BMW AG Annual Report 2012

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ANNUAL REPORT 2012

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BMW GROUP IN FIGURES

REPORT OF THE SUPERVISORY BOARD

STATEMENT OF THE CHAIRMAN OF THE
BOARD OF MANAGEMENT

18
18
21
24
44
47
50

65
66
74

78
78
78
80
82
84
86

COMBINED GROUP AND COMPANY MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market in 2012
Disclosures relevant for takeovers and explanatory comments
Financial Analysis
50
52
54
57
59
59
61
62
Internal Control System and explanatory comments
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

86
100
107
108
129
145

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

150

Responsibility Statement by the
Company’s Legal Representatives

151

Auditor’s Report

152

153

154
155
158

160

165

166
170

178
178
180
182
184
186
187

STATEMENT ON CORPORATE GOVERNANCE
(Part of the Combined Group and
Company 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 Board of Management
Members of the Supervisory Board
Composition and work procedures of the Board of
Management of BMW AG and its committees
Composition and work procedures of the Supervisory Board
of BMW AG and its committees
Information on Corporate Governance
Practices Applied Beyond Mandatory
Requirements
Compliance in the BMW Group
Compensation Report

OTHER INFORMATION
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Financial Calendar
Contacts

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 – one of Germany’s largest industrial companies – is one of the most success-
ful car and motorcycle manufacturers in the world. With BMW, MINI and Rolls-Royce, the
BMW Group owns three of the strongest premium brands in the automobile industry. The vehicles
it manufactures set the highest standards in terms of aesthetics, dynamics, technology and
quality, borne out by the Company’s leading position in engineering and innovation. In addition
to its strong position in the motorcycles market, the BMW Group also offers a successful range
of financial services.

The course towards a successful future was set in 2007 with the adoption of Strategy Number ONE.
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
inter national 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 indi-
vidual 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 the most sustainable company in the automotive industry for many years.

BMW Group in figures

Sales volume of automobiles*
in thousand units

1,800

1,700

1,600

1,500

1,400

1,300

1,200

Revenues

in € billion

1,435.9 1,286.3 1,461.2 1,669.0 1,845.2

53.2

50.7

60.5

68.8

76.8

* Including automobiles from the joint venture BMW Brilliance.

Profit before financial result

in € million

Profit before tax

in € million

8,400

7,200

6,000

4,800

3,600

2,400

1,200

8,400

7,200

6,000

4,800

3,600

2,400

1,200

921

289

5,111

8,018

8,300

351

413

4,853

7,383

7,819

BMW Group in figures

Sales volume – Automobiles1

BMW

MINI

Rolls-Royce

Total

Sales volume – Motorcycles

BMW

Husqvarna

Total

Production – Automobiles1

BMW

MINI

Rolls-Royce

Total

Production – Motorcycles

BMW

Husqvarna

Total

Workforce at end of year 2

2008

2009

2010

2011

2012

Change in %

1,202,239

1,068,770

1,224,280

1,380,384

1,540,085

232,425

1,212

216,538

1,002

234,175

2,711

285,060

3,538

301,526

3,575

1,435,876

1,286,310

1,461,166

1,668,982

1,845,186

101,685

13,511

115,196

87,306

13,052

98,047

12,066

100,358

110,113

104,286

9,286

113,572

106,358

10,751

117,109

1,203,482

1,043,829

1,236,989

1,440,315

1,547,057

235,019

1,417

213,670

918

241,043

3,221

294,120

3,725

311,490

3,279

1,439,918

1,258,417

1,481,253

1,738,160

1,861,826

104,220

14,232

118,452

82,631

10,612

93,243

99,236

13,035

112,271

110,360

8,505

118,865

113,811

11,473

125,284

11.6

5.8

1.0

10.6

2.0

15.8

3.1

7.4

5.9

– 12.0

7.1

3.1

34.9

5.4

BMW Group

100,041

96,230

95,453

100,306

105,876

5.6

Financial figures

in € million

Revenues

Capital expenditure

Depreciation and amortisation
Operating cash flow 3

Profit before financial result

Profit before tax

Net profit

53,197

50,681

60,477

68,821

76,848

4,204

3,670

4,471

921

351

330

3,471

3,600

4,921

289

413

210

3,263

3,682

8,149

5,111

4,853

3,243

3,692

3,646
8,1104

8,018

7,383

4,907

5,240

3,541

9,167

8,300

7,819

5,122

11.7

41.9

– 2.9

13.0

3.5

5.9

4.4

1 Including automobiles from the joint venture BMW Brilliance.
2 Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners.
3 Cash inflow from operating activities of the Automotive segment.
4 Adjusted for reclassifications as described in note 42.

Joachim Milberg
Chairman of the Supervisory Board

7 REPORT OF THE SUPERVISORY BOARD

Dear Shareholders and Shareholder Representatives,

Despite the persisting sovereign debt crisis in the eurozone and the volatile economic conditions prevail-
ing in several of our major markets, the BMW Group finished yet another financial year with an outstanding
overall result.

In our capacity as Supervisory Board, we closely monitored the performance of the BMW Group and
developments on specific markets throughout the financial year 2012. We duly advised the Board of Manage-
ment in matters of governance and continuously supervised its running of the business with great diligence.
In this endeavour we laid great store on an open, trusting and constructive exchange of information and
opinions.

Main emphases of the Supervisory Board’s monitoring and advisory activities We deliberated regularly

on the current performance and financial position of the BMW Group in a total of five meetings. Other areas
reported on and discussed extensively during the year were corporate strategy and planning, risk provision
and risk management, and corporate governance. We also made decisions with respect to the composition
of the Board of Management and the allocation of duties to Board of Management members. The Board of
Management informed us regularly and promptly of sales performance, workforce developments and other
significant matters, both at scheduled meetings and at other times as the need arose. In addition, the Chair-
man of the Board of Management, Dr. Reithofer, informed me directly about major business transactions and
projects. Dr. Kley, the Chairman of the Supervisory Board’s Audit Committee, regularly exchanged informa-
tion with Dr. Eichiner, the Board of Management member responsible for Finance and Financial Reporting.

In its regular reports on the financial condition of the Group, the Board of Management provided us with

detailed descriptions of sales volume performance and market developments for each of the Automotive
and Motorcycles segments as well as the performance of Financial Services, including new business volumes
and the development of vehicle residual values on key markets. The Board of Management also regularly
reported on the Group’s business activities in China, in particular on the sales situation there, the further
expansion of production capacities at the BMW Brilliance joint venture’s manufacturing sites in Dadong and
Tiexi, and on engine production at the Foresight engine plant opened in Shenyang in April 2012. Further-
more, the Board of Management reported to us regularly on current earnings, profitability and major changes
in the workforce size. Its business status reports also dealt with major current activities and projects, such
as ongoing developments in the BMW Peugeot Citroën Electrification joint venture, the status of cooperation
negotiations and agreements with Toyota in the fields of fuel cells, lightweight-construction, development of
sports cars as well as in the field of battery technology research. After presentation of reports by the Board of
Management, the two boards also discussed current challenges such as current economic developments and
the increasing degree of regulation on a number of markets.

We again gave careful consideration to matters concerning the performance, management and future
prospects of the Financial Services segment. One of the main focuses of reporting and discussion was the
segment’s financing model. The Board of Management described the current status of projects and the various
measures employed to ensure access to financial resources, including, for example, the use of asset-backed
securities and the expansion of BMW Bank GmbH in Europe.

One of the 2012 Supervisory Board meetings was held at the BMW plant in Leipzig, where we took the
opportunity to obtain information on the use of carbon-fibre-reinforced plastics (CFRP) in the BMW i family
of electrically powered vehicles and enquire into the state of preparations for production start-up later this
year. In the new pressing plant specially constructed for this work, we were treated to a practical demonstration
of how CFRP mats are processed to form CFRP components.

In preparation for our deliberations on the Long-term Business Forecast, the Board of Management
explained the principles applied for planning global added value within the Group in the period up to 2024
as well as the targets set for the configuration and production capacities of the Group’s plants during this
period. Additionally, a raft of measures was presented designed to help limit the scale of investment expenditure
to be incurred in connection with the expansion of production capacities.

Again in 2012, in both the Personnel Committee and the full Supervisory Board, we examined the com-
pensation of Board of Management members for appropriateness. In doing so, we also evaluated compensation
studies for the DAX and sought the expertise of an external compensation advisor who was independent of
both the BMW Group and the members of the Board of Management. Adopting a proposal of the Personnel
Committee, no changes were made to the Board of Management compensation system in 2012. The rules
governing the purchase of vehicles and other Group products and the use of vehicles by Board of Management
members were brought into line with those already in place for top-level department heads. Detailed infor-
mation on the compensation of Board of Management members can be found in the Compensation Report
(page 170 et seq.).

In the second half of the year we again convened for a two-day meeting primarily devoted to corporate

and product strategy on the one hand and to the Long-term Business Forecast on the other.

In the first part of the meeting we discussed with the Board of Management the findings of its annual
review of the Group’s Strategy Number ONE. In light of current developments, this review included a renewed
examination and assessment of the impact that could potentially arise from various crisis scenarios of varying
intensity in regions significant for sales performance.

In its report, the Board of Management also considered the strategic planning of worldwide production
capacities. In addition to the expansion of production capacities at the Spartanburg and Leipzig plants, the
Board of Management also presented its plans for future production facility and capacity expansion at other
locations. The Supervisory Board fully supports the Board of Management in its endeavours to exploit growth
opportunities in specific regions, whilst at the same time maintaining a well-balanced distribution of sales and
value added across the world’s markets.

In conjunction with our deliberations on product strategy, the Board of Management and the Head of
Design for the BMW Group presented and elaborated on selected vehicle projects. Furthermore, in a dis-
cussion with the head of the i product line, we were informed of the Group’s current activities and the needs
of customers in the field of electromobility and given an insight into some of the solutions arrived at so far,
such as for the charging of batteries at home and on the road. At our request, other related service concepts
currently being developed by the BMW Group were explained to us.

We also took a close look at the latest advances being made in the field of emission reduction and avidly

discussed, together with the Board of Management both the technical and the entrepreneurial challenges
that need to be mastered, particularly those ensuing from regulatory provisions or customer expectations with
regard to urban mobility.

The Supervisory Board remains firm in its conviction that the strategic direction set by the Board of

Management for the BMW Group is robust and sustainable.

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

a number of BMW, MINI and Rolls-Royce vehicles, including some BMW models equipped with hybrid and
electric drive systems.

9 REPORT OF THE SUPERVISORY BOARD

After concluding the Annual Strategy Review, the second part of the meeting included an in-depth
discussion of the Long-term Business Forecast drawn up by the Board of Management for the years from
2013 to 2018 and, after thorough examination, we gave the required approval. The Board of Manage-
ment elucidated changes in sales and financing volumes compared with the previous year’s forecast and
also explained the potential impact of volume and earnings risks associated with specific scenarios.
We encouraged the Board of Management in its strategy of maintaining flexibility in terms of cost
planning.

We also thoroughly examined the Annual Budget presented by the Board of Management in November

2012 for the financial year 2013 and discussed the impact of potential economic developments.

We concurred with the decision of the Board of Management to raise the share capital of the Company in

accordance with Article 4 no. 5 of the Articles of Incorporation (Authorised Capital 2009) by € 422,845 and
to issue a corresponding number of new non-voting bearer shares of preferred stock, each with a par value
of € 1, at favourable conditions to employees.

The Board of Management and Supervisory Board jointly examined corporate governance within the
BMW Group and issued a new Declaration of Compliance, the wording of which is included in the Corporate
Governance Report (page 153). The BMW Group currently complies with the recommendations of the Govern-
ment Commission on the German Corporate Governance Code (code version dated 15 May 2012, “Code”)
published on 15 June 2012 with one exception, namely the revised recommendation on the structure of super-
visory board compensation contained in section 5.4.6 paragraph 2 sentence 2 of the Code (“If members of
the Supervisory Board are promised performance-related compensation, it shall be oriented toward sustain-
able growth of the enterprise”). In this context, and following preparatory work carried out by the Presiding
Board, we examined various models with the Board of Management with respect to the future compensation
of the Supervisory Board. A proposed change to the Articles of Incorporation will be put to the shareholders
at the 2013 Annual General Meeting.

With regard to its own composition, based on a detailed composition profile, the Supervisory Board de-
cided upon specific appointment goals in 2010, which are discussed in detail in the Corporate Governance
Report (page 164 et seq.). In 2012, in line with section 5.4.1 paragraph 2 of the Code, we set what we consider
to be an appropriate target for the number of independent members in the Supervisory Board (at least twelve
of which at least six should represent the shareholders). On the basis of a self-assessment of the full Super-
visory Board and its individual members, we were able to conclude that the composition of the Supervisory
Board at 31 December 2012 meets that target. No conflicts of interest arose during the year under report on
the part of members of either the Supervisory Board or the Board of Management. Significant transactions
with Supervisory Board members and other related parties as defined by IAS 24, including close relatives
and intermediary entities, are scrutinised on a quarterly basis.

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

us (both in the Personnel Committee and in the full Supervisory Board) of the progress made in imple-
menting the BMW Group’s diversity concept, with its focus on gender, cultural background and age / experience.
In this context, we obtained information from the Board of Management with regard to the proportion of,
and changes in, management positions held by women, in particular at senior management level and at execu-
tive level below the Board of Management. We concluded that the Code’s requirements for the promotion of
diversity are also being complied with in terms of management functions, and concur with the Board of
Management that, in addition to the efforts to improve gender diversity, even more should be done to promote
cultural diversity and the international character of the workforce.

We endeavour to assess and improve continuously on the effectiveness of the work performed in the
Supervisory Board and its committees, not least in consideration of the broader range of tasks for which the
Supervisory Board now finds itself responsible. The Chairman of the Audit Committee and myself are
therefore always pleased to receive comments and suggestions for improvement from Supervisory Board
members. The formal examination of the Supervisory Board’s efficiency is also treated once each year as a
separate agenda point which is prepared by means of a questionnaire required to be completed by all Super-
visory Board members.

Each of the five Supervisory Board meetings in 2012 was attended on average by over 90 % of its members,

a fact that can be tied in to the analysis of attendance fees for individual members disclosed in the Compen-
sation Report. No member of the Supervisory Board missed more than two meetings in his / her period of
office during the year. Presiding Board and committee meetings were fully attended in the vast majority of
cases (page 163).

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

prepare complex issues and decisions more thoroughly, the Supervisory Board has established a Presiding
Board and several committees. A description of the duties, composition and work procedures of these com-
mittees is provided in the Corporate Governance Report (page 160 et seq.).

The relevant committee chairmen provided timely and comprehensive accounts of the work of the
Presiding Board and other committees to the full Supervisory Board, as did the chairman of the Nomination
Committee to the shareholder representatives on the full Supervisory Board.

In a total of four meetings, the Presiding Board focused mainly on the preparation of topics for the meet-
ings of the full Supervisory Board unless this fell under the remit of one of the committees. Complex issues,
such as the Long-term Business Forecast and the Annual Strategic Review, were dealt with on the basis of
written and oral reports provided by Board of Management members and senior department heads. In the
case of financial planning, for example, we arranged for the Board of Management member responsible for
Finances to brief us in advance on detailed aspects of the Long-term Business Forecast. The Head of Group
Strategy and Planning, Environment provided us with facts, assumptions and principles relevant for global
value added within the Group in the period up to 2024, including the targets and distribution of production
capacities built into the forecasts, and discussed analyses from the Annual Strategy Review with us. The
Presiding Board selected further 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.

Two telephone conference calls were also conducted by the Presiding Board in conjunction with current

activities and projects. In one of those conference calls, the Board of Management and the Head of Product
and Brand Strategy reported on the current status of cooperation arrangements, in particular the planned
extension of collaboration with Toyota Motor Corporation. In another telephone conference call, the Board
of Management explained the plans to sell Husqvarna Motorcycles.

The Audit Committee held three meetings and three telephone conference calls during 2012. In accordance
with the recommendation of the German Corporate Governance Code, we discussed each of the interim finan-
cial reports with the Board of Management prior to publication. Representatives of the external auditors were
present for part of the time during the telephone conference call held to present the Interim Financial Report
for the six-month period to 30 June 2012. The report had been subjected to review by the external auditors.

One meeting of the Audit Committee was primarily dedicated to preparing the Supervisory Board’s meet-
ing in spring 2012 at which the financial statements were examined. In order to prepare its recommendation

11 REPORT OF THE SUPERVISORY BOARD

to the full Supervisory Board regarding the proposed election of external auditors at the Annual General
Meeting 2012, the Audit Committee obtained a Declaration of Independence from the proposed external
auditor. The Audit Committee also considered the scope and composition of non-audit services, including
tax advisory services, provided by KPMG entities to the BMW Group. There were no indications of conflicts
of interest or grounds for exclusion or lack of independence on the part of the auditor. The fee proposals for
the audit of the year-end Company and Group Financial Statements 2012 and the review of the six-month
Interim Financial Report were deemed appropriate by the Audit Committee. Subsequent to the Annual
General Meeting 2012 the Audit Committee appointed the external auditor for the relevant engagements and,
with due consideration to the suggestions made by the full Supervisory Board, specified audit focus areas.
In relation to the audit of the Company Financial Statements, for example, this included the accounting
treatment of commodity derivatives and in relation to the audit of the Group Financial Statements this in-
cluded the measurement of interest rate derivatives.

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

in place throughout the BMW Group, focusing on the internal control system (ICS) as the basis for financial
reporting. We were also provided with a description of planned areas of action and further developments in
this field.

The Audit Committee considered the set of measures undertaken by the Board of Management in 2012

to ensure that “compliance” as a concept is fully embedded in the principles of conduct valid for all Group
employees. The Chairman of the BMW Group Compliance Committee reported to the Audit Committee on
the current compliance situation, which, as in the previous year, was deemed satisfactory. The Audit Com-
mittee also enquired into the implementation of anti-corruption measures resolved in the previous year, the
enlargement of the BMW Group Compliance Organisation -- in particular within the Financial Services
segment -- and the results of sample testing carried out in Germany and abroad.

The Head of Group Internal Audit reported to us in the Audit Committee on the significant findings of
audits conducted by Group Internal Audit and on the planned areas of focus on the industrial and financial
services sides of the business.

The Personnel Committee convened four times during the financial year 2012. In preparation for a meet-
ing of the full Supervisory Board, the Personnel Committee reviewed the compensation of Board of Manage-
ment members (including pension benefits) for appropriateness in comparison with other DAX companies.
Other specific issues relating to employment contracts were also addressed by the Personnel Committee. The
Personnel Committee gave its approval in one case for a member of the Board of Management to accept a
mandate for membership of the supervisory board of a non-BMW Group entity.

The Nomination Committee convened once during the financial year 2012, on which occasion it de-
liberated on proposals for candidates for the Supervisory Board elections at the 2013 Annual General Meeting,
taking account of the composition objectives stipulated for the Supervisory Board.

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

convene during the financial year 2012.

Composition and organisation of the Board of Management We deliberated with the Board of Manage-
ment on changes to the structure and allocation of portfolio responsibilities with the objective of making the
best use of individual members’ expertise and strengthening the overall responsibility of the Board of Manage-
ment. In this context, it was decided to establish separate areas of responsibility for the BMW brand on the
one hand and for the MINI brand, Rolls-Royce Motor Cars and motorcycles business on the other. The new

structure and allocation of responsibilities resolved by the Board of Management in agreement with the
Supervisory Board is depicted in detail in the Corporate Governance Report (page 154). In view of the fact
that Mr. Krüger was set to take over responsibility for the newly created board portfolio comprising MINI,
Motorcycles, Rolls-Royce and Aftersales BMW Group, we appointed Milagros Caiña Carreiro-Andree as
member of the Board of Management and as successor to Mr. Krüger with responsibility for Human Resources
and as Industrial Relations Director with effect from 1 July 2012. The composition of the Board of Manage-
ment team was otherwise unchanged during the financial year 2012. No decisions needed to be made in 2012
with respect to the reappointment of Board of Management members.

Composition of the Supervisory Board, the Presiding Board and Supervisory Board committees The

mandate of Franz Oberländer as employee representative on the Supervisory Board ended on 31 May 2012
when he entered into retirement. On 1 June 2012 the Munich District Court appointed Dr. Dominique
Mohabeer, member of the Works Council of BMW AG at the Munich site, to the position of employee repre-
sentative on the Supervisory Board for the remaining term of office. As a result, the proportion of women
in the Supervisory Board increased to 20 %, in line with the composition objectives set by the Supervisory
Board.

Anton Ruf, executive staff representative on the Supervisory Board, retired on 31 October 2012, at which

date he also ceased to be a member of the Supervisory Board. He was succeeded on 1 November 2012 by
Oliver Zipse, Head of Brand and Product Strategies, who took over the role of executive staff representative
on the Supervisory Board for the remaining term of office as elected substitute member. In view of a new
management position he will have within the BMW Group from 1 April 2013 onwards, Mr. Zipse has resigned
his mandate on the Supervisory Board with effect from 31 March 2013.

On 29 November 2012 the shareholder representatives in the Supervisory Board elected Susanne Klatten

as a further member of the Nomination Committee. The composition of the Presiding Board and other
committees of the Supervisory Board remained unchanged during the financial year 2012. The Corporate
Governance Report includes an overview of the composition of the Supervisory Board and its committees
(page 155 et seq., page 163).

Examination of financial statements and the profit distribution proposal KPMG AG Wirtschafts-
prüfungs gesellschaft conducted a review of the abridged Interim Group Financial Statements and Interim
Group Management Report for the six-month period ended 30 June 2012. The results of the review were
also reported orally to the Audit Committee. No issues were identified that might indicate that the abridged
Interim Group Financial Statements and Interim Group Management Report had not been prepared, in all
material respects, in accordance with the applicable provisions.

The Group and Company Financial Statements of Bayerische Motoren Werke Aktiengesellschaft for the
year ended 31 December 2012 and the Combined Group and Company Management Report – as authorised
for issue by the Board of Management on 19 February 2013 – were audited by KPMG AG Wirtschafts prüfungs-
gesell schaft and given an unqualified audit opinion.

The Financial Statements and Combined Group and Company 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 good time. At the meeting held on 1 March 2013 these
documents were examined and discussed in detail by the Audit Committee. The Supervisory Board subse-
quently examined these documents at its meeting on 14 March 2013, after hearing the committee chairman’s
report on the meeting of the Audit Committee. In both meetings, the Board of Management gave a detailed
explanation of the financial reports it had prepared. Representatives from KPMG attended both meetings,

13 REPORT OF THE SUPERVISORY BOARD

reported on significant audit findings and answered any additional questions raised by the members of the
Supervisory Board. The representatives of the external auditors confirmed that the risk management system
established by the Board of Management is capable of identifying events or developments that might impair
the going-concern status of the Company and that no material weaknesses in the internal control system and
risk management system were found with regard to the financial reporting process. Similarly, the external
auditors confirmed that they had not identified any facts in the course of their work that were inconsistent
with the contents of the Declaration of Compliance issued jointly by the two boards. Based on own thorough
examination by the Audit Committee and the full Supervisory Board, we concurred with the results of the
external audit.

In accordance with the conclusion reached as a result of the examination by the Audit Committee and

Supervisory Board, no objections were raised.

The Group and Company Financial Statements of Bayerische Motoren Werke Aktiengesellschaft for the
financial year 2012 prepared by the Board of Management were approved at the Supervisory Board Meeting
held on 14 March 2013. The separate financial statements have thus been adopted.

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

of Management to use the unappropriated profit to pay a dividend of € 2.50 per share of common stock and
€ 2.52 per share of non-voting preferred stock. Taking account of the financial condition of the BMW Group,
we consider the proposal appropriate and concur with it.

Expression of thanks by the Supervisory Board We would like to express our gratitude to the members

of the Board of Management and all employees worldwide for their commitment and contribution to
another set of excellent financial statements for the year ended 31 December 2012.

We also wish to extend a special word of thanks to Mr. Oberländer and Mr. Ruf, both of whom left the
Supervisory Board in 2012 after many years of dedicated and constructive work in the Supervisory Board.
In addition to achieving success in their chosen fields of activity, they spent most of their working lives
diligently serving both the Company and the employees they represented.

Munich, 14 March 2013

On behalf of the Supervisory Board

Joachim Milberg
Chairman of the Supervisory Board

Norbert Reithofer
Chairman of the Board of Management

15 STATEMENT OF THE CHAIRMAN OF THE BOARD OF MANAGEMENT

Dear Shareholders,

Your Company has once again demonstrated a strong performance with new sales volumes, revenues

and earnings highs for the 2012 financial year.

At the BMW Group, we look to the future and are prepared to go against the trend, if need be; we have

the stamina to stick to our chosen path. For us, it is always the customer who comes first – that is why we
offer innovative products and services and what makes us the world’s top-selling premium car manufacturer.
But we aim to do even better – which means continuing to grow at a profitable rate and acting in a responsible
manner as a member of society.

Our actions are based on our tradition, our values and our Company’s unique corporate culture and team

spirit. At the BMW Group, we all share a passion for mobility. It is our common purpose to make individual
mobility viable for the future, as the demands on cars continue to evolve. Our industry is in a period of transi-
tion – what we refer to as “iconic change”. We are driving and shaping this technological shift towards sus-
tainable mobility. It will require all our powers of innovation in the development of new products and attrac-
tive mobility services, as well as constant review of our structures and processes and how we work together.

2012 – the most successful year in the history of the Company. Our success is built on the desirability
of our products. More than 1.84 million BMW, MINI and Rolls-Royce vehicles were delivered to customers in
2012, beating the previous year’s record by more than 10 %. All three of our automobile brands set new re-
cords. In addition, more than 117,000 customers purchased a BMW or Husqvarna motorcycle. Our Financial
Services business also continued to grow and contributed to the positive performance in sales figures.

Thanks to strong demand for our premium vehicles, revenues rose to more than € 76.8 billion and profit
before tax increased to around € 7.8 billion in the 2012 financial year – both new highs for the Group. The net
profit of more than € 5.1 billion also represented a new record.

Our financial success allows us the necessary freedom to continue investing in our future. In 2012, our

research and development expenses rose to more than € 3.9 billion, mostly in connection with projects to
secure our future growth.

Our figures for 2012 are the result of an outstanding collective performance. On behalf of the Board of
Management, I would like to thank all of our employees for their efforts, determination and achievements in
2012. I would also like to thank our retail organisation, our suppliers and our business partners, who play
such an important part in the Company’s success.

Five years of Strategy Number ONE: interim targets for 2012 fulfilled. The success of the 2012 financial

year is also the result of the long-term decisions we made as part of our Strategy Number ONE.

We presented our strategy to the public back in autumn 2007 – with a vision for the year 2020. The aim is
to prepare the BMW Group for the future, as it faces a wide range of different challenges in a changing environ-
ment for individual mobility. Specific measures were implemented in the four strategic areas of “Growth”,
“Shaping the future”, “Profitability” and “Access to technology and customers”. We also set ourselves ambitious

interim targets for 2012, including much greater efficiency and higher profitability. For the Automotive seg-
ment, we defined an EBIT margin target of between 8 % and 10 %.

What have we achieved during the first five years of Number ONE?
– We have become more profitable, and doubled our profit before tax between 2007 and 2012. At the end of

2012, our EBIT margin in the Automotive segment was above our 8 % and 10 % target range.

– The price of BMW common stock climbed more than 70 % from the end of 2007 to the end of 2012, while

Germany’s DAX fell by 5.6 % over the same period.

– We have leveraged much more than the € 6 billion in efficiency potential originally targeted.
– In 2007, Efficient Dynamics was already the best technology on the market for lowering fuel consumption
and CO2 emissions. Back then, we had 27 BMW and MINI models with 140 grams of CO2 per kilometre or
less. By the end of 2012, the BMW Group fleet included 73 models at or below this level.
Our core model series – the BMW 3 Series, the BMW 5 Series and the BMW 7 Series – are also available as
full hybrids. Efficient Dynamics continues: we aim to reduce the CO2 emissions of our vehicle fleet by at
least another 25 % between 2008 and 2020.

– We have systematically expanded our global production network since 2007 – from 23 production facilities
in twelve countries to 29 locations in 14 countries by the end of 2012. The most recent example is our new
Tiexi plant in Shenyang, which we have been operating with our joint venture partner, Brilliance, since
2012. When we plan a site, we ensure that it sets new standards: Tiexi is the most sustainable vehicle plant
in China today and one of the most advanced in the world.

Over the past five years, our strategy has proven robust, and shown the way forward under changing
external conditions: during the global financial and economic crisis of 2008 and 2009, the BMW Group still
showed a profit and paid a dividend. In 2010 and 2011, we steered our Company back on track for success –
initially helped by an economic tailwind, but then maintaining our performance in a challenging and volatile
environment in 2012.

This clearly shows that we have reached the first major milestone in our strategy. We have fulfilled all the

interim targets of our Strategy Number ONE for the year 2012 – and, in some cases, exceeded them. We de-
livered on our promises. Today, the BMW Group is a stronger, more international and more future-oriented
company than it was when we embarked on our Strategy Number ONE. Above all else, the BMW Group is
an attractive investment – and I would like to thank you, our shareholders, for supporting us on this journey.

