50, 75, 79, 13, 51 – 52, 54, 58 – 60, 25, 36 – 37, 40, 50 – 51, 58, 61, 75, 81, 84, 90, Return on sales Revenue reserves Risk management 146, 148, 150, 169 29, 50 – 51, 58, 152, 165, 169 60 – 61, 77, 107 – 108 07, 09, 11, 63 – 65, 67 – 68, 128, 157 81, 90, 133 50 – 51, 75, 91 07 – 08, 12, 16, 18 – 21, 23 – 24, 33, 74, 81, 97, 139 09, 13, 29, 42 – 43, 45 – 46, 50, 54, 59, 75, 80, S Sales and administrative costs Sales volume 50 – 51, 54, 68, 73, 165 Segment information Shareholdings of members of the Board of Management and the Supervisory Board Statement of Comprehensive Income Stock 84, 95, 107, 131 – 132, 140 – 141, 152, 155, 157, 165, 168 – 169 Subscribed capital Subsidiaries 94, 96, 99 – 101, 105, 108, 117, 119, 121, 123, 125 – 126, 131, 157, 159, 162 – 163, 166, 169 Supervisory Board 130 – 132, 140 – 142, 146 – 157, 159 Suppliers Sustainability 158, 168 – 169 51, 54, 59 – 60, 82 – 84, 86, 88, 91 – 92, 03, 29, 31, 35, 38, 43 – 44, 146 – 147, 38, 44, 66 – 67, 129, 149, 158 06 – 11, 13, 42, 45 – 47, 64, 54, 60, 77, 168 – 169 T Tangible, intangible and investment assets 100 – 101 Trade payables 127 Trade receivables 54, 60, 77, 79, 105 – 107, 121, 123 49, 54, 56, 60, 77, 79, 118, 121, 123, 60, 79, 98, W Workforce 05, 27 – 29, 44, 57, 59, 69, 95, 160, 165 This version of the Annual Report is a translation from the German version. Only the original German version is binding. 172 Index of graphs 13 04 14 04 Finances Profit before financial result Profit before tax Revenues 04 BMW Group Capital expenditure and operating cash flow BMW Group Revenues by region 13 Exchange rates compared to the Euro Oil price trend 15 Precious metals price trend Steel price trend 15 Contract portfolio of BMW Group Financial Services Contract portfolio retail customer financing of BMW Group Financial Services 2009 Regional mix of BMW Group purchase volumes 2009 38 Change in cash and cash equivalents Balance sheet structure – Automobiles segment Balance sheet structure Group BMW Group Value added 2009 55 57 26 25 15 53 Stock Development of BMW stock compared to stock exchange indices 42 55 18 Production and sales volume 04 Deliveries of automobiles BMW Group Deliveries of automobiles by region and market BMW Group – key automobile markets 2009 Deliveries of BMW diesel automobiles MINI brand cars in 2009 – analysis by model variant Automobile production of the BMW Group by plant in 2009 BMW motorcycles delivered BMW Group – key motorcycle markets 2009 BMW motorcycles in 2009 – analysis by series 22 23 20 24 18 24 21 Workforce BMW Group Apprentices at 31 December Employee fluctuation ratio BMW AG 28 Share of women in management positions at BMW AG Accident frequency at BMW Group Compliance Committee 159 28 29 27 31 31 Environment CO2 emissions per vehicle produced Energy consumed per vehicle produced Process wastewater per vehicle produced Water consumption per vehicle produced Roadmap of the BMW Group for sustainable mobility Volatile organic compounds (VOC) per vehicle produced Waste for removal per vehicle produced Development of CO2 emissions of BMW Group cars in Europe 32 32 33 34 33 33 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts 173 Other Information Financial Calendar Annual Accounts Press Conference Financial Analysts’ Meeting Quarterly Report to 31 March 2010 Annual General Meeting Quarterly Report to 30 June 2010 Quarterly Report to 30 September 2010 Annual Report 2010 Annual Accounts Press Conference Financial Analysts’ Meeting Quarterly Report to 31 March 2011 Annual General Meeting Quarterly Report to 30 June 2011 Quarterly Report to 30 September 2011 17 March 2010 18 March 2010 5 May 2010 18 May 2010 3 August 2010 3 November 2010 15 March 2011 15 March 2011 16 March 2011 4 May 2011 12 May 2011 2 August 2011 3 November 2011 174 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 89 382-1 46 61 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. 162 162 164 166 168 170 172 173 174 Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Index of graphs Financial Calendar Contacts Number ONE Creating individual mobility of the future. Growth Future Developing a growth market. Customers Winning new customers through technological leadership. Profitability Preparing for the future by thinking ahead. Falzmarke Imagetitel und Klappe innen Hakan Kaya and his family find the BMW ActiveHybrid X6 appealing. Connecting emotions Our changing world constantly demands new ideas. At the BMW Group, we are working to create cutting-edge mobility solutions for the future. We are a sustainable company. That is why we accept responsibility for resources, the environment and society. Our goal is clear: for every person to be able to experience the freedom of indi- vidual mobility. We offer premium solutions for per- sonal transportation. Our strong brands and outstanding products inspire and impress our customers around the world. We have a clear strategy which we implement con- sistently. That is what makes the BMW Group different. Connecting emotions Vehicle fleet Consumption and emissions data of BMW Group vehicles Values measured in accordance with the New European Driving Cycle (EU Directive: 80 / 1268 / EEC in the relevant applicable version). Valid for vehicles with a European country specification. Vehicles with average CO2 emissions of below / maximum 140 grams CO2 / km are highlighted. Model BMW 116i 3-door 4 116i 3-door 4, 6 118i 3-door 4 120i 3-door 4 130i 3-door 4 116d 3-door 1 118d 3-door 4 120d 3-door 4 123d 3-door 4 116i 5-door 4 116i 5-door 4, 6 118i 5-door 4 120i 5-door 4 130i 5-door 4 116d 5-door 1 118d 5-door 4 120d 5-door 4 123d 5-door 4 120i Coupé 4 125i Coupé 4 135i Coupé 4 118d Coupé 4 120d Coupé 4 123d Coupé 4 118i Convertible 4 120i Convertible 4 125i Convertible 4 135i Convertible 4 118d Convertible 4, 7 120d Convertible 4, 7 123d Convertible 4 316i Sedan 4, 8 318i Sedan 4 320i Sedan 4 325i Sedan 4 325i xDrive Sedan 4 330i Sedan 4 330i xDrive Sedan 4 335i Sedan 4 335i xDrive Sedan 4 316d Sedan 1, 4 318d Sedan 4 320d Sedan 4 320d xDrive Sedan 4 320d EfficientDynamics Edition Sedan 4 325d Sedan 4 330d Sedan 4 330d xDrive Sedan 4 335d Sedan 2, 4 M3 4 316i Touring 1, 4, 8 318i Touring 4 320i Touring 4 325i Touring 4 Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) 7.9 (8.7) 7.9 (8.9) 7.9 (8.7) 8.6 (8.9) 12.4 (12.5) 5.3 5.4 (6.7) 5.9 (6.7) 6.4 (6.9) 7.9 (8.7) 7.9 (8.9) 7.9 (8.7) 8.6 (8.9) 12.4 (12.5) 5.3 5.4 (6.7) 5.9 (6.7) 6.4 (6.9) 8.6 (8.9) 11.9 (11.7) 12.1 (11.7) 5.4 (6.7) 5.9 (6.7) 6.4 (6.9) 8.5 (9.2) 8.8 (9.4) 12.1 (11.9) 12.2 (11.8) 5.8 (7.3) 6.2 (7.6) 6.6 (7.1) 8.1 (8.9) 8.1 (8.7) 8.3 (9.3) 9.8 (10.0) 11.0 (11.1) 10.0 (10.2) 11.1 (11.2) 12.0 (12.6) 12.4 (13.1) 5.4 5.4 (6.8) 5.9 (6.8) 6.4 (7.2) 5.0 7.3 (7.9) 7.3 (8.0) 8.3 (8.8) 9.0 17.7 (15.9) 8.1 8.1 (8.9) 8.3 (9.5) 9.9 (10.2) 5.1 (5.4) 5.1 (5.5) 5.1 (5.4) 5.4 (5.3) 6.3 (6.2) 3.9 4.0 (4.5) 4.1 (4.5) 4.4 (4.7) 5.1 (5.4) 5.1 (5.5) 5.1 (5.4) 5.4 (5.3) 6.3 (6.2) 3.9 4.0 (4.5) 4.1 (4.5) 4.4 (4.7) 5.4 (5.3) 6.0 (6.2) 6.4 (6.7) 4.0 (4.5) 4.1 (4.5) 4.4 (4.7) 5.5 (5.7) 5.6 (5.6) 6.2 (6.4) 6.5 (6.8) 4.4 (4.9) 4.4 (4.7) 4.6 (4.9) 5.3 (5.5) 5.3 (5.4) 5.3 (5.3) 5.7 (5.9) 6.4 (6.5) 5.9 (5.9) 6.5 (6.6) 6.3 (6.5) 6.7 (6.8) 4.0 4.0 (4.4) 4.0 (4.4) 4.5 (4.8) 6.1 (6.6) 6.1 (6.8) 6.1 (6.6) 6.6 (6.6) 8.5 (8.5) 4.4 4.5 (5.3) 4.7 (5.3) 5.1 (5.5) 6.1 (6.6) 6.1 (6.8) 6.1 (6.6) 6.6 (6.6) 8.5 (8.5) 4.4 4.5 (5.3) 4.7 (5.3) 5.1 (5.5) 6.6 (6.6) 8.2 (8.2) 8.5 (8.5) 4.5 (5.3) 4.7 (5.3) 5.1 (5.5) 6.6 (7.0) 6.8 (7.0) 8.4 (8.4) 8.6 (8.6) 4.9 (5.8) 5.0 (5.8) 5.3 (5.7) 6.3 (6.8) 6.3 (6.6) 6.4 (6.8) 7.2 (7.4) 8.1 (8.2) 7.4 (7.5) 8.2 (8.3) 8.4 (8.7) 8.8 (9.1) 4.5 4.5 (5.3) 4.7 (5.3) 5.2 (5.7) 3.6 4.8 (5.1) 4.8 (5.2) 5.5 (5.7) 5.2 9.3 (8.5) 4.1 5.7 (6.1) 5.7 (6.2) 6.5 (6.8) 6.6 12.4 (11.2) 143 (154) 143 (158) 143 (154) 153 (155) 199 (199) 118 119 (140) 125 (140) 135 (145) 143 (154) 143 (158) 143 (154) 153 (155) 199 (199) 118 119 (140) 125 (140) 135 (145) 153 (155) 190 (190) 198 (198) 119 (140) 125 (140) 135 (145) 153 (163) 159 (164) 195 (195) 200 (200) 129 (152) 133 (152) 140 (150) 146 (159) 146 (155) 148 (159) 168 (174) 188 (192) 173 (175) 191 (193) 196 (202) 205 (212) 118 119 (140) 125 (140) 137 (150) 109 151 (160) 152 (164) 171 (178) 174 290 (263) 5.3 5.3 (5.6) 5.3 (5.5) 5.8 (6.1) 6.3 6.3 (6.8) 6.4 (7.0) 7.3 (7.6) 147 147 (159) 149 (164) 170 (178) BMW 325i xDrive Touring 4 330i Touring 4 330i xDrive Touring 4 335i Touring 4 335i xDrive Touring 4 316d Touring 1, 4 318d Touring 4 320d Touring 4 320d xDrive Touring 4 325d Touring 4 330d Touring 4 330d xDrive Touring 4 335d Touring 2, 4 316i Coupé 1, 4, 8 318i Coupé 1, 4 320i Coupé 4 325i Coupé 4 325i xDrive Coupé 4 330i Coupé 4 330i xDrive Coupè 4 335i Coupé 4 335i xDrive Coupé 4 320d Coupé 4 320d xDrive Coupé 4 325d Coupé 4 330d Coupé 4 330d xDrive Coupé 4 335d Coupé 2, 4 M3 Coupé 4 318i Convertible 1, 4 320i Convertible 4 325i Convertible 4 330i Convertible 4 335i Convertible 4 320d Convertible 4 325d Convertible 4 330d Convertible 4 M3 Convertible 4 523i Sedan 4 528i Sedan 4 535i Sedan 4 550i Sedan 2, 4 520d Sedan 4, 9 525d Sedan 4 530d Sedan 4 520i Touring 523i Touring 525i Touring 525i xDrive Touring 530i Touring 530i xDrive Touring 550i Touring 520d Touring 4, 5 525d Touring 525d xDrive Touring 530d Touring 11.1 (11.2) 10.2 (10.7) 11.2 (11.3) 12.1 (12.6) 12.4 (13.2) 5.4 5.4 (6.9) 6.0 (6.9) 6.5 (7.3) 7.4 (8.0) 7.5 (8.1) 8.4 (8.9) 9.1 8.1 8.1 8.6 (9.3) 9.8 (10.0) 11.0 (11.1) 10.0 (10.2) 11.1 (11.2) 12.0 (11.8) 12.4 (13.1) 5.9 (6.8) 6.4 (7.2) 7.3 (7.9) 7.3 (8.0) 8.3 (8.8) 9.0 17.7 (15.9) 8.4 8.8 (9.8) 10.2 (10.6) 10.5 (11.1) 12.4 (12.2) 6.3 (7.1) 7.7 (8.2) 7.7 (8.2) 18.0 (16.0) 10.5 (10.5) 10.4 (10.4) 11.8 (11.9) 15.4 k. A. 8.1 (7.7) 8.0 (7.7) 9.4 (9.5) 10.9 (10.9) 11.1 (11.0) 12.0 (11.8) 11.5 (11.4) 12.3 (12.4) 17.0 (16.1) 6.7 (7.7) 8.4 (8.6) 9.1 (9.2) 8.8 (9.3) 6.5 (6.6) 6.1 (6.2) 6.6 (6.7) 6.4 (6.5) 6.7 (6.9) 4.0 4.0 (4.5) 4.1 (4.5) 4.6 (4.9) 4.9 (5.2) 5.0 (5.3) 5.6 (5.8) 5.3 5.3 5.3 5.4 (5.3) 5.7 (5.9) 6.4 (6.5) 5.9 (5.9) 6.5 (6.6) 6.3 (6.4) 6.7 (6.8) 4.0 (4.4) 4.5 (4.8) 4.8 (5.1) 4.8 (5.2) 5.5 (5.7) 5.2 9.3 (8.5) 5.6 5.6 (5.8) 5.9 (6.3) 6.2 (6.5) 6.7 (6.8) 4.4 (4.7) 5.2 (5.4) 5.2 (5.4) 9.6 (8.9) 5.9 (5.9) 6.3 (6.0) 6.6 (6.4) 7.5 k. A. 5.1 (5.1) 5.3 (5.2) 5.6 (5.5) 