It is in all our interests that the BMW Group not only has a successful present, but, even more impor-
tantly, a promising future. For that reason, we are now working towards the next major milestone in our
strategy.

Number ONE still our corporate compass – next milestone in 2016. In 2016, we will celebrate 100 years

of BMW. By then, we aim to sell well over two million BMW, MINI and Rolls-Royce brand vehicles – with
BMW Motorrad and Financial Services also continuing to contribute to our success. Profitability is, and will
remain, the foundation upon which we build and shape our future.

17 STATEMENT OF THE CHAIRMAN OF THE BOARD OF MANAGEMENT

In the 2013 financial year, we aim to continue on our successful course, targeting record sales at Group
level. The main risks and uncertainties for our business stem from the volatility in our environment, the high
level of public-sector debt and the uneven performance of the automobile markets.

We remain confident. In 2013, all three automobile brands and BMW Motorrad will bring new and revised

models onto the market. In addition to that:

We are putting electromobility on the road. Late 2013 heralds a new era of premium mobility: we will
launch the pure electric BMW i3, our solution for emissions-free driving in urban areas. At the same time,
customers will be able to purchase their charging current from renewable energies.

Production of the BMW i family sets new standards for resource conservation and the use of innovative
materials, such as carbon fibre, in automobile manufacturing. In 2012, the BMW Group was named industry
leader in the Dow Jones Sustainability Index for the eighth consecutive year – and therefore remains the
world’s most sustainable car company.

At Bayerische Motoren Werke, we have a clear vision: to be a leader in the future development of individual
mobility. We believe in the potential of electromobility – not least in order to meet ambitious CO2 emissions
reduction targets in the EU and worldwide. In this regard, we are collaborating with Toyota Motor Corporation
in the field of sustainable mobility. In early 2013, we signed an agreement to establish cooperation on fuel
cells, lightweight construction technologies and the development of a sports car.

Employees are our most important success factor. The most important requirement for a successful

future is our motivated and dedicated employees – and, not least, our young talents. For this reason, we
increased the number of apprentices in Germany by about 10 % last year. No fewer than 1,376 young people
embarked on a career with the BMW Group at the start of the 2012 training year, and the total number of
apprentices reached 4,266 at the end of 2012. Last year alone, we invested more than € 280 million in vocational
and professional training to provide our employees with the qualifications they need for technological
change.

We are convinced that our investments in all areas today will enable your Company to be well positioned

to face the future. We hope we can count on your continued trust and support as we move forward.

Norbert Reithofer
Chairman of the Board of Management

COMBINED GROUP AND COMPANY MANAGEMENT REPORT

A Review of the Financial Year

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT

18
21
24
44
47

66
74

A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments
Financial Analysis
50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

BMW Group finishes financial year with record figures
The BMW Group remained firmly on the road to success
in 2012 with record figures. Despite an increasingly
volatile market environment, sales of BMW, MINI and
Rolls-Royce brand cars increased by 10.6 % to 1,845,186*
units (2011: 1,668,982*), ensuring that the BMW Group
retained pole position in the premium segment.

All three automobile brands performed exceedingly
well, each contributing in their own measure towards
this resounding success. Record sales volume figures
were registered across the board with 1,540,085* BMW
(2011: 1,380,384* units; + 11.6 %), 301,526 MINI (2011:
285,060 units; + 5.8 %) and 3,575 Rolls-Royce cars
(2011: 3,538 units; + 1.0 %) sold during the 12-month
period. The new BMW 3 Series, 5 Series, 6 Series and
BMW X models were particularly successful within
a portfolio of models brimming with attractive cars.
The MINI Countryman, the MINI Coupé and the
new MINI Roadster also played an important role in
making 2012 another highly successful year for the
BMW Group.

Although the majority of motorcycle markets contracted
considerably during the reporting period, our Motor-
cycles segment also broke its previous sales volume re-
cord. We handed over 117,109 BMW and Husqvarna
motorcycles to customers in various markets worldwide,

3.1 % more than in the previous year (2011: 113,572 units).
The number of BMW brand motorcycles sold in 2012
climbed by 2.0 % to 106,358 units (2011: 104,286 units).
Husqvarna recorded a sales volume of 10,751 units
(2011: 9,286 units; + 15.8 %).

The Financial Services segment can also look back
on a successful year. The number of new contracts
signed with retail customers worldwide rose by 12.1 %
to 1,341,296 for the 12-month period (2011: 1,196,610
contracts). The number of leasing and financing con-
tracts in place with retail customers and dealerships
totalled 3,846,364 units at the end of the reporting pe-
riod (2011: 3,592,093 contracts; + 7.1 %).

Revenues and earnings attain new heights
The dynamic rise in new car sales in 2012 enabled the
BMW Group to attain new heights in terms of both reve-
nues and earnings. Group revenues grew dynamically,
rising by 11.7 % to reach € 76,848 million for the year (2011:
€ 68,821 million). Despite greater investment in tech-
nologies of the future, increased intensity of competi-
tion and higher personnel costs, earnings also climbed
to new heights in 2012. EBIT rose to € 8,300 million
(2011: € 8,018 million; + 3.5 %) and earnings before tax
improved by 5.9 % to € 7,819 million (2011: € 7,383 mil-
lion). It should be noted that the previous year’s figures
include a positive exceptional factor of € 524 million

BMW Group revenues by region

in € million

75,000

67,500

60,000

52,500

45,000

37,500

30,000

22,500

15,000

7,500

Europe

thereof Germany

Asia

thereof China

Americas
thereof USA

Other markets

Europe

thereof Germany

Asia

thereof China

Americas

thereof USA

Other markets

Total

31,432

10,739

6,320

2,763

13,294

11,349

2,151

53,197

28,425

11,436

7,364

4,039

12,433

10,628

2,459

50,681

29,788

11,207

13,384

8,444

14,168

11,638

3,137

60,477

33,815

12,859

17,768

11,591

14,287

11,516

2,951

68,821

35,157

12,186

22,159

14,448

16,271

13,447

3,261

76,848

* Including automobiles from the joint venture BMW Brilliance.

19 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

arising on the reductions of provision for residual value
and credit loss risks. Business with end-of-contract
leasing vehicles gave rise to an exceptional gain of
€ 124 million in 2012. Income tax expense for the year
under report totalled € 2,697 million (2011: € 2,476 mil-
lion; + 8.9 %), resulting in a slightly higher effective tax
rate of 34.5 % (2011: 33.5 %). At € 5,122 million, Group
net profit marked a new record, surpassing the high
level reached the previous year by 4.4 % (2011: € 4,907
million).

Automotive business also achieved new record figures
in terms of both revenues and earnings. At € 70,208 mil-
lion, revenues were 11.0 % up on the previous year (2011:
€ 63,229 million). EBIT rose to € 7,624 million (2011:
€ 7,477 million; + 2.0 %), while segment profit before tax
totalled € 7,195 million (2011: € 6,823 million; + 5.5 %).

In the Motorcycles segment revenues reflected the
good sales volume performance and rose by 3.8 % to
€ 1,490 million. EBIT, however, was below that of the
previous year (€ 9 million; – 80.0 %) due to the sale of
Husqvarna Motorcycles. Segment profit before tax fell
accordingly by 85.4 % to € 6 million.

The Financial Services segment remained on its growth
course and made another excellent contribution to the
BMW Group’s performance in 2012. Segment reve-
nues rose sharply (+ 11.7 %) to € 19,550 million (2011:
€ 17,510 million). Segment EBIT, however, declined to
€ 1,558 million (2011: € 1,763 million; – 11.6 %), while
profit before tax dropped to € 1,561 million (2011:
€ 1,790 million; – 12.8 %). Lower earnings for the seg-
ment must be seen in the light of the figure reported
for the previous year, which included a positive excep-
tional factor of € 439 million arising on the reduction
of residual value and credit loss risks. Business with
end-of-contract leasing vehicles gave rise to an excep-
tional gain of € 124 million in 2012.

Increase in proposed dividend
In view of the very strong earnings performance for the
year, the Board of Management and the Supervisory
Board will propose to the Annual General Meeting to
use BMW AG’s unappropriated profit of € 1,640 million
(2011: € 1,508 million) to pay a dividend of € 2.50 for
each share of common stock (2011: € 2.30) and a divi-
dend of € 2.52 for each share of preferred stock (2011:
€ 2.32). These figures correspond to a distribution rate of
32.0 % for 2012 (2011: 30.7 %).

BMW Group Capital expenditure and operating cash flow

in € million

9,000

8,000

7,000

6,000

5,000

4,000

3,000

Capital
expenditure

Operating
cash flow1

4,204

3,471

3,263

3,692 5,240

4,471

4,921

8,149

8,1102 9,167

1 Cash inflow from operating activities of the Automotive segment.
2 Adjusted for reclassifications as described in note 42.

2012 and was therefore 41.9 % above that of the previous
year (2011: € 3,692 million). During the year under report,
investments in property, plant and equipment amounted
to € 4,028 million (2011: € 2,598 million; + 55.0 %). Capi-
talised development costs totalled € 1,089 million (2011:
€ 972 million; + 12.0 %). The capitalisation ratio for devel-
opment expenditure decreased compared to the pre-
vious year to 27.6 % (2011: 28.8 %). The capital expendi-
ture ratio for the year rose to 6.8 % of Group revenues
(2011: 5.4 %; + 1.4 percentage points), close to the tar-
geted level of 7 %. As in previous years, capital expendi-
ture was covered by operating cash flow1.

We again invested primarily in the introduction of new
models such as the BMW 6 Series Gran Coupé, the
derivatives of the BMW 3 Series, the MINI Roadster and
the revised models of both the BMW 7 Series and the
X1. Moreover, preparations for the manufacture of elec-
tric cars under the sub-brand BMW i progressed apace
during the period under report.

BMW Group and Toyota Motor Corporation sign
cooperation agreement
The BMW Group and the Toyota Motor Corporation
(TMC) continue to work together in the field of sustain-
able mobility. The two entities signed a contract at the
end of January 2013 with respect to cooperation in
the fields of fuel cells, lightweight-construction tech-
nologies and the development of sports cars.

Numerous model start-ups – level of investment raised
The volume of investment for intangible assets and
property, plant and equipment rose to € 5,240 million for

The BMW Group and TMC also signed an agreement on
the joint research of lithium-air batteries, a post-lithium
battery technology. With the signing of this agreement,
the joint research on the next generation of lithium-ion

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT

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66
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Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

batteries initiated in March 2012 has now entered the
second phase.

BMW Group incorporated BMW Peugeot Citroën
Electrification
The BMW Group and PSA Peugeot Citroën mutually
agreed to terminate cooperation in the BMW Peugeot
Citroën Electrification joint venture. The BMW Group
is taking over the company and will carry on with the
work that has been begun. The decision of the two part-
ners does not have any impact on the current engine-
producing cooperation arrangements between PSA
Peugeot Citroën and the BMW Group.

New strategy in Motorcycles segment
A new strategy developed for the Motorcycles segment
means that the BMW Group will be concentrating in
future solely on its BMW brand. Against this background,
the takeover of Husqvarna Motorcycles has been
agreed upon with Pierer Industrie AG, Austria. The
transaction is due to be completed during the first six
months of 2013, subject to approval by the Austrian
merger control authorities.

21 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

General Economic Environment

Significant downturn in global economy
As expected, the global economy suffered a perceptible
downturn in 2012. The source of the downward trend
lay clearly in Europe, where economic output fell dur-
ing the period under report in both the eurozone and
the United Kingdom. By contrast, the US economy
remained relatively stable throughout 2012 despite the
fact that the growth rate was still down on the historic
average. Growth rates in the major emerging markets
fell short of expectations.

High sovereign debt levels in industrial countries con-
tinue to pose a structural risk for the worldwide economy.
The future course of the debt crisis in Europe will de-
pend partly on the course of action taken by policy-
makers, but also on the way the situation is perceived
on the world’s capital markets. In view of early elections
in Italy, Spain’s outstanding decision to apply for support
from the European Stability Mechanism (ESM), dis-
cussions on a further debt cut for Greece and the per-
formance of the French economy, renewed turbulence
cannot be ruled out.

Economic performance is also being held down by high
debt levels in the USA, Japan and the UK. The two po-
litical sides in the USA reached a compromise at the
turn of the new year, reducing the looming threat of a
drop in consumer spending due to tax increases and
expenditure cuts in 2013 to approximately one third of
the originally planned magnitude, equivalent to some
1.5 % of economic output. In December 2012, the newly
elected government in Japan announced the initiation
of further government-funded stimulus programmes,
despite the high level of state debt.

Central banks worldwide have reacted to the risk of an
impending economic downturn by continuing their

expansive monetary policies on a massive scale. So far,
however, only share and raw material prices have really
benefited and been propped up at a high level. Despite
these moves, there is still no sign of a genuine revival in
demand in industrial countries.

The eurozone’s economy contracted overall by 0.4 % in
2012. Germany was the only major country in the euro-
zone that managed to register any real growth (+ 0.7 %).
France’s gross domestic product (GDP) practically stag-
nated at a rate of + 0.1 %. By contrast, Italy (– 2.2 %) and
Spain (– 1.4 %) slipped into recession. The UK economy –
Europe’s largest outside the eurozone – reached the pre-
vious year’s level.

The USA recorded a growth rate of 2.2 % in 2012, thanks
to the recovery of the employment and property mar-
kets. Despite uncertainties about possible fiscal changes
in 2013, domestic demand remained stable up to the
year-end.

The Japanese economy grew by 1.8 % as a result of the
high level of investment and the production catch-up
effect caused by the previous year’s catastrophe. Even
here, however, the growth rate slowed down sharply
over the course of the year.

China, too, lost some momentum in 2012, growing
by only 7.8 % compared to the previous year’s 9.3 %,
but nevertheless remained the most dynamic of the
world’s major economies. The growth rate in India
fell from 6.9 % in 2011 to 5.1 % in 2012. The most pro-
nounced slow-down was registered in Brazil, where
growth dropped to 1.1 % and hence to a mere quar-
ter of the previous year’s rate (2011: + 4.4 %). Russia’s
GDP also grew more slowly than one year earlier
(+ 3.4 %).

Exchange rates compared to the euro

(Index: 31 December 2007 = 100)

140

130

120

110

100

Source: Reuters

British Pound

US Dollar

Chinese
Renminbi
Japanese Yen

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments
Financial Analysis
50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

18
21
24
44
47

66
74

Exchange rates remain volatile, but only marginally
changed on a year-end comparison
The world’s currency markets were heavily influenced
again in 2012 by the impact of the sovereign debt crisis.
Although the US dollar exchange rate was practically
unchanged on a year-end comparison (US dollar 1.30 to
the euro), the escalation of the euro crisis in summer
2012 temporarily caused a sharp rise in the value of the
US dollar.

Since the rate of the Chinese renminbi is more or less
coupled to that of the US dollar, the volatility of the
Chinese currency generally reflects that of the US dollar
to the euro. A continuation of the gradual appreciation
of the renminbi of 1 % to 2 % was also noticeable in 2012.

The British pound increased moderately in value against
the euro and finished the year at GBP 0.81 to the euro,
thus continuing to recover from its low point during the
financial crisis. The Japanese yen fell to a rate of 114 yen
to the euro, in advance of the expansionary monetary
and fiscal policies expected to be adopted by the new
government.

Higher prices for major raw materials
Political uncertainties regarding further developments
in various conflicts in the Middle East kept the price
of Brent oil – the most relevant for Europe – at a high
level, namely US dollar 112 per barrel on average for the
year. By contrast, the price of WTI oil – the most relevant
parameter for the USA – was somewhat lower in 2012
(average price of US dollar 94 per barrel). The upshot
was a further rise in energy prices, particularly in Europe.
By contrast, the price of steel decreased worldwide, re-
flecting the economic downturn. Prices of non-ferrous

and precious metals continued to be highly volatile,
generally in an upward direction.

Car markets in 2012
The number of passenger cars and light commercial ve-
hicles sold worldwide rose to 72.6 million units (+ 5.7 %)
in 2012, primarily on the back of increased demand in
the USA and China. This time, however, demand in the
USA provided the strongest momentum, with the mar-
ket growing by 13.4 % to 14.5 million units. After a pe-
riod of exceptionally rapid growth in China, including
several years of double-digit growth, the passenger car
market expanded by a relatively moderate 9.4 % in 2012
to approximately 13.3 million units.

In Europe, the number of new registrations fell once
again in 2012 (12.5 million units; – 7.8 %). The decrease
in Germany was less pronounced, with new registra-
tions down by 2.9 % to approximately 3.1 million units.

Steel price trend

(Index: January 2008 = 100)

170

160

150

140

130

120

110

100

Source: Working Group for the Iron and Metal Processing Industry

Price in US Dollar

Price in €

Oil price trend

Price per barrel of Brent Crude

140

120

100

Source: Reuters

23 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Precious metals price trend

(Index: 31 December 2007 = 100)

300

250

200

150

100

Source: Reuters

Gold
Palladium

Platinum

market in Japan continued to steer a course of recovery
in 2012, growing strongly by 18 %.

The financial services market in 2012
All of the world’s major central banks adhered to their
adopted course, ensuring that commercial banks had
access to large volumes of liquidity. Marked rises in
refinancing costs in a number of countries within the
eurozone triggered various political measures that
helped to stabilise the financial markets.

Price levels on international used car markets continued
to develop inconsistently in 2012. While North America,
Germany and Great Britain were largely stable, adverse
economic developments in some southern European
countries caused used car prices to fall in the region.

Despite the debt crisis in Europe and the resulting nega-
tive impact on unemployment figures, credit risk levels
for retail, dealer and importer financing business did
not worsen overall. By contrast, the situation in southern
Europe continues to be difficult in the face of adverse
economic conditions.

The percentage drops in France (– 14.0 %), Italy (– 20.0 %)
and Spain (– 13.4 %) reached double figures in each
case. Of the major car markets in Europe, only Great
Britain was able to buck the trend, with the number of
new vehicles registered up by 5.3 % to approximately
2 million units.

Japan’s car market grew exceptionally strongly in 2012,
jumping by 28 % to 5.2 million units, mainly due to eco-
nomic revival in the wake of the Fukushima catastrophe
in the previous year, manifested in a production catch-
up effect and increased demand for spare parts.

The Russian market demonstrated its generally robust
state of health with new registrations up by around 9 %
to 2.7 million units. India’s car market also continued
to display an upward trend (2.8 million units; + 10 %).
Brazil saw its car market climb by 3.4 % to 3.6 million
units, largely due to the initiation of a new state-funded
stimulus programme.

Motorcycle markets in 2012
International motorcycle markets in the 500 cc plus class
continued to fare divergently in 2012. Overall this mar-
ket segment contracted worldwide by 1 % compared
to the previous year. In Europe (– 9 %), the impact of the
sovereign debt crisis was felt most sharply in the region’s
southern countries, including sharp market downturns
in Italy (– 20 %) and Spain (– 22 %). Great Britain (– 5 %)
and France (– 2 %) recorded more moderate declines.
In a contrasting trend, the 500 cc plus class market in
Germany grew by 4 % compared to one year earlier. The
corresponding segment in the USA also registered a
moderate increase (+ 2 %) in the period under report.
Brazil was 6 % up on the previous year. The motorcycle

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
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24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

24
30
31
33
36
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39
41
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments
Financial Analysis
Internal Control System and
explanatory comments
Risk Management
Outlook

44
47

50
65

66
74

Review of Operations

AUTOMOTIVE SEGMENT

Car sales volume at new all-time high
The BMW Group sold a total of 1,845,186* BMW, MINI
and Rolls-Royce brand vehicles during the year 2012,
the best sales volume performance ever achieved in the
company’s history (+ 10.6 %). Despite increasing uncer-
tainties on many markets, particularly in Europe, the
BMW Group retained its pole position in the premium
segment worldwide.

This strong performance was underlined by the fact
that all three brands broke their previous sales volume
records. Sales of BMW brand cars rose by 11.6 % to
1,540,085* units. Both MINI (301,526 units; + 5.8 %) and
Rolls-Royce (3,575 units; + 1.0 %) also registered sales
volume growth.

Double-digit growth in Asia and the Americas
Sales of BMW, MINI and Rolls-Royce brand cars in Asia
rose by almost one third to 493,393* units (+ 31.4 %).
The number of cars sold in China jumped by 40.1 % to
327,341* units, surpassing the 300,000 threshold for the
first time with ease. Strong growth was also recorded in
Japan (56,701 units; + 19.0 %).

The Americas region also made a good contribution
to the overall performance, with 425,382 units (+ 11.8 %)
sold in this region, including 348,532 units sold in the
USA (+ 13.8 %). These figures enabled us to maintain our
pole position amongst premium manufacturers.

BMW Group sales volume of vehicles by region and market

in 1,000 units

1,800

1,600

1,400

1,200

1,000

800

600

400

200

BMW Group – key automobile markets 2012

as a percentage of sales volume

Other

USA

China*

Japan

Italy

France

Great Britain

Germany

USA
China*

Germany

Great Britain

18.9

17.7

15.6

9.5

France

Italy

Japan

Other

3.7

3.3

3.1

28.2

BMW Group car sales in Europe were marginally higher
in a year-on-year comparison, despite somewhat difficult
business conditions. Overall, we sold 865,417 vehicles
in this region (+ 0.8 %). Sales volume in Germany edged
up by 0.7 % to 287,362 units. We also convincingly beat
the previous year’s performance in Great Britain, with
sales volume up by 4.2 % to 174,530 units. France failed
to match the previous year’s level (67,364 units; – 4.4 %),

Europe

thereof Germany

Asia*
thereof China*

Americas
thereof USA

Other markets

Europe

thereof Germany

Asia*

thereof China*

Americas

thereof USA

Other markets

Total

864.6

280.9

165.7

65.9

355.4

303.6

50.2

761.9

267.5

183.2

90.6

294.2

242.1

47.0

791.2

267.2

286.3

169.6

329.7

266.6

54.0

858.4

285.3

375.5

233.6

380.3

306.3

54.8

865.4

287.4

493.4

327.3

425.3

348.5

61.1

1,435.9

1,286.3

1,461.2

1,669.0

1,845.2

* Including automobiles from the joint venture BMW Brilliance.

25 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

while sales in Italy dropped to 60,520 units (– 16.5 %) due
to the impact of the sovereign debt crisis. By contrast,
sales in the growing Russian market rose by almost one
third to 40,230 units (+ 33.0 %).

their leading positions in their respective segments of the
market. The BMW X1 was again the best-selling model
in its segment. The new BMW 3 Series Sedan, which
has been on the market since February 2012, accelerated
straight into first place in the mid-range segment.

BMW brand exceeds 1.5 million threshold for first time*
In addition to retaining the top position for the
BMW brand in the premium segment as a whole, the
BMW 1 Series, 5 Series and 6 Series each consolidated

The BMW 1 Series performed extremely well with sales up
by 28.6 % on the previous year to 226,829 units. During
the year ended 31 December 2012 we sold 406,752 units

Sales volume of BMW vehicles by model variant*
in units

2012

2011

Change

Proportion of
in % BMW sales volume
2012 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

Gran Coupé

BMW 7 Series

BMW X1

BMW X3

BMW X5

BMW X6

BMW Z4

14,462

176,066

20,015

16,286

226,829

20,328

111,898

24,357

19,835

176,418

294,045

240,279

59,144

29,525

24,038

72,054

39,332

32,799

406,752

384,464

280,504

57,425

21,087

359,016

8,480

7,880

6,833

23,193

248,835

61,215

22,451

332,501

2,937

6,459

–

9,396

– 28.9

57.3

– 17.8

– 17.9

28.6

22.4

– 17.9

– 24.9

– 26.7

5.8

12.7

– 6.2

– 6.1

8.0

–

22.0

–

59,184

68,774

– 13.9

147,776

126,429

149,853

117,944

108,544

104,827

43,689

40,822

16.9

27.1

3.5

7.0

15,249

18,809

– 18.9

14.7

26.4

23.3

1.5

3.9

9.6

9.7

7.1

2.8

1.0

BMW total

1,540,085

1,380,384

11.6

100.0

* Including automobiles from the joint venture BMW Brilliance.

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

(+ 5.8 %) of the BMW 3 Series. Demand for the BMW 5 Se-
ries was also strong again in 2012, with sales up by 8.0 %
to 359,016 units. Sales of the BMW 6 Series more than
doubled in 2012 to reach 23,193 units (2011: 9,396 units).
Only the BMW 7 Series (59,184 units; – 13.9 %) and the
BMW Z4 (15,249 units; – 18.9 %) fell short of their previ-
ous year’s sales volume figures.

The various models of the BMW X family also performed
extremely well in 2012. The BMW X1 was handed over
to 147,776 customers, an increase of 16.9 % on one year
earlier. Even faster growth was achieved by the BMW
X3, with sales volume of 149,853 units (+ 27.1 %). Sales
of the BMW X5 and the BMW X6 totalled 108,544 units
(+ 3.5 %) and 43,689 units (+ 7.0 %) respectively.

MINI brand with new record sales volume
MINI surpassed the sales volume threshold of 300,000
units for the first time in a single year by achieving a
new record of 301,526 units (+ 5.8 %). Sales of the MINI
Countryman rose sharply to 102,271 units (+ 14.9 %), while
sales of the MINI Coupé practically tripled to 11,311 units
(2011: 3,799 units). The new MINI Roadster recorded
sales volume of 9,202 units in the period since its market
launch. In a contrasting trend, however, sales were down
on last year’s levels for the MINI Hatch (131,569 units;

Sales volume of MINI vehicles by model variant

in units

MINI brand cars in 2012 – analysis by model variant

as a percentage of total MINI brand sales volume

MINI One
(including One D)

MINI Cooper S
(including Cooper SD)

MINI Cooper
(including Cooper D)

MINI Cooper

MINI Cooper S (including Cooper SD)

35.7

(including Cooper D)

44.5 MINI One (including One D)

19.8

– 4.1 %), the MINI Convertible (24,474 units; – 16.5 %) and
the MINI Clubman (22,699 units; – 11.8 %).

The MINI brand continued to generate a very high-value
product mix in 2012, with 44.5 % of customers opting
for the MINI Cooper, 35.7 % for the MINI Cooper S and
19.8 % for the MINI One.

2012

2011

Change

Proportion of
in % MINI sales volume
2012 in %

MINI Hatch

MINI Convertible

MINI Clubman

MINI Countryman

MINI Coupé

MINI Roadster

131,569

137,155

– 4.1

24,474

29,325

– 16.5

22,699

25,745

– 11.8

102,271

89,036

14.9

11,311

3,799

9,202

–

5.8

43.6

8.1

7.5

33.9

3.8

3.1

100.0

MINI total

301,526

285,060

27 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Sales volume of Rolls-Royce vehicles by model variant

in units

Rolls-Royce

Phantom (including Phantom Extended Wheelbase)

Coupé (including Drophead Coupé)

Ghost

Rolls-Royce total

2012

2011

573

216

2,786

3,575

537

281

2,720

3,538

Change
in %

6.7

– 23.1

2.4

1.0

Rolls-Royce again records all-time high
Rolls-Royce Motor Cars remained market leader in the
ultra-luxury segment in 2012. The new Phantom Series II
models have been available since September and re-
ceived a thoroughly positive response from customers.
The brand’s top model, the Phantom, was handed over
to 573 customers (+ 6.7 %) during the year under report.
The Coupé (including Drophead Coupé) registered a
23.1 % drop in sales to 216 units. Sales of the Rolls-Royce
Ghost totalled 2,786 units, surpassing the previous year’s
already high figure by 2.4 %.

Car production increased
Production of BMW, MINI and Rolls-Royce Motor Cars
brand vehicles was increased by 7.1 % to 1,861,826* units
in 2012 in order to meet the continually growing de-
mand for BMW Group vehicles. Of this total, 1,547,057*
units (+ 7.4 %) related to BMW, 311,490 units (+ 5.9 %) to
MINI and 3,279 units (– 12.0 %) to Rolls-Royce.

Production network running at full capacity
The BMW Group’s production network was dominated
in 2012 by numerous model start-ups, preparation
work for the series production of the BMW i3 and con-
tinued expansion of its international sites. Despite these
challenges, new production volume records were set.
Its high degree of flexibility enabled the production net-
work to even out regional sales volume fluctuations by
adapting its production programme wherever neces-
sary. For the second consecutive year we manufactured
over one million vehicles at our German plants. Even
so, the percentage of vehicles produced at plants outside
Germany grew to over 46 %.

The BMW plant in Munich saw the start-ups of the
BMW ActiveHybrid 3 and the BMW 3 Series Touring in
2012. Employees from the Munich plant were also on
hand to support the production start-ups of the new
BMW 3 Series in other plants, such as at Tiexi in China
* Including automobiles from the joint venture BMW Brilliance.

and in Rosslyn in South Africa. Work is also in full swing
to integrate a further model at the plant in Munich – the
BMW 4 Series Coupé. At the same time, a record num-
ber of over 214,000 units were manufactured in Munich
during the period under report. In summer, a family
day attended by 80,000 employees and their families
was held to celebrate 90 years of production and 60 years
of automotive manufacture at the Munich plant.

Summer 2012 also saw the production start-up of the
three-door BMW 1 Series in Regensburg. The new
BMW 3 Series Sedan had already been integrated in the
plant’s production with equal success in March 2012.
The range of vehicles manufactured at this plant includes
the BMW 1 Series, the BMW 3 Series and the BMW Z4.

Vehicle production of the BMW Group by plant
in 2012

in 1,000 units

Assembly plants
Graz2

Tiexi 1

Dadong1

Dingolfing

Goodwood
Rosslyn

Leipzig

Oxford

Spartanburg

Munich

Regensburg

Dingolfing

Spartanburg

Regensburg

Munich

Oxford

Leipzig

332.7

301.5

300.3

214.1

207.8

164.3

Rosslyn

Goodwood
Dadong1
Tiexi1
Graz (Magna Steyr) 2

Assembly plants

45.7

3.3

108.9

41.1

103.7

38.4

1 Joint venture BMW Brilliance
2 Contract production

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

Also in summer 2012, the five-millionth car rolled
off the production line since manufacturing at the
Regensburg plant began in 1986. The plant has been
undergoing extensive expansion work since the pre-
vious autumn. The pressing plant has been enlarged
and a second main production line set up for making
car bodies. We have also built an additional logistics
centre to handle increased material volumes. These
measures all contributed towards boosting the efficiency,
flexibility and start-up expertise at the Regensburg
plant, which is borne out by the numerous awards won
in 2012.

Electromobility production network
almost completed
Preparations for the series production of the BMW i
models represented an important focal point of activi-
ties at the Leipzig, Dingolfing and Landshut plants
during the year under report. These plants are being
built into a competence network for e-mobility, in which
the BMW i models will be produced in a multi-plant
system. Lightweight construction using carbon-fibre-
reinforced plastics (CFRP) plays a key role in the pro-
duction process.

The Leipzig plant is destined to play a major role in the
production and assembly of the BMW i models. The
building phase, as well as the enlargement of the body-
making and pressing plant, are proceeding according
to plan. In spring 2013, four wind turbines installed at
the plant’s premises will be put into operation to supply
the production of BMW i models with clean, renewable
energy. A total of 400 new employees have been recruited
to manufacture the BMW i models and also take up con-
ventional production duties. Series production of the
new five-door BMW 1 Series also commenced with great
success in Leipzig.

In summer, the first assembly line for high-voltage bat-
teries designed for use in the new BMW i models went
into operation at the Dingolfing plant, thus signalling
a further milestone on the road to the series production
of BMW electric vehicles. The battery, the e-transmis-
sion and the aluminium chassis for the BMW i3 will all
be built in Dingolfing. Various components for the
BMW i8 will also be produced at the plant. Parallel to
preparations for the BMW i vehicles, the Dingolfing
plant also mastered the successful start-ups of the BMW
6 Series Gran Coupé and the BMW M6 Convertible.
In addition to all these activities, the BMW 6 Series as
well as various 5 and 7 Series models continue to be
manufactured at the plant.

A new production system for ultra-lightweight, high-
strength carbon parts went into operation at the Lands-
hut component plant in spring 2012. The carbon fibre
cores produced at the Wackersdorf plant are processed
in Landshut and Leipzig to form CFRP body parts and
subsequently delivered to the CFRP body making unit
at the BMW plant in Leipzig. The new, highly innova-
tive CFRP production set-up in the two plants makes it
possible for the first time to manufacture vehicle body
sections from carbon fibre parts in an automated, large-
scale production system.

The ceremony to celebrate the start of construction of
an expanded high-pressure die-casting foundry as well
as a core-moulding plant also took place in Lands hut in
April 2012. As the demand for die-cast lightweight alloy
parts is continually growing, production capacity will be
boosted from the current 58,000 tonnes to 69,000 tonnes
per year in future. In addition, a new resource-saving
smelting plant was commissioned in Landshut in the
autumn. The BMW Group is thereby demonstrating how
economically viable production can be successfully
combined with ecological sustain ability. Conversion
from liquid to solid metal delivery is helping to achieve
a 10 % reduction in the total volume of CO2 emitted
from the aluminium smelter through to completion of
the die-cast part.

Global presence being strengthened
The BMW Group’s production network has meanwhile
grown to a total of 29 sites located in 14 countries. In
May the second carmaking plant of the BMW Brilliance
Automotive joint venture was opened at the Tiexi* site
in Shenyang (China) and a local engine production plant
was also commissioned. The extended-wheelbase ver-
sions of both the BMW X1 and of the BMW 3 Series Se-
dan for the Chinese market are being built exclusively
in Tiexi*. The new plant sets standards in terms of tech-
nology and sustainability. Over 41,000 BMW vehicles
rolled off the production lines there in 2012. The ex-
tended-wheelbase version of the BMW 5 Series Sedan
is produced at the Dadong* plant in China.

The BMW Group’s global production presence has also
been reinforced by the enlargement of the plant at
Spartanburg in the USA. At the beginning of 2012 we
announced that the plant’s capacity would be extended
to up to 350,000 units by 2014. The BMW X models X3,
X5 and X6 as well as the X5 M and X6 M are currently
manufactured at the plant. During the year under report
the BMW Group decided that the BMW X4 will also be
* Joint venture BMW Brilliance

29 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

built in Spartanburg as the latest member of the X Series
family. For the first time, more than 300,000 vehicles were
produced at the Spartanburg plant during a single year.

The production start-up of the new BMW 3 Series Sedan
commenced at our plant in Rosslyn, South Africa, at the
beginning of 2012. Among other improvements, the
plant’s IT and logistics infrastructure was renewed in ad-
vance, in order to accommodate a capacity of 90,000 units
in the medium term and further raise the efficiency of
the plant.

The assembly plants that mainly serve regional markets
are also steadily growing. The BMW Group manufac-
tured over 38,000 units at its production sites in Egypt,
India, Indonesia, Malaysia, Russia and Thailand. The
production start-up of new models such as the BMW X3
and the 3 Series Sedan has also begun successfully.

A further member of the BMW Group’s production
network is planned for Brazil, where the market shows
great promise for the future. Following the receipt of
approval from the Brazilian government at the begin-
ning of 2013, we now plan to manufacture up to 30,000
vehicles there per annum.

Expansion of MINI and Rolls-Royce production
The British production triangle comprising the MINI
plant in Oxford, the component plant in Swindon and
engine production in Hams Hall is an important element
of the BMW Group’s production network. The focal
point of MINI production is in Oxford, where not only
the MINI Hatch, the Convertible and the Clubman are
manufactured, but also the Coupé and the Roadster.

In order to secure further capacity for the intended
growth of the MINI brand, the BMW Group entered into
an agreement in 2012 with the Dutch VDL NedCar bv
involving the contract production of MINI automobiles
in the Netherlands as from 2014.

The MINI models Countryman and Paceman are already
being produced under contract by the company Magna
Steyr Fahrzeugtechnik in Austria. After the successful
start-up of the MINI Paceman, over 100,000 vehicles were
again produced at the plant for the BMW Group in 2012.

Capacity at the Rolls-Royce manufacturing plant in
Goodwood, England, was also raised during the year
under report. We enlarged both the production facilities
and the paint shop in preparation for future models and
to meet high demand, particularly for bespoke vehicles.

Engine production network becoming increasingly
globalised
The engine production network is also constantly grow-
ing and, parallel to the vehicle manufacturing plant in
Tiexi, the BMW Brilliance Automotive joint venture
opened a new engine plant in Shenyang in 2012, which
supplies the two Chinese carmaking plants with the
latest generation of 4-cylinder combustion engines. The
new engine plant, of which there are now four in the
BMW Group’s network, was opened after only a 12-month
construction period. More than 42,000 engines were
manufactured at the plant in 2012.

Due to the strong demand for 4-cylinder petrol-driven
engines worldwide, engine-building capacities at the
Munich plant were fully utilized, with a daily manufac-
ture of up to 1,600 engines in 2012. Almost 388,000 en-
gines were manufactured at the plant. The range of
products manufactured at the Munich plant also includes
8- and 12-cylinder petrol engines as well as 6-cylinder
diesel engines for the new M Performance models.

In future, the new BMW Efficient Dynamics family of
engines will also be built there and the task of setting
up production, logistics and assembly lines began dur-
ing the year under report. The 3-cylinder engine is the
first representative of a new modular engine that ena-
bles production to be managed with even greater flexi-
bility. It will be produced in close cooperation with the
engine plants in Hams Hall and Steyr.

The largest engine plant in the BMW Group in Steyr
celebrated its 30th year of production in 2012. Prepara-
tions are currently underway for the start-up of the
new generation of modular engines. In 2012 over one mil-
lion (1,035,902) engines were produced in Steyr, bring-
ing the total number of engines manufactured since
commencement of series production at the plant to over
15 million. Currently BMW 4- and 6-cylinder diesel en-
gines, 6-cylinder petrol engines and MINI diesel engines
are manufactured in Steyr.

More than 3 million engines have been manufactured
at the Hams Hall plant since production commenced in
2001, almost 400,000 (395,854) of which were built in
2012. Preparations for the production of future genera-
tions of engines at the plant also include the propulsion
unit for the new BMW i8, which is scheduled to be pro-
duced exclusively in Hams Hall.

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

MOTORCYCLES SEGMENT

Record year for Motorcycles segment
The Motorcycles segment achieved its best sales volume
to date in 2012, despite a difficult market environment.
A total of 117,109 BMW and Husqvarna brand motor-
cycles was sold worldwide (+ 3.1 %). Sales of BMW brand
motorcycles increased by 2.0 % to reach a new record of
106,358 units. In addition, a total of 10,751 Husqvarna
brand motorcycles was handed over to customers (+ 15.8 %).

Sharp increase in motorcycle sales overseas
Motorcycle sales in the USA jumped by 20.6 % to 14,455
units in 2012. Even faster growth was achieved in Brazil,
where sales volume of 7,446 units (+ 36.8 %) was recorded.
3,410 motorcycles were sold to customers in Japan (+ 22.4 %).

Continued market uncertainties in Europe were responsi-
ble for a decrease to 71,256 units (– 5.1 %). Sales in Ger-
many, by contrast, rose to 22,363 units, surpassing the
previous year’s already high figure by 5.9 %. Good sales
performance was also recorded in France, with 11,441 mo-
torcycles handed over to customers (+ 11.7 %). By contrast,
sales volume in Great Britain (5,905 units; – 5.9 %) fell
short of the figure achieved one year earlier. The negative
impact of the sovereign debt crisis on consumer spending
was felt very clearly on the Spanish (5,317 units; – 16.2 %)
and Italian (11,403 units; – 25.5 %) motorcycle markets.

Model offensive continued
The G 650 GS Sertão, the revised models of the S 1000 RR
and the F 800 R, the special R 1200 GS Rallye model and
the special K 1300 R and K 1300 S models all came onto
the markets at the end of March 2012, in good time for the
start of the motorcycle season. The market launch of the
C 650 GT and C 600 SPORT scooters followed in July, ini-
tially in Europe. The new BMW F 700 GS and F 800 GS
motorcycles were first presented in July 2012 and came
onto the markets in September. The fifth generation of
the successful R 1200 GS model, with its newly developed
boxer engine, was showcased by BMW Motorrad at the
INTERMOT International Motorcycle Exhibition in Co-
logne. The new BMW HP4 was also unveiled to the public
for the first time in Cologne. This high-performance
model, which is equipped with features and technical
highlights that make it extremely agile and ensure an ex-
tremely dynamic riding performance, has been available
since December 2012. A number of special models were
presented during the EICMA International Motorcycle
Fair in Milan and will become available to customers in
2013 to mark the 90th anniversary of BMW’s motorcycle
business. The C evolution – a close-to-production proto-
type of an electric scooter – was presented at the end
of July and is expected to make its market debut in 2014.

The Husqvarna brand expanded its range of products with
the launch of various new on-road bikes (TR 650 Strada,

BMW Group – key motorcycle markets 2012

as a percentage of sales volume

Germany

USA

France

Other

Spain

Great Britain

Brazil

Italy

Germany

USA

France

Italy

19.1

12.3

9.8

9.7

Brazil

Great Britain

Spain

Other

6.4

5.0

4.5

33.2

TR 650 Terra, Nuda 900 and 900R ABS) and off-road bikes
(TE250R and TE310R).

In January 2012, the BMW K 1600 GT won first prize
in the International Bike Of The Year 2011 Awards.
The K 1600 GT delighted the motorcycle press with its
unique combination of comfort, performance and use
of innovative technologies.

Motorcycle production increased
In total, 125,284 BMW and Husqvarna brand motor-
cycles were manufactured during the year under
report (+ 5.4 %), with 113,811 BMW brand motorcycles
built at the motorcycle plant in Berlin (+ 3.1 %) and
11,473 Husqvarna brand motorcycles built in Italy
(+ 34.9 %).

BMW Group sales volume of motorcycles

in 1,000 units

140

120

100

BMW

Husqvarna

101.7

13.5

87.3

13.1

98.0

104.3 106.4

12.1

9.3

10.7

Total

115.2

100.4

110.1

113.6 117.1

31 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

FINANCIAL SERVICES SEGMENT

Financial Services segment remains on
growth course
Despite fluctuations on international capital markets,
the Financial Services segment achieved another
good performance in 2012 with its attractive range of
products and continued to grow. Overall 3,846,364
credit financing and lease contracts were in place with
dealers and retail customers at the end of the reporting
period (2011: 3,592,093 contracts; + 7.1 %). In balance
sheet terms, the segment’s business volume rose by
€ 5,729 million to € 80,974 million (2011: € 75,245 mil-
lion; + 7.6 %).

The Financial Services segment operates in more than
50 countries worldwide as partner to the sales organi-
sation, with activities comprising the following six lines
of business:
1. Lease and credit financing of BMW Group vehicles

for retail customers

2. Lease and credit financing for fleet customers / fleet

ing for inventories, real estate and equipment. The
segment’s range of products is rounded off by the pro-
vision of insurance and banking services.

Significant growth in new business
Credit and leasing business with retail customers saw
further dynamic growth in 2012, with 1,341,296 new
contracts signed worldwide, 12.1 % more than last year
(2011: 1,196,610 contracts).

Double-digit growth rates were achieved in both lines
of financing, with lease business up by 16.3 % and credit
financing by 10.0 % compared to the previous year. Leas-
ing accounted for 33.8 % of total new business, credit
financing for 66.2 %.

The proportion of new BMW Group cars leased and
financed by the Financial Services segment was 40.4 %,
marginally lower than one year earlier (2011: 41.1 %;
– 0.7 percentage points).

management

3. Multi-brand financing
4. Dealer financing
5. Insurance
6. Banking

In the used car financing line of business, a total of
303,490 new contracts were signed during 2012,
marginally up (+ 0.6 %) on the previous year (2011:
301,539 contracts).

Credit financing and the lease of BMW Group brand
cars and motorcycles to retail customers is the largest
line of business. The BMW Group operates its inter-
national multi-brand fleet business under the brand
name “Alphabet International”, providing mobility
solutions in 19 countries. This includes first and fore-
most the financing of corporate car requirements as
well as the comprehensive management of corporate
car fleets. Within the multi-brand financing line of
business, credit financing, leasing and other services
are marketed to retail customers under the brand
name “Alphera”. The Financial Services segment also
supports the dealer organisation by providing financ-

The total volume of all new credit and leasing contracts
concluded with retail customers during the period
under report amounted to € 36,664 million, 15.4 % up on
the preceding year (2011: € 31,779 million).

A total of 3,534,620 retail customer contracts was in
place at 31 December 2012, 6.7 % more than one year
earlier (2011: 3,311,809 contracts). All regions con-
tributed to the increase in business volume, with the
contract portfolio rising by 9.8 % in the Europe / Middle
East region, 5.2 % in the Americas region and 1.1 % in
the EU-Bank region. The sharpest increase was recorded
in the Asia / Pacific region (+ 24.2 %).

Contract portfolio of Financial Services segment

in 1,000 units

BMW Group new vehicles financed by
Financial Services segment

3,800

3,600

3,400

3,200

3,000

2,800

2,600

in %

3,032

3,086

3,190

3,592 3,846

Financing

Leasing

20.9

27.6

24.7

24.3

24.1

20.0

21.1

20.7

19.7

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

Contract portfolio retail customer financing of
Financial Services segment 2012

as a percentage by region

Asia / Pacific

Europe / Middle
East / Africa

EU-Bank

Americas

EU-Bank

Americas

32.8

31.4

Europe / Middle East / Africa

24.6

Asia / Pacific

11.2

Awards for quality of service
The BMW Group’s Financial Services segment was again
the recipient of numerous international awards in
2012. In the annual survey carried out by the market
research institute J. D. Power and Associates, our Finan-
cial Services business in the USA came first for the ninth
time in succession in the category “Dealer Financing
Satisfaction StudySM”. The award presented by this in-
ternationally renowned market research institute is
acknowledgement of the high level of dealer satisfaction
achieved with our leasing and financing products.

Expansion of BMW Bank continued in line with plan
Further progress was made in 2012 to expand the BMW
Bank. With effect from August 2012, financial services
business in France was integrated directly with the BMW
Bank by means of a subsidiary. Financial Services
business in Germany now covers entities in Germany,
France, Italy, Portugal and Spain.

Strong growth for fleet business
Alphabet International, with its wide range of multi-
brand products, is one of the top four fleet service pro-
viders in Europe. At the end of the reporting period,
Alphabet was managing a portfolio of 502,397 fleet
contracts, up 5.8 % on the previous year (2011: 474,717
contracts).

Multi-brand financing up sharply
Demand for multi-brand financing grew sharply in
2012 with a total of 163,945 new contracts signed
(+ 17.3 %). At the end of the reporting period, the multi-
brand financing line of business covered 417,408 con-
tracts (2011: 370,999 contracts: + 12.5 %).

Increased dealer financing volumes
The total volume of financing disbursed to the dealer
organisation amounted to € 12,669 million at 31 Decem-
ber 2012, an increase of 11.0 % compared to one year
earlier (2011: € 11,417 million).

Deposit volume again higher than at the end of
the previous year
Deposit business represents a significant component of
the BMW Group’s refinancing strategy. The Financial
Services segment’s deposit volume totalled € 13,018 mil-
lion (+ 8.1 %) at the end of the reporting period. By con-
trast, decreases were recorded for securities and credit
card business, with the number of securities custodian
accounts falling by 5.5 % to 23,042 and credit card con-
tracts down by 2.4 % to 281,464.

Dynamic growth for insurance business
In addition to its leasing and financing products, the
Financial Services segment also offers a wide range of
insurance services relating to individual mobility. New
business grew by 15.7 % to 979,776 contracts in 2012.
The insurance contract portfolio expanded by 7.6 %
compared to last year’s figure to stand at 2,158,892 con-
tracts (2011: 2,007,268 contracts).

Risk profile largely unchanged
The BMW Group’s credit and residual value risk profile
remained largely unchanged. The loss ratio on lending
decreased further in the year under report, falling by
one basis point from 0.49 % in 2011 to 0.48 %. Average
losses on residual value risks also decreased slightly.

The Financial Services segment uses the value at risk
(VaR) methodology to measure the amount of unex-
pected loss for major risk categories (credit, residual
value and interest rate risks, operational risks and in-
surance business-related risks), based on a confidence
level of 99.98 % and a holding period of one year.

33 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Development of credit loss ratio

in %

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.59

0.84

0.67

0.49

0.48

Losses are managed using an integrated limit system
based on a limit determined and set at the beginning
of each financial year by reference to available risk
coverage equity. The stipulated limit was not exceeded
in 2012, which means that the segment’s risk-bearing
capacity was ensured at all times (see also section “Risk
Management”).

RESEARCH AND DEVELOPMENT

Research and development expenditure increased
In 2012 our Research and Innovation network employed
a workforce of more than 10,900 people based in 13 lo-
cations spread over five countries. Research and devel-
opment expenditure for the year rose by 17.2 % to
€ 3,952 million, mostly on projects aimed at securing the
Group’s future (2011: € 3,373 million). The research and
development ratio was 5.1 %, 0.2 percentage points
higher than in the previous year (2011: 4.9 %). Further
information on research and development activities is
provided in note 9 to the Group Financial Statements.

New Efficient Dynamics engine family under
development
Efficient Dynamics is one of the most effective strate-
gies for reducing both fuel consumption and CO2 emis-
sions. During the period under report the efficiency of
our combustion engines was further improved while
maintaining or even boosting engine performance. Fur-
thermore, full hybrid drive systems were developed
for the BMW 3 Series and 7 Series and additional pro-
gress was made in the fields of energy management and
lightweight construction.

In 2012 we presented a 1.5-litre engine based on the
BMW TwinPower Turbo technology. This 3-cylinder en-
gine is one of the first power units of the new Efficient
Dynamics engine family. It is based on a standardised
design principle and uses a higher number of common
components both for petrol and diesel engines. It is
thus possible to effectively develop 3-, 4- and 6-cylinder
engines of varying capacities using one common tech-
nological concept.

Since 2011 we have been offering the ECO PRO Driving
Experience Control, which enables drivers to select
between various driving modes from sporty to highly
economical. The latest ECO PRO mode is connected to
the navigation system. With the help of navigation
data, the vehicle anticipates the road ahead and provides
the driver with information that promotes efficient
driving. For instance, the vehicle’s energy management
system knows it is approaching a town and gives the
driver an appropriate early warning. In combination
with the ECO PRO coasting function, the engine is de-
coupled and the vehicle is then only slowed by the aero-
dynamic drag and rolling resistance. Consistent use of
the ECO PRO mode can reduce fuel consumption signifi-
cantly.

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

We have also made improvements to our hybrid tech-
nology and are currently offering BMW ActiveHybrid
technology for the models BMW ActiveHybrid 7,
BMW ActiveHybrid 5 and BMW ActiveHybrid 3. The
power for the electrically driven features in these
vehicles is largely generated by the Brake Energy Re-
generation system.

Further progress was also made in the field of light-
weight construction during the period under report.
Current examples are bumper brackets made of
aluminium and instrument panel supports of magne-
sium.

In order to offer customers the BMW i3 and i8 complete
with electricity from fully renewable sources, in 2012
the BMW Group entered into a strategic cooperation
with NATURSTROM AG. In a further step towards the
complete automation of CFRP production, cooperation
arrangements with the aircraft manufacturer Boeing
were announced in December 2012, the main points of
which are research into the recycling of carbon fibres
and the automation of production processes. We also
entered into strategic partnerships during the year un-
der report with a view to establishing efficient, cus-
tomer-friendly wallboxes in the garages of BMW i3 and
i8 owners.

BMW ConnectedDrive: innovations for
connected mobility
Connected Drive stands for forward-looking vehicle
concepts and technologies. New functions demon-
strate the innovation leadership of the BMW Group
when it comes to the connectedness of the driver, the
vehicle and the environment.

The latest generation of our navigation system is equipped
with a three-dimensional graphic visualisation that
includes additional functions as well as an optimised
display and operating concept. The new dictation func-
tion with speech-text entry enables the driver to dictate
texts for e-mails and SMS text messages. Moreover, in
2012 the BMW Group became the first carmaker world-
wide to offer high-speed Internet functionality in a
vehicle. The LTE standard forms the interface between
the user’s mobile end device and the Internet.

Since August 2012 the My BMW Remote app has also
been available for smartphones with Android operating
systems. My BMW Remote enables BMW owners to ac-
tivate numerous practical functions of their vehicle re-
motely, such as doors to be locked and unlocked. In addi-
tion, users of BMW ConnectedDrive and MINI Connected
now have new apps designed to enhance the range of in-
formation and entertainment available within the vehicle.

BMW i3 Concept Coupé and i8 Concept Spyder
celebrate world premiere
In April 2012 the BMW i8 Concept Spyder celebrated
its world premiere at the Shanghai Motor Show. In
June we demonstrated the use of regenerative materials
for vehicle interiors based on the BMW i3 Concept. The
BMW i3 Concept Coupé was presented in Los Angeles
in November. As well as providing an opportunity to
preview the design of a model nearing series production,
the complete connectedness of this vehicle with the
outside world was in the spotlight.

Research project enables cars and motorcycles to
communicate with each other
Numerous companies from the automotive and tele-
communications industries, the government of the Ger-
man state of Hesse and the city of Frankfurt am Main
as well as various universities and scientific institutions
have united in the research project “Sichere Intelligente
Mobilität – Testfeld Deutschland (simTD)”. Their joint
aim is to test the functionality, suitability for everyday
use and effectiveness of car-to-X communication for the
first time under real conditions. After four years of re-
search work, the field trial commenced in October 2012
with over 120 vehicles. The BMW Group is the only pro-
ject partner taking part in the field trial with both cars
and motorcycles. The simTD project is testing various
driver assistance systems based on car-to-X communi-
cation methods for BMW Group cars and motorcycles.
For example, traffic light systems can transmit informa-
tion about their switching times to enable a driver assis-
tance system to either pass on information regarding the
optimum speed for a personal “green wave” or warn
about the imminent danger of going through a red light
(traffic light phase assistant). A specific transfer of
data describing the traffic situation, the condition of
the road surface and further factors makes it possible to
relay early warnings of accidents (obstacle warning),
traffic jams (end-of-jam warning) or the formation of
black ice (road weather warning) from one vehicle to
other motorists in the vicinity. Additionally, based on
the vehicle data transferred, it is possible to calculate the
risk of a collision, enabling warnings to be transmitted
about the risk of collision at crossings (cross-traffic as-
sistant). Further car-to-X functions in the simTD re-
search project are the warning for emergency vehicles,
the electronic brake light and the road sign assistant.
Moreover, the test vehicles supply the data necessary to
improve traffic management. In this way, traffic jams
can be anticipated, CO2 emissions can be reduced and
waiting times at traffic lights minimised.

35 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Numerous awards received once again for
achievements in the field of development
Alongside the BMW 6 Series Convertible, the BMW 6 Se-
ries Coupé, the BMW 1 Series M Coupé and the
BMW ActiveE, in January 2012 two of the Group’s mo-
torcycles, the BMW K 1600 GT / GTL and the BMW
G 650 GS received the 2011 GOOD DESIGNTM Award.
For over 60 years the world’s oldest design award has
been given to manufacturers and designers for especially
innovative, visionary products, concepts and ideas.
The awards are given according to the criteria of func-
tionality and aesthetics and are supplemented by a
contemporary ecological standard of sustainable design.
In July the Group additionally received the GREEN
GOOD DESIGNTM Award for the BMW i8 Concept, the
BMW i3 Concept and the MINI Rocketman Concept. Cri-
teria such as low energy consumption and reduced de-
pendency on fossil fuels are particularly focused on.

In February 2012 the new BMW 6 Series Coupé re-
ceived the iF Gold Award for outstanding design. The
special prize is the highest award that the renowned
International Forum Design can bestow. In addition,
the BMW 1 Series, the BMW 1 Series M Coupé, the
BMW 6 Series Convertible and the BMW G 650 GS
motorcycle received iF Product Design Awards. The iF
Design Award of the International Forum Design has
established itself over the last 60 years or so as one
of the most highly regarded seals of quality for out-
standing design work.

When it came to the red dot awards, the BMW Group was
proud to receive a total of eleven of these internationally
coveted prizes, including two with the highest seal of
quality “best of the best” for the BMW AirFlow 2 helmet
and the Husqvarna Nuda 900R. The red dot award
was also given to the BMW 6 Series Gran Coupé, the
BMW 6 Series Coupé, the BMW M5, the BMW 1 Series
M Coupé, the BMW C 600 SPORT, the BMW C 650 GT,
the BMW K 1600 GT and the BMW G 650 GS. The BMW
3 Series Sedan also earned an Honourable Mention. The
red dot award, which was first presented in 1955, is one
of the world’s most prestigious awards in the field of
product design. With this award, the jury, which consists
of 30 international design experts, honours extraordinary
design achievements in a wide range of fields.

In October 2012 the jury of experts of the German Design
Council announced the winner of the German Design
Awards 2013. At this year’s competition, the BMW 6 Se-
ries Convertible was among the winners in the Trans-
portation and Public Space category. The BMW 1 Series
and the Husqvarna Nuda 900R also received recognition.

The two vehicles earned a Special Mention for their
particularly outstanding design features. The 30-person
jury of the German Design Award 2013 comprises de-
sign experts from commerce, science and the design in-
dustry. The competition pays tribute to innovative and
international design trends.

The sixth generation of the BMW 3 Series received the
internationally prestigious “Goldenes Lenkrad” auto-
motive prize, which is already the fifth success for this
series. The BMW 3 Series Sedan came out top in the
medium- and luxury-class category. The award is given
to the most convincing new car of the year on the mar-
ket in each category.

With victories in four classes as well as four second and
two third places in the “International Engine of the
Year Award” we repeated the success of the previous year
and simultaneously underscored our leading position
as the dominant manufacturer in this competition. Win-
ners in their classes were the 1.6-litre turbo engine of the
MINI Cooper S, the 4-cylinder engine featuring BMW
TwinPower Turbo technology that currently powers the
new BMW 328i, the in-line 6-cylinder with M TwinPower
Turbo engine from the BMW 1 Series M Coupé and the
V8 propulsion unit under the bonnet of the BMW M3.