6.1 (6.2) 6.0 (6.1) 6.6 (6.7) 6.1 (5.9) 6.6 (6.4) 7.8 (7.5) 4.5 (4.7) 5.2 (5.4) 5.6 (5.7) 5.3 (5.3) 8.2 (8.3) 7.6 (7.9) 8.3 (8.4) 8.5 (8.7) 8.8 (9.2) 4.5 4.5 (5.4) 4.8 (5.4) 5.3 (5.8) 5.8 (6.2) 5.9 (6.3) 6.6 (6.9) 6.7 6.3 6.3 6.6 (6.8) 7.2 (7.4) 8.1 (8.2) 7.4 (7.5) 8.2 (8.3) 8.4 (8.4) 8.8 (9.1) 4.7 (5.3) 5.2 (5.7) 5.7 (6.1) 5.7 (6.2) 6.5 (6.8) 6.6 12.4 (11.2) 6.6 6.8 (7.3) 7.5 (7.9) 7.8 (8.2) 8.8 (8.8) 5.1 (5.6) 6.1 (6.4) 6.1 (6.4) 12.7 (11.5) 7.6 (7.6) 7.8 (7.6) 8.5 (8.4) 10.4 5.0 (5.2) 6.2 (6.1) 6.3 (6.1) 6.9 (7.0) 7.9 (7.9) 7.9 (7.9) 8.6 (8.6) 8.1 (7.9) 8.7 (8.6) 11.2 (10.7) 5.3 (5.8) 6.4 (6.6) 6.9 (7.0) 6.6 (6.8) 190 (194) 177 (184) 193 (195) 199 (203) 206 (215) 119 120 (142) 128 (142) 140 (153) 153 (163) 155 (165) 174 (181) 176 146 146 154 (159) 168 (174) 188 (192) 173 (175) 191 (193) 196 (196) 205 (212) 125 (140) 137 (150) 151 (160) 152 (164) 171 (178) 174 290 (263) 154 159 (169) 176 (185) 182 (190) 205 (205) 135 (149) 160 (168) 162 (170) 297 (269) 177 (178) 182 (178) 199 (195) 243 132 (137) 162 (160) 166 (160) 166 (167) 186 (186) 186 (186) 203 (204) 191 (187) 205 (204) 267 (254) 140 (154) 171 (176) 184 (187) 176 (180) — Contents — Preface Norbert Reithofer Topic one Future project i Topic two Growth India Topic three Customers Efficient Dynamics Topic four Profitability Efficient capital Highlights 2009 Moments of sheer delight IAA 2009 04 09 25 37 51 59 60 69 04 Norbert Reithofer Chairman of the Board of Management 05 Preface Ladies and Gentlemen, The BMW Group achieved positive group earnings for the 2009 financial year, despite the global economic crisis. The company remains the automobile industry’s leading premium manufacturer. More than 1.28 million customers purchased a BMW, MINI or Rolls-Royce last year, and over 87,000 customers bought a BMW motorcycle. Sales benefited only marginally from the national stimulus programmes initiated in many countries, such as the scrappage bonus scheme in Germany. Our accomplishments in 2009 were realised as an independent company. We continue to chart our own course with courage and determination – and with a clear view to the future. As you read this annual report, you will learn more about how we are preparing to face the future. The legally required section of the report focuses on facts and figures from the 2009 financial year. The image section illustrates how we are translating the four pillars of our Strategy Number ONE – Future, Growth, Customers and Profitability – into action. It also cites many examples of how we are conserving resources and gradually realising sustainable mobility. Ultimately, companies and products are made by people. Here you can learn about the people behind our products: Who are the men and women who make up the BMW Group? Above all, you will have the opportunity to get to know our customers. Who buys our vehicles, and why? What does their BMW, MINI or Rolls-Royce mean to them? 2009 – Crisis management and innovative projects for the future Two fac- tors determined our actions as a company in 2009: active crisis management and innovative future projects. We acted quickly and decisively in response to the economic crisis: Vehicle inventories were reduced; fixed costs were substantially trimmed across all divisions; and several plants temporarily implemented short-time working. We also took steps to secure sufficient liquidity. We were capable of operating effectively throughout and were able to refinance at relatively favourable rates on the capital markets at all times. 06 Parallel to these short-term measures, we also set the course for the successful development of the BMW Group over the next few years – something I believe is crucial. We invested in projects for the future and our sites, in particular in Germany, the US, China and India. Our involvement in India is one of the focal points of this report. Our Strategy Number ONE lays the foundation and sets out a vision that unites everyone at the BMW Group: to be the lead- ing provider of premium products and premium services for indi- vidual mobility in the year 2020. This makes it quite clear that premium is, and will continue to be, our business model. The concept of “premium” is changing, just as society and people’s lifestyles are changing. To give an example: People still want to be mobile as individuals – and there is a rising demand for mobility, especially in growth markets such as China and India. But people all over the world are becoming more interested in how efficient their vehicle is. Our Efficient Dynamics measures have drastically reduced fuel consumption and CO2 emissions across our entire fleet. Would you ever have believed that BMW could be the world’s most environ- mentally friendly premium brand? Or that the average fleet con- sumption of the BMW and MINI fleets could be lower than that of the mass manufacturers – even though they offer much better performance? The statistics of the German Federal Motor Trans- port Authority are unequivocal: Average CO2 emissions for new BMW and MINI vehicles registered in Germany in 2009 were no more than 156 grams of CO2 per kilometre. That represents an average fuel consumption of 5.9 litres per 100 kilometres. We will continue to push ahead with Efficient Dynamics For the BMW Group, the year 2010 will largely be defined by the new BMW 5 Se- ries. I personally believe that the new BMW 5 Series is one of the best cars we have ever built. Currently, the vehicle with the best fuel economy and lowest emissions in the BMW model range is the 320d Efficient Dynamics Edition. Customers will be able to experience its sheer driving pleasure with a fuel consumption of just 4.1 litres per 100 kilometres and 109 grams of CO2 per kilo- metre from spring 2010 onwards. We showcased everything that 07 Preface Efficient Dynamics still has to offer at the 2009 IAA International Motor Show within our BMW Vision EfficientDynamics. This con- cept car rightly attracted a great deal of attention – not just for its futuristic design, but also for its innovative drivetrain, comprising a 3-cylinder turbo diesel engine with two electric motors mounted on both axles. Consequently, this thoroughly sporty vehicle con- sumes an average of just 3.76 litres per 100 kilometres. This tech- nical masterpiece is highlighted further in detail. New drive technologies: hybridisation and electrification We also believe premium means offering our customers new technical solutions. The first two BMW models with hybrid drive will become available in 2010. Our worldwide MINI E customer test has so far been a resounding success. There are about 600 MINI cars with electric drives currently on the roads. No other electric car has clocked as many kilometres and as many miles as the MINI E. Our customers think it is terrific. They are helping us learn how e-mobility can succeed in everyday situations. We also presented the first BMW with electric drive, and will be releasing a further trial fleet of electric vehicles based on the BMW Concept ActiveE concept car to cus- tomers next year. All of the experience we gain will be incorporated into our Megacity Vehicle. This is much more than just a highly innovative car. We aim to completely redefine how cars are built – with regard to vehicle architecture, lightweight construction and use of materials – to create a sustainable value chain. No automobile manufacturer uses resources more efficiently Everybody is talking about sustainability – when action is what is needed. We believe our vehicles should also be produced in an environmentally responsible manner. In September 2009, the Dow Jones Sustain- ability Index named the BMW Group as the leading company in the automobile sector for the fifth consecutive year. For us this is both an incentive and an obligation. We are committed to sustainability in all areas. That is why we decided to send a clear signal and withdraw from Formula One at the end of the 2009 season – although it was not an easy decision after ten years of successfully competing at the highest level in motorsports. 08 New directions with Strategy Number ONE We are taking a new direction with our Strategy Number ONE. The small car segment represents a source of growth opportunities, and we will therefore be offering premium products for these customers. Collaboration with others will also allow us to achieve economies of scale. We will continue to rely on strategic partnerships with the best partners for the task at hand. What is more, increased use of shared modules between models and brands will enable us to further reduce costs through- out the entire process chain, but still maintain our high quality. Our industry is currently in a period of tremendous upheaval and technological change. The economic crisis has further accelerated this trend. In order to be successful on the marketplace, companies must find the right answers to the challenges of tomorrow. Our ideas and actions are geared towards the long term. Our strategy provides us with the plan for shaping our own future. We achieved a great deal in 2009. I would like to thank every single one of our 96,230 employees for their outstanding personal dedi- cation. I would also like to thank our customers for their confidence in our products and our company, as well as our entire retail net- work. We have also continued to work productively with our sup- pliers. Last but not least, I would like to thank our shareholders and investors for their commitment to the BMW Group – particularly in these times of economic crisis. The effects of the economic crisis will continue to be felt in 2010. However, we are cautiously optimistic that we will be able to resume our growth path this year. We believe in the future of individual mobility – and we are already creating it. Norbert Reithofer project i Future Growth Customers Profitability Inventing the future – by putting it to the test. MINI E field trial The drivers Roughly 600 MINI customers in three countries The cities New York, Los Angeles, London, Berlin, Munich The car MINI E with a 150 kW electric motor and lithium-ion battery The aim To test e-mobility in everyday situations Montclair, New Jersey Malibu, California MINI E No. 250, Tom Moloughney MINI E No. 246, Sandra Kulli Berlin MINI E No. 15, Hudson Ledwon 11 Topic one project i Sandra Kulli Tom Moloughney The future starts now Hudson Ledwon They are highly efficient, quiet and, when run on energy from renewable sources, unbeatably fuel-efficient and low in emissions. Electric motors will undoubtedly play an important part in the future of the automobile. But what does the e-mobility experience feel like today? What is it like to drive an electric car on a daily basis? In other words, what can we learn from the future? The BMW Group is finding answers with the help of around 600 MINI E drivers from New York, Los Angeles, London, Berlin and Munich. Sandra Kulli MINI E driver MINI E No. 246 Malibu, California 15 Topic one project i How has your experience been? What was your best experience with your MINI E so far? And your worst experience? What made you decide to take part in the MINI E experiment? 5 What do you hope to see from the next generation of electric vehicles? 13 Malibu Vista Drive, Malibu Since she got the keys to her MINI E in June 2009, Sandra Kulli has been driving her electric car in and around Los Angeles on a daily basis. The 62-year- old real estate marketing strategist lives in Malibu, off Pacific Coast Highway, and spends her free time skiing, hiking and gardening. 2 2 1 Marketing strategist Sandra Kulli drives through Santa Monica with her granddaughter Michelle [1 – 2]. Their route takes them past the antique street lamps outside the LA County Museum of Art [3] and along an aptly futuristic-sounding road [4] to Santa Monica Beach [5]. Abbott Kinney Avenue, Santa Monica 3 4 Tom Moloughney MINI E driver MINI E No. 250 Montclair, New Jersey 19 Topic one project i Is the MINI E your only car, or do you drive any other vehicles? How has your experience been? What is the main difference to driving a conventional car? Is the MINI E more of a fun car for you or just an A-to-B car? 10 You have even started blogging about your MINI E experience. Why is that? 17 East Fox Chase Road, Chester Tom Moloughney, 42, runs an Italian restaurant in Montclair, New Jersey. MINI E driver No. 250 blogs about his experiences with e-mobility. Valley Road, Montclair 6 7 8 9 Since Tom Moloughney has had his MINI E, his sports car usually stays parked in the garage [6]. That is also where he charges the battery [7 – 8] for trips to Jersey City [9 – 10] or to his restaurant in Montclair, New Jersey. Hudson Ledwon MINI E driver MINI E No. 15 Berlin 23 Topic one project i What made you decide to take part in the MINI E field trial? I ’m your typical “early adopter ” – new technologies fascinate me. Plus, I like to drive a car that is fast and dynamic – and the MINI E is both of these. And then, because I like to share a good thing, I also let my friends and acquaintances borrow the MINI E for a day or so on several occasions. The most spontaneous feedback I got was a text message from one of my friends who ’s a racing enthusiast . It just said: “Great car. Want one too.” You live in the middle of the city. Where did you recharge your MINI E? All over the city. Two energy providers have set up charging stations throughout Berlin : outside shopping centres, in parking garages and even along the Kudamm (one of Berlin ’s most famous boulevards). There are even two parking spaces reserved exclusively for electric cars right in front of Berlin Central Station . That is pretty cool. How has your experience been? 15 So what is your verdict after six months driving the MINI E? I love it ! I used the car every day and ended up driving about 5, 000 kilometres through Berlin during the six months or so I had it. If it had been up to me, I would have liked to keep it longer – even though there are obviously a few restrictions involved in driving an electric prototype . For example, the performance of the lithium-ion battery diminished considerably when temperatures in Berlin plunged just before Christmas. 21 Heynstraße, Berlin 11 12 13 There is no quieter or emission-friendlier way to drive a car in a city like Berlin [13 – 15] than to drive the MINI E. It is easy for Hudson Ledwon to “fill up” on the go using a charger cable at one of many public charging stations [11 – 12]. 22 Puschkinallee, Berlin 14 Just a few days ago, Hudson Ledwon, 45, returned his MINI E at the end of its field trial. From now on, the IT consultant from Berlin will be back on the road in more traditional style – on his motorbike and bicycle and driving his sports car. 24 Conclusion no. 1: MINI E passes the test Having 600 or so drivers on the roads in their electric-powered MINI E cars in five totally different cities, day in, day out, results in numerous sets of extremely valuable experiences. The kind of e-mobility that the MINI E brings to the road is perfectly suitable for everyday driving. The customers selected to participate in the field trial used their MINI E just like they would a conventional vehicle: to com- mute to work, to go shopping or to drive to the cinema. Their average trip dis- tance was 41 kilometres. This is just a sample of what a prototype like the MINI E can already accomplish today – and impressive proof that e-mobility is not just an amazing form of everyday transportation, but also a viable one. Conclusion no. 2: Future technology on the road today The MINI E field trial is now entering its second phase, with additional test drivers in new cities. At the same time, we are already presenting the next step on the road to sustainable CO2-free mobility: the BMW Concept ActiveE. This concept vehicle, developed on the basis of the BMW 1 Series Coupé, will be powered by a new, specially designed synchronous electric motor. In 2011, a trial fleet of these vehicles will make their debut on the roads. Their purpose will be to provide additional feedback from customers and test a preliminary version of the drivetrain for the forthcoming Megacity Vehicle. This vehicle, which has been specially de- signed for urban mobility, will enter series production by the middle of this decade – and will contain much of what we are testing with customers today. India Future Growth Customers Profitability Opening markets by winning people’s hearts. Over the past three years the BMW Group has begun growing its market share in India. Today it is already the market leader in India’s steadily growing premium segment. And there are plenty of signs that this is just the beginning. New Delhi December 8, 2009 Chennai plant December 10, 2009 27 Topic two India Journey to an awakening land At first sight, it appears to be an adventure of epic proportions: a country almost as big as the European Union, but with more than twice the population. Six different climate zones; 21 official languages; 1.2 billion people. A place where agriculture is still the main source of employment and the average yearly income only 708 euros. The speed limit on its highways is, in theory, 90 kilometres an hour – but the real pace is dictated by the rhythm of ox carts and rickshaws. Not to mention the cows, dust and potholes along the road. Explore India with us. Total Indian road network State highways National highways Motorways 200 km 3,314,000 km 131,899 km 70,548 km 28 But a closer look reveals the Indian subcontinent to be a market with tremendous potential. India did not open up to the world market until the early nineties – but today it is often referred to as an “awakening elephant”, with gross national product growing by an average of seven percent, year after year. And with average income climbing 14 percent per annum, the Indian middle class is now larger than the population of Germany. This enormous momentum is also seen in the automobile market, which has doubled in size to approximately 1.8 million cars within four years, and includes more and more high-end premium vehicles. For an automobile manufacturer, right now India is the place to be. “India has traditionally been a small-car market – primarily because of the strong demand for cheap mobility,” claims a current market analysis from the consultancy Ernst & Young. “But we are also seeing an upward trend among consumers, triggered by rising incomes, changes in customer preferences and a desire for upward mobility.” In other words, India is a prime example of an emerging market. It has become a remarkable success story for the BMW Group. To understand how, it is important to talk to the people who are involved with the company in the country: To people like Rahul Chawla, for instance, an enthusiastic BMW customer from New Delhi. Or Yadur Kapur (New Delhi), one of 16 dedicated BMW dealers across the country. Or Dhimant Desai and his colleagues responsible for building vehicles to German quality standards in Chennai in Southern India. A special report. 