BMW crowns DTM comeback with all three titles
BMW Motorsport celebrated its first season back in the
German Touring Car Masters (DTM) championship
with a clean sweep in all three categories. Not only the
drivers’ title, but also the teams’ and manufacturers’
titles all went to BMW. With this triple success, BMW
Motorsport can look back at a DTM season in which its
three teams and six drivers greatly exceeded all expec-
tations with the BMW M3 DTM. Apart from four victo-
ries, we also managed an additional seven placings.

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

PURCHASING

Purchasing and Supplier Network functions
further enhanced
As the leading provider of premium automobiles, to-
gether with its partners the BMW Group operates the
most efficient supply chain in the automotive industry.
In today’s volatile environment this means being able at
all times to react swiftly and flexibly to fluctuations in
demand while maintaining a consistently high quality
of parts and competitive costs. Moreover, we have made
it a key aim to promote our own innovative strengths and
those of our suppliers to enhance our position as the
leading provider of innovations in the premium segment.

In advance of the introduction of the BMW i3 in 2013
we drew up an extensive sustainability programme dur-
ing the period under report, aimed at generating yet
further improvements in the field of resource efficiency.

Numerous model start-ups during the reporting year
Numerous new models were launched in 2012 for the
BMW, MINI and Rolls-Royce brands. BMW success-
fully launched six new derivatives of the 1, 3, 5 and
6 Series. MINI successfully introduced its Coupé, while
Rolls-Royce Motor Cars brought its Phantom Series II
onto the market. Particularly worthy of mention are the
launch in 2012 of the BMW 6 Series Gran Coupé and
the two hybrid vehicles, the BMW ActiveHybrid 3 and
BMW ActiveHybrid 5. The BMW Group also introduced
the extended-wheelbase version of the BMW 3 Series
Sedan to the Chinese market and brought out revised
versions of the BMW 7 Series and the X1 in order to
satisfy rising demand in the fast-growing markets of
China, India, Brazil and Russia.

Further internationalisation of procurement markets
The BMW Group continued to focus in 2012 on increas-
ing the international scale of its purchasing activities.
One example of this was the success achieved with the
newly launched BMW 1 Series and 3 Series models. The
opening of our new plant in Tiexi*, China, for instance,
enabled us to significantly increase the volume of mate-
rial purchased locally. This is a good example of how
we are increasingly shifting added value along the sup-
ply chain and into our sales markets, thus helping us
to hedge currency exposures. Multi-currency ordering
also enables us to pay for purchasing volumes in the
currency in which added value is generated.

High level of investment safeguards productivity
and technology lead
In addition to its purchasing, quality assurance and
logistics functions, the BMW Group’s Purchasing and
* Joint venture BMW Brilliance

Regional mix of BMW Group purchase volumes 2012

in %, basis: production material

Africa

Asia / Australia

NAFTA

Central and
Eastern Europe

Germany

Rest of Western Europe

Germany

50.3

NAFTA

Rest of Western Europe

Central and Eastern Europe

17.3

14.8

Asia / Australia

Africa

13.4

3.1

1.1

Supplier team is also responsible for component pro-
duction sites, an arrangement that is unique in the auto-
motive industry. Regular comparative analyses help
to guarantee that processes are efficient and effective.
The sites concerned are regularly required to prove their
competitiveness against external providers. The high
level of efficiency achieved was again borne out in 2012
by the bestowal of numerous industry awards.

The significance of Landshut as the competence cen-
tre for lightweight construction and electromobility
within the BMW Group was underlined by the com-
missioning of the production plant for ultra-light-
weight carbon-fibre parts. The carbon fibre cores pro-
duced at the Wackersdorf plant are processed in
Landshut to form CFRP body parts and subsequently
delivered to the BMW plant in Leipzig, where produc-
tion of the BMW i3 and BMW i8 will commence dur-
ing the course of 2013. This investment in CFRP tech-
nology provides the basis for large-scale automated
series production of carbon-fibre parts and is an
important aspect of the BMW Group’s long-term light-
weight construction strategy. For the time being at
least, the BMW Group is in a unique position within
the automotive industry.

In addition to the manufacturing of carbon-fibre cores
and cockpits for the BMW 1 Series and 3 Series, the
Wackersdorf plant handles packaging and distribution
of small parts for CKD / SKD production worldwide. As
such, the plant constitutes a key element of the Group’s
logistics arrangements.

37 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Sustainability within the value-added chains
Sustainability criteria are a fundamental part of our pur-
chasing terms and conditions and supplier assessments.
Among other requirements, we expect our suppliers to
guarantee that sub-suppliers also comply with our ex-
acting standards. Our Top Two position in the Supply
Chain category of the Dow Jones Sustainability Index in
2012 is testament to the high standards we set. Further
information on risk management procedures applied
within the Purchasing and Supplier network is pro-
vided in the risk report.

SALES AND MARKETING

Sixth generation of the BMW 3 Series
successfully launched
The new BMW 3 Series Sedan has been available on
markets worldwide since February 2012. Now in its sixth
generation, the latest model is again setting standards
in its class and has received broad acclaim inter nationally
from customers and the media alike. The BMW Active-
Hybrid 5 came onto the market in March. The BMW M6
Convertible as well as the new M Performance models,
M550d xDrive (as Sedan and Touring) have all been avail-
able since May. June saw the launch of the BMW 6 Series
Gran Coupé, the first four-door Coupé in the brand’s his-
tory, as well as those of the BMW X5 M50d, the BMW X6
M50d and the BMW X6 (the latter as a model revision).
The BMW M 135i plus model revisions of the BMW 7 Se-
ries and the BMW X1 reached the showrooms in July.
The extended-wheelbase version of the BMW 3 Series Se-
dan for China and the M6 Coupé became avail able in Au-
gust. The new BMW 3 Series Touring and the new BMW
1 Series three-door version were introduced in Septem-
ber, the latter incorporating the xDrive four-wheel-drive
system in a 1 Series vehicle for the first time. September
also saw the launch of the BMW ActiveHybrid 3. The BMW
Concept Active Tourer celebrated its world debut at this
year’s Automobile Show in Paris, providing an initial in-
sight into a whole array of groundbreaking innovations.

MINI family grows
The MINI Roadster was introduced as the sixth member
of the MINI family in March 2012. The brand’s seventh
model, the MINI Paceman, was presented in Paris,
the world’s first Sports Activity Coupé to appear in the
premium compact segment.

The Countryman John Cooper Works became the sixth
model to be sold under the umbrella of the sports-
oriented John Cooper Works sub-brand. The MINI John
Cooper Works GP, the fastest MINI ever built, celebrated
its world debut in Paris. MINI customers can now choose
between 43 different models.

Rolls-Royce Phantom Series II launched
Rolls-Royce Motor Cars launched the new Phantom
Series II in September. As well as an enhancement to its
timeless design, a whole host of technical innovations
were incorporated in the Phantom Series II. Both cus-
tomer and media reactions to the new series have been
extremely positive. Rolls-Royce Motor Cars also expanded
the scope of its Bespoke Programme for the Phantom
family and for the Ghost.

Entire BMW Group brand spectrum now housed
at the BMW Welt
In October 2012 the BMW Group presented its expanded
brand exhibition at the BMW Welt, which now displays

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

the entire spectrum of BMW Group brands (BMW,
BMW Motorrad, MINI, Rolls-Royce and Husqvarna Mo-
torcycles) and sub-brands (BMW i, BMW M and MINI
John Cooper Works). For the first time the BMW Group
is now also presenting itself as a company in its own
display area in the Double Cone, highlighting the role
that our employees can play as company ambassadors.

In the BMW area, both design and technological aspects
are showcased alongside the vehicles themselves. The
BMW i presentation provides comprehensive informa-
tion on the subject of electromobility. The BMW M area
provides many insights into the world of motor sport.
Visitors to the MINI area are welcomed with an array of
surprising and unconventional ideas. The Rolls-Royce
presentation is stylish and modern as befits the brand.

The BMW Motorrad area features besides motorcycles a
Biker’s Lodge, which serves as a platform for the motor-
cycle community. The Husqvarna brand focuses on the
sporty nature of the off-road segment.

BMW i establishes its worldwide credentials
BMW i stands for visionary electric vehicles, revolution-
ary lightweight construction, inspiring design and inno-
vative mobility services. It also stands for a new under-
standing of the term “premium” that is strongly defined
by sustainability. The international BMW i Born Electric
Tour, which commenced in June 2012, is scheduled to
stage visits in seven megacities in Europe, Asia and the
USA in the period up to mid-2013. These events provide
an opportunity for interested parties and potential cus-
tomers to experience the BMW i3 Concept and BMW i8
Concept at first hand and find out about the sustaina-
bility aspects, innovative technologies and services that
BMW i offers. BMW i’s 360° Electric concept provides
comprehensive solutions in the fields of battery-charg-
ing infrastructure and mobility guarantees.

Range of mobility services broadened
The car-sharing service, DriveNow, launched in 2011,
was expanded during the year under report to the cities
of Cologne, Düsseldorf and San Francisco, and is now
being used by more than 75,000 customers. DriveNow’s
fleet in San Francisco includes BMW ActiveE electric
cars, making it the first car-sharing provider in the world
to operate with electrically powered premium vehicles.
The ParkNow service was also launched in San Francisco,
providing a comprehensive parking service enabling
drivers to make reservations, use parking spaces without
a ticket and pay online.

Over the course of 2012, three new mobility services
were added to the MyCityWay and ParkatmyHouse ser-
vices already launched in the previous year. Parkopedia
provides information on hundreds of thousands of park-

ing and garage spaces worldwide. Chargepoint is cur-
rently the world’s leading provider for charging stations
for electric vehicles and allows future BMW i customers
to obtain up-to-date information about available stations
at any time. Embark is a mobile app that shows the best
way of getting around cities on foot or by public transport.

New premium experience
The BMW Group launched a new worldwide programme
called “Future Retail” in 2012 aimed at improving the
premium experience when customers come into contact
with the Group’s brands. The stated objectives of the
programme are:
– to create new and additional points of contact for

our brands,

– to achieve an even more exclusive ambience in

dealerships,

– to provide targeted support to dealerships that help
them focus even more effectively on customers’
requirements.

In this context, so-called “Experience Centres” were
opened in Paris, Amsterdam and London for the
BMW and MINI brands.

Sales network expanded
As sales volumes continued to rise, more than 100 sales
outlets were added to the worldwide dealer network in
2012. Similar to the previous year, the main thrust of
the expansion was in China, where an additional 82 BMW
and 25 MINI dealerships were opened. The MINI sales
network was strengthened in par ticular in Asia and
South America. The number of dealerships in southern
Europe was reduced in response to the economic con-
ditions prevailing in this region. Overall, the BMW
Group’s car sales network comprises some 3,300 BMW,
1,550 MINI and 110 Rolls-Royce dealerships worldwide.

Another record year for customer service
Worldwide revenues generated with customer services
again reached record levels in 2012. This was the case
in Germany as well as in the main growth markets.
Spare parts revenues also grew strongly in the year un-
der report, repeating the fine performance recorded in
the previous year.

BMW Group as official partner to the
Olympic Games in London
As Official Automotive Partner of the London 2012
Olympic and Paralympic Games, the BMW Group made
available a fleet of some 4,000 low-emissions vehicles
for athletes, officials and the organising committee. This
also included the important contribution made by the
160 BMW ActiveE and 40 MINI E vehicles that escorted
the Olympic Flame across the United Kingdom prior to
the Games themselves.

39 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

WORKFORCE

Workforce increased
The BMW Group’s worldwide workforce grew to a
total of 105,876 employees at 31 December 2012 (2011:
100,306 employees; + 5.6 %). The major part of the
increase was attributable to strong demand for cars on
the one hand and the development of new technologies
(such as electromobility) on the other.

Number of apprentices increased
1,376 young people started their vocational training
with the BMW Group at the beginning of the new
training year. In Germany alone, the BMW Group
increased the number of apprentices by more than
10 % to 1,200. At the end of the reporting period,
the BMW Group employed 4,266 apprentices world-
wide (+ 9.4 %).

The BMW Group introduced a new training concept in
Germany during the year under report, focusing on
individual talents and strengths. Alongside the conven-
tional training route, the BMW Group continues to
offer training courses that can lead to entrance qualifi-
cation for university. Our training programme at the
Spartanburg plant in the USA, based on the principles
of the German dual training system, proceeded into
its second year. In cooperation with our joint venture
partner, Brilliance Automotive, we also offer young
people employed at the Shenyang site in China a com-
parable route for embarking on a professional career.

Increased investment for employee training
Expenditure on basic and further training rose by 14.6 %
in the period under report to € 282 million, indicative
of the high pace of innovation within the enterprise.
The range of courses on offer was expanded significantly,
particularly for new technologies, but also in the field of
healthcare. Further emphasis was placed on broadening
the international scope of our training courses.

Greater promotion of young talent
A well-coordinated system of promoting talented em-
ployees has been adopted to ensure that the BMW Group

BMW Group apprentices at 31 December

4,500

4,000

3,500

3,000

2,500

2,000

4,102

3,915

3,798

3,899 4,266

remains competitive in the future. A potential career with
the BMW Group is made even more attractive by offer-
ing bachelor, master and Ph.D. programmes to all aca-
demic target groups, thus combining technical training
and practical experience with the provision of financial
support. Internationally oriented programmes aimed at
securing management-level staff supplement the promo-
tion of talented young people in the BMW Group.

BMW Group highly rated as an attractive employer
The BMW Group remains one of the most attractive
employers in the world. This is based on numerous up-
to-date studies and rankings tables. In the most recent
edition of “The World’s Most Attractive Employers”
published by the Universum agency, the BMW Group
asserted its position as the most attractive German
employer, achieving top spot in both the en gineering
and business categories. We also came out on top
among manufacturers in a student survey conducted in
China by Trendence.

Similarly, we came first in that agency’s German Young
Professional Barometer 2012 across all sectors. The BMW
Group was able to repeat the excellent results achieved a
year ago in the Universum Professional Barometer Ger-
many and took first place in the Business and Engineer-
ing categories as well as third place in the Information
Technology category.

BMW Group employees

Automotive

Motorcycles

Financial Services

Other

BMW Group

31.12. 2012

31.12. 2011

96,518

2,939

6,295

124

91,517

2,867

5,801

121

105,876

100,306

Change
in %

5.5

2.5

8.5

2.5

5.6

Proportion of non-tariff female employees at
BMW AG / BMW Group*
in %

Employee fluctuation ratio at BMW AG1
as a percentage of workforce

7.0

6.0

5.0

4.0

3.0

2.0

1.0

BMW AG

BMW Group

8.4

8.8

9.1

10.0

11.1

11.8

12.9

* Percentage calculated for the BMW Group since 2010

5.852 4.59 2 2.74

2.16

3.87

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 (voluntary employment contract termination agreements)

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

spectrum of social engagement. They include an educa-
tion centre for children in Peru, support for orphans in
Panama, educational projects for children and youths
in South Africa and initiatives for combating illiteracy in
Ethiopia.

Diversity as a competitive factor
Social diversity is one of the principal components of
our personnel and sustainability strategies. Diversity
is encouraged throughout the BMW Group on the basis
of the following criteria: gender, origin / cultural back-
ground and age / experience. The clear goal is to secure
long-term success for the enterprise through the deploy-
ment of diverse and complementary talents.

The proportion of women in the workforce, in manage-
ment positions and in training programmes for young
talent was further increased during the year under re-
port. Particularly good progress was made in the num-
ber of women in management positions, with the
proportion rising to 12.9 % for the BMW Group and
10.0 % for BMW AG. Specific training and promotion
programmes – for both women and men – have been
expanded and rolled out worldwide as part of the
strategy of bringing the proportion of women in manage-
ment positions up to our target corridor of between
15 % and 17 % by the year 2020. Female representation
in trainee programmes throughout the BMW Group is
already above 35 %. Employees from 16 countries partici-
pated in the international trainee programme in 2012.

International awards for social engagement
For the first time in 2012, the BMW Group presented
awards for the social commitment of its employees on a
worldwide basis, thereby acknowledging the wide range
of voluntary work they carry out for other people in
their own free time. Out of numerous projects submit-
ted from a total of 14 countries, awards were ultimately
given to four outstanding projects spanning a broad

41 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

SUSTAINABILITY

Safeguarding the future of the BMW Group with
sustainable business practices
Commercial success, the responsible use of resources
and the assumption of social responsibility form the
basis for long-term growth and a steady rise in corpo-
rate value. Sustainability is therefore a key element in
our Strategy Number ONE.

The BMW Group’s sustainability strategy is valid through-
out the organisation and is incorporated in the Group
Balanced Scorecard as a strategic corporate goal. In 2012
we again asserted our position as most sustainable pre-
mium provider in the field of individual mobility, a fact
also confirmed by an independent source: in the Dow
Jones Sustainability Index (DJSI) rankings published in
September 2012, the BMW Group was listed as the most
sustainable automobile manufacturer in the world for
the eighth time in succession.

The Sustainability Board, which includes all members
of the BMW Board of Management, continually develops
the Group’s sustainability strategy and manages sustain-
ability initiatives group-wide. The Sustainability Board
meets twice a year and is supported by the Sustainability
Committee, comprising representatives from the various
fields of responsibility. The principal task of this body
is to ensure implementation of the sustainability strategy
across the Group.

As well as paying due attention to social and ecological
aspects in decision-making, the BMW Group’s sustain-
ability management strategy encompasses the system-
atic analysis of external framework conditions and a
continual dialogue with our stakeholders. The stake-
holder dialogues held in Berlin and San Francisco in
2012 provided us with important input for the further
enhancement of our sustainability strategy.

Clean production: key milestone reached
The integration of environmental management in all
production processes enables us to reduce our use of
resources and minimise environmental impact. We see
this as an ongoing process. At an early stage we set our-
selves the goal of a 30 % reduction in average resource
consumption and emissions per vehicle produced for
the period 2006 to 2012, using the measurable parame-
ters energy, water, process wastewater, non- recyclable
waste and solvents. We also check the level of CO2 emis-
sions resulting from energy consumption. In actual fact,
we improved efficiency by more than a third (35.7 %),
thus surpassing our ambitious target.

A more detailed look at the fundamental parameters
over the six-year period shows the following picture:

Energy consumption

Water consumption

Process wastewater

Non-recyclable waste

Solvent emissions

– 26 %

– 30 %

– 36 %

– 65 %

– 27 %

During the same period the CO2 emissions per vehicle
produced also fell by 30 %. We have now set ourselves
new targets to be reached by 2020: we aim to reduce
resource consumption and emissions per vehicle pro-
duced by an average of 45 % compared to 2006.

Conserving resources in production
During the period under report, resource consumption
and emissions per vehicle produced were reduced by
an average of 11.6 %, equivalent to cost savings of more
than €9 million on the previous year.

Energy consumed per vehicle produced

in MWh / vehicle

Water consumption per vehicle produced
in m3 / vehicle

3.00

2.80

2.60

2.40

2.20

2.00

2.80

2.60

2.40

2.20

2.00

1.80

2.80

2.89

2.75

2.46

2.44

2.56

2.31

2.12

2.10

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations

18
21
24

Automotive segment
Motorcycles segment
Financial Services segment
Research and development
Purchasing
Sales and Marketing
Workforce
Sustainability

44
47

50
65

66
74

CO2 emissions per vehicle produced
in t / vehicle

Process wastewater per vehicle produced
in m3 / vehicle

0.90

0.85

0.80

0.75

0.70

0.65

0.70

0.60

0.50

0.40

0.30

0.20

0.82

0.91

0.86

0.71

0.68

0.64

0.62

0.58

0.54

0.48

The high number of model start-ups, the increasing
number of models being launched and the greater verti-
cal range of manufacture, such as with CFRP, were the
main challenges in our endeavours to improve energy
efficiency. Expansion of our highly efficient and ecologi-
cally sustainable combined heat and power plants led to
higher consumption due to conversion factors. Despite
this fact we managed to reduce the energy consumed
per vehicle produced in 2012 to 2.44 MWh (– 0.8 %). This
improvement was achieved by means of a number of
measures such as the use of waste heat from the paint
shop at the Leipzig plant and the use of energy-efficient
motors for cooling the computer centre at our Oxford
plant. Greater energy efficiency and the use of electric-
ity produced from regenerative sources helped to re-
duce the CO2 emissions per vehicle produced by 4.2 %
to 0.68 tonnes during the period under report.

The volume of water required per vehicle produced also
fell to 2.10 m3 (– 0.9 %) in 2012. The amount of process
wastewater produced decreased by 11.1 % to 0.48 m3 per
vehicle produced. The conversion of the paint shop
in Spartanburg to a water-free paint process and the re-

use of water in the paint shops at the Dingolfing and
Munich plants were the main contributing factors to
this reduction.

The volume of non-recyclable production waste was re-
duced by a further 23.5 % to 6.11 kg per vehicle pro-
duced in 2012. The primary reason for the improvement
was the conversion from waste disposal to recycling at
all plants in the UK.

Solvent emissions increased slightly by 1.8 % to 1.68 kg
per vehicle produced during the period under report,
largely due to increased production volumes in China.
New, eco-friendly painting processes will come on line
at the Tiexi* plant by the end of 2013. The paint shop
at the Dadong* plant is also scheduled for retrofitting
with a view to minimising solvent emissions in years to
come.
* Joint venture BMW Brilliance

Eco-friendly transportation solutions
The general increase in production volume combined
with regional shifts in demand had an impact on the

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

2.50

2.25

2.00

1.75

1.50

14.84

10.63

10.09

7.99

6.11

1.96

1.77

1.60

1.65

1.68

43 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

percentages of various modes of transportation used.
The percentage of air freight used edged up to 1.2 %.
The percentage of sea freight also rose slightly to
79.2 %. Rail transportation went up to 8.9 %, whereas
the amount of goods transported by road fell to
10.7 %. Overall, 56.9 % of all new vehicles left the Group’s
plants by rail (+ 3.8 percentage points).

tation of innovative car-sharing strategies, also with
purely electrically powered vehicles under the
DriveNow brand, we are consciously addressing
changing needs in the field of individual mobility.
Further information on this topic can be found in
the sections “Research and Development” and “Sales
and Marketing”.

Sustainability also demanded in supplier network
Sustainability aspects also play a key role in the selec-
tion and assessment of our suppliers. More information
on this topic is available in the section “Purchasing”.

Top position in premium segment for reduction
of CO2 emissions
Increasingly strict legislation governing vehicle emissions
worldwide is presenting new challenges for the auto-
motive industry. The BMW Group took measures at an
early stage aimed at achieving significant reductions in
the fuel consumption and emission levels of its vehicle
fleet. Efficient Dynamics innovations are having a bene-
ficial impact on the entire fleet and are subject to con-
tinual improvement. As from 2013 the electric drive
systems in products of the sub-brand BMW i will be in-
creasingly supplementing our range of models. With
the growing use of electricity to power vehicles and the
rise of hybrid technology, we will continue to play a ma-
jor role in reducing CO2 emissions and improving fuel
economy. All of these factors taken together will enable
us to meet applicable CO2 and fuel consumption
thresholds in the future.

Between 1995 and 2012 we reduced the CO2 emissions
levels of our newly sold cars in Europe by more than
30 %. In 2012 the BMW Group’s vehicle fleet recorded
average fuel consumption of 5.0 litres of diesel / 100 km,
6.3 litres of petrol / 100 km and average CO2 emissions
of 138 g / km in Europe (EU-27). We also lead the field
among German premium-segment manufacturers with
CO2 emissions of 143 g / km. In 2012 the BMW Group’s
fleet already included 34 models with emissions of less
than 120 g CO2 / km. Our efficient technologies have
given us a competitive edge, particularly in markets
governed by a CO2-based vehicle tax. It remains our
goal to reduce the CO2 emissions of our vehicle fleet by
at least another 25 % between 2008 and 2020.

Strategic orientation towards sustainable individual
mobility of the future
We think the term “premium” will be increasingly
defined by reference to sustainability in years to come.
With our own BMW i sub-brand and the implemen-

BMW Stock and Capital Market in 2012

COMBINED GROUP AND COMPANY

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

18
21
24
44
47

66
74

Overview of capital markets in 2012
BMW stock significantly outperformed the market as a
whole within a generally volatile environment during
2012. Helped by the best ratings in the European auto-
mobile sector, the BMW Group was again able to refi-
nance its operations at attractive conditions. The BMW
Group was index leader in the Dow Jones Sustainability
Index World for the eighth time in succession.

Stock markets record sharp gains despite debt crisis
The debt crisis in the eurozone once again had a signifi-
cant impact on the performance of stock markets in
2012. In contrast to the previous year, the German stock
index, the DAX, was able to avoid these negative in-
fluences, particularly towards the end of the year, and –
against a background of high volatility – recorded its
biggest gain since 2003.

After a good start to the year, the DAX reached more
than 7,100 points in the first quarter. The initial failure
to form a government in Greece and concerns about
Spanish banks pushed down the DAX to its low for the
year of 5,900 points in June. The European Central
Bank’s plan to purchase an unlimited volume of bonds
initially provided a sharp boost to stock markets. By
the time November came, however, increasing uncer-
tainties caused by the “fiscal cliff” in the USA again took
their toll on the DAX, pushing the index back under the
mark of 7,000 points. After some substantial gains in
the following weeks, the DAX registered its high for the
year of 7,683 points on 19 December and finished the
stock exchange year at 7,612 points, 29.1 % above its
closing level at the end of the previous financial year.

the last day of trading, thus achieving a gain of 13.8 % for
the year as a whole.

BMW stock was not fully able to entirely escape the in-
fluence of these stock exchange developments. After a
good start to the year, BMW common stock registered
its initial high for the year of € 73.95 in March. The price
slid back to approximately € 53 over the course of the
year, only then to complete a catch-up race to the actual
high for the year of € 74.00 on 28 December 2012. The
price of BMW common stock finished the stock ex-
change year at € 72.93. BMW preferred stock finished on
31 December 2012 at € 48.76, thus gaining more than
one-third in value over the year as a whole (+ 33.4 %).
Both categories of BMW stock therefore outperformed
the DAX in 2012.

At the beginning of January 2013, the BMW Group was
presented with the Global Shareholder Value Award
for the best performance in the automobile manufacturer
category over a three-year period. This accolade was
awarded by PriceWaterhouseCoopers in conjunction
with Automotive News. In June 2012, the BMW Group
had already won the European Shareholder Value Award
for the best performance in the automobile manufacturer
category over one- and three-year periods.

Employee Share Scheme
BMW AG has enabled its employees to participate in its
success for more than 30 years. Since 1989 this partici-
pation has taken the form of an Employee Share Scheme.
In total, 422,905 shares of preferred stock were issued
to employees in 2012 as part of this scheme.

The Prime Automobile Index developed similarly, clos-
ing at 976 points (+ 41.9 %) after putting on 288 points
over a generally volatile twelve-month period. The EURO
STOXX 50 index reached the level of 2,636 points on

In accordance with a resolution taken by the Board
of Management on 20 November 2012 and with the
approval of the Supervisory Board, the share capital
was increased by € 422,845 from € 655,566,568 to

Development of BMW stock compared to stock exchange indices

(Index: 30 December 2002 = 100)

400

350

300

250

200

150

100

BMW preferred stock

BMW common stock

Prime Automobile

DAX

45 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

€ 655,989,413 by the issue of 422,845 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 pre-
ferred stock carry the same rights as existing shares
of preferred stock. In addition, 60 shares of preferred
stock were also bought back via the stock market.

Top-level ratings
In April 2012 the rating agency Standard & Poor’s
raised BMW AG’s long-term rating from A– (positive
outlook) to A (stable outlook). At the same time, the
short-term rating was also raised by one level from
A-2 to A-1.

The main reasons for the upgrade were strong demand
for premium vehicles, the sharp rise in profitability and
the successful implementation of Strategy Number ONE.
The BMW Group therefore has the best ratings of all
European car manufacturers.

BMW AG’s long-term and short-term ratings had al-
ready been raised by one level in July 2011 by the rating
agency Moody’s from A3 / P-2 to A2 / P-1 with a stable
outlook.

BMW Group is sector leader in the Dow Jones
Sustain ability Index for the eighth year in succession
As in previous years, the BMW Group was included in
numerous sustainability funds and indices in 2012. In
September 2012 the BMW Group was named Sector
Leader in the Dow Jones Sustainability Index World
and Europe for the eighth time in succession. The rating
agency, SAM, which analyses the sustainability per-
formance of companies on behalf of Dow Jones, praised
our state-of the-art innovation management as well as
our clear commitment to reducing negative environ-
mental impact along the entire value chain. The BMW
Group is the only enterprise in the carmaking sector to
have been represented continuously since the inception
of this family of sustainability indices in 1999. In June

BMW stock

Common stock

Number of shares in 1,000
Stock exchange price in €1

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 €1

Year-end closing price

High

Low

Key data per share in €

Dividend

Common stock

Preferred stock

Earnings per share of common stock3
Earnings per share of preferred stock4
Cash flow 5

Equity

1 Xetra closing prices
2 Proposed by management
3 Annual average weighted amount
4 Stock weighted according to dividend entitlements
5 Cash inflow from operating activities of the Automotive segment.
6 Adjusted for reclassifications as described in note 42.