1 2 Germany Vehicles per 1,000 inhabitants Population, Germany: 82.2 million India Vehicles per 1,000 inhabitants Population, India: 1.2 billion 1 Comfortably wending its way between rickshaws and temples: a BMW built in India 2 Rahul Chawla enjoys a rare moment behind the wheel of his BMW 525i. 29 Topic two India Rahul Chawla, 39 Name Home city Customer since New Delhi 2007 565 9 December 8, 2009 — 5 — 35 p.m. Tronica City, northeast Delhi The red-orange sun is already sinking behind the rice paddies as Rahul Chawla steers his car across the bridge over the Yamuna River. The 39-year-old carefully manoeuvres his BMW 525i around potholes, bajaj rickshaws, cyclists and packed buses. Traffic regularly grinds to a halt because a motorcycle has broken down or a cow stopped in the middle of the road. Chawla uses the downtime to check email on his BlackBerry or give his staff a few brief instructions on the phone. Time is a precious commodity for the 39-year-old textile businessman. He just built another new factory for 250 sewing workers on the outskirts of the Indian capital. In his office in the heart of New Delhi he is working with designers on ideas for his brand-new fashion label. As chairman of the “Young Indians”, an association of young 30 business people from the city, he also organises educa- tional projects for underprivileged children in his spare time. “The more people I meet, the more I learn,” says the self-made entrepreneur as he nervously checks his Swiss wristwatch and hits the gas. Rahul Chawla is al- ways on the go. This young entrepreneur is typical of the mobile, cosmo- politan, highly-motivated elite that is helping to develop India’s potential as rapidly as possible. Many of these young professionals have studied abroad and are com- fortable working anywhere in the world. Chawla, for instance, turned down attending Harvard in the early nine- ties to set up his own textile business in Delhi. Today he produces fashion designs for trend setting global labels, regularly flies to the US for meetings and likes to spend his holidays in Southern Europe. For him it is perfectly normal to think globally and demand the best when it comes to his own personal mobility – so a BMW 525i from the new BMW assembly plant in Chennai was the obvious choice. “BMW stands for perfection, performance and reliability,” explains Chawla. “And those are things that matter in my line of work. BMW is a perfect fit for my lifestyle.” A typical day in Chawla’s life begins early in the morning in South Delhi, the city’s most exclusive neighbourhood, where the 39-year-old lives with his wife, two children, parents and brother. Chawla usually takes advantage of +155 % 135,000 09 +152 % 53,000 05 21,000 01 31 Topic two India High-income households 4 3 5 his commute to the office through the chaos of the capi- tal city to make a few early phone calls and work un- disturbed on his laptop, before he gets caught up in his day. He rarely has time to drop into his favourite bar – the elegant “360°” on the ground floor of the Oberoi Hotel – after work. It is even rarer that Chawla drives his BMW himself. But whenever he does, he certainly enjoys the experience. “To me,” says Chawla, “a BMW isn’t a luxury. It’s part of my work. It’s my way of rewarding myself.” What he considers a luxury is coming home early and playing with his son before bedtime. Or flying over to Europe for a few days, like he did last summer, renting a BMW at Nice Airport and just driving away. 3 Textile entrepreneur Chawla in the heart of New Delhi 4 Material testing at Rahul Chawla’s textile factory 5 The Oberoi’s “360°” bar is one of New Delhi’s top addresses. 32 8 7 95 % 09 BMW market coverage of India’s premium sales potential 6 6 BMW customers and sales consultant: the excitement of buying a new car 7 BMW showroom on the road from New Delhi to Agra 8 Yadur Kapur, self-made entrepreneur and successful BMW dealer December 9, 2009 — 10 — 01 a.m. Mathura Road, New Delhi For a moment you can’t help but wonder: Where is this place? The gleaming white interior; the tasteful leather chairs; the soft music playing behind the glass facade; the “Joy is BMW” banner hanging on the wall. It takes a glance out the window, across to the concrete pylons where the new Sky-Train is being built, to remind us that we are not in Milan or Miami, but in the BMW showroom in the southeast of the megacity New Delhi. For Yadur Kapur, one of the local BMW dealers, the building site just outside his door is a perfect example of India’s economic miracle. “Ten years ago you had to wait months to get a telephone line – now it takes just 30 minutes. And that new metro line out there? That will actually be finished in time for the 2010 Commonwealth Games!” Delhi-born Kapur was raised in Dubai and went to college in the US. 33 Topic two India Yadur Kapur, 39 New Delhi 2007 Name Location Dealer since Staff 100 Like all of the 16 BMW dealerships in India Kapur offers his customers a fully equipped service garage – with the company’s head office in Munich on standby, a round- the-clock emergency service, a private breakdown ser- vice and expert mechanics, who are sent to the Chennai plant’s training centre for regular training. All of these services are still totally new to the emerging Indian auto- mobile market. But they go a long way towards explaining BMW’s success in the region. “The challenges India faces are quite staggering,” he says. “But then, so is the progress being made.” And so it is only natural that the country is also seeing the emergence of a steadily growing class of successful professionals – who are, of course, potential BMW cus- tomers. Kapur and his staff typically do business with entrepreneurs, lawyers, managers and doctors – hard- working, global-minded, brand-conscious and discrimin- ating individuals. “All of these people travel a great deal. They’ve been around the world and they know what a good car is – so naturally they want to drive one at home.” Almost all of them work in their BMW while a chauffeur drives them where they need to go. The first question Kapur’s clients ask is “not about the price, but about how comfortable and well-equipped the interior is.” 34 India, Chennai plant Chennai, capital of the South Indian state of Tamil Nadu, is well on its way to becoming the car capital of India. Alongside New Delhi – home to BMW India’s headquarters, including sales and the international purchasing office – and the national parts centre in Mumbai, Chennai – formerly known as Madras – is the third hub in the BMW Group’s Indian market offensive. BMW 3 Series and 5 Series vehicles for the Indian market have been assembled in this harbour city since February 2007. Back then, BMW was expected to sell about 2,400 vehicles a year in India up until 2009. In actual fact, over 50 percent more were sold last year. 39 % 41 % 08 09 33 % 07 9 % 06 BMW market share of the Indian premium segment (per year) 9 10 9 Dr. Dhimant Desai ensures BMW quality standards at the Chennai plant. 10 More than 120 highly qualified employees implement them. 35 Topic two India December 10, 2009 — 7 — 30 a.m. Mahindra World City, Chennai Early in the morning, when the working day begins, dragonflies flit through the air and it is still pleasantly cool in “Mahindra World City”. At this campus-like business park south of Chennai, 123 BMW employees assembled about 2,600 vehicles last year. To meet specific demand from the Indian retail network, parts are ordered in Ger- many, packed into containers at the plant in Wackersdorf and transported to Bremerhaven for shipping. 30 days later a truck delivers the parts from Chennai harbour to the plant – and assembly can begin. Adapting BMW vehicles to Indian road conditions and lower-quality petrol means modifying injection pumps, reinforcing under bodies and raising the wheelbase by 18 millimetres. “Other than that,” explains Dr. Dhimant Desai, the plant’s quality manager, “our vehicles are no different to BMWs built in Dingolfing or Spartanburg. After all, Indian customers expect 100 % BMW quality.” Assembly workers – most of whom are Indian, and who have all completed engineering courses – are highly motivated and extremely well qualified. “There is one challenge, though,” explains plant manager Jürgen Eder, “the climate here. In the weeks before the monsoon, temperatures in the halls can reach 37 degrees Celsius.” 36 11 11 Pleased with good results: employees at the BMW plant in Chennai 4 — 30 p.m. As plant buses bring workers home and the halls quiet down, quality manager Desai and plant manager Eder pore over the production plans one more time. Besides production of the BMW 3 Series and the new 5 Series, the X1 will ramp up in Chennai over the coming months. And as BMW dealers open up showrooms and service garages in ten more cities across the country, a separate investment of 50 million US dollars will substantially expand BMW Financial Services. In other words, market leader BMW is setting course for further strong growth. Efficient Dynamics Future Growth Customers Profitability Winning new customers by asking new questions. More driving pleasure, lower emissions: No other automobile manufacturer in the world today implements this principle more successfully than the BMW Group. Our engineers are already working on the next Efficient Dynamics technolo- gies – on the future of efficient, high-performance mobility. Drive strategy Aerolab Vehicle architecture Design Heat management Systems development Energy management Lightweight construction technology 39 Topic three Efficient Dynamics Fresh ideas – 1.8 million times over When it comes to reducing fuel consumption and CO2 emissions, the BMW and MINI brands outperform all other competitors in the premium segment. This unique position was earned through Efficient Dynamics technologies – which already enable enhanced performance and lower emissions in more than 1.8 mil- lion BMW and MINI vehicles on the road today. This development strategy still holds tremendous potential, as illustrated by the BMW Vision EfficientDynamics concept car, a fascinating project realised jointly by BMW engineers and designers from totally different disciplines. 42 43 Topic three Efficient Dynamics 1 2 1 Every detail of the BMW Vision EfficientDynamics was optimised. 2 Its design combines lightweight construction throughout with aerodynamic qualities. If efficiency and dynamic performance were seen as an incentive instead of a contradiction, what would it mean for individual mobility? 44 0.22 Air resistance By comparison, conventional sports cars only achieve a maximum of 0.29 Cx Holger Winkelmann, head of Aerodynamics A top speed of 250 km / h provided by a 120 kW engine – that was the goal right from the start of development of the BMW Vision EfficientDynamics concept. Ambitious parameters like these represent a huge challenge for designers and aerodynamics experts alike: Such a sporty but efficient vehicle demands an extremely aerodynamic design. For this, it is necessary to precisely determine how the vehicle’s components can be used to the best aerodynamic effect. This means imagining new concepts with complex fluid mechanical processes that even experienced aerodynamicists have trouble grasping. However, these complex relationships are currently being explored at the BMW Group’s new Munich-based Aerodynamics Testing Centre. Inside the 170-million- euro facility – the most advanced of its kind in the world – we are able to simulate wind speeds of up to 300 kilometres per hour, as well as cornering and even passing manoeuvres. This is where the Air Curtain was created: Air hangs like an invisible curtain over the front wheels, optimising the airflow around the wheel arch. This aero- dynamic trick can be seen in the BMW Vision EfficientDynamics – and will soon be a standard feature in many of our vehicles. How do you design vehicles that are radically different? Can air be used to overcome air resistance? Johannes Liebl, head of Efficient Dynamics Our development departments are home to a great many ex- perts who are undoubtedly among the best in their particular field of specialisation. But the most amazing ideas occur when you put them together in a room with other specialists: with the best and brightest from totally different disciplines; people who question why things have to be done a particular way and whether it wouldn’t be possible to do them completely differently. The BMW Vision EfficientDynamics concept car was born from many such questions. It is precisely this approach of developing, discussing and building things differently that we are currently applying to future generations of our series models. It is still too early to say exactly what they will look like. But we are on the verge of solving some extremely interesting questions. But one thing is certain: We will once again be bringing improved dynamic per- formance, combined with increased efficiency, to the road. 45 Topic three Efficient Dynamics 3 4 3 As BMW “energy minister”, Johannes Liebl coordinates Efficient Dynamics research. 4 Holger Winkelmann (left) knows how to build with air. 5 Test bench at the new Aerodynamics Testing Centre 6 Flow optimisation for the Vision EfficientDynamics 5 6 46 1.4 t Weight Thanks to a lightweight construction strategy implemented consistently throughout 7 8 Why does better safety have to mean more weight? Jochen Esmann, head of Lightweight Construction and Vehicle Weight The history of automobile manufacturing is one of steady improvements in safety and comfort. That is a good thing – and important, too. All the same, every additional airbag and every increase in crash safety automatically means more weight – and therefore requires more fuel. At least, that is how it was until a few years ago: Now we have begun to reverse the upward spiral in weight. What does a vehicle need to be able to do? And what should that feature be allowed to weigh? Which lightweight materials, new kinds of vehicle topology and combined functions will allow the required features to be realised at the lowest possible weight? Questions like these accompany us throughout the entire development process. They are uncomfortable, difficult questions with no easy answers. But they help us develop vehicles that offer considerably more comfort and safety for relatively few extra kilos. 47 Topic three Efficient Dynamics Siegfried Koelbel, head of Systems Development, Lateral and Vertical Dynamics Laws of physics dictate that the narrower the tyre, the lower its rolling resistance; the lower the rolling resistance, the lower the vehicle’s fuel consumption. A ten percent decrease in rolling resistance means at least one percent lower fuel consumption. In theory, we would only have to use narrow, low-resistance tyres to reduce fuel con- sumption and emissions. Reducing rolling resistance is a lot more difficult in prac- tice, however. Our top priority is always to maximise safety for the driver and the vehicle – and narrower tyres obvi- ously offer less traction. At the same time, we also want our customers to continue to enjoy BMW’s signature dynamic driving experience. Both – safety and dynamic performance – can realistically be achieved with the new lower-resistance tyres we are currently researching. But it will take extensive testing and numerous adjustments to find the ideal combination of the three parameters: structure, profile and material. However, a technological breakthrough that we hope to have on the roads as quickly as possible is imminent. Mario Majdandzic, designer The only way to reach totally new dimensions is to take a totally new approach. For instance, for the BMW Vision EfficientDynamics concept car design engineers, de- velopers and designers worked in a development process that is at least as efficient and dynamic as the end product. Within a very short period of time this process produced a high-end vehicle in which every detail is optimised for the greatest possible efficiency and maximum sportiness. For example, we designed its rear lights so that, besides their main signalling function, they would also work as airfoils to optimise rear-end aero dynamics. We are also rapidly integrating similar smart components with dual functions into our series models. As a result, it should be possible in the future to recognise an efficient and dynamic vehicle from its design, and not just from its con- sumption and performance figures. How do you make a tyre that is both safe and economical? Why will a rear light never be just a rear light again? 7 Jochen Esmann (second from right) replaces kilos with ideas. 8 Mario Majdandzic (second from right) gives rear lights a new function. 9 Craftsmanship goes into the concept car. 10 Lightweight construction of the Vision EfficientDynamics body 9 10 48 3.76 l Fuel consumption /100 km Andreas Eder, manager Thermal Management – Advanced Development and Simulation It doesn’t take sophisticated measuring equipment to feel the thermal energy lost by a car. All you have to do is hold your hand close to a warm exhaust pipe. No more than one third of the energy supplied to the combustion engine from fuel is converted into movement; two thirds are lost as heat through the radiator or exhaust pipe. We intend to put a share of these remaining two thirds to work in the future. For this, we will use a thermoelectric generator (TEG) to convert some of the heat lost into electric current. NASA already uses this technology to supply its spacecraft with energy. But, however surprising it may seem, much lower standards of materials and technology are required in space than on earth: On the roads, our generators must be able to withstand conditions like constant stop-and-go traffic, vibrations and drastic temperature swings. Unlike NASA, we also have to find solutions that can be used hundreds of thousands of times at a reasonable cost throughout our entire fleet. Our TEG has already helped save several percent in fuel in the Vision EfficientDynamics vehicle. In the series models we are currently working on, we hope to be able to meet the vehicle’s total electric power requirements over longer distances. In this, the TEG is the perfect complement to the brake energy regeneration that comes as standard: With the TEG, we regenerate energy not only from braking, but also from accelerating and driving at a constant speed. Theodor Melcher, developer, Powertrain, Director CoC Strategy, Pre Development, Architecture Powertrain Even after many years, there are still occasional surprises in store for our experienced engine developers. We knew, for instance, that we could reach new dimensions of performance and efficiency by combining a small-volume turbo diesel engine with two high-performance electric drives, as we had in the BMW Vision EfficientDynamics. But we were still surprised by the concept car’s excep- tionally dynamic performance on the road. Its fuel con- sumption in the European driving cycle is only 3.76 litres per 100 kilometres, with a CO2 emission rating of no more than 99 grams per kilometre. In other words, it com- bines the sporty performance of a BMW M automobile with the fuel consumption of a small car. That was a very pleasant surprise – and one with potential for the future. Only a third of the energy from fuel is currently used – so what could you do with the other two thirds? How dynamic can an electric drive potentially be? 11 Avoiding energy loss: thermoelectric generator in the exhaust gas system 12 Prototype in test operation: technology test in a workshop vehicle 13 Teaching vehicles how to think: Geert Schmitz (left) 14 Turning waste heat into electricity: TEG in the hands of Andreas Eder (centre) 11 12 49 Topic three Efficient Dynamics 13 14 How to teach a car to think like a driver, but just one step ahead? Geert Schmitz, Energy Management, head of Energy Concepts Imagine a car approaching a traffic jam far ahead. Or, to take another example: a driver heading home from work along his usual route. Wouldn’t it make sense for the vehicle to prepare for each scenario? Say, if it could charge its battery so it could save fuel by driving through heavy traffic and residential areas on just its electric engine? What if it could notify the driver of speed limits ahead and help avoid unnecessary braking? We already know that defensive driving uses up to 20 percent less fuel. That is why we are working on driver assistance systems to notify drivers proactively about gradients and traffic jams. In the future, drivers will also be able to access fuel-saving route recom- mendations to fit the type of vehicle they drive and their individual driving style. We group technology issues such as these under the term forward-looking energy management because they help the vehicle and its driver to drive defensively and there- by save fuel. They are also referred to as forward-looking because we see a promising future in these developments. 50 How much reality is there in a vision? Johannes Liebl, head of Efficient Dynamics In the words of songwriter Tom Waits, “Everything you can think of is true” – and the high-performance concept car, BMW Vision EfficientDynamics, certainly is fascinating proof of that claim. It boasts an outstanding combination of efficiency and dynamic performance; and its futuristic design offers a glimpse of what efficient but sporty ve hicles might look like in the future. On the other hand, this example of cutting-edge tech- nology is simply the logical continuation of our BMW Efficient Dynamics development strategy. Some of the technologies used in the BMW Vision EfficientDynamics are already being implemented in current BMW models; others will soon be ready for series production. Or, to put it simply, the BMW Vision EfficientDynamics is a remarkable vision that could very soon become an exciting reality. 