2012

2011

2010

2009

2008

601,995

72.93

73.76

53.16

53,994

–

48.76

49.23

35.70

2.50 2
2.52 2

7.77

7.79

13.97

46.35

51.76

73.52

45.04

53,571

–

36.55

45.98

32.01

2.30

2.32

7.45

7.47
12.37 6

41.34

58.85

64.80

28.65

53,163

–

38.50

41.90

21.45

1.30

1.32

4.91

4.93

12.45

36.53

31.80

35.94

17.61

52,665

–

23.00

24.79

11.05

0.30

0.32

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

30.42

30.99

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

and explanatory comments
Financial Analysis
50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

18
21
24
44
47

66
74

2012, the BMW Group received the SAM Group’s
Sustainability Award for its commitment to sustain-
ability. The BMW Group was also included in the British
FTSE4Good Index again in 2012.

In the Global 500 Ranking of the Carbon Disclosure
Project (CDP) published in September, the BMW Group
achieved its best performance to date. With a score of
99 out of a possible 100 points, we were crowned Sector
Leader and were in the TOP 3 of all participating com-
panies. As a result of this performance, the BMW Group
is listed in the CDP’s Carbon Disclosure Leadership
Index (CDLI) and the Carbon Performance Leadership
Index (CPLI).

Regular communication with capital markets
In addition to information provided in quarterly and
year-end financial reports, interested parties such as an-
alysts, institutional investors, and rating agencies are
kept informed of developments in one-to-one discussions
and in roadshows, sometimes attended by members of
the Board of Management. A second Capital Markets
Day was held in China and attracted a great deal of
interest.

As in previous years, dialogue with capital markets was
supplemented by SRI (Socially Responsible Investment)
roadshows and participation in conferences held for
investors with investment strategies based on sustain-
ability criteria. These events were used to keep investors
and analysts informed of our sustainability-oriented
activities. Debt IR roadshows were also held to commu-
nicate specifically with credit analysts and debt capital
investors.

The scope of information available to private investors
in the “Investor Relations” section of the BMW Group
website was also expanded and complemented by
a dedicated app. The Investor Relations team again
handled a great many inquiries from private investors
regarding BMW stock and bonds.

The BMW Group’s investor relations activities again
received praise in the renowned Extel Survey conducted
by Thomson Reuters (first place in the automobile sec-
tor) and in specialist publications such as Institutional
Investor and IR Magazine.

47 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Disclosures relevant for takeovers1 and explanatory comments

Composition of subscribed capital
The subscribed capital (share capital) of BMW AG
amounted to € 655,989,413 at 31 December 2012 (2011:
€ 655,566,568) and, in accordance with Article 4 (1)
of the Articles of Incorporation, is sub-divided into
601,995,196 shares of common stock (91.77 %) (2011:
601,995,196; 91.83 %) and 53,994,217 shares of non-voting
preferred stock (8.23 %) (2011: 53,571,372; 8.17 %), each
with a par value of € 1. The Company’s shares are issued
to bearer. The rights and duties of shareholders derive
from the German Stock Corporation Act (AktG) in con-
junction with the Company’s Articles of Incorporation,
the full text of which is available at www.bmwgroup.com.
The right of shareholders to have their shares evidenced
is excluded in accordance with the Articles of Incor-
poration. The voting power attached to each share cor-
responds to its par value. Each € 1 of par value of
share capital represented 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 shares
within the meaning of § 139 et seq. AktG, which carry a
cumulative preferential right in terms of the allocation
of profit and for which voting rights are normally ex-
cluded. These shares only confer voting rights in excep-
tional cases stipulated by law, in particular when the
preference amount has not been paid or has not been
fully paid in one year and the arrears are not paid
in the subsequent year alongside the full preference
amount due for that year. With the exception of voting
rights, holders of shares of preferred stock are entitled
to the same rights as holders of shares of common
stock. Article 24 of the Articles of Incorporation con-
fers preferential treatment to the non-voting shares of
preferred stock with regard to the appropriation of
the Company’s unappropriated profit. Accordingly, the
unappropriated profit is required to be appropriated
in the following order:
1 Disclosures pursuant to § 289 (4) HGB and § 315 (4) HGB

(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 € 0.02 per
€ 1 par value on non-voting preferred shares and
(c) uniform payment of any other dividends on shares
on common and preferred stock, provided the
shareholders do not resolve otherwise at the Annual
General Meeting.

Restrictions affecting voting rights or the transfer
of shares
As well as shares of common stock, the Company has
also issued non-voting shares of preferred stock. Further
information relating to this can be found above in the
section “Composition of subscribed capital”.

When the Company issues non-voting shares of pre-
ferred stock to employees in conjunction with its Em-
ployee Share Scheme, these shares are subject as a
general rule to a company-imposed vesting period of
four years, measured from the beginning of the calen-
dar year in which the shares are issued.

Contractual holding period arrangements also apply
to shares of common stock required to be acquired by
Board of Management members and certain senior
department heads in conjunction with share-based
remuneration programmes (Compensation Report of
the Corporate Governance section; note 18 to the Group
Financial Statements).

Direct or indirect investments in capital exceeding
10 % of voting rights
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:2

AQTON SE, Bad Homburg v. d. Höhe, Germany

Stefan Quandt, 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

2 Based on voluntary balance notifications provided by the listed shareholders at 31 December 2012

Direct share of
voting rights (%)

Indirect share of
voting rights (%)

17.4

0.4

16.3

12.6

17.4

16.3

12.6

COMBINED GROUP AND COMPANY

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

and explanatory comments
Financial Analysis
50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

18
21
24
44
47

66
74

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 shareholdings if such changes are subject to manda-
tory notification rules.

Shares with special rights which confer control rights
There are no shares with special rights which confer
control rights.

System of control over voting rights when employees
participate in capital and do not exercise their control
rights directly
The shares issued in conjunction with the Employee
Share Scheme are shares of non-voting preferred stock
which are transferred solely and directly to employees.
Like all other shareholders, employees exercise their
control rights over these shares on the basis of relevant
legal provisions and the Company’s Articles of Incor-
poration.

Statutory regulations and Articles of Incorporation
provisions with regard to the appointment and removal
of members of the Board of Management and changes
to the Articles of Incorporation
The appointment or removal of members of the Board
of Management is based on the rules contained in
§ 84 et seq. AktG in conjunction with § 31 of the German
Co-Determination Act (MitbestG).

Amendments to the Articles of Incorporation must
comply with § 179 et seq. AktG. All amendments must
be decided upon by the shareholders at the Annual
General Meeting (§ 119 (1) no. 5, § 179 (1) AktG). The
Supervisory Board is authorised to approve amend-
ments to the Articles of Incorporation which only affect
its wording (Article 14 no.3 of the Articles of Incor-
poration); it is also authorised to change Article 4 of
the Articles of Incorporation in line with the relevant
utilisation of Authorised Capital 2009. Resolutions
are passed at the Annual General Meeting by simple
majority of shares unless otherwise explicitly required
by binding provisions of law or, when a majority of
share capital is required, by simple majority of shares
represented in the vote (Article 20 of the Articles of
Incorporation).

Authorisations given to the Board of Management
in particular with respect to the issuing or buying back
of shares
The Board of Management is authorised to buy back
shares and sell repurchased shares in situations spe-

cified in § 71 AktG, e. g. to avert serious and imminent
damage to the Company and / or to offer shares to persons
employed or previously employed by BMW AG or one
of its affiliated companies. In accordance with Article 4
no. 5 of the Articles of Incorporation, the Board of
Management is authorised – with the approval of the
Supervisory Board – to increase BMW AG’s share capital
during the period until 13 May 2014 by up to € 3,201,945
for the purposes of an Employee Share Scheme by
issuing new non-voting shares of preferred stock, which
carry the same rights as existing non-voting preferred
stock, in return for cash contributions (Authorised
Capital 2009). Existing shareholders may not subscribe
to the new shares. No conditional capital is in place at
the reporting date.

Significant agreements entered into by the Company
subject to control change clauses in the event of a take-
over bid
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 take-
over bid:
– An agreement concluded with an international con-
sortium of banks relating to a syndicated credit line
(which was not being utilised at the balance sheet
date) entitles the lending banks to give extraordinary
notice to terminate the credit line (such that all out-
standing amounts, including interest, would fall due
immediately) if one or more parties jointly acquire
direct or indirect control of BMW AG. The term “con-
trol” is defined as the acquisition of more than 50 %
of the share capital of BMW AG, the right to receive
more than 50 % of the dividend or the right to direct
the affairs of the Company or appoint the majority of
members of the Supervisory Board.

– A cooperation agreement concluded with Peugeot SA
relating to the joint development and production of a
new family of small (1 to 1.6 litre) petrol-driven engines
entitles each of the cooperation partners to give ex-
traordinary notification of termination in the event of
a competitor acquiring control over the other contrac-
tual party and if any concerns of the other contractual
party concerning the impact of the change of control
on the cooperation arrangements are not allayed
during the subsequent discussion process.

– 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 acquired by a third party or the other
party is merged with another legal entity. The termi-

holder or to require the affected party to acquire the
other shareholder’s shares.

– An engine supply agreement between BMW AG and
Toyota Motor Europe SA relating to the sale of diesel
engines entitles each of the contractual parties to give
extraordinary notification of termination in the event
that one of the contractual parties merges with an-
other company or is taken over by another company.

Compensation agreements with members of the
Board of Management or with employees in the event
of a takeover bid
The BMW Group has not concluded any compensation
agreements with members of the Board of Manage-
ment or with employees for situations involving a take-
over offer.

49 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

nation of the joint venture agreement may result in
the sale of the shares to the other joint venture partner
or in the liquidation of the joint venture entity.

– Framework agreements are in place with financial in-

stitutions and banks (ISDA Master Agreements) with
respect to trading activities with derivative financial
instruments. Each of these agreements includes an
extraordinary right of termination which triggers the
immediate settlement of all current transactions in
the event that the creditworthiness of the party in-
volved is materially weaker following a direct or in-
direct acquisition of beneficially owned equity capital
which confers the power to elect a majority of the
Supervisory Board of a contractual party or any other
ownership interest that enables the acquirer to exer-
cise control over a contractual party or which consti-
tutes a merger or a transfer of net assets.

– Financing agreements in place with the European

Investment Bank (EIB) entitle the EIB to request early
repayment of the loan in the event of an imminent
or actual change in control at the level of BMW AG
(partially in the capacity of guarantor and partially in
the capacity of borrower), if the EIB has reason to
assume – after the change of control has taken place
or 30 days after it has requested to discuss the situa-
tion – that the change in control could have a mate-
rial adverse effect, or, in all but two cases as an addi-
tional alternative, if the borrower refuses to hold such
discussions. A change in control of BMW AG arises
if one or more individuals take over or lose control of
BMW AG, with control being defined in the above-
mentioned financing agreements as (i) holding or hav-
ing control over more than 50 % of the voting rights,
(ii) the right to stipulate the majority of the members
of the Board of Management or Supervisory Board,
(iii) the right to receive more than 50 % of dividends
payable, or, in all but two cases as an additional alter-
native (iv) other comparable controlling influence
over BMW AG.

– 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 agreement includes call and put rights
in case – directly of indirectly – 50 % or more of
the voting rights relating to the relevant other share-
holder of the joint ventures are acquired by a third
party, or if 25 % of such voting rights have been ac-
quired by a third party if that third party is a com-
petitor of the party that has not been affected by the
acquisition of the voting rights. In the event of such
acquisitions of voting rights by a third party, the non-
affected shareholder has the right to purchase the
shares of the joint ventures from the affected share-

Analysis of the Group Financial Statements

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

Group Internal Management System
Taking into account the interests and expectations of
capital providers is an important aspect of value-based
management within the BMW Group. Only companies
generating profits on a sustainable basis that exceed the
cost of equity and debt capital employed are capable of
ensuring long-term growth, an increase in value for capi-
tal providers, jobs and, ultimately, corporate autonomy.

The BMW Group’s internal management system is multi-
layered. The principal key financial performance indica-
tor at Group level is value added. Business is managed
at segment level on the basis of segment-specific rates of
return. The system is complemented by value-based
and return-based performance indicators measured in
conjunction with project decisions.

Value added as top-level key financial
performance indicator
Value added reflects the amount of earnings over and
above the cost of capital, and gives an indication of
whether the Group is meeting the minimum require-
ments for the rate of return expected by capital pro-
viders. A positive value added means that a company is
creating more additional value than the cost of capital
and it is therefore an important measure of financial
success.

Value added Group = earnings amount – cost of capital

= earnings amount – (cost of capital rate ×
capital employed)

in € million

Earnings amount

Cost of capital (EC + DC)

2012

2011

2012

2011

Value added Group

2012

2011

BMW Group

8,128

7,637

4,221

3,575

3,907

4,062

Capital employed comprises Group equity, the financial
liabilities of the Automotive and Motorcycles segments
and pension provisions. Value added is determined on
the basis of the average level of capital employed for a
particular year, 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 employed capital, earnings for RoCE pur-
poses corresponds to Group earnings before tax and
interest expense incurred in conjunction with the pen-
sion provision and on the financial liabilities of the
Automotive and Motorcycles segments (earnings before
interest and taxes).

The cost of capital rate is the minimum rate of return
expected by capital providers in return for the capital
employed by the Group. Since capital employed com-
prises an equity capital element (e. g. share capital) and
a debt capital element (e. g. bonds), the overall cost of
capital rate is determined on the basis of the weighted
average rates for equity and debt capital.

The cost of equity capital corresponds to the minimum
rate of return expected by an equity capital provider
investing in BMW stock. This minimum rate of return

is determined using the Capital Asset Pricing Model
(CAPM) and corresponds to the interest rate on long-
term, risk-free securities (e. g. German federal bonds)
plus a risk premium for the specific risk involved in in-
vesting in BMW AG.

The cost of debt capital is calculated on the basis of the
average interest rates relevant for long-term financial
liabilities and pension obligations.

For the purposes of measuring the average cost of capi-
tal rate, equity and debt cost rates are weighted on the
basis of a notional ratio derived from fixed, targeted
market values for equity and debt capital. Stability in
managing the business over time is ensured by keeping
the cost of capital rate within a pre-defined range and
by refraining from revising it unless there have been
significant changes in circumstances.

Cost of capital rate (before tax)

in %

2012

2011

BMW Group

51 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

The return on capital employed for the Group (RoCE
Group) is also important, as – in addition to providing
the basis for measuring value added – the RoCE also
gives an indication of how efficiently the Group has em-
ployed funds made available by capital providers in a
particular year.

RoCE Group

Profit before interest expense and tax
=

Capital employed

Segments managed based on capital rates of return
Complementing the value added approach taken to
manage business at Group level, segments are managed
on the basis of rates of return on capital. RoCE is used
as a rate-of-return indicator for the Automotive and
Motorcycles segments. As is common practice in
the banking sector, the performance of the Financial
Services segment is measured on the basis of the re-
turn on equity (RoE).

RoCE Automotive
and Motorcycles

Profit before financial result
Capital employed

Return on capital employed

RoE Financial
Services

Profit before tax

Equity capital

The RoCE measured for the Automotive and Motorcycles
segments is an indicator of the profitability of operations.
It is measured as the ratio of the segment profit before
financial result and the average amount of capital em-
ployed in operations. Capital employed corresponds to
the sum of all current and non-current operational as-
sets less liabilities that do not incur interest (e. g. trade
payables). Based on the Group’s cost of capital as a mini-
mum rate of return and comparisons with competitive
market values, the long-term target RoCE for the Auto-
motive and Motorcycles segments has been set at a mini-
mum of 26 %.

Capital employed by Automotive segment

in € million

2012

2011

Operational assets

less: non-interest-bearing liabilities

Capital employed

31,613

21,448

10,165

29,323

19,651

9,672

Earnings for
RoCE purposes
in € million

Capital
employed
in € million

Return on
capital employed
in %

2012

2011

2012

2011

2012

2011

BMW Group

Automotive

Motorcycles

8,128

7,624

7,637

7,477

35,178

29,788

10,165

511

9,672

442

23.1

75.0

1.8

25.6

77.3

10.2

RoE for the Financial Services segment is defined as
segment profit before taxes divided by the average

amount of equity capital allocated to the segment. The
target is a sustainable return on equity of at least 18 %.

Return on equity

Profit
before tax
in € million

Equity

in € million

Return
on equity
in %

2012

2011

2012

2011

2012

2011

Financial Services

1,561

1,790

7,347

6,084

21.2

29.4

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

Value management used to control projects
Operations of the Automotive and Motorcycles seg-
ments are shaped to a large extent by project work,
which have a substantial influence on future performance.
Project decisions are therefore a crucial component of
value-based management for the BMW Group.

Decisions are taken on the basis of project calculations
measured in terms of the cash flows a project is ex-
pected to generate. Calculations are made for the full
term of a project, i.e. for all years in which cash flows
are expected to arise. Project decisions are taken on
the basis of the capital value and internal rate of return
calculated for the project. These two measures are con-
sistent with the performance indicators employed in
the Group’s financial target system.

The capital value of a project indicates the extent to
which a project will be able to generate a positive con-
tribution to earnings over and above the cost of capital.
A project with a positive capital value enhances value
added and therefore results in an increase in the value
of the business. The internal rate of return corresponds
to the average RoCE of a project over its entire term.
It therefore provides a basis for assessing the extent to
which a project will be able to help the segment achieve
its targeted RoCE.

Project calculations are supplemented by a standardised
assessment of opportunities and risks. The criteria used
for taking decisions as well as the long-term impact of
periodic earnings is documented for all project decisions
and incorporated in the long-term Group forecast. This
system enables an analysis of the periodic reporting
impact of project decisions on earnings and rates of re-
turn over the term of each project. The overall result is a
self-contained controlling model.

Earnings performance
The BMW Group continued on its successful course in
2012 and posted another record year. The number
of BMW, MINI and Rolls-Royce brand cars sold rose by
10.6 % to 1,845,186 units, enabling the BMW Group
to retain pole position at the head of the premium
segment.

The BMW Group recorded a net profit of € 5,122 mil-
lion (2011: € 4,907 million) for the financial year 2012.
The post-tax return on sales was 6.7 % (2011: 7.1 %).
Earnings per share of common and preferred stock
were € 7.77 and € 7.79 respectively (2011: € 7.45 and € 7.47
respectively).

Group revenues rose by 11.7 % to € 76,848 million (2011:
€ 68,821 million), reflecting in particular the expan-

Group Income Statement

in € million

Revenues

Cost of sales

Gross profit

Selling and administrative expenses

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

2012

2011

76,848

– 61,354

15,494

– 7,007

829

– 1,016

8,300

271

753

– 913

– 592

– 481

7,819

68,821

– 54,276

14,545

– 6,177

782

– 1,132

8,018

162

763

– 943

– 617

– 635

7,383

– 2,697

5,122

– 2,476

4,907

53 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

sion and rejuvenation of the model portfolio, dynamic
growth in Asia and the Americas and revenues of the
ICL Group (2011: consolidated with effect from 30 Sep-
tember 2011). Adjusted for exchange rate factors, the
increase was 7.1 %. Revenues from the sale of BMW,
MINI and Rolls-Royce brand cars climbed by 11.3 % on
the back of higher sales volumes. Motorcycles busi-
ness revenues were 3.6 % up on the previous year. Reve-
nues generated with Financial Services operations
rose by 13.8 %. Revenues attributable to “Other Entities”
amounted to € 2 million (2011: € 1 million).

increase in administrative expenses was attributable
to the higher number of employees on the one hand
and increased non-personnel costs on the other. Over-
all, selling and administrative expenses rose by 13.4 %
compared to the previous year and represented 9.1 %
(2011: 9.0 %) of revenues.

Depreciation and amortisation on property, plant
and equipment and intangible assets recorded in cost
of sales and in selling and administrative expenses
amounted to € 3,541 million (2011: € 3,646 million).

Revenues generated by the BMW Group in the Africa,
Asia and Oceania regions increased overall by 22.7 %.
The figure includes China, where revenues jumped
by 24.6 % thanks to the growth of business on this mar-
ket. Revenues in Europe (excluding Germany) and
the Americas region grew by 9.6 % and 13.9 % respec-
tively. By contrast, revenues generated in Germany fell
by 5.2 %.

Cost of sales went up by € 7,078 million to € 61,354 mil-
lion, partly influenced by expenditure for future tech-
nologies. Gross profit improved by 6.5 % to € 15,494 mil-
lion, giving a gross profit margin of 20.2 % (2011: 21.1 %).

The gross profit margin recorded by the Automotive seg-
ment was 19.5 % (2011: 20.7 %) and that of the Motor-
cycles segment was 17.0 % (2011: 15.9 %). The gross
profit margin of the Financial Services segment fell from
14.3 % to 13.1 %.

Research and development costs increased by 10.6 %
to € 3,993 million, mostly due to activities related to
the electrification of the future product range. As a
percentage of revenues, the research and development
ratio remained stable at 5.2 %. Research and develop-
ment expense includes amortisation of capi talised
development costs amounting to € 1,130 million (2011:
€ 1,209 million). Total research and development ex-
penditure amounted to € 3,952 million (2011: € 3,373
million). This figure comprises research costs, non-capi-
talised development costs, capitalised de velopment
costs and systematic amortisation of capi talised devel-
opment costs. The research and development ex-
penditure ratio for 2012 was therefore 5.1 % (2011: 4.9 %).
The proportion of development costs recognised as as-
sets in 2012 was 27.6 % (2011: 28.8 %).

Selling expenses went up as a result of volume rises
and inclusion of the ICL Group for the full year. The

The net expense reported for other operating income
and other operating expenses amounted to € 187 mil-
lion, an improvement of € 163 million compared to
the previous year. The main reason for the change was
the lower level of allocations to provisions.

As a result of the progress made, the profit before
financial result amounted to € 8,300 million (2011:
€ 8,018 million).

The financial result was a net expense of € 481 million,
which represented an improvement of € 154 million
compared to the previous year (2011: net expense of
€ 635 million). This includes the result from equity
accounted investments totalling € 271 million (2011:
€ 162 million), comprising the Group’s share of results
from interests in the joint venture BMW Brilliance
Automotive Ltd., Shenyang, the joint ventures with
the SGL Carbon Group, the two new DriveNow enti-
ties as well as the joint venture BMW Peugeot Citroën
Electrification B.V., the Hague, up to the date of the
termination of joint venture arrangements.

Other financial result was positively impacted in 2012
by improved market values on commodity derivatives
and negatively impacted by impairment losses on in-
vestments. Overall, other financial result improved from
a net expense of € 617 million in 2011 to a net expense
of € 592 million in 2012.

Taking all these factors into consideration, the profit
before tax improved to € 7,819 million (2011: € 7,383 mil-
lion). The figure for the previous year included an ex-
ceptional gain of € 524 million arising on the reduction
of allowances / provisions for residual value and bad
debt risks. Business with end-of-contract leasing
vehicles gave rise to an exceptional gain of € 124 mil-
lion in 2012. The pre-tax return on sales was 10.2 %
(2011: 10.7 %).

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

Revenues by segment

in € million

Profit / loss before tax by segment

in € million

2012

2011

2012

2011

Automotive

Motorcycles

Financial Services

Other Entities

Eliminations

Group

70,208

1,490

19,550

– 14,405

76,848

63,229

1,436

17,510

Automotive

Motorcycles

Financial Services

Other Entities

– 13,359

68,821

Eliminations

Group

7,195

1,561

– 6

– 937

7,819

6,823

1,790

– 168

– 1,103

7,383

Income tax expense for the year totalled € 2,697 million
(2011: € 2,476 million), giving an effective tax rate of
34.5 % (2011: 33.5 %). Tax increases as a result of non-
deductible expenses relate mainly to the impact of non-
recoverable withholding taxes on intra-group dividends
and transfer price issues.

Revenues of the Automotive segment grew by 11.0 % to
€ 70,208 million (2011: € 63,229 million) due to increased
sales volumes. The strong sales volume performance
is also reflected in the profit before tax figure, which de-
spite higher personnel and non-personnel expenses,
improved from € 6,823 million in 2011 to € 7,195 million
in 2012.

In the Motorcycles segment, the number of BMW and
Husqvarna brand motorcycles sold increased by 3.1 %,
while segment revenues rose by 3.8 %. The pre-tax seg-
ment result fell by € 35 million to € 6 million. This dete-
rioration includes the negative impact of the planned
sale of the Husqvarna Group entities to Pierer Industrie
AG. For further information see note 32 of the Group
Financial Statements.

Financial Services segment revenues grew by 11.7 % to
€ 19,550 million. The pre-tax segment result fell by
€ 229 million to € 1,561 million (2011: € 1,790 million).
The previous year’s result included exceptional income
of € 439 million arising on the reduction of provisions
for residual value and bad debt risks. Business with
end-of-contract leasing vehicles gave rise to an excep-
tional gain of € 124 million in 2012.

The Other Entities segment recorded a pre-tax loss of
€ 6 million compared to one of € 168 million in the pre-
vious year. The main reason for the improvement in
earnings is the lower expense for allocations to provi-
sions in 2012.

Inter-segment eliminations down to the level of profit
before tax gave rise to a net expense of € 937 million
(2011: net expense of € 1,103 million).

Financial position*
The consolidated cash flow statements for the Group
and the Automotive and Financial Services segments
show the sources and applications of cash flows for
the financial years 2011 and 2012, classified into cash
flows from operating, investing and financing ac-
tivities. Cash and cash equivalents in the cash flow
statements correspond to the amount disclosed in
the balance sheet.

Cash flows from operating activities are determined in-
directly, starting with Group and segment net profit.
By contrast, cash flows from investing and financial ac-
tivities are based on actual payments and receipts.

The BMW Group used various sources of funds for in-
ternal financing purposes. In addition to the issue of
interest-bearing debt, cash funds are also allocated in-
ternally in line with business requirements, including
the use of dividends and similar transactions. In this
context, it is possible that cash funds may be transferred
from one segment to another. Up to the first quarter
2012, these cash inflows and outflows were reported in
the Cash Flow Statements of the Automotive and Finan-
cial Services segments as part of cash flows from oper-
ating activities. Due to the increasing importance of
inter-segment transactions, the method of presentation
was changed with effect from the second quarter 2012.
Intragroup inter-segment dividends and similar trans-
actions are now reported as part of cash flows from
financing activities. The reclassification from operating
activities to financing activities resulted in the previous
year in an increase in the operating cash flow. The pre-
* Previous year’s figures adjusted

55 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

vious year’s figures were adjusted accordingly (impact in
2011 on the Automotive segment: increase in operating
cash flow of € 1,033 million / Financial Services segment:
€ 411 million).

The Group’s operating activities generated a positive
cash flow of € 5,076 million (2011: € 5,713 million), which
includes net profit for the year of € 5,122 million (2011:
€ 4,907 million). Changes in working capital resulted
in a net cash inflow of € 1,755 million (2011: net cash
outflow of € 1,615 million), reflecting stable inventory
levels on the one hand and a reduction in trade receiv-
ables on the other. The increase in receivables from
sales financing and leased products resulted in a cash
outflow from operating activities of € 5,409 million
(2011: € 3,216 million).

The cash outflow for investing activities amounted to
€ 5,433 million, (2011: € 5,499 million) and was thus 1.2 %
lower than one year earlier. Investment in property,
plant and equipment and intangible assets resulted in a
cash outflow of € 5,236 million (2011: € 3,679 million),
while disbursements for financial assets amounted to
€ 171 million (2011: € 543 million).

Cash inflow from financing activities totalled € 952 mil-
lion (2011: € 87 million). Proceeds from the issue of
bonds amounted to € 7,977 million (2011: € 5,899 million),
compared with an outflow of € 6,727 million (2011:

€ 5,333 million) for the repayment of bonds. Dividend
payments made in 2012 totalled € 1,516 million, of
which € 1,508 million was disbursed by BMW AG and
€ 8 million by a subsidiary to minority shareholders.
The change in other financial liabilities and commercial
paper gave rise to a cash inflow of € 1,301 million (2011:
€ 439 million).

The cash outflow for investing activities exceeded cash
inflow from operating activities in 2012 by € 357 million. In
the previous year, there had been a surplus of € 214 million.

After adjustment for the effects of exchange-rate fluc-
tuations and changes in the composition of the BMW
Group for a net negative amount of €1 million (2011:
net positive amount of € 43 million), the various cash
flows resulted in an increase in cash and cash equiva-
lents of € 594 million (2011: € 344 million).

The cash flow statement for the Automotive segment
shows that the cash inflow from operating activities
exceeded the cash outflow for investing activities by
€ 3,637 million (2011: € 2,385 million). Adjusted for net
investments in marketable securities amounting to
€ 172 million (2011: € 781 million), mainly in conjunction
with strategic liquidity planning, the surplus of the
cash inflow from operating activities over the cash out-
flow for investing activities was € 3,809 million (2011:
€ 3,166 million).