15 15 Steffi Zimmermann explains the design philosophy behind the concept car. 16 Fascinating perspective: the interior of the BMW Vision EfficientDynamics 16 Efficient capital Future Growth Customers Profitability We increase capital by thinking outside the box. A company must maintain its autonomy in order to act deci- sively in a crisis. Through active crisis management, efficiency increases and consistent man- agement of capital and costs, the BMW Group did just that during the recession in 2009. At the same time, it also laid the best foundation for a sus- tainable upturn. 53 Topic four Efficient capital “ In a crisis, you can either hope for it to pass quickly, or you can respond swiftly and deliberately – which is what we did.” left Friedrich Eichiner Friedrich Eichiner, 54, joined the BMW Group in 1987. After holding a series of executive positions in logistics, sales development and corporate planning, he was appointed to the Board of Management, where he was initially responsible for Corporate and Brand Development. In December 2008 – in the midst of the financial crisis – he assumed responsibility for the Finance Division. Erich Ebner von Eschenbach Erich Ebner von Eschenbach, 48, performed various management functions for HypoVereinsbank and was Chief Financial Officer of two software com panies, before becoming head of the BMW Group Treasury in October 2006. right 54 “ Companies who are unable to offer their customers attractive financing will lose those customers.” Mr. Eichiner, Mr. Ebner von Eschenbach, how deeply has the BMW Group been affected by the global economic and financial crisis to date? Mr. Eichiner Like the rest of the automobile industry, the BMW Group has been unable to fully escape the consequences of the crisis. In an exceptional situation like this, there are two options: hope for the economic crisis to pass, or respond quickly and deliberately – which is what we did. As a result, we came through 2008 in relatively good shape and made a successful start to a difficult 2009. Overall, we certainly performed better last year than most of the other automobile manufacturers. How do you manage such a massive economic downturn? Mr. Eichiner We immediately scaled back production in autumn 2008 to prevent inventories from building up and avoid tying up funds unnecessarily. In an economic crisis, cash really is king. Besides that, we consistently con- trolled our financial resources, costs and our access to the capital markets at all times to ensure our flexibility and sufficient liquidity. Mr. Ebner von Eschenbach In that respect, we benefited from having a corporate financial structure with an international focus. We have our own financing companies in Singapore, New York and in Europe, where we are represented on the global capital markets round-the-clock, five days a week. This is one of the reasons we were able to fund our financial services business on attractive terms. During the crisis not only was access to many segments of the capital market limited, but investors were also demanding much higher risk premiums. What do those higher risk premiums cost you? Mr. Ebner von Eschenbach We have to raise between 20 and 30 billion euros’ worth of new capital for our financial services business every year. With volumes like that, a risk premium that may only be a few hundredths of a percentage point higher automatically means additional costs in the high double-digit million euro range. 55 Topic four Efficient capital Then why don’t you just leave financing the leasing business to others? Mr. Eichiner Because the sales financing business is an essential component in our value chain. Nowadays every other new car sold by the BMW Group is financed by us. That is a fact. But it also means that companies who are un- able to offer their customers attractive financing will lose those customers. During the crisis we saw many market players withdrawing from the leasing and financing business. We were successful in filling that gap, thanks to the flexibility of our financial services business. 56 So, even during a global economic crisis, investment capital is definitely still available? Mr. Ebner von Eschenbach At no point did we have a problem raising capital – that is because we have such a good reputation on the capital markets. However, it is important to tap liquidity at the right time, with the right instruments, backed by strong arguments. Our customers in Germany, for instance, increased their deposits with the BMW Bank by two billion euros during a crisis year, thanks to our high level of creditworthiness. Our banking business in the US also expanded considerably over the past year. We will use the insights we gained to continue expanding our banking business in Germany and the US and give our funding an even broader global base. But, all the same, weren’t there moments over those dramatic few months when you also felt a little nervous? Mr. Eichiner Of course. Back in late 2008, we were concerned, too. We weren’t sure whether the global financial system could withstand the pressure. No one had experienced a situation like that with such a dramatic snowball effect. Mr. Ebner von Eschenbach The important thing to realise is that the BMW Group’s core business is profitable and is financed from its own resources. Our funding requirements originate solely from our financial services business. That gives the BMW Group an entirely different risk profile than com- panies who are incurring operating losses and need to fund these losses through borrowed capital. Before the crisis you announced your aim of cutting costs by six billion euros up to 2012. Is that still valid after the crisis? Mr. Eichiner Certainly. The crisis prompted us to take a more rigorous approach to cost management than we had originally intended. As a result, we will easily exceed our target of six billion euros in savings. 57 Topic four Efficient capital “ Our core business is profitable. That gives the BMW Group an entirely different risk profile than many of our competitors.” Would you say the BMW Group is a different company now than it was before the crisis? Mr. Eichiner We are definitely more efficient today; stronger, faster, more open and even more focused on our customers than we were before. But the reasons for that are not to be found in the crisis, but in our Strategy Number ONE, which we developed back in 2006 / 2007. If you remem- ber, back then no one saw the financial crisis coming. Thanks to Number ONE, when the crisis did erupt, there was no need to discuss fundamentals. Everyone in the company knew what had to be done. Does that mean no area of the company will be spared? Mr. Eichiner No, we aren’t using short-term cuts across the board to make those economies, but long-term strategies. We have not cancelled a single innovation programme: We are not sacrificing the future to save costs. Instead what we have done, for instance, is discuss making the supply chain even more efficient with our suppliers. We have switched our vehicle development to a modular system with components that can be used for different models. That is the decisive difference between short- sighted cost-cutting measures and long-term improve- ments in efficiency. Was Strategy Number ONE damaged by the crisis at all? Did you have to adapt your strategy to new realities? Mr. Eichiner On the contrary: Number ONE was instrumental in our company weathering this crisis better than others. One of our strategic goals is to boost profitability – and that pays even greater dividends in times of crisis. Another is the development of new markets and technologies. We have strengthened our involvement in China and India – in markets where we expect to see exceptionally strong growth. Our Efficient Dynamics innovations, which have already secured us a leading position in the premium market today, are another example. And 58 “ We are more efficient today; stronger, more open and even more focused on our customers. And that is why we will emerge from this crisis as one of the winners.” with the launch of new, highly efficient and dynamic models, like the BMW X1, the 5 Series GT and the new BMW 5 Series, we will pick up speed as the recovery progresses. I am certain that the BMW Group will emerge from this crisis as one of the winners. Our profitability target for 2012 of a return on sales of eight to ten percent in the automobile business re- mains unchanged. What have you yourselves learned over the past difficult months? Mr. Eichiner I have realised how important it is to act quickly and decisively. And you can only do that if you have flexible structures, like the BMW Group does. That is why, for me, the most important realisation was also an extremely encouraging one: that we are on the right track. Mr. Ebner von Eschenbach Based on previous experience, we should expect to face further economic downturns and challenges to the international financial system in the future. The companies hardest hit in situations like that will be those who fail to learn the right lessons from this crisis. Highlights 2009 Our highlights fuel fascination. Moments of sheer delight In 2009 we presented around 1.4 million customers with their new vehicles. It is always a special moment for us – and, of course, for our customers, too. We captured that moment for seven customers. BMW Z4 Christian Brandl on Jan. 22, 2010 BMW ActiveHybrid X6 Hakan Kaya on Feb. 6, 2010 BMW X1 Kämmerer Family on Jan. 20, 2010 BMW 5 Series Gran Turismo Douglas Lempereur on Feb. 12, 2010 Rolls-Royce Ghost Kai Berghäuser on Feb. 3, 2010 MINI Convertible Bettina Kroiß on Jan. 22, 2010 BMW S 1000 RR Claudia Engelmann on Dec. 14, 2009 IAA 2009 The IAA International Motor Show in Frankfurt is the world’s leading forum for individual mobility. At the show, the BMW Group presents much more than just vehicles: 01 The pleasure of discovering the future for oneself 02 The fascination of experiencing Efficient Dynamics live 03 The knowledge to create sustainable mobility 61 Highlights 2009 “ My motto is: ‘Don’t just dream your dreams, live them.’ And the BMW Z4 is one of mine.” Christian Brandl Jan. 22, 2010 BMW Welt, Munich BMW Z4 The sportiness of a roadster with the elegance of a classic car: The new edition of the popular BMW Roadster is an expression of sheer driving pleasure. 62 BMW X1 Kämmerer Family Jan. 20, 2010 BMW Welt, Munich Freedom is a source of pleasure – and that includes being able to use a vehicle any way the driver wants. With its highly versatile interior and strong performance features, the BMW X1 offers maximum freedom for every lifestyle. “ Understated design. A dynamic engine. The typical BMW driving experience. In other words: The perfect car for us.” 63 Highlights 2009 Hakan Kaya Feb. 6, 2010 BMW Welt, Munich “ A car that combines excel- lent driving characteristics with excellent environmen- tal performance – what more could you ask for?” BMW ActiveHybrid X6 Generates the energy that powers it: The world’s first four- wheel drive hybrid, the BMW ActiveHybrid X6, travels short distances on electric power alone – and uses around 20 percent less fuel than the conventional model. 64 “ Great driving experience in the driver’s seat, and luxurious comfort with ambient lighting in the back seat. For such a car, I went all the way from Florida to Munich to pick it up.” Douglas Lempereur Feb. 12, 2010 BMW Welt, Munich 65 Highlights 2009 BMW 5 Series Gran Turismo A classy sedan? An adaptable estate car? A versatile SUV? The BMW 5 Series Gran Turismo is all of those things rolled into one – and therefore in a class of its own. 66 “ I was already amazed by the Phantom. Now the Ghost is the ultimate in motoring comfort and elegance.” Kai Berghäuser Feb. 3, 2010 Procar Automobile, Cologne Rolls-Royce Ghost Of all the design maxims, simplicity is the hardest to deliver. In the Rolls-Royce Ghost it has been honed to perfection – and paired with state-of-the-art technologies for luxurious mobility. MINI Convertible Striking profile. High-performance engine. A genuine four-seater with maximum open-air feeling. In short: a MINI Convertible. 67 Highlights 2009 Bettina Kroiß Jan. 22, 2010 MINI retail outlet, Munich “ This is such a cult car. It even makes driving to work fun.” 68 BMW S 1000 RR Speed requires control – something we have been reinventing for the motorcycle for more than 20 years. The S 1000 RR provides a good example of this: It has a sporty feel, can be safely controlled and is still pleasantly easy to drive in everyday situations. Claudia Engelmann Dec. 14, 2009 Tommy Wagner Motorräder, Munich “ An elegant, lean, super sports bike that sets the standard in its class.” 69 Highlights 2009 IAA 2009 Experiencing the joy. For the first time, visitors to the Frankfurt Motor Show were able to see the BMW Group’s new vehicles in action. But experiencing the joy also means shaping one’s own future – through conversations with experts, or perhaps in a more playful manner. 01 The pleasure of discovering the future for oneself Sept. 17, 2009 Junior Campus 02 The fascination of experiencing efficient dynamics live Sept. 16, 2009 BMW stand 03 The knowledge to create sustainable mobility Sept. 14, 2009 ZEIT Future Summit 73 Highlights 2009 4 7 10 71 1 2 Sept. 16, 2009 IAA – BMW stand What does sheer driving pleasure really feel like? For the first time, visitors to the IAA 2009 were able to experience that signature BMW driving feeling up close. The BMW Group showcased its Efficient Dynamics fleet and vehicle premieres, such as the BMW ActiveHybrid X6 and the BMW 5 Series Gran Turismo, driving around a several-hundred-metre circuit. 5 In the future: e-mobility MINI E style 6 In perfection: the new Rolls-Royce Ghost 7 In motion: the BMW Vision EfficientDynamics concept car (left) 8 3 Sept. 17, 2009 IAA – Junior Campus How do you build the city car of the future? At the BMW Group’s Junior Campus hundreds of children built their own future vehicles. In sustainability workshops or- ganised by the Campus they learned about issues such as resource conservation and traffic management. They were also able to improve their road safety aware- ness on an integrated mobility course. 1 Children tested water saving technologies and logistic concepts in the Campus lab. 2 Several hundred children visited the Campus at the IAA. 3 Building sustainable products in the Campus workshop 4 A mobility concept for tomorrow – with its developers 5 6 9 Sept. 14, 2009 IAA – ZEIT Future Summit What might sustainable mobility look like? That was the question debated by leading experts at the Future Summit held by the German weekly newspaper DIE ZEIT and hosted at the BMW Group stand for the first time. According to former German Foreign Minister Joschka Fischer: “E-mobility represents a major challenge.” 8 BMW Chairman of the Board of Management Reithofer: “The automobile must continue to evolve through innovation.” 9 Norbert Reithofer and Klaus Töpfer, former director of the UN Environmental Programme 10 Klaus Töpfer, Norbert Reithofer, Josef Joffe (DIE ZEIT), Regine Günther (WWF), Joschka Fischer, Stefan Schulte (Fraport) (from left) 74 Speed is what defines change today – where standing still means going backwards. Every day we break new ground with our ideas. We are pioneers building our own future. We have world-class employees – a team that efficiently networks talent and knowledge. And a corporate culture where every individual out- standing achievement strengthens the BMW Group’s claim to leadership. a t a d n o i t p m u s n o C Annual Report 2009 Facts and figures s t n e t n o C A further contribution towards preserving resources BMW Group Annual Report 2009 awarded the „Blue Angel“ eco-label. The paper used (Enviro Top and Nanoo Color) was produced, climate-neutrally and without optical brighteners and chlorine bleach, from recycled waste paper. All other production materials used also comply with the requirements of the Blue Angel eco-label (RAL-UZ 14). The Blue Angel is considered to be one of the most stringent eco-labels in the world. The CO2 emissions generated through print and production were neutralised by the BMW Group. To this end, the corresponding amount of emissions allowances was erased, with the transaction identification DE-89388 on February 23, 2010. Published by Bayerische Motoren Werke Aktiengesellschaft 80788 Munich Germany Telephone +49 89 382-0 9 0 0 2 t r o p e R l a u n n A p u o r G W M B Our changing world constantly demands new ideas. At the BMW Group, we are working to create cutting-edge mobility solutions for the future. We are a sustainable company. That is why we accept responsibility for resources, the environment and society. Our goal is clear: for every person to be able to experience the freedom of indi- vidual mobility. We offer premium solutions for per- sonal transportation. Our strong brands and outstanding products inspire and impress our customers around the world. We have a clear strategy which we implement con- sistently. That is what makes the BMW Group different. Connecting emotions Vehicle fleet Consumption and emissions data of BMW Group vehicles Values measured in accordance with the New European Driving Cycle (EU Directive: 80 / 1268 / EEC in the relevant applicable version). Valid for vehicles with a European country specification. Vehicles with average CO2 emissions of below / maximum 140 grams CO2 / km are highlighted. Model BMW 116i 3-door 4 116i 3-door 4, 6 118i 3-door 4 120i 3-door 4 130i 3-door 4 116d 3-door 1 118d 3-door 4 120d 3-door 4 123d 3-door 4 116i 5-door 4 116i 5-door 4, 6 118i 5-door 4 120i 5-door 4 130i 5-door 4 116d 5-door 1 118d 5-door 4 120d 5-door 4 123d 5-door 4 120i Coupé 4 125i Coupé 4 135i Coupé 4 118d Coupé 4 120d Coupé 4 123d Coupé 4 118i Convertible 4 120i Convertible 4 125i Convertible 4 135i Convertible 4 118d Convertible 4, 7 120d Convertible 4, 7 123d Convertible 4 316i Sedan 4, 8 318i Sedan 4 320i Sedan 4 325i Sedan 4 325i xDrive Sedan 4 330i Sedan 4 330i xDrive Sedan 4 335i Sedan 4 335i xDrive Sedan 4 316d Sedan 1, 4 318d Sedan 4 320d Sedan 4 320d xDrive Sedan 4 320d EfficientDynamics Edition Sedan 4 325d Sedan 4 330d Sedan 4 330d xDrive Sedan 4 335d Sedan 2, 4 M3 4 316i Touring 1, 4, 8 318i Touring 4 320i Touring 4 325i Touring 4 Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) 7.9 (8.7) 7.9 (8.9) 7.9 (8.7) 8.6 (8.9) 12.4 (12.5) 5.3 5.4 (6.7) 5.9 (6.7) 6.4 (6.9) 7.9 (8.7) 7.9 (8.9) 7.9 (8.7) 8.6 (8.9) 12.4 (12.5) 5.3 5.4 (6.7) 5.9 (6.7) 6.4 (6.9) 8.6 (8.9) 11.9 (11.7) 12.1 (11.7) 5.4 (6.7) 5.9 (6.7) 6.4 (6.9) 8.5 (9.2) 8.8 (9.4) 12.1 (11.9) 12.2 (11.8) 5.8 (7.3) 6.2 (7.6) 6.6 (7.1) 8.1 (8.9) 8.1 (8.7) 8.3 (9.3) 9.8 (10.0) 11.0 (11.1) 10.0 (10.2) 11.1 (11.2) 12.0 (12.6) 12.4 (13.1) 5.4 5.4 (6.8) 5.9 (6.8) 6.4 (7.2) 5.0 7.3 (7.9) 7.3 (8.0) 8.3 (8.8) 9.0 17.7 (15.9) 8.1 8.1 (8.9) 8.3 (9.5) 9.9 (10.2) 5.1 (5.4) 5.1 (5.5) 5.1 (5.4) 5.4 (5.3) 6.3 (6.2) 3.9 4.0 (4.5) 4.1 (4.5) 4.4 (4.7) 5.1 (5.4) 5.1 (5.5) 5.1 (5.4) 5.4 (5.3) 6.3 (6.2) 3.9 4.0 (4.5) 4.1 (4.5) 4.4 (4.7) 5.4 (5.3) 6.0 (6.2) 6.4 (6.7) 4.0 (4.5) 4.1 (4.5) 4.4 (4.7) 5.5 (5.7) 5.6 (5.6) 6.2 (6.4) 6.5 (6.8) 4.4 (4.9) 4.4 (4.7) 4.6 (4.9) 5.3 (5.5) 5.3 (5.4) 5.3 (5.3) 5.7 (5.9) 6.4 (6.5) 5.9 (5.9) 6.5 (6.6) 6.3 (6.5) 6.7 (6.8) 4.0 4.0 (4.4) 4.0 (4.4) 4.5 (4.8) 6.1 (6.6) 6.1 (6.8) 6.1 (6.6) 6.6 (6.6) 8.5 (8.5) 4.4 4.5 (5.3) 4.7 (5.3) 5.1 (5.5) 6.1 (6.6) 6.1 (6.8) 6.1 (6.6) 6.6 (6.6) 8.5 (8.5) 4.4 4.5 (5.3) 4.7 (5.3) 5.1 (5.5) 6.6 (6.6) 8.2 (8.2) 8.5 (8.5) 4.5 (5.3) 4.7 (5.3) 5.1 (5.5) 6.6 (7.0) 6.8 (7.0) 8.4 (8.4) 8.6 (8.6) 4.9 (5.8) 5.0 (5.8) 5.3 (5.7) 6.3 (6.8) 6.3 (6.6) 6.4 (6.8) 7.2 (7.4) 8.1 (8.2) 7.4 (7.5) 8.2 (8.3) 8.4 (8.7) 8.8 (9.1) 4.5 4.5 (5.3) 4.7 (5.3) 5.2 (5.7) 3.6 4.8 (5.1) 4.8 (5.2) 5.5 (5.7) 5.2 9.3 (8.5) 4.1 5.7 (6.1) 5.7 (6.2) 6.5 (6.8) 6.6 12.4 (11.2) 143 (154) 143 (158) 143 (154) 153 (155) 199 (199) 118 119 (140) 125 (140) 135 (145) 143 (154) 143 (158) 143 (154) 153 (155) 199 (199) 118 119 (140) 125 (140) 135 (145) 153 (155) 190 (190) 198 (198) 119 (140) 125 (140) 135 (145) 153 (163) 159 (164) 195 (195) 200 (200) 129 (152) 133 (152) 140 (150) 146 (159) 146 (155) 148 (159) 168 (174) 188 (192) 173 (175) 191 (193) 196 (202) 205 (212) 118 119 (140) 125 (140) 137 (150) 109 151 (160) 152 (164) 171 (178) 174 290 (263) 5.3 5.3 (5.6) 5.3 (5.5) 5.8 (6.1) 6.3 6.3 (6.8) 6.4 (7.0) 7.3 (7.6) 147 147 (159) 149 (164) 170 (178) BMW 325i xDrive Touring 4 330i Touring 4 330i xDrive Touring 4 335i Touring 4 335i xDrive Touring 4 316d Touring 1, 4 318d Touring 4 320d Touring 4 320d xDrive Touring 4 325d Touring 4 330d Touring 4 330d xDrive Touring 4 335d Touring 2, 4 316i Coupé 1, 4, 8 318i Coupé 1, 4 320i Coupé 4 325i Coupé 4 325i xDrive Coupé 4 330i Coupé 4 330i xDrive Coupè 4 335i Coupé 4 335i xDrive Coupé 4 320d Coupé 4 320d xDrive Coupé 4 325d Coupé 4 330d Coupé 4 330d xDrive Coupé 4 335d Coupé 2, 4 M3 Coupé 4 318i Convertible 1, 4 320i Convertible 4 325i Convertible 4 330i Convertible 4 335i Convertible 4 320d Convertible 4 325d Convertible 4 330d Convertible 4 M3 Convertible 4 523i Sedan 4 528i Sedan 4 535i Sedan 4 550i Sedan 2, 4 520d Sedan 4, 9 525d Sedan 4 530d Sedan 4 520i Touring 523i Touring 525i Touring 525i xDrive Touring 530i Touring 530i xDrive Touring 550i Touring 520d Touring 4, 5 525d Touring 525d xDrive Touring 530d Touring 11.1 (11.2) 10.2 (10.7) 11.2 (11.3) 12.1 (12.6) 12.4 (13.2) 5.4 5.4 (6.9) 6.0 (6.9) 6.5 (7.3) 7.4 (8.0) 7.5 (8.1) 8.4 (8.9) 9.1 8.1 8.1 8.6 (9.3) 9.8 (10.0) 11.0 (11.1) 10.0 (10.2) 11.1 (11.2) 12.0 (11.8) 12.4 (13.1) 5.9 (6.8) 6.4 (7.2) 7.3 (7.9) 7.3 (8.0) 8.3 (8.8) 9.0 17.7 (15.9) 8.4 8.8 (9.8) 10.2 (10.6) 10.5 (11.1) 12.4 (12.2) 6.3 (7.1) 7.7 (8.2) 7.7 (8.2) 18.0 (16.0) 10.5 (10.5) 10.4 (10.4) 11.8 (11.9) 15.4 k. A. 8.1 (7.7) 8.0 (7.7) 9.4 (9.5) 10.9 (10.9) 11.1 (11.0) 12.0 (11.8) 11.5 (11.4) 12.3 (12.4) 17.0 (16.1) 6.7 (7.7) 8.4 (8.6) 9.1 (9.2) 8.8 (9.3) 6.5 (6.6) 6.1 (6.2) 6.6 (6.7) 6.4 (6.5) 6.7 (6.9) 4.0 4.0 (4.5) 4.1 (4.5) 4.6 (4.9) 4.9 (5.2) 5.0 (5.3) 5.6 (5.8) 5.3 5.3 5.3 5.4 (5.3) 5.7 (5.9) 6.4 (6.5) 5.9 (5.9) 6.5 (6.6) 6.3 (6.4) 6.7 (6.8) 4.0 (4.4) 4.5 (4.8) 4.8 (5.1) 4.8 (5.2) 5.5 (5.7) 5.2 9.3 (8.5) 5.6 5.6 (5.8) 5.9 (6.3) 6.2 (6.5) 6.7 (6.8) 4.4 (4.7) 5.2 (5.4) 5.2 (5.4) 9.6 (8.9) 5.9 (5.9) 6.3 (6.0) 6.6 (6.4) 7.5 k. A. 5.1 (5.1) 5.3 (5.2) 5.6 (5.5) 6.1 (6.2) 6.0 (6.1) 6.6 (6.7) 6.1 (5.9) 6.6 (6.4) 7.8 (7.5) 4.5 (4.7) 5.2 (5.4) 5.6 (5.7) 5.3 (5.3) 8.2 (8.3) 7.6 (7.9) 8.3 (8.4) 8.5 (8.7) 8.8 (9.2) 4.5 4.5 (5.4) 4.8 (5.4) 5.3 (5.8) 5.8 (6.2) 5.9 (6.3) 6.6 (6.9) 6.7 6.3 6.3 6.6 (6.8) 7.2 (7.4) 8.1 (8.2) 7.4 (7.5) 8.2 (8.3) 8.4 (8.4) 8.8 (9.1) 4.7 (5.3) 5.2 (5.7) 5.7 (6.1) 5.7 (6.2) 6.5 (6.8) 6.6 12.4 (11.2) 6.6 6.8 (7.3) 7.5 (7.9) 7.8 (8.2) 8.8 (8.8) 5.1 (5.6) 6.1 (6.4) 6.1 (6.4) 12.7 (11.5) 7.6 (7.6) 7.8 (7.6) 8.5 (8.4) 10.4 5.0 (5.2) 6.2 (6.1) 6.3 (6.1) 6.9 (7.0) 7.9 (7.9) 7.9 (7.9) 8.6 (8.6) 8.1 (7.9) 8.7 (8.6) 11.2 (10.7) 5.3 (5.8) 6.4 (6.6) 6.9 (7.0) 6.6 (6.8) 190 (194) 177 (184) 193 (195) 199 (203) 206 (215) 119 120 (142) 128 (142) 140 (153) 153 (163) 155 (165) 174 (181) 176 146 146 154 (159) 168 (174) 188 (192) 173 (175) 191 (193) 196 (196) 205 (212) 125 (140) 137 (150) 151 (160) 152 (164) 171 (178) 174 290 (263) 154 159 (169) 176 (185) 182 (190) 205 (205) 135 (149) 160 (168) 162 (170) 297 (269) 177 (178) 182 (178) 199 (195) 243 132 (137) 162 (160) 166 (160) 166 (167) 186 (186) 186 (186) 203 (204) 191 (187) 205 (204) 267 (254) 140 (154) 171 (176) 184 (187) 176 (180) s t n e t n o C 04 BMW Group in figures 06 Report of the Supervisory Board 12 12 14 18 42 45 48 63 64 70 74 74 74 76 78 80 81 Group Management Report A Review of the Financial Year General Economic Environment Review of Operations BMW Group – Capital Market Activities in 2009 Disclosures pursuant to § 289 (4) and § 315 (4) HGB Financial Analysis 48 50 52 54 56 56 58 59 Internal Control System Risk Management Outlook 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 Group Financial Statements Income Statements Statement of Comprehensive Income Balance Sheets Cash Flow Statements Group Statement of Changes in Equity Notes to the Group Financial Statements 81 90 97 98 119 133 Accounting Principles and Policies Notes to the Income Statement Notes to the Statement of Comprehensive Income Notes to the Balance Sheet Other Disclosures Segment Information 138 Responsibility Statement by the Company’s Legal Representatives 139 Auditors’ Report 140 140 141 142 145 146 151 157 158 162 162 164 166 168 170 173 174 Statement on Corporate Governance (Sub-section of Management Report) Information on the Company’s Governing Constitution Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG Members of the Supervisory Board Members of the Board of Management Information on Work Procedures of the Management Board and Supervisory Board and on the Composition and Work Procedures of its Committees Compensation Report Information on Corporate Governance Practices Applied Beyond Mandatory Requirements Compliance in the BMW Group Other Information BMW AG Principal Subsidiaries BMW Group Ten-year Comparison BMW Group Locations Glossary Index Financial Calendar Contacts t r o p e R t n e m e g a n a M p u o r G s t n e m e t a t S l i i a c n a n F p u o r G e c n a n r e v o G e t a r o p r o C n o i t a m r o f n I r e h t O Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) Model Urban (l / 100 km) Extra-urban (l / 100 km) Combined (l / 100 km) CO2 emis- sions (g / km) BMW 530d xDrive Touring 535d Touring 2 M5 Touring 3 535i Gran Turismo 2, 4 550i Gran Turismo 2, 4 530d Gran Turismo 2, 4 535d Gran Turismo 2, 4 630i Coupé 650i Coupé 635d Coupé 2 630i Convertible 650i Convertible 635d Convertible 2 M6 Coupé 3 M6 Convertible 3 740i 2, 4 740Li 2, 4 750i 2, 4 750i xDrive 2, 4 750Li 2, 4 750Li xDrive 2, 4 760i 2, 4 760Li 2, 4 730d 2, 4 730Ld 2, 4 740d 2, 4 ActiveHybrid 7 2, 4 ActiveHybrid 7L 2, 4 X1 sDrive18i 4 X1 xDrive25i 2, 4 X1 xDrive28i 2, 4 X1 sDrive18d 4 X1 xDrive18d 4 X1 sDrive20d 4 X1 xDrive20d 4 X1 xDrive23d 2, 4 X3 xDrive20i 1 X3 xDrive25i X3 xDrive30i X3 xDrive18d 1, 4 X3 xDrive20d 4 X3 xDrive30d X3 xDrive35d 2 X5 xDrive35i 2, 4 X5 xDrive50i 2, 4 X5 xDrive30d 2, 4 X5 xDrive40d 2, 4 X5 M 4, 10 X6 xDrive35i 2, 4 X6 xDrive50i 2, 4 X6 xDrive30d 2, 4 X6 xDrive40d 2, 4 ActiveHybrid X6 2, 4 9.6 (9.9) 9.2 21.7 5.8 (5.6) 5.6 10.5 7.2 (7.2) 6.9 14.6 192 (192) 182 348 12.3 16.2 8.1 8.3 6.9 8.3 5.6 5.8 8.9 11.2 6.5 6.7 209 263 173 175 11.2 (11.0) 17.8 (15.9) 9.2 11.8 (11.6) 19.2 (16.5) 9.6 21.4 22.0 6.0 (5.8) 8.1 (7.4) 5.6 6.3 (6.0) 8.8 (7.7) 5.8 10.2 10.6 7.9 (7.7) 11.7 (10.5) 6.9 8.3 (8.1) 12.6 (10.9) 7.2 14.3 14.7 188 (184) 279 (249) 183 198 (192) 299 (258) 190 342 352 13.8 14.0 16.4 17.1 16.4 17.1 18.8 18.9 9.0 9.1 9.0 12.6 12.6 11.3 (11.5) 12.9 13.0 6.1 (7.1) 6.7 (7.7) 6.4 (7.1) 7.0 (7.7) 7.8 12.6 12.8 (13.1) 13.4 (13.3) 7.9 8.2 (8.3) 9.7 (9.9) 9.7 13.2 17.5 8.7 8.8 19.3 13.2 17.5 8.7 8.8 10.8 7.6 7.7 8.5 8.9 8.5 8.9 9.5 9.6 5.5 5.6 5.7 7.6 7.6 6.4 (6.6) 7.2 7.3 4.7 (5.2) 5.1 (5.4) 4.7 (5.2) 5.1 (5.4) 5.5 6.9 7.3 (7.4) 7.3 (7.6) 5.2 5.5 (5.8) 6.0 (6.4) 6.7 8.3 9.6 6.7 6.8 10.8 8.3 9.6 6.7 6.8 9.4 9.9 10.0 11.4 11.9 11.4 11.9 12.9 13.0 6.8 6.9 6.9 9.4 9.4 232 235 266 278 266 278 299 303 178 180 181 219 219 8.2 (8.4) 9.3 9.4 5.2 (5.9) 5.7 (6.2) 5.3 (5.9) 5.8 (6.2) 6.3 9.0 9.3 (9.5) 9.5 (9.7) 6.2 6.5 (6.7) 7.4 (7.7) 7.8 191 (195) 217 219 136 (155) 150 (164) 139 (155) 153 (164) 167 215 224 (228) 229 (233) 165 172 (178) 196 (206) 208 10.1 12.5 7.4 7.5 13.9 10.1 12.5 7.4 7.5 9.9 236 292 195 198 325 236 292 195 198 231 BMW X6 M 4, 10 19.3 10.8 13.9 325 Z4 sDrive23i 4 Z4 sDrive30i 4 Z4 sDrive35i 4 Z4 sDrive35is 2, 4 12.4 (11.8) 12.4 (11.9) 13.5 (12.6) 12.6 6.2 (6.1) 6.2 (6.2) 7.0 (6.9) 6.9 8.5 (8.2) 8.5 (8.3) 9.4 (9.0) 9.0 199 (192) 199 (195) 219 (210) 210 MINI MINI One 4 MINI One MINIMALIST 4, 8 MINI Cooper 4 MINI Cooper S 4 MINI John Cooper Works 1, 4 MINI One D 1 MINI Cooper D 7.2 (8.7) 6.5 6.9 (8.7) 7.3 (8.9) 9.4 4.7 4.7 (6.5) MINI One Convertible 4 7.3 (8.9) MINI Cooper Convertible 4 7.2 (8.9) MINI Cooper S Convertible 4 7.5 (9.1) MINI John Cooper Works Convertible 1, 4 9.6 4.4 (5.1) 4.3 4.6 (5.1) 5.0 (5.0) 5.8 3.5 3.5 (4.2) 4.3 (5.3) 4.9 (5.3) 5.1 (5.1) 5.4 (6.4) 5.1 5.4 (6.4) 5.8 (6.4) 7.1 3.9 3.9 (5.0) 127 (150) 119 127 (150) 136 (149) 165 104 104 (134) 5.7 (6.6) 5.7 (6.6) 6.0 (6.6) 133 (154) 133 (154) 139 (153) 5.9 7.3 169 MINI One Clubman 4 MINI Cooper Clubman 4 MINI Cooper S Clubman 4 MINI John Cooper Works Clubman 1, 4 MINI Cooper D Clubman Rolls-Royce Rolls-Royce Ghost 2, 4 Rolls-Royce Phantom 2 Rolls-Royce Phantom extended Wheelbase 2 7.3 (8.8) 7.0 (8.8) 7.4 (8.9) 4.5 (5.2) 4.7 (5.2) 5.0 (5.0) 5.5 (6.5) 5.5 (6.5) 5.9 (6.4) 129 (152) 129 (152) 137 (150) 9.5 4.9 (6.6) 5.8 3.6 (4.2) 7.2 4.1 (5.1) 167 109 (136) 20.5 23.2 9.6 11.3 13.6 15.7 317 377 23.3 11.4 15.8 380 Rolls-Royce Phantom Coupé 2 23.2 11.3 15.7 377 Rolls-Royce Phantom Drophead Coupé 2 23.2 11.3 15.7 377 Figures in brackets only valid for automatic transmissions. 1 only available with manual transmission 2 only available with automatic transmission 3 comes as standard with sequential M transmission (7-gear) 4 EU-5 comes as standard 5 EU-4 comes as standard for right-hand drive vehicles 6 variant with 1.6-litre cubic capacity 7 Consumption values for models with automatic transmission in right-hand drive vehicles vary. 8 only available in selected EU countries 9 figures not yet available 10 comes as standard with 6-gear M Sport automatic transmission Further information and constantly updated data for the vehicles is available on the Internet at www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com. as of model year 2010 a t a d n o i t p m u s n o C Annual Report 2009 Facts and figures s t n e t n o C A further contribution towards preserving resources BMW Group Annual Report 2009 awarded the „Blue Angel“ eco-label. The paper used (Enviro Top and Nanoo Color) was produced, climate-neutrally and without optical brighteners and chlorine bleach, from recycled waste paper. All other production materials used also comply with the requirements of the Blue Angel eco-label (RAL-UZ 14). The Blue Angel is considered to be one of the most stringent eco-labels in the world. The CO2 emissions generated through print and production were neutralised by the BMW Group. To this end, the corresponding amount of emissions allowances was erased, with the transaction identification DE-89388 on February 23, 2010. Published by Bayerische Motoren Werke Aktiengesellschaft 80788 Munich Germany Telephone +49 89 382-0 9 0 0 2 t r o p e R l a u n n A p u o r G W M B
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