Change in cash and cash equivalents

in € million

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. 2011

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. 2012

7,776

+ 5,076

– 5,433

+ 952

– 1

8,370

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

Free cash flow of the Automotive segment can be analysed as follows:

in € million

31. 12. 2012

31. 12. 2011

Cash inflow from operating activities

Cash outflow for investing activities

Net investment in marketable securities

Free cash flow Automotive segment

9,167

– 5,530

172

3,809

8,110

– 5,725

781

3,166

The cash outflow for operating activities of the Financial
Services segment is influenced primarily by cash flows
relating to leased products and receivables from sales
financing and totalled € 4,192 million in 2012 (2011:
€ 1,897 million). Cash outflow for investing activities to-
talled € 32 million (2011: cash inflow of € 204 million).

Net financial assets of the Automotive segment com-
prise the following:

in € million

31. 12. 2012

31. 12. 2011

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

7,484

2,205

5,862

15,551

– 2,224

13,327

5,829

1,801

6,404

14,034

– 1,747

12,287

Refinancing
Operating cash flow provides a solid financial basis
for the BMW Group. We are also able to call on a broadly
based range of instruments to refinance our world-
wide operations via international money and capital
markets. Almost all of the funds raised are used to
finance the BMW Group’s Financial Services business.

Apart from issuing commercial paper on the money
market, the BMW Group’s financing companies also
issue bearer bonds. In addition, retail customer and
dealer financing receivables on the one hand and
leasing rights and obligations on the other are secu-
ritised in the form of asset-backed securities (ABS)
financing arrangements. Financing instruments em-
ployed by our banks in Germany and the USA (e. g.
customer deposits) are also used as a supplementary
source of financing. Owing to the increased use of inter-
national money and capital markets to raise funds, the

scale of funds raised in the form of loans from interna-
tional banks is relatively small.

As in previous years, operations were refinanced in 2012
at an attractive level. Thanks to the best rating in the
European automobile industry and the high level of ac-
ceptance it enjoys on capital markets, the BMW Group’s
refinancing activities were not affected by financial mar-
ket volatility in 2012. In addition to the issue of bonds
and loan notes on the one hand and private placements
on the other, we were also able to issue commercial
paper at good conditions. Additional funds were also
raised via new securitised instruments and the prolon-
gation of existing instruments. As in previous years,
all issues were highly sought after by private and institu-
tional investors.

During the year, the BMW Group issued four bench-
mark bonds with a total issue volume of € 4 billion on

57 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

European capital markets. Bonds were also issued in
Canadian dollars, British pounds, Norwegian krone, In-
dian rupees, South Korean won and other currencies
for a total amount of € 5.1 billion.

visions (81.6 %), trade payables (20.5 %), non-current
financial liabilities (4.0 %) and other provisions (8.7 %).
Deferred tax liabilities (7.1 %) and current other lia-
bilities (3.3 %) decreased.

A total of eight ABS transactions were executed in 2012,
including two public transactions in the USA and one
each in Germany and South Africa with a total volume
equivalent to € 2.3 billion. Further funds were also raised
via new ABS conduit transactions in Japan, Australia
and the UK totalling € 1.7 billion.

The regular issue of commercial paper also strengthens
our financial base. The following table provides an over-
view of existing money and capital market programmes
of the BMW Group at 31 December 2012:

At € 5,207 million, the carrying amount of intangible as-
sets was € 31 million lower than at the end of the pre-
vious year. Within intangible assets, capitalised develop-
ment costs decreased by € 41 million to € 4,347 million.
Development costs recognised as assets during the year
under report totalled € 1,089 million (+12.0 %) and
were therefore higher than one year earlier. The propor-
tion of research and development costs recognised as
assets was 27.6 % (2011: 28.8 %). The corresponding am-
ortisation expense was € 1,130 million (2011: € 1,209 mil-
lion). Goodwill was unchanged from the previous year
and stood at € 369 million.

Programme

Amount utilised

Euro Medium Term Notes

Commercial paper

€ 25.5 billion

€ 4.7 billion

The BMW Group’s liquidity position is extremely robust,
with cash funds totalling € 11.0 billion on hand at 31 De-
cember 2012. A syndicated credit line of € 6 billion is
also in place. The credit line, which is being made avail-
able at attractive conditions by a consortium of 39 inter-
national banks, has a term up to October 2017 and can
be extended by one year.

Further information with respect to financial liabilities
is provided in the notes to the Group Financial State-
ments 33 and 37.

Net assets position
The Group balance sheet total increased by € 8,421 mil-
lion to stand at € 131,850 million at 31 December 2012.
Adjusted for changes in exchange rates, the balance
sheet total increased by 7.5 %.

The main factors behind the increase on the assets
side of the balance sheet were receivables from sales
financing (7.2 %), property, plant and equipment
(14.2 %), leased products (5.9 %) and financial assets
(24.0 %). By contrast, trade receivables went down by
22.6 % thanks to proactive receivables management.
Inventories increased marginally (0.9 %) compared to
the previous year.

On the equity and liabilities side of the balance sheet,
the increase related to equity (12.2 %), pension pro-

Property, plant and equipment rose sharply to
€ 13,341 million. Capital expenditure of € 4,028 mil-
lion was 55.0 % higher than in the previous year (2011:
€ 2,598 million). The main focus was on product invest-
ments for production start-ups and infrastructure
improvements. Depreciation on property, plant and
equipment totalled € 2,298 million. Total capital ex-
penditure on intangible assets and property, plant and
equipment as a percentage of revenues increased to
6.8 % (2011: 5.4 %).

Leased products climbed by € 1,356 million or 5.9 % as
a result of increased business volumes. Adjusted for ex-
change rate factors, the increase was 6.1 %.

Receivables from sales financing increased by 7.2 % to
€ 52,914 million due to higher business volumes. Of
this amount, customer and dealer financing accounted
for € 40,650 million (6.1 %) and finance leases for
€ 12,264 million (11.0 %).

Compared to the end of the previous financial year, in-
ventories went up only marginally by € 87 million
(+0.9 %) to € 9,725 million. Adjusted for exchange rate
factors, the increase was 1.3 %.

Financial assets went up by 24.0 % to € 6,760 million,
largely due to higher levels of marketable securities
and investment fund shares as well as increases in fair
values of currency derivatives.

Liquid funds went up by 9.1 % to € 11,025 million and
comprise cash and cash equivalents, marketable securi-
ties and investment fund shares (the last two items re-
ported as financial assets).

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

Balance sheet structure – Group

Total equity and liabilities in € billion
Non-current assets

62 %

60 %

22 %

40 %

23 %

40 %

Equity

Non-current provisions and liabilities

Current assets

38 %

40 %

38 %

37 %

Current provisions and liabilities

thereof cash and cash equivalents

6 %

2012

2011

2012

132

123

132

Balance sheet structure – Automotive segment

Total equity and liabilities in € billion
Non-current assets

44 %

41 %

Equity

42 %

41 %

Current assets

56 %

58 %

15 %

44 %

16 %

43 %

Non-current provisions and liabilities

Current provisions and liabilities

thereof cash and cash equivalents

11 %

9 %

2012

2011

2012

Cash and cash equivalents went up by € 594 million to
€ 8,370 million.

On the equity and liabilities side of the balance sheet,
equity rose overall by € 3,299 million (+12.2 %) to
€ 30,402 million. The main reason for the increase was
the profit attributable to shareholders of BMW AG to-
talling € 5,096 million. Translation differences arising

on currency translation reduced equity by € 123 million.
Deferred taxes on items recognised directly in equity
increased equity by € 49 million. Actuarial losses on pen-
sion obligations mainly due to lower interest rates
caused Group equity to reduce by € 1,881 million. Changes
in fair value gains and losses of derivative financial
in struments (€ 1,302 million) and marketable securities
(€ 214 million) had a positive impact on equity. Income

59 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

and expenses relating to equity accounted investments
and recognised directly in equity, net of deferred tax,
increased equity by € 82 million. The dividend payment
decreased equity by € 1,508 million. Minority interests
went up by € 42 million. Other changes amounted to
€ 7 million.

A portion of the Authorised Capital created at the
Annual General Meeting held on 14 May 2009 in con-
junction with the Employee Share Scheme was used
during the financial year under report to issue shares
of preferred stock to employees, thereby increasing sub-
scribed capital to € 656 million. An amount of € 18 mil-
lion was transferred to capital reserves in conjunction
with this share capital increase. The equity ratio of the
BMW Group improved overall by 1.1 percentage points
to 23.1 %. The equity ratio of the Automotive segment
was 40.9 % (2011: 41.1 %) and that of the Financial Ser-
vices segment was 8.6 % (2011: 8.7 %).

Pension provisions increased by 81.6 % to € 3,965 million
mainly as a result of lower discount factors used in Ger-
many, the UK and the USA. In the case of pension plans
with fund assets, the fair value of fund assets is offset
against the defined benefit obligation.

Current and non-current other provisions increased by
€ 542 million to € 6,795 million.

Current and non-current financial liabilities went up
by € 1,530 million to € 69,507 million. Within financial
liabilities, there were increases in bonds (+4.5 %), cus-
tomer deposits (banking) (+8.1 %) and liabilities to
banks (+12.9 %). By contrast, liabilities for commercial
paper decreased by € 901 million.

Trade payables amounted to € 6,433 million and were
thus 20.5 % higher than one year earlier, mainly
attributable to the expansion of business operations.

Other liabilities increased by 2.6 % to € 10,196 million.

Overall, the earnings performance, financial position
and net assets position of the BMW Group continued to
develop very positively during the financial year under
report.

Compensation report
The compensation of the Board of Management com-
prises both a fixed and a variable component. Benefits
are also payable – primarily in the form of pension

benefits – at the end of members’ mandates. Further
details, including an analysis of remuneration by each
individual, are disclosed in the Compensation Report,
which can be found in the section “Statement on
Corporate Governance”. The Compensation Report is
a sub-section of the Combined Group and Company
Management Report.

Events after the end of the reporting period
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
amortisation, cost of materials and other expenses are
treated as bought-in costs in the value added calcula-
tion. The allocation statement applies value added to
each of the participants involved in the value added
process. It should be noted that the gross value added
amount treats depreciation as a component of value
added which, in the allocation statement, is treated as
internal financing.

Net valued added by the BMW Group in 2012 rose by
6.8 % to € 18,975 million. The increase over the previous
year was attributable to the higher level of revenues.

The bulk of the net value added (45.0 %) is applied to em-
ployees. The proportion applied to providers of finance
fell to 10.7 %, mainly due to the lower refinancing costs
on international capital markets for the financial ser-
vices side of the business. The government / public sector
(including deferred tax expense) accounted for 17.3 %.
The proportion of net value added applied to share-
holders, at 8.7 %, was higher than in the previous year.
Minority interests take a 0.1 % share of net value added.
The remaining proportion of net value added (18.2 %)
will be retained in the Group to finance future operations.

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

BMW Group value added statement

Work performed

Revenues

Financial income

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

2012
in € million

2012
in %

2011
in € million

2011
in %

Change
in %

76,848

– 270

829

77,407

41,304

9,173

50,477

26,930

7,955

18,975

8,535

2,030

3,288

1,640

3,456

99.3

– 0.4

1.1

100.0

53.4

11.8

65.2

34.8

10.3

24.5

45.0

10.7

17.3

8.7

18.2

0.1

68,821

– 400

782

69,203

36,753

7,261

44,014

25,189

7,424

17,765

7,739

2,149

2,970

1,508

3,373

99.5

– 0.6

1.1

100.0

53.1

10.5

63.6

36.4

10.7

25.7

43.6

12.1

16.7

8.5

19.0

0.1

18,975

100.0

17,765

100.0

11.9

14.7

6.9

6.8

10.3

– 5.5

10.7

8.8

2.5

–

6.8

* Cost of materials comprises all primary material costs incurred for vehicle production plus ancillary material costs (such as customs duties, insurance premiums and freight).

BMW Group value added 2012

in %

Depreciation and amortisation

Other expenses

Net value added

Cost of materials

Net value added

Cost of materials

24.5

53.4

Depreciation and amortisation

10.3

Other expenses

11.8

45.0 %

Employees

10.7 %

Providers of finance

17.3 %

Government / public sector

8.7 %

18.2 %

Shareholders

Group

0.1 %

Minority interest

61 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

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

Automotive

Financial Services

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

Return on capital employed

Group

Automotive

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

Free cash flow of Automotive segment

Net financial assets Automotive segment

* Previous year’s figure adjusted

2012

2011

20.2

15.4

10.8

10.2

6.7

28.8

18.9

23.1

40.9

8.6

21.1

16.9

11.7

10.7

7.1

30.9

20.5

22.0

41.1

8.7

163.9

160.2

23.1

75.0

1.8

21.2

5,076

– 5,433

93.4

3,809

13,327

25.6

77.3

10.2

29.4

5,713

– 5,499

103.9
3,166*

12,287

€ million

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

50
52
54
57
59
59
61
62
Internal Control System and
explanatory comments
Risk Management
Outlook

66
74

Comments on Financial Statements of BMW AG
The financial statements of BMW AG are drawn up in
accordance with the German Commercial Code (HGB)
and the German Stock Corporation Act (AktG).

BMW AG develops, manufactures and sells cars and
motorcycles manufactured by itself, foreign subsidiaries
and Magna Steyr. Sales activities are carried out through
the Company’s own branches, independent dealers,
subsidiaries and importers. The number of cars manu-
factured at German and foreign plants in 2012 rose by
7.1 % to 1,861,826 units. At 31 December 2012, BMW AG
had 74,571 employees, 2,941 more than one year
earlier.

Sales volume went up again in 2012, as a result of which
revenues grew by 6.9 % compared to the previous year.
The most significant increase was recorded in Asia.
Sales to Group sales companies accounted for € 43.9 bil-
lion or approximately 74.7 % of total revenues of
€ 58.8 billion. The increase in cost of sales was slightly
less pronounced than the increase in revenues. As a
consequence, gross profit increased by € 866 million to
€ 12.6 billion.

Research and development expenses were 17.3 % higher
than in the previous year, driven primarily by activities
related to the electrification of the future product range.

The increase in net other operating income and expenses
in 2012 was attributable mainly to exceptional factors
in 2011 (income from retrospective changes to transfer
prices and from the reversal of warranty provisions) and
lower expenses for allocations to onerous commodity
and currency hedging contracts in 2012.

The financial result improved by € 566 million, mainly
as a result of the positive impact of fair value changes in
designated plan assets for pension and other long-term
personnel-related provisions and the offsetting nega-
tive effect of impairment losses recognised on financial
assets.

The profit from ordinary activities increased from
€ 4,037 million to € 4,797 million.

The expense for income taxes relates primarily to current
tax for the financial year 2012, and is lower than in the
previous year mainly as a result of a reduced amount of

expense recorded in conjunction with provisions for tax
field audit risks.

After deducting the expense for taxes, the Company re-
ports a net profit of € 3,131 million (2011: € 1,970 million).

Capital expenditure on intangible assets and property,
plant and equipment amounted to € 2,776 million (2011:
€ 2,032 million), an increase of 36.6 % over the previous
year. The main focus was on product investments for
production start-ups and infrastructure improvements.
Depreciation and amortisation amounted to € 1,613 mil-
lion (2011: € 1,578 million).

Investments went up from € 2,823 million to € 3,094 mil-
lion, mainly as a result of transfers to capital reserves at
the level of BMW Bank GmbH, Munich, and the acqui-
sition of shares in BMW Finance S.N.C., Guyancourt,
which were subsequently contributed to BMW Bank.
An impairment loss of € 143 million was recognised in
2012 on the investment in SGL Carbon SE, Wiesbaden.

At € 3,749 million, inventories remained at a similar level
to the previous year despite the expansion of business
operations during the year.

Cash and cash equivalents rose by € 1,754 million to
€ 4,618 million, reflecting good earnings, the concen-
tration of liquidity at the level of BMW AG and a
re duction in investments in marketable securities in
favour of liquid funds. Financial receivables from sub-
sidiaries decreased.

Equity rose by € 1,642 million to € 9,864 million and the
equity ratio improved from 29.9 % to 30.9 %.

In order to secure obligations resulting from pre-retire-
ment part-time work arrangements and a part of the
Company’s pension obligations, assets have been trans-
ferred to BMW Trust e.V., Munich, in conjunction with
Contractual Trust Arrangements (CTA), on a trustee
basis. The assets concerned comprise mainly holdings in
investment fund assets and a receivable resulting from a
so-called “Capitalisation Transaction” (Kapitalisierungs-
geschäft). Fund assets are offset against the related
guaranteed obligations. The resulting surplus of assets
over liabilities is reported in the BMW AG balance sheet
on the line “Surplus of pension and similar plan assets
over liabilities”.

63 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Pension provisions, net of designated plan assets, de-
creased from € 84 million to € 56 million.

External liabilities to banks and financing via subsidiar-
ies increased in 2012.

BMW AG Balance Sheet at 31 December

in € 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

Surplus of pension and similar plan assets over liabilities

Total assets

Equity and liabilities

Subscribed capital

Capital reserves

Revenue reserves

Unappropriated profit available for distribution

Equity

2012

2011

178

7,806

3,094

11,078

3,749

858

6,297

2,061

2,514

4,618

161

6,679

2,823

9,663

3,755

729

5,827

1,479

3,028

2,864

20,097

17,682

118

672

120

31,965

27,508

656

2,053

5,515

1,640

9,864

655

2,035

4,024

1,508

8,222

Registered profit-sharing certificates

Pension provisions

Other provisions

Provisions

Liabilities to banks

Trade payables

Liabilities to subsidiaries

Other liabilities

Liabilities

Deferred income

Total equity and liabilities

7,406

7,462

1,408

3,900

8,451

800

14,559

31,965

7,651

7,735

911

2,940

6,923

741

11,515

27,508

COMBINED GROUP AND COMPANY

18
21
24
44
47

MANAGEMENT REPORT
A Review of the Financial Year
General Economic Environment
Review of Operations
BMW Stock and Capital Market
Disclosures relevant for takeovers
and explanatory comments

Financial Analysis

50
52
54
57
59
59
61
62

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

Internal Control System and

explanatory comments
Risk Management
Outlook

66
74

BMW AG Income Statement

in € million

Revenues

Cost of sales

Gross profit

Selling expenses

Administrative expenses

Research and development expenses

Other operating income and expenses

Result on investments

Financial result

Profit from ordinary activities

Extraordinary income

Income taxes

Other taxes

Net profit

Transfer to revenue reserves

Unappropriated profit available for distribution

KPMG AG Wirtschaftsprüfungsgesellschaft, Munich,
has issued an unqualified audit opinion on the financial
statements of BMW AG, of which the balance sheet and
the income statement are presented here. The BMW AG
financial statements for the financial year 2012 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.

2012

2011

58,805

55,007

– 46,252

– 43,320

12,553

11,687

– 3,684

–1,701

– 3,573

703

598

– 99

4,797

– 3,381

–1,410

– 3,045

670

181

– 665

4,037

–

–1,635

– 2,073

– 31

3,131

–1,491

1,640

– 23

1,970

– 462

1,508

65 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

Internal Control System* and explanatory comments

The internal control system in place throughout the
BMW Group is aimed at ensuring the effectiveness of
operations. It makes an important contribution towards
ensuring compliance with the laws that apply to the
BMW Group as well as providing assurance on the pro-
priety and reliability of internal and external financial
reporting. The internal control system is therefore a sig-
nificant factor in the management of process risks. The
principal features of the internal control system and the
risk management system, as far as they relate to individ-
ual entity and Group financial reporting processes, are
described below.

Information and communication
One component of the internal control system is that of
“Information and Communication”. It ensures that all
the information needed to achieve the objectives set for
the internal control system is made available to those
responsible in an appropriate and timely manner. The re-
quirements 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
primarily set out in organisational manuals, in guidelines
covering internal and external financial reporting issues
and in accounting manuals. These instructions, which
can be accessed at all levels via the BMW Group’s intranet
system, provide the framework for ensuring that the rele-
vant rules are applied consistently throughout the Group.
The quality and relevance of these instructions is en-
sured by regular review as well as by continuous commu-
nication between the relevant departments.

Organisational measures
All financial reporting processes (including Group finan-
cial reporting processes) are structured in organisational
terms in accordance with the principle of segregation
of duties. These structures allow errors to be identified at
an early stage and prevent potential wrongdoing. Regu-
lar comparison of internal forecasts and external financial
reports improves the quality of financial reporting. The
internal audit department serves as a process-inde-
pendent function, testing and assessing the effectiveness
of the internal control system and proposing improve-
ments when appropriate.

Controls
Extensive controls are carried out by management in all
financial reporting processes at an individual entity and
Group level, thus ensuring that legal requirements and
* Disclosures pursuant to § 289 (5) HGB and § 315 (2) no. 5 HGB

internal guidelines are complied with and that all busi-
ness transactions are properly executed. Controls are
also carried out with the aid of IT applications, thus re-
ducing the incidence of process risks.

IT authorisations
All IT applications used in financial reporting processes
throughout the BMW Group are subject to access restric-
tions, allowing only authorised persons to gain access
to systems and data in a controlled environment. Access
authorisations are allocated on the basis of the nature
of the duties to be performed. In addition, IT processes
are designed and authorisations allocated using the dual
control principle, as a result of which, for instance, re-
quests cannot be submitted and approved by the same
person.

Internal control training for employees
All employees are appropriately trained to carry out
their duties and kept informed of any changes in regu-
lations or processes that affect them. Managers and
staff also have access to detailed best-practice descrip-
tions relating to risks and controls in the various pro-
cesses, thus increasing risk awareness at all levels.
As a consequence, the internal control system can be
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 through-
out the entire Group.

Evaluating the effectiveness of the internal
control system
Responsibilities for ensuring the effectiveness of the
internal control system in relation to individual entity
and Group financial reporting processes are clearly de-
fined and allocated to the relevant managers and pro-
cess owners. The BMW Group assesses the design and
effectiveness of the internal control system on the basis
of internal review procedures (e. g. management self-
audits, internal audit findings). 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 develop-
ment of the internal control system ensures its continued
effectiveness. Group entities are required to confirm
regularly as part of their reporting duties that the in-
ternal control system is functioning properly. Effective
measures are implemented whenever weaknesses are
identified and reported.

Risk Management

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Risk management within the BMW Group
The growing internationalisation of business activities,
the increasing pressure of competition and the rapid
pace of technological change entail opportunities and
risks for the BMW Group. Making full use of the oppor-
tunities that present themselves is the basis for our
corporate success and reflected in our Strategy Number
ONE (see section “Outlook for the BMW Group in 2013”).
In order to achieve growth, profitability, efficiency and
sustainable levels of business in the future, the BMW
Group consciously exposes itself to a wide variety of risks.
Managing risks is a fundamental prerequisite for being
able to deal successfully with the constant flow of changes
in the relevant political, legal, technical and economic
landscapes.

Risk management is a permanent process for the BMW
Group, covering all aspects of the Group’s business
worldwide. Its key elements are the early identification,
analysis and measurement of opportunities and risks,
the coordinated use of suitable management tools and
monitoring. Although managed from the centre, the
risk management system is based on a decentralised
structure, supported by a network of risk managers. This
approach raises awareness and encourages a balanced
approach to risks at all levels throughout the organi-
sation. The risk management network is formally em-
bedded in the organisational structure of the BMW
Group. Duties, responsibilities and tasks are assigned
to the network. The integration of risk management
functions in the overall management of the enterprise

serves to improve transparency and underlines the im-
portance of risk management within the BMW Group.
The risk management process is geared towards meeting
the criteria effectiveness, usefulness and completeness.
Seamless coordination with the Compliance Commit-
tee, the Internal Control System and the Group Internal
Audit is also ensured.

Risks identified at a decentralised level are initially
reported to a steering committee. Risks deemed by that
committee to be significant or potentially capable of
jeopardising the entity’s going-concern status are re-
ported to the Board of Management and the Supervisory
Board, classified on the basis of the potential scale of
impact on earnings and cash flows on the one hand and
qualitative criteria on the other. The risk is quantified,
taking account of the probability of occurrence and risk
mitigation measures.

Decisions are reached after consideration of detailed
project analyses that show both potential risks and po-
tential opportunities. In conjunction with the Group’s
monthly and long-term forecasting systems, opportu-
nities and risks attached to specific business activities
are evaluated and used as the basis for implementing
measures to mitigate risks and achieve targets. Impor-
tant success factors – such as financial market develop-
ments or the competitive situation – are monitored
continuously to ensure that unfavourable developments
are identified at an early stage and appropriate counter-
measures implemented.

Risk Management within the BMW Group

Effectiveness

Identification

Usefulness

Compliance
Committee

Risk Management

Reporting

Analysis and
Measurement

Supervisory Board

Completeness

Monitoring

Controlling

Board of Management

Group Audit

Internal Control System

67 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

The risk management system is tested regularly by the
Internal Audit. By regularly sharing experiences with
other companies, the BMW Group ensures that new in-
sights flow into the risk management system, thus con-
tributing to continual improvement. Regular basic and
further training as well as information events are invalu-
able ways of preparing people for new or additional re-
quirements with regard to the processes in which they
are involved.

Managing the business on a sustainable basis is a core
corporate strategy (see “Sustainability” section in the
Combined Group and Company Management Report).
Opportunities and risks related to sustainability issues
are discussed in a sustainability committee. Strategic
options and measures open to the BMW Group are put
forward to the Sustainability Board, to which all mem-
bers of the Board of Management belong. The emer-
gence of new risks is also monitored closely throughout
the group-wide risk network. The close ties between
steering and sustainability committees ensure that risk
and sustain ability management are closely coordinated.

The principal risk factors facing the BMW Group are de-
scribed below. Additional disclosures on risks relating
to financial instruments are provided in note 41 of the
Group Financial Statements.

Political and global economic risks
The ever-growing complexity and intensity of world-
wide competition is constantly increasing the danger of
incalculable chain reactions and their consequences.
General anxiety regarding the stability of the finance
system and further developments in the sovereign debt
crisis currently constitute risk factors for business per-
formance. The slow-down of economic momentum in
China, political instability in the Middle East and parts
of Asia as well as market regulations in various coun-
tries pose further risks.

The escalation of political tension, terrorist activities,
natural disasters or possible pandemics could all have a
negative impact on the world economy and interna-
tional capital markets that can lead to a scarcity of raw
materials and the possible breakdown of material or
parts deliveries. The BMW Group counters these risks
primarily by internationalising its purchasing, sales and
production structures in order to reduce the potential
impact of risk exposures in individual countries.

Strategic and sector-specific risks
The car manufacturing industry worldwide is faced with
the constant challenge of having to reduce fuel con-

sumption and emissions and raise safety standards at
the same time. These requirements are increasingly
accompanied by rules governing individual mobility in
metropolitan areas. Changing regulations and rising
fuel and energy prices also influence customer behaviour.
One of the main risks the industry faces is the possible
threat of short-term tightening of laws and regulations
that can trigger the requirement for significantly higher
levels of investment. In some cases, changes in customer
behaviour are not only brought on by new regulations,
but also through changes of opinion, values and envi-
ronmental issues. Among other factors, global climate
change is having an effect on legislation, regulations
and consumer behaviour. In order to meet structural
changes in the demand for individual mobility that no
longer necessarily means actually owning a vehicle, we
are offering corresponding mobility services, such as
the DriveNow car-sharing model.

With its Efficient Dynamics concept, the BMW Group
has a pioneering role in reducing both fuel consump-
tion and emissions and fulfilling legal rules and require-
ments at the same time. In addition, the BMW Group is
investing in the development of sustainable drive tech-
nologies and materials, with the aim of providing highly
efficient vehicles for individual mobility in the premium
segment well into the future.

Risks emanating from statutory requirements to take
back and recycle end-of-life vehicles are minimised
by ensuring that “designing for recycling” is fully con-
sidered during the product development stage. All ef-
forts are taken to ensure that the raw materials gained
from recycling end-of-life vehicles can be reused in the
production process. Statutory risks stemming from
vehicle recycling in various markets are minimised by
means of a specialised in-house team working in con-
junction with regional managers.

Medium- and long-term targets have already been put
in place in Europe, North America, Japan, China and
other countries to reduce fuel consumption and CO2
emissions. Europe has set a target of achieving an aver-
age of 130 g CO2 / km for all new vehicles by 2015. The
EU Regulation defines rules for CO2 emissions based on
the weight of each particular vehicle. For the BMW Group
this means a target of under 140 g CO2 / km per vehicle.
In the USA fuel economy targets have now been defined
up to the year 2025. Beginning with a gradual reduction
for 2012 models, the new car fleets of all manufac-
turers are to achieve an average emission value of 250 g
CO2 / mile (155 g CO2 / km) by model year 2016 and
an average value of 163 g CO2 / mile (101 g CO2 / km) by

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model year 2025. Japan has also set ambitious targets
for reducing fuel consumption. Authorities in China are
currently discussing new, stricter regulations to tighten
up the existing individual vehicle fuel consumption rules
for the years 2013 to 2015.

The broader market introduction of alternative drive
systems means new challenges and additional investment
for the automotive industry. At the same time we also
see this as an opportunity to put our technological exper-
tise and innovative strengths to use. Greater fuel econ-
omy and the reduction of emissions are fundamental
parameters that we automatically include when designing
new products.

In the short and medium term we will achieve greater fuel
economy by electrifying the drivetrain and developing
comprehensive hybrid systems. We are also working on
solutions for sustainable mobility in densely populated
areas. Large-scale field trials with the MINI E have
been carried out in the UK, Germany, France, the USA,
China and Japan. A test fleet of BMW ActiveE electric
cars based on the BMW 1 Series Coupé has been on the
road since 2011. The extensive knowledge gained from
the trials will be used in the series development of the
BMW Group’s electric cars. The BMW i3 will come onto
the market at the end of 2013 as the first series-produced
electric car made by the BMW Group for the metro-
politan regions of the world.

Not only the safety of our customers, but that of all other
road users is an essential component of our product re-
sponsibility. The BMW Group analyses the entire pro-
cess chain from accident prevention to post-crash appli-
cations, such as the extended emergency call integrated
in Connected Drive, which is a unique innovation. In
order to minimise injury and damage caused by acci-
dents we are employing both active and passive safety
technologies. Active safety measures such as suspen-
sion regulation and driver assistance systems make an
essential contribution to the prevention of accidents.

Our enhanced technology in passive vehicle safety
has also led to the latest BMW 3 Series and 5 Series
sedans achieving top marks in consumer tests world-
wide, thereby setting new standards in their classes.

Moreover, the BMW Group is already researching
topics for which we are only likely to receive answers
in the longer term. These include, for instance, safety
questions that may only present themselves when a

far greater number of hybrid and electric cars are on
the road.

Operational risks
Production
Production interruptions represent a major risk for the
BMW Group, due to the potential scale of their impact.
Apart from hazards posed by the elements (such as
fire or flooding), power supply and IT breakdowns, pro-
duction interruptions can also be caused by logistical
problems (such as the failure of a supplier to deliver).
Precautionary measures are therefore incorporated in
production and logistics structures to make provision
for such eventualities, both in terms of likelihood of oc-
currence and loss impact. These measures include the
use of firewalls, sprinkler systems and auxiliary power
supplies.

The flexible nature of our production network and
working time models also generally help to reduce opera-
tional risks. The assessment of both environmental
and social risks when selecting new production sites is
also an important factor in minimising risk. Risks aris-
ing from business interruption and loss of produc-
tion due to acts of God are insured up to economically
reasonable levels with insurance companies that enjoy
a good credit standing.

Purchasing
The customary distribution of tasks between manufac-
turers and suppliers within the automotive sector
creates economic benefits, but also exposes contracting
parties to a certain degree of mutual dependence. As
part of a policy of preventative risk management imple-
mented within the purchasing function, suppliers are
assessed for technical competence on the one hand and
financial strength on the other, during both the develop-
ment and production phases of our vehicles. Suppliers’
risks at a local level also play an increasingly important
role in the context of decision-making. As part of our
catalogue of procedures, for instance, we also assess the
extent to which supplier sites are exposed to natural
hazards, such as floods or earthquakes, thus reducing
our exposure to parts supply risks.

Sustainability plays a crucial role in all of our purchas-
ing activities and is taken into consideration when
developing environmental, social and governance
standards. In this context, we manage sustainability
risks using a systematic three-stage risk management
approach, comprising risk filters, modularly designed

69 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

supplier risk evaluation questionnaires and external
sustainability audits. In addition to managing risk,
we are also constantly on the alert to identify oppor-
tunities, including options for using resources more
efficiently.

The risk of certain suppliers suffering capacity bottle-
necks rose during the period under report, mainly
reflecting the growth in volumes that needed to be
handled in 2012. Material supplies were nevertheless
fully assured at all times by means of appropriate early-
intervention measures.

Sales and marketing
The regional spread of sales, the composition of the
model mix, and hence the volume of related services,
is constantly changing. Sales and production processes
within the BMW Group are flexible enough to allow
new opportunities to be exploited at short notice. We
also offer new and attractive services whenever changes
in demand patterns warrant it.

Personnel
As an attractive employer, for many years we have en-
joyed a favourable position in the intense competition
for qualified technical and management staff. Having
a satisfied and motivated workforce is a key factor for
success. Training programmes for new employees re-
cruited from specific target groups and attractive per-
sonnel development programmes make it easier to re-
cruit and further the careers of highly qualified staff
and protect the Group from the risk of know-how drift.

Demographic change will have a lasting impact on con-
ditions prevailing on employment markets, giving rise
to risks and opportunities that are likely to affect busi-
nesses to an increasing degree in the coming years. We
see demographic change as one of our main challenges
and we are taking a proactive approach to softening
the impact it is likely to have on operational processes.
Our key focus is on creating an optimal working envi-
ronment for the future, promoting and maintaining the
workforce’s ability to perform with the appropriate set
of skills, increasing employees’ awareness of health is-
sues and the development of individual employee work-
ing life-time models aimed at retaining a motivated
workforce in the long term.

We encourage diversity within the BMW Group’s work-
force. Heterogeneous teams comprising men and women
from a variety of cultural backgrounds and differing age

groups are often more productive and show greater
innovative skill.

Risks relating to pension obligations
Risks arise for the BMW Group in conjunction with
obligations relating to defined-benefit pension plans.
Pension obligations to employees under such plans are
measured on the basis of actuarial reports. Future pen-
sion payments are discounted by reference to market
yields on high-quality corporate bonds. These yields are
subject to market fluctuation and influence the level
of pension obligations. Furthermore, changes in other
parameters, such as rising inflation, also have an impact
on pension obligations.

Most of the BMW Group’s pension obligations are ad-
ministered in external pension funds and the assets of
those funds kept separate from Company assets. As a
consequence, the level of funds required to finance pen-
sion payments out of operations will be substantially
reduced in the future, since most of the Group’s pension
obligations are settled out of pension fund assets. In
the case of the UK pension fund, the risk of the rising
life expectancy of pensioners has also been hedged. The
pension assets of the BMW Group comprise interest-
bearing securities with a high level of creditworthiness,
equities, property and other investment classes. Pension
fund assets are monitored continuously and managed
from a risk-and-yield perspective. Risk is reduced by
ensuring a broad spread of investments which are struc-
tured to coincide with the timing of pension payments
and the expected pattern of pension obligations. In their
own way, each of these measures helps to reduce fluc-
tuations in pension funding shortfalls.

Information, data protection and IT risks
We attach great importance to protecting individual
rights, business secrets, innovation and process infor-
mation from unauthorised access, damage and / or mis-
use. The protection of information and data is an inte-
gral component of our business processes and based on
International Security Standard ISO / IEC 27001. Staff,
process design and information technology each play a
role in our comprehensive risk and security concept.

The requirement to apply uniform standards across the
Group is embedded in the BMW Group’s core princi-
ples and documented in detailed working instructions.
These instructions require employees to handle all in-
formation (such as customer and employee data) appro-
priately, ensure that information systems are properly

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used and that risks pertaining to information technol-
ogy (IT risks) are dealt with transparently. Regular com-
munication, awareness-raising activities and training
measures (e. g. online training on information and data
protection issues) create a high degree of security and
risk awareness among the employees involved. Employees
also receive training from the Group’s Compliance
Organisation to ensure compliance with legal and regu-
latory requirements.

Potential IT and data protection risks resulting from
the use of information technology and the processing
of information are monitored on a regular basis and
managed by the departments responsible.

The technical data protection procedures used 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
group-wide to ensure that stipulated requirements are
complied with. A high level of protection is afforded
by regular analyses, detailed up-front controls (such as
compliance with mandatory data protection require-
ments) and rigorous security management (for instance
in the form of our centralised Security Operation Cen-
tre, which is responsible for monitoring internal net-
work traffic). The IT data protection and security strategy
adopted in 2011 has not only tightened security within
the BMW Group, it also helps to identify IT risks and
enables appropriate action to be taken. At the same time,
the Group’s data protection strategy was adopted and
a set of data protection rules published, which apply for
all of the Group’s employees.

In the case of cooperation arrangements and business
partner relationships we protect our intellectual property
as well as customer and employee data by stipulating
clear instructions with regard to data protection and the
use of information technology. Information underlying
key areas of expertise is subject to particularly stringent
security measures.

Financial risks and those relating to the provision of
financial services
Currency risks
The sale of vehicles outside the eurozone gives rise
to exchange risks. The BMW Group’s currency risk in
2012 was dominated by the US dollar, the Chinese
renminbi, the British pound, the Russian rouble and

the Japanese yen. Foreign currency risks are determined
for forecast exposures measured using cash flow-at-
risk models and scenario analyses. Operational currency
management is based on the results provided by these
tools.

The BMW Group manages currency risks both at a stra-
tegic (medium and long term) and at an operating
level (short and medium term). In the 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 increas-
ing the volume of local production. In this context,
the expansion of the plant in Spartanburg, USA, and
the opening of the BMW Brilliance joint venture’s new
plant in Tiexi in 2012 at the Shenyang site, China, are
helping to reduce foreign exchange risks in two major
sales markets.

For operating purposes (short and medium term), cur-
rency risks are hedged on the financial markets.
Hedging transactions are entered into only with finan-
cial partners of good credit standing. A description of
the methods applied for risk measurement and hedging
is provided in the notes to the Group Financial State-
ments. Counterparty risk management procedures are
carried out continuously to monitor the creditworthi-
ness of business partners.

Raw material risks
The availability of specific groups of raw materials and
changes in raw materials prices both represent signifi-
cant risks for the BMW Group. In order to safeguard
the supply of production materials and reduce cost
risks, commodities markets are closely monitored and
analysed.

Financial derivatives are employed to hedge against
price risks arising for precious metals (i. e. platinum,
palladium and rhodium) and non-ferrous metals (i. e.
aluminium, copper and lead) and, to some extent,
steel and steel ingredients such as iron ore. Medium
and long-term purchase contracts with fixed pricing
arrangements for raw materials such as steel and plas-
tics are also in place. A description of the methods
applied for risk measurement and hedging is provided
in the notes to the Group Financial Statements.

Changes in the price of crude oil (as a basic ingredient
in many of our components) have an indirect impact on
our production costs. Crude oil prices (and exchange

71 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

rates) also influence fuel prices, which, in turn, directly
influence the purchasing behaviour of our customers.
The BMW Group counters this by developing and selling
efficient and economical engines and by developing al-
ternative drive technologies.

Liquidity risks
Good liquidity management ensures the BMW Group’s
solvency at all times. Were strategic and sector-spe-
cific risks, operational risks and financial risks to oc-
cur, this could have an adverse impact on the Group’s
liquidity.

A target liquidity concept was put in place several years
ago, drawing on the experience gained during the
financial crisis, and is adhered to rigorously. As well as
maintaining a liquidity reserve, access to liquid funds
by Group entities is ensured by a broad diversification
of refinancing sources. The liquidity position is moni-
tored continuously at a separate entity level and
managed by means of a cash flow requirements and
sourcing forecast system in place throughout the Group.
Liquidity risks can arise in the form of rising refinanc-
ing costs on the one hand and restricted access to funds
on the other. Most of the Financial Services segment’s
credit financing and lease business is refinanced on
capital markets. The BMW Group has good access to
financial markets thanks to its excellent creditworthi-
ness and, as in previous years, was able to raise funds
at good conditions in 2012, reflecting a diversified
refinancing strategy and the solid liquidity base of the
BMW Group. Internationally recognised rating agencies
have confirmed the BMW Group’s strong creditwor-
thiness. There is a general risk that ratings could be
downgraded, in which case the cost of refinancing con-
ditions would increase; at present this risk is deemed
to be low.

Risks relating to Financial Services
The main categories of risk relating to the provision of
financial services are credit and counterparty risk, re-
sidual value risk, interest rate risk, liquidity risk and
operational risk. In order to evaluate and manage these
risks, a variety of internal methods has been developed
based on regulatory environment requirements (such
as Basel II) and which comply with national and inter-
national standards.

A set of strategic principles and rules derived from
regulatory requirements serves as the basis for risk
management within the Financial Services segment.

At the heart of the risk management process is a clear
division into front- and back-office activities and a com-
prehensive internal control system.

In order to ensure that the segment is capable of bear-
ing the risks to which it is exposed (i.e. its “risk-bearing
capacity”), we monitor the segment’s total exposure to
major risks. This involves measuring unexpected losses
using a variety of value-at-risk techniques adapted to
each relevant risk category. These losses are aggregated
(after factoring in correlation effects) and compared
with resources available to cover risks (i.e. equity). The
segment’s risk-bearing capacity is monitored continu-
ously with the aid of an integrated limit system which
also differentiates between the various risk categories.
The segment’s total risk exposure was covered at all
times during the past year by the available risk-coverage
volumes.

Use of the “matched funding principle” to finance the
Financial Services segment’s operations eliminates
liquidity risks to a large extent. Regular measurement
and monitoring ensure that cash inflows and outflows
from transactions in varying maturity cycles and cur-
rencies will offset each other. The relevant procedures
are incorporated in the BMW Group’s target liquidity
concept.

Interest rate risks relate to potential losses caused by
changes in market interest rates and can arise when
fixed interest rate periods for assets and liabilities
recognised in the balance sheet do not match. Interest-
rate risks in the Financial Services line of business are
managed by raising refinancing funds with matching
maturities and by employing interest rate derivatives.
For risk management purposes, all interest-related asset
or liability exposures are aggregated on a cash flow
basis taking account of subsequent changes, e. g. in the
case of early termination of a contract. Interest rate risks
are managed on the basis of a value-at-risk approach
and stipulated limits. Limits are set using a benchmark-
oriented approach that focuses on interest rate arrange-
ments contained in the original contracts. Compliance
with prescribed limits is tested regularly. Sensitivity
analyses and stress scenarios showing the potential im-
pact of interest rate changes on earnings are also used
as tools to manage interest rate risks. These interest rate
positions are aggregated for the BMW Group as a whole
and measured with a value-at-risk methodology and
taking other Group positions into account (structured
as far as possible on a risk-neutral basis).

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Credit risks arise in conjunction with lending to retail
customers and major corporate customers, the latter
relating primarily to the dealer, fleet and importer
financing / leasing lines of business. Counterparty de-
fault risk, by contrast, refers to the risk that banks or
financial institutes with which financial instruments
have been transacted are unable to meet their payment
obligations.

Lending to retail customers is largely based on auto-
mated scoring techniques. In the case of major cor-
porate customers, creditworthiness is checked using
internal rating models, which take account of financial
statement data and supplementary qualitative evalua-
tions. Customer creditworthiness is tested at least once
a year and revised accordingly. The approval for lend-
ing to major corporate customers is primarily based on
a standardised method of measuring the value of the
vehicle(s) or other object(s) serving as collateral. The re-
coverability of the value of items accepted as collateral
is regularly reviewed, measured and evaluated with
a view to assessing the impact on the level of risk not
covered by collateral.

In order to minimise risk from lending, we employ
standardised instruments such as subsequent security,
additional collateral, retention of vehicle documents
or higher upfront payments. In addition, the levels
of authority and responsibility of those involved in the
lending process are clearly defined. Local, regional and
centralised credit audits are also regularly performed
by Internal Audit to check compliance with lending
approval and authorisation rules procedures as well as
the processes and IT systems involved.

We continue to develop standardised credit decision pro-
cesses for the BMW Group worldwide. The focus here
is on improving the quality of credit applications, the
Group’s rating methodology and procedures used to se-
lect employees within the worldwide credit and coun-
terparty risk network.

In the case of vehicles which remain with the Financial
Services segment at the end of a contract (leases and
credit financing arrangements with option of return),
there is a residual value risk if the residual value calcu-
lated at the inception of the contract is not recovered
when the vehicle is sold (residual value risk). Residual
values are calculated uniformly throughout the BMW
Group in accordance with mandatory guidelines. For risk
management purposes, the expected risk-free residual

value of a vehicle is measured on the basis of external
and internal information. These amounts are checked
regularly and adjusted as appropriate. Residual values
of vehicles on used car markets are continuously moni-
tored and reported on. In addition to internal informa-
tion, our assessments also take account of external mar-
ket data. The BMW Group strives to mitigate effectively
against declining residual values by actively managing
the life cycles of current models, optimising reselling
processes on international markets and implementing
targeted price and volume measures. Potential losses
are measured by comparing forecasted market values
and contractual residual values by model and market.

The scope of procedures applied to manage operational
risks is based on Basel II requirements. This includes
identifying and measuring potential risk scenarios, com-
puting and monitoring key risk indicators on an ongoing
basis, the systematic recording of loss claims and a
range of coordinated measures aimed at mitigating risk.
Both qualitative and quantitative aspects are taken into
account in the decision-making process. The latter is
backed up by various system-based solutions, all of
which follow the principles of operational risk manage-
ment, such as the segregation of duties, dual control,
documentation and transparency. In addition, both the
effectiveness and efficiency of the internal control system
are tested regularly.

Legal risks
Acting responsibly and complying with the law are the
basic prerequisites for our success. Current legislation
provides the binding framework for our wide range of
activities around the world. The growing international
scale of operations of the BMW Group, the complexity
of the business world and the whole gamut of complex
legal regulations increase the risk of laws being broken,
simply because they are not known or fully understood.

The BMW Group has established a Compliance Or-
ganisation aimed at ensuring that its representative
bodies, managers and staff act in a lawful manner at
all times. Further information on the BMW Group’s
Compliance Organisation can be found in the section
“Corporate Governance”.

Like all enterprises, the BMW Group is, or could be,
confronted with the risk of legal disputes relating, among
other things, to warranty claims, product liability, in-
fringement of protected rights or proceedings initiated
by government agencies. Any of these matters could

73 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

have an adverse impact on the Group’s reputation. Such
proceedings are typical for the sector or arise as a con-
sequence of realigning our product or purchasing strategy
to suit changed market conditions. Particularly in the
US market, class action lawsuits and product liability
risks can give rise to substantial financial consequences
and cause reputational damage. The BMW Group recog-
nises appropriate levels of provision for lawsuits. A part
of these risks, especially where the American market is
concerned, is insured where this makes business sense.
Some risks, however, cannot be assessed in full or can-
not be assessed at all. It cannot be ruled out that losses
from damages could arise which are not, or which are
not fully, covered by insurance policies or provisions.

The high quality of our products, which is ensured by
regular quality audits and ongoing improvement meas-
ures, helps to reduce this risk. In comparison with com-
petitors, this can give rise to benefits and opportunities
for the BMW Group.

The BMW Group is not currently involved in any court
or arbitration proceedings which could have a signifi-
cant impact on its financial condition.

Changes in the regulatory environment may impair our
sales volume, revenues and earnings performance in
specific markets or economic regions. Further details are
provided in the section “Strategic and sector-specific
risks”.

COMBINED GROUP AND COMPANY

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

18
21
24
44
47

66
74

Outlook

The assessments contained in the “Outlook” section
are based on the forecasts made by BMW AG for the
years 2013 and 2014 and reflect the most recent status.
The basis of preparation of our forecasts, which take ac-
count of consensual opinions of leading organisations,
such as banks and economic research institutes, is set
out below. These assumptions flow into the targets set
for the segments.

Our continuous forecasting process ensures that the
BMW Group is always ready to take advantage of oppor-
tunities as they arise. The principle risks facing the busi-
ness are described in detail in the risk report.

only modest growth of some 0.8 % in 2013, even with
the help of generous expansionary monetary and fiscal
policies.

The Chinese economy is likely to gather pace again in
the course of the current year. Positive early indicators
as well as the announcement made by the Chinese
government of further programmes to stimulate the
economy give reason to believe that GDP in China
will rise by 8.0 %. High property price levels and over-
capacities in the construction and heavy industries sec-
tor, could, however, hold down the growth rate in the
region.

Economic outlook for 2013
The global economy is expected to stabilise at a slower
growth rate of approximately 2 % in 2013. However, in
view of burgeoning public-sector debt in Europe, the USA
and Japan, substantial over-capacities in China and
conflict hot spots in the Middle East, the outlook is over-
shadowed by a number of major risks.

Output in the eurozone is set to stagnate in 2013 at the
previous year’s level. The German economy, the largest
in Europe, is forecast to grow again in 2013, albeit at the
modest rate of 0.7 %. The French economy is expected
to remain flat for the time being, a prediction fraught
with major uncertainty in view of the prevailing risks.
Based on forecasts, Italy’s gross domestic product (GDP)
is set to contract by approximately 1.0 %. In Spain the
downward trend is likely to continue, with economic
output down by a further 1.6 %. A growth rate of 0.9 % is
predicted for the UK, Europe’s largest market outside
the eurozone.

Again this year the recovery in the USA looks set to
continue and growth in the region is predicted to run at
around 2.0 %. The looming tax rises and expenditure
cuts previously planned for the turn of the financial
year 2013 were reduced. However, the negative impact
on purchasing power should be offset by growing
vitality on the job and property markets. Overall, how-
ever, growth is likely to remain at roughly the previous
year’s level and the US economy is set to continue its
upward trend.

The economies of India and Brazil are expected to grow
by 6.0 % and 3.5 % respectively. Russia’s GDP is likely to
expand by about 3.4 %, roughly in line with the previous
year.

Fluctuations on currency markets
High public-sector debt in Europe, the USA and Japan
are likely to cause continued fluctuations on the world’s
currency markets. The US dollar / euro exchange rate
is expected to average out at previous year’s levels. The
Chinese renminbi will probably remain coupled to the
US dollar, with only minor fluctuations between the two
currencies. The budget situation and greater expansion-
ary monetary policies in Japan could cause the Japanese
yen to drop further in value. The British pound is fore-
cast to appreciate modestly against the euro, assuming
the UK can maintain stable economic growth.

Car markets in 2013
Taken as a whole, the world’s car markets are expected
to grow by some 4.0 % in the current year to a total of
75.5 million units. High demand for replacement vehicles
after a number of weak years should boost volumes sold
in the USA by approximately 2.1 % to 14.8 million units.

The Chinese passenger car market is forecast to grow by
approximately 8.5 % to 14.4 million units. The regional
spread of sales in China is likely to shift increasingly in-
land, away from the coast towards the interior provinces,
which are now entering a catch-up phase.

The performance of the Japanese economy in 2013 will
depend largely on the policymaking skills of the newly
elected government. Having slipped back into recession
at the end of 2012, Japan is at best likely to achieve

The downward trend seen in Europe in recent years is
set to continue, with the market as a whole contracting
by 1.8 % to 12.3 million units. Following a period of
drastic decreases, however, the market could well now
consolidate at approximately this level. Sales volumes

75 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

are forecast to remain flat in Germany, France and Spain
and decrease marginally in the UK and Italy.

The car market in Japan could see a drop of 4 % to 5.0 mil-
lion units as the catch-up effect begins to wane.

A growth rate of around 10 % is forecast for the Russian
car market in 2013, which would entail a volume of
some 3.0 million units. Demand for cars in India is pre-
dicted to rise by 7 % to 2.9 million units in 2013. The
corresponding figures for Brazil are 9 % and 3.95 million
units respectively.

Motorcycle markets in 2013
Overall, we expect the world’s motorcycle markets in
the 500 cc plus class to grow slightly in 2013. In Europe,
however, the negative trend is quite likely to continue,
with only the German market looking set to remain
stable. Modest growth is forecast for the USA and Japan.
The motorcycle market in Brazil is also likely to con-
tinue expanding, even if not quite as dynamically as in
recent years.

The financial services market in 2013
The forecast of moderate growth for the global econ-
omy in the current year is likely to be achieved – among
other factors – on the back of looser monetary policies
in the USA, China and some growth markets. Down-
beat economic prospects will probably ensure that in-
flationary pressures in industrialised countries do not
rise further. We are assuming that the world’s major
central banks continue their expansionary monetary
policies throughout the current year. Both the European
Central Bank (ECB) and the US Reserve Bank have an-
nounced their intention to keep interest rates at their
current low level during 2013. Refinancing conditions
for the whole sector are likely to remain volatile for
the foreseeable future given the pervading nervousness
on the world’s capital markets.

There is also unlikely to be any change in the divergent
development of vehicle residual values over the course
of 2013. The economic situation will remain particularly
tense in southern Europe. At present, it is difficult to
assess the extent to which the sovereign debt crisis will
affect other European countries. For the time being, it
seems reasonable to assume that used car markets out-
side Europe will remain more or less stable in average
terms.

A similarly heterogeneous picture is also likely to apply
for the credit risk situation over the course of 2013.
Compared to the ongoing tenseness in southern Europe,
the overall situation elsewhere is expected to improve
marginally.

Outlook for the BMW Group in 2013
High public-sector debt levels and the prospect of con-
solidation in spending, particularly in Europe, remain a
source of uncertainty in 2013. Other concerns for the
global economy have been kindled by slower growth in
China and political instability in a number of regions.
The situation is exacerbated by the fact that greater vola-
tility in forecasting parameters currently makes it more
difficult for the BMW Group to predict future perfor-
mance with any degree of accuracy.

Our answer to uncertainties in a volatile environment is
to follow our Strategy Number ONE, which we have
been actively implementing for several years now. The
strategic aim we are pursuing is clearly reflected in the
excellent figures reported for the past year and en ables
us to look forward with confidence to 2013. We intend
to continue the success story with our strong brands,
all of which enjoy a global presence. We will be aided in
this endeavour by our attractive range of models and
services, comprehensively designed to meet the needs
of individual mobility. With our focus on “premium”,
as the world’s leading provider we benefit to an excep-
tional extent from the high demand for premium seg-
ment vehicles.

We forecast that vehicle sales will again rise to new re-
cord levels in 2013, enabling the BMW Group to remain
the world’s foremost premium car manufacturer.

Demand for our models remains high, particularly for
the BMW 1, 3, 5 and 6 Series and the BMW X family.
The launches of the BMW 3 Series Touring on European
markets and the BMW 3 Series Sedan (with xDrive four-
wheel-drive system) in the USA have also driven sales
momentum, right from the outset. Further impetus will
come from the BMW X1, which is now also available in
China and the USA. Our exceptionally strong sales per-
formance in some parts of the world, such as in China
and the USA, is more than compensating the market
weakness a number of European countries are currently
experiencing. Even here, however, we are still achieving
good growth in a host of countries.

COMBINED GROUP AND COMPANY

Internal Management System
Earnings Performance
Financial Position
Net Assets Position
Subsequent Events Report
Value Added Statement
Key Performance Figures
Comments on BMW AG

18
21
24
44
47

66
74

We will again be introducing numerous new and revised
models to the market in 2013 and these will give a boost
to sales. The new BMW 3 Series Gran Turismo will be
launched in June to become the third body variant of
the current model family and represent an innovative,
fully autonomous concept within the highly successful
BMW 3 Series model range. The M6 Gran Coupé,
due to be launched in the same month, is the third
body variant of the M6 sports car and combines high
per formance with elegant design. The new BMW 4 Se-
ries Coupé, which again sets standards in terms of
design, dynamic performance and efficiency in the
sporty medium-class coupé segment, is set to follow in
September. At the end of the year, the BMW i3 will be
launched as the first series-built electric vehicle made
by the BMW Group for the metropolitan regions of
the world.

The MINI brand continues to enjoy great popularity.
In March, MINI will be adding a seventh vehicle to
its family of models in the form of the Paceman.
Rolls-Royce recently launched its new top model, the
Phantom Series II. The Rolls-Royce Wraith celebrated
its world premiere at the Geneva International
Auto mobile Show.

We will continue giving careful consideration to achiev-
ing a balanced distribution in terms of global sales
volumes. The BMW Group remains committed to the
principle that “production follows the market”. The
opening of the new plant in Tiexi*, China, in 2012 is an-
other important step in our unbroken endeavour to
service this emerging market successfully. Production
capacity in China currently stands at a total of 200,000
vehicles per year. In the medium term, we plan to in-
crease the capacities of our two Chinese plants to pro-
duce up to 300,000 units per annum. We are already
taking steps to ensure our ability to ultimately expand
production volume on a flexible basis to accommodate
up to 400,000 units per annum. Even with its high pro-
duction levels, the new plant in Tiexi* is setting new
standards in the field of emission reduction and efficient
use of resources.

The BMW Group’s global production capability has also
been additionally strengthened by the expansion of
the Spartanburg plant in the USA. Capacity here will be
increased to manufacture up to 350,000 units by 2014.
* Joint venture BMW Brilliance

We also intend to bolster our presence in growth mar-
kets, such as Brazil. Following the receipt of approval
from the Brazilian government at the beginning of 2013,
we now plan to manufacture up to 30,000 vehicles there
per annum.

Compared to the rest of the sector, our global produc-
tion network is extremely flexible. Revised shift models,
working-time accounts for employees and a whole
range of other measures enable us to compensate for
fluctuations in demand. High levels of capacity utili-
sation are an important factor in maintaining the
Group’s profitability.

The efficiency of our drive systems has enabled us to
play a pioneering role in reducing fleet consumption
and CO2 emissions, whilst simultaneously enhancing
the sporty and dynamic character of our vehicles.

The combustion engine is going to remain the world’s
foremost drive technology in the foreseeable future. We
are therefore developing a new generation of combus-
tion engines as part of our Efficient Dynamics initiative.
In future we will be able to offer both petrol- and diesel-
powered vehicles with three-, four- and six-cylinder
engines of varying capacities. BMW’s TwinPower Turbo
Technology will be deployed, ensuring a high level of
efficiency and enabling further improvements to be made
across the fleet in terms of consumption and emissions.
In combination with the electric-drive components of
our ActiveHybrid or plug-in hybrid vehicles, this new
generation of combustion engines will make a signifi-
cant contribution towards attaining our consumption
and emissions targets.

The completely newly developed electric vehicle, the
BMW i3, is due to be launched at the end of 2013. This
premium car of the future features an absolutely new
drivetrain concept and the consistent use of CFRP in its
design. The innovative BMW i3 is a striking demonstra-
tion of the BMW Group’s expertise in the field of light-
weight construction.

Connected Drive has been setting standards for many
years now in the development of forward-looking con-
cepts and technologies aimed at connecting driver,
vehicle and surroundings. These innovations increase
road safety levels, offer greater convenience and create
new opportunities for information and entertainment.

Residual value risks are expected to develop differently
from region to region, remaining stable in growth
markets and a source of concern in southern Europe.
We also expect a small decline in market prices in the
USA, Great Britain and Germany. An improvement in
the credit risk situation will have a positive effect on
business performance.

Outlook for 2014
Assuming economic conditions remain stable, the
BMW Group will continue to grow in 2014. The finan-
cial position should also be very solid. New models will
provide a further boost to sales volumes, producing
a correspondingly favourable impact on revenues and
earnings. We expect the Automotive segment will again
achieve an EBIT margin within the desired target corri-
dor of between 8 % and 10 % and a RoCE above 26 %.
The Financial Services segment should continue to
grow apace and continue increasing the size of its con-
tract portfolio. The RoE target for the segment will re-
main unchanged at 18 %. However, actual returns will
partially depend on political and economic develop-
ments worldwide.

77 COMBINED GROUP AND COMPANY MANAGEMENT REPORT

The BMW Group continues to enjoy a solid financial
base. Strong cash flows and straightforward access to
capital markets also provide us with additional room to
manoeuvre, which we are using to hone our leading
competitive edge and pursue our declared strategy of
ensuring that the BMW Group remains the world’s
leading provider of premium products and premium
services. Group profit before tax in 2013 should be on a
similar scale to that reported for 2012.

Automotive segment in 2013
We forecast that the Automotive segment will continue
to perform well in 2013 on the back of strong sales vol-
ume growth. We intend to forge ahead with continued
investment in innovation, future technologies and the
consistent internationalisation of our production net-
work. Assuming economic conditions remain stable, we
forecast single-digit sales volume growth for the Group
and hence a new record for the current year.

We are again striving to achieve an EBIT margin within
the target corridor of between 8 % and 10 % and a RoCE
above 26 %. Depending on political and economic de-
velopments, however, results may be above or below the
targeted levels. The financial position of our Automotive
segment is also set to remain very strong in 2013.

Motorcycles segment in 2013
Thanks to its attractive and extremely youthful model
range, we forecast further growth in sales volume for
the BMW brand in 2013, with impetus also being gen-
erated by the full availability of the Scooter and the new
R 1200 GS. Increased sales volumes in 2013 should re-
sult in higher revenues and earnings, compared to the
situation in 2012 where earnings were negatively im-
pacted by one-off higher expenses incurred in realigning
the Group’s motorcycle business.

Financial Services segment in 2013
We expect the Financial Services segment to continue
growing and deliver another strong performance in
2013. Despite the positive impact of various measures
taken to ease the debt crisis in Europe, the situation in
southern Europe remains tense and uncertain. We are
actively reducing our exposure to risks in these countries
by rigorously applying appropriate risk management
procedures. Based on the segment’s performance at the
beginning of the year, we forecast a further increase in
the contract portfolio and a RoE of at least 18 %.

GROUP FINANCIAL STATEMENTS

BMW Group
Income Statements for Group and Segments
Statement of Comprehensive Income for Group

Income Statements for Group and Segments

in € million

Revenues

Cost of sales

Gross profit

Selling and administrative expenses

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

Note

Group

Automotive

(unaudited supplementary information)

2012

2011

2012

2011

76,848

68,821

70,208

63,229

– 61,354

– 54,276

– 56,525

– 50,164

15,494

14,545

13,683

13,065

– 7,007

– 6,177

– 5,837

– 5,260

829

– 1,016

8,300

271

753

– 913

– 592

– 481

782

– 1,132

8,018

162

763

– 943

– 617

– 635

673

– 895

7,624

271

620

– 819

– 501

– 429

528

– 856

7,477

164

680

– 889

– 609

– 654

7,819

7,383

7,195

6,823

– 2,697

– 2,476

5,122

4,907

Attributable to minority interest

Attributable to shareholders of BMW AG

Earnings per share of common stock in €

Earnings per share of preferred stock in €

Dilutive effects

Diluted earnings per share of common stock in €

Diluted earnings per share of preferred stock in €

5,096

7.77

7.79

–

7.77

7.79

* Includes impact of exceptional items relating to the sale of the Husqvarna Group.

Statement of Comprehensive Income for Group

in € million

Net profit

4,881

7.45

7.47

–

7.45

7.47

Note

Available-for-sale securities

Financial instruments used for hedging purposes

Exchange differences on translating foreign operations

214

1,302

– 123

Actuarial losses on defined benefit pension obligations, similar obligations and plan assets

– 1,881

Deferred taxes relating to components of other comprehensive income

Other comprehensive income for the period (after tax) from equity accounted investments

Other comprehensive income for the period after tax

Total comprehensive income

Total comprehensive income attributable to minority interests

Total comprehensive income attributable to shareholders of BMW AG

– 2,458

4,737

4,713

– 1,832

4,991

4,966

2012

2011

5,122

4,907

– 72

– 801

168

– 586

421

– 41

– 911

– 357

4,765

3,996

4,739

3,970

78
78
78

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of

80
82
84

Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity
Notes
86

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

100

107

108
129
145

79 GROUP FINANCIAL STATEMENTS

Motorcycles

Financial Services

Other Entities

Eliminations

(unaudited supplementary information)

2012*

2011

2012

2011

2012

2011

2012

2011

1,490

1,436

19,550

17,510

– 1,236

– 1,207

– 16,984

– 15,013

254

229

2,566

2,497

– 181

– 176

– 72

–

– 11

–

– 3

– 22

– 16

–

– 16

– 10

–

– 12

–

– 4

– 12

–

– 980

101

– 129

1,558

–

– 9

– 719

– 89

1,763

–

– 15

1,561

1,790

– 545

1,016

1,015

– 1,053

737

–

737

–

– 18

122

– 51

–

1,792

–

– 27

249

– 246

– 19

– 2

1,739

– 14,405

– 13,359

Revenues

13,391

– 1,014

12,108

Cost of sales

– 1,251

Gross profit

– 75

131

– 949

Selling and administrative expenses

– 71

Other operating income

Other operating expenses

– 1,248

Profit / loss before financial result

–

Result from equity accounted investments

– 1,672

– 1,669

Interest and similar income

– 1,758

– 1,841

1,684

1,814

Interest and similar expenses

– 98

– 64

– 6

– 1

– 2

– 45

– 149

– 168

– 131

– 132

–

Other financial result

145

Financial result

– 937

– 1,103

Profit / loss before tax

323

– 614

–

– 614

384

Income taxes

– 719

Net profit / loss

–

Attributable to minority interest

– 719

Attributable to shareholders of BMW AG

Earnings per share of common stock in €

Earnings per share of preferred stock in €

Dilutive effects

Diluted earnings per share of common stock in €

Diluted earnings per share of preferred stock in €

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income

Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity
Notes
86

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

100

107

108
129
145

BMW Group
Balance Sheets for Group and Segments at 31 December

Assets

in € 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

Assets held for sale

Current assets

Total assets

Equity and liabilities

in € million

Subscribed capital

Capital reserves

Revenue reserves

Accumulated other equity

Equity attributable to shareholders of BMW AG

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

Liabilities in conjunction with assets held for sale

Current provisions and liabilities

Note

Group

Automotive

(unaudited supplementary information)

2012

2011

2012

2011

5,207

13,341

24,468

514

548

5,238

11,685

23,112

302

561

32,309

29,331

2,148

2,001

800

1,702

1,926

568

81,336

74,425

9,725

2,543

20,605

4,612

966

3,648

8,370

9,638

3,286

20,014

3,751

1,194

3,345

7,776

–

4,648

13,053

128

514

4,789

–

759

2,219

3,859

29,969

9,366

2,305

–

2,746

775

16,146

7,484

–

4,682

11,444

151

281

4,520

–

287

2,276

3,139

26,780

9,309

3,014

–

2,307

1,065

15,333

5,829

–

50,514

49,004

38,822

36,857

131,850

123,429

68,791

63,637

Note

Group

Automotive

(unaudited supplementary information)

2012

2011

2012

2011

656

1,973

28,340

– 674

30,295

655

1,955

26,102

– 1,674

27,038

107

30,402

27,103

28,105

26,154

3,965

3,513

3,040

39,095

3,404

53,017

3,282

1,482

30,412

6,433

6,792

2,183

3,149

3,273

37,597

2,911

49,113

3,104

1,363

30,380

5,340

7,026

–

2,371

3,175

451

1,775

3,394

11,166

2,641

1,269

1,289

5,669

811

2,840

893

1,822

3,289

9,655

2,519

1,188

1,468

4,719

18,652

17,934

–

48,431

47,213

29,520

27,828

Total equity and liabilities

131,850

123,429

68,791

63,637

81 GROUP FINANCIAL STATEMENTS

Motorcycles

Financial Services

Other Entities

Eliminations

(unaudited supplementary information)

2012

2011

2012

2011

2012

2011

2012

2011

Assets

242

–

314

348

114

–

538

852

202

–

258

318

128

–

482

740

486

499

28,060

25,900

–

32,309

29,331

126

279

1,330

62,643

123

216

1,185

57,245

143

20,605

20,014

813

132

3,573

797

–

877

2,823

1,518

–

5,761

–

1,730

381

16,995

24,868

–

1,480

–

5,727

–

1,883

373

15,384

23,389

–

955

–

Intangible assets

–

Property, plant and equipment

– 3,720

– 2,939

Leased products

–

Investments accounted for using the equity method

– 10,009

– 9,694

Other investments

–

– 467

– 878

–

Receivables from sales financing

– 535

Financial assets

– 939

Deferred tax

– 21,384

– 19,140

Other assets

– 36,458

– 33,247

Non-current assets

–

– 427

–

Inventories

–

Trade receivables

–

Receivables from sales financing

– 388

Financial assets

–

Current tax

30,285

29,098

– 46,387

– 43,942

Other assets

–

426

–

Cash and cash equivalents

–

Assets held for sale

26,054

25,464

31,914

30,531

– 46,814

– 44,330

Current assets

88,697

82,709

56,782

53,920

– 83,272

– 77,577

Total assets

Motorcycles

Financial Services

Other Entities

Eliminations

(unaudited supplementary information)

2012

2011

2012

2011

2012

2011

2012

2011

Equity and liabilities

Subscribed capital

Capital reserves

Revenue reserves

Accumulated other equity

Equity attributable to shareholders of BMW AG

Minority interest

–

135

–

246

410

114

–

277

442

852

–

114

–

383

541

–

125

–

199

740

7,631

7,169

8,361

6,576

– 13,695

– 12,796

Equity

173

4,777

14,174

19,653

38,867

289

136

16,830

474

24,470

–

164

4,302

13,251

17,172

34,941

297

16,160

481

23,583

–

1,475

1,276

23,613

23,059

–

– 2,193

– 467

–

Pension provisions

–

Other provisions

– 1,932

Deferred tax

– 535

Financial liabilities

– 19,907

– 17,960

Other liabilities

25,141

24,403

– 22,567

– 20,427

Non-current provisions and liabilities

235

228

12,720

13,141

–

– 427

–

Other provisions

–

Current tax

– 389

Financial liabilities

–

Trade payables

10,235

9,460

– 46,586

– 43,968

Other liabilities

–

Liabilities in conjunction with assets held for sale

42,199

40,599

23,280

22,941

– 47,010

– 44,354

Current provisions and liabilities

88,697

82,709

56,782

53,920

– 83,272

– 77,577

Total equity and liabilities

BMW Group
Cash Flow Statements for Group and Segments

in € million

Net profit

Reconciliation between net profit and cash inflow / outflow from operating activities

Current tax

Other interest and similar income / expenses

Depreciation and amortisation of other tangible, intangible and investment assets

Change in provisions

Change in leased products

Change in receivables from sales financing

Change in deferred taxes

Other non-cash income and expense items

Gain / loss on disposal of tangible and intangible assets and marketable securities

Result from equity accounted investments

Changes in working capital

Change in inventories

Change in trade receivables

Change in trade payables

Change in other operating assets and liabilities

Income taxes paid

Interest received

Cash inflow / outflow from operating activities

Investment in intangible assets and property, plant and equipment

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

Expenditure for investments

Net cash in acquiring ICL Group

Proceeds from the disposal of investments

Cash payments for the purchase of marketable securities

Cash proceeds from the sale of marketable securities

Cash inflow / outflow from investing activities

Issue / Buy-back of treasury shares

Payments into equity

Payment of dividend for the previous year

Intragroup financing and equity transactions

Interest paid

Proceeds from the issue of bonds

Repayment of bonds

Change in other financial liabilities

Change in commercial paper

Cash inflow / outflow from financing activities

Effect of exchange rate on cash and cash equivalents

Effect of changes in composition of Group on cash and cash equivalents

Change in cash and cash equivalents

Cash and cash equivalents as at 1 January

Cash and cash equivalents as at 31 December

1 Adjusted for reclassifications as described in note 42.
2 Interest relating to financial services business is classified as revenues / cost of sales.

Note

Group

2012

2011

5,122

4,907

2,908

– 4

3,716

446

– 1,421

– 3,988

– 211

407

– 16

– 271

1,755

– 108

744

1,119

– 1,084

– 2,462

179

5,076

2,868

3,654

779

– 379

– 2,837

– 338

148

–

– 162

– 1,615

– 1,715

– 800

900

1,175

– 2,701

213

5,713

– 5,236

– 3,679

– 171

–

107

– 1,265

1,090

– 5,433

–

– 1,516

–

– 102

7,977

– 543

– 595

– 2,073

1,317

– 5,499

–

– 852

–

– 82

5,899

– 6,727

– 5,333

2,159

– 858

952

– 14

594

191

248

– 13

344

7,776

8,370

7,432

7,776

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity
Notes
86

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

100

107

108
129
145

83 GROUP FINANCIAL STATEMENTS

Automotive

Financial Services

(unaudited supplementary information)

2012

20111
(changed)

2012

20111

(changed)

4,737

4,991

1,016

737

Net profit

3,026

104

3,679

261

–

– 386

265

– 14

– 271

1,622

– 54

722

954

– 1,937

– 2,191

249

9,167

2,726

3,564

577

–

– 707

– 79

–

– 164

– 1,590

– 1,685

– 886

981

887

– 2,453

234

8,110

– 104
–2

– 2

– 2,256

– 3,988

497

– 13

– 2

–

– 1

743

Reconciliation between net profit and cash inflow / outflow from operating activities

86
102

Current tax

Other interest and similar income / expenses

Depreciation and amortisation of other tangible, intangible and investment assets

– 156

Change in provisions

– 1,311

Change in leased products

– 2,837

Change in receivables from sales financing

804

– 9

–

– 2

101

– 16

846

Change in deferred taxes

Other non-cash income and expense items

Gain / loss on disposal of tangible and intangible assets and marketable securities

Result from equity accounted investments

Change in inventories

Change in trade receivables

Change in trade payables

Change in other operating assets and liabilities

– 139
–2

– 171
–2

Income taxes paid

Interest received

– 4,192

– 1,897

Cash inflow / outflow from operating activities

– 5,074

– 3,565

– 37

– 25

Investment in intangible assets and property, plant and equipment

– 384

–

– 1,167

995

– 5,530

–

– 1,516

– 833

– 157

–

508

– 4

– 1,201

– 249

– 1,866

1,085

– 5,725

–

– 852

– 1,666

– 244

–

316

299

– 1,983

– 2,131

– 11

1,655

5,829

7,484

– 10

–

244

5,585

5,829

–

– 97

– 32

–

1,505
–2

1,189

– 842

1,653

–

3,505

– 3

– 721

1,518

797

–

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

Expenditure for investments

104

Net cash in acquiring ICL Group

–

Proceeds from the disposal of investments

– 113

Cash payments for the purchase of marketable securities

232

Cash proceeds from the sale of marketable securities

204

Cash inflow / outflow from investing activities

–

– 1,021
–2

Issue / Buy-back of treasury shares

Payments into equity

Payment of dividend for the previous year

Intragroup financing and equity transactions

Interest paid

653

Proceeds from the issue of bonds

– 925

Repayment of bonds

3,229

Change in other financial liabilities

–

Change in commercial paper

1,936

Cash inflow / outflow from financing activities

– 6

Effect of exchange rate on cash and cash equivalents

291

Effect of changes in composition of Group on cash and cash equivalents

Change in cash and cash equivalents

1,227

Cash and cash equivalents as at 1 January

1,518

Cash and cash equivalents as at 31 December

BMW Group
Group Statement of Changes in Equity

in € million

Note

Subscribed
capital

Capital
reserves

Revenue reserves

31 December 2010

Dividends paid

Net profit

Other comprehensive income for the period after tax

Comprehensive income 31 December 2011

Premium arising on capital increase
relating to preferred stock

Other changes

31 December 2011

655

–

655

Pension
obligations

Other revenue
reserves

1,939

–1,785

24,277

–

– 419

–

– 852

4,881

–

4,881

–

1,955

– 2,204

28,306

in € million

Note

Subscribed
capital

Capital
reserves

Revenue reserves

31 December 2011

Dividends paid

Net profit

Other comprehensive income for the period after tax

Comprehensive income 31 December 2012

Subscribed share capital increase
out of Authorised Capital

Premium arising on capital increase
relating to preferred stock

Other changes

31 December 2012

Pension
obligations

Other revenue
reserves

1,955

– 2,204

28,306

–

– 1,350

–

– 1,508

5,096

–

5,096

–

655

–

656

1,973

– 3,554

31,894

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes

in Equity
Notes
86

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

100

107

108
129
145

85 GROUP FINANCIAL STATEMENTS

Accumulated other equity

Treasury
shares

Equity
attributable to
shareholders
of BMW AG

Minority
interest

Total

Translation
differences

Securities

Derivative
financial
instruments

Pension

obligations

–1,064

–

201

–

– 863

–

– 70

–70

–

– 61

–127

–

– 623

–

–750

–

23,904

23,930

31 December 2010

–

– 852

4,881

– 911

3,970

–

– 852

Dividends paid

4,907

Net profit

– 911

Other comprehensive income for the period after tax

3,996

Comprehensive income 31 December 2011

Premium arising on capital increase
relating to preferred stock

Other changes

27,038

27,103

31 December 2011

Accumulated other equity

Treasury
shares

Equity
attributable to
shareholders
of BMW AG

Minority
interest

Total

Translation
differences

Securities

Derivative
financial
instruments

Pension

obligations

– 863

– 61

– 750

–

– 128

–

169

–

952

–

– 984

108

202

–

27,038

27,103

31 December 2011

–

– 1,508

5,096

– 357

4,739

–

– 1,508

Dividends paid

5,122

Net profit

– 357

Other comprehensive income for the period after tax

4,765

Comprehensive income 31 December 2012

Subscribed share capital increase
out of Authorised Capital

Premium arising on capital increase
relating to preferred stock

Other changes

–

30,295

107

30,402

31 December 2012

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

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

Basis of preparation
The consolidated financial statements of Bayerische
Motoren Werke Aktiengesellschaft (BMW Group Finan-
cial Statements or Group Financial Statements) at
31 December 2012 have been drawn up in accordance
with International Financial Reporting Standards (IFRSs)
as endorsed by the EU. The designation “IFRSs” also
includes all valid International Accounting Standards
(IASs). All Interpretations of the IFRS Interpretations
Committee (IFRICs) mandatory for the financial year
2012 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,
relating to the application of International Financial
Reporting Standards, provides the legal basis for pre-
paring consolidated financial statements in accordance
with international standards in Germany and applies
to financial years beginning 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 classifi-
cation 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.

A Statement of Comprehensive Income is presented at
Group level reconciling the net profit to comprehensive
income for the year.

In order to provide a better insight into the net assets,
financial position and performance of the BMW Group
and going beyond the requirements of IFRS 8 (Operat-
ing Segments), the Group Financial Statements also
include balance sheets and income statements for the
Automotive, Motorcycles, Financial Services and Other
Entities segments. The Group Cash Flow Statement is
supplemented by statements of cash flows for the Auto-
motive and Financial Services segments. This supple-
mentary information is unaudited.

In order to facilitate the sale of its products, the BMW
Group provides various financial services – mainly loan

and lease financing – to both retail customers and dealers.
The inclusion of the financial services activities of the
Group therefore has an impact on the Group Financial
Statements.

Inter-segment transactions – relating primarily to inter-
nal sales of products, the provision of funds and the
related interest – are eliminated in the “Eliminations”
column. Further information regarding the allocation
of activities of the BMW Group to segments and a
description of the segments is provided in note 48.

In conjunction with the refinancing of financial services
business, a significant volume of receivables arising
from retail customer and dealer financing is sold. Simi-
larly, rights and obligations relating to leases are sold.
The sale of receivables is a well-established instrument
used by industrial companies. These transactions
usually take the form of asset-backed financing trans-
actions involving the sale of a portfolio of receivables
to a trust which, in turn, issues marketable securities
to refinance the purchase price. The BMW Group con-
tinues to “service” the receivables and receives an
appropriate fee for these services. In accordance with
IAS 27 (Consolidated and Separate Financial State-
ments) and Interpretation SIC-12 (Consolidation – Spe-
cial Purpose Entities) such assets remain in the Group
Financial Statements although they have been legally
sold. Gains and losses relating to the sale of such assets
are not recognised until the assets are removed from
the Group balance sheet on transfer of the related sig-
nificant risks and rewards. At € 9.4 billion, the balance
sheet value of assets sold at 31 December 2012 was un-
changed from one year earlier.

In addition to credit financing and leasing contracts,
the Financial Services segment also brokers insurance
business 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 dis-
closed in millions of euros (€ million) unless stated
otherwise.

Bayerische Motoren Werke Aktiengesellschaft has its
seat in Munich, Petuelring 130, and is registered in the
Commercial Register of the District Court of Munich
under the number HRB 42243.

87 GROUP FINANCIAL STATEMENTS

All consolidated subsidiaries have the same year-end
as BMW AG with the exception of BMW India Private
Ltd., New Delhi, and BMW India Financial Services
Private Ltd., New Delhi, both of whose year-ends are
31 March.

The Group Financial Statements, drawn up in accord-
ance with § 315 a HGB, and the Combined Group and
Company Management Report for the financial year
ended 31 December 2012 will be submitted to the oper-

ator 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 Combined Group and Company Management
Report can be downloaded from the BMW Group web-
site at www.bmwgroup.com/ir.

The Board of Management authorised the Group Finan-
cial Statements for issue on 19 February 2013.

Consolidated companies
The BMW Group Financial Statements include, besides
BMW AG, all material subsidiaries, four special pur-
pose securities funds and 26 special purpose trusts (al-
most all used for asset-backed financing transactions).

The number of subsidiaries – including special purpose
securities funds and other special purpose trusts – con-
solidated in the Group Financial Statements changed in
2012 as follows:

Germany

Foreign

Total

Included at 31 December 2011

Included for the first time in 2012

No longer included in 2012

Included at 31 December 2012

160

164

186

188

51 subsidiaries (2011: 48), either dormant or generating
a negligible volume of business, are not consolidated
on the grounds that their inclusion would not influence
the economic decisions of users of the Group Financial
Statements. Non-inclusion of operating subsidiaries re-
duces total Group revenues by 0.9 % (2011: 0.7 %).

The joint ventures SGL Automotive Carbon Fibers
GmbH & Co. KG, Munich, SGL Automotive Carbon
Fibers Verwaltungs GmbH, Munich, and SGL Auto-
motive Carbon Fibers LLC, Dover, DE, as well as BMW
Brilliance Automotive Ltd., Shenyang, are accounted
for using the equity method. Similarly, the joint ven-
tures DriveNow GmbH & Co. KG, Munich, and Drive-
Now Verwaltungs GmbH, Munich, are accounted for
using the equity method. In accordance with an agree-
ment dated 24 October 2012, BMW Holding B. V., The
Hague, acquired from Peugeot Citroën Automobiles
S. A., Vélizy-Villacoublay, that entity’s investment in
BMW Peugeot Citroën Electrification B. V., The Hague,
with effect from 30 November 2012 and the joint
venture arrangements accordingly terminated. BMW
Peugeot Citroën Electrification B. V., The Hague, and

its subsidiary, BMW Peugeot Citroën Electrification
GmbH, Munich, are not consolidated on the grounds
of immateriality. Cirquent GmbH, Munich, which had
previously been accounted for using the equity method,
was sold in 2012. Four (2011: 18) participations 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 “List of Group Investments” pursuant to § 313 (2) HGB
will be submitted to the operator of the electronic ver-
sion 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.
The List of Group Investments, the List of Third Party
Companies which are not of Minor Importance for the
Group and the full list of consolidated companies are
also posted as appendices on the BMW Group website.

PT BMW Indonesia, Jakarta, BMW China Services Ltd.,
Beijing, BMW India Financial Services Private Ltd., New

Delhi, BMW Osaka Corp., Osaka, BMW Receivables 1
Inc., Whitby, BMW Receivables 2 Inc., Whitby, and
BMW Receivables Limited Partnership, Whitby, were
consolidated for the first time in the financial year 2012.

The following mergers took place during the financial
year 2012: Alphabet B.V., Rijswijk, with Alphabet
Nederland B. V., Breda; Alphabet Belgium Short Term
Rental N. V., Aartselaar, with Alphabet Belgium Long
Term Rental N. V., Aartselaar; ETS Garcia S. A., Paris,
with BMW France S. A., Montigny-le-Bretonneux;
Alphabet Italia S. p. A., Milan with Alphabet Italia Fleet
Management S. p. A., Rome; and Alphabet Fleet Ser-
vices España S. L., Madrid, with Alphabet España Fleet
Management S. A. U., Madrid. As a result of these

mergers Alphabet B. V., Rijswijk, Alphabet Belgium
Short Term Rental N. V., Aartselaar, ETS Garcia S. A.,
Paris, Alphabet Italia S. p. A., Milan, and Alphabet Fleet
Services España S. L., Madrid, ceased to be consoli-
dated companies. Furthermore, BMW Overseas Enter-
prises N. V., Willemstad, was wound up and ceased to
be a consolidated company.

The group reporting entity also changed by comparison
to the previous year as a result of the first-time con-
solidation of six special purpose trusts and one special
purpose securities fund and the deconsolidation of
three special purpose trusts and three special purpose
securities funds.

Consolidation principles
The equity of subsidiaries is consolidated in accord-
ance with IFRS 3 (Business Combinations). IFRS 3
requires that all business combinations are accounted
for using the acquisition method, whereby identifia-
ble assets and liabilities acquired are measured at
their fair value at acquisition date. An excess of acqui-
sition cost over the Group’s share of the net fair value
of identifiable assets, liabilities and contingent lia-
bilities is recognised as goodwill as a separate balance
sheet line item and allocated to the relevant cash-
generating unit (CGU). Goodwill of € 91 million which
arose prior to 1 January 1995 remains netted against
reserves.

Receivables, payables, 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. Any difference between the
cost of investment and the Group’s share of equity
is accounted for in accordance with the acquisition
method. Investments in other companies are ac-
counted for as a general rule using the equity method
when significant influence can be exercised (IAS 28
Investments in Associates). As a general rule, there is
a rebuttable assumption that the Group has signifi-
cant influence if it holds between 20 % and 50 % of the
associated company’s voting power.

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

shareholders’ equity are offset directly against accumu-
lated other equity. Exchange differences arising from
the use of different exchange rates to translate the
income statement are also offset directly against accu-
mulated other equity.

Foreign currency receivables and payables in the single
entity accounts of BMW AG and subsidiaries are re-
corded, at the date of the transaction, at cost. At the end
of the reporting period, foreign currency receivables
and payables are translated at the closing exchange rate.
The resulting unrealised gains and losses as well as the
subsequent realised gains and losses arising on settle-

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

89 GROUP FINANCIAL STATEMENTS

ment are recognised in the income statement in accord-
ance with the underlying substance of the relevant
transactions.

The exchange rates of those currencies which have a
material impact on the Group Financial Statements
were as follows:

US Dollar

British Pound

Chinese Renminbi

Japanese Yen

Russian Rouble

Closing rate

Average rate

31.12. 2012

31.12. 2011

2012

2011

1.32

0.81

8.23

114.10

40.41

1.30

0.84

8.17

100.15

41.69

1.29

0.81

8.11

102.63

39.91

1.39

0.87

9.00

111.00

40.88

Accounting policies
The financial statements of BMW AG and of its subsid-
iaries in Germany and elsewhere have been prepared
for consolidation purposes using uniform accounting
policies in accordance with IAS 27 (Consolidated and
Separate Financial Statements).

Revenues from the sale of products are recognised when
the risks and rewards of ownership of the goods are
transferred to the dealer or customer, provided that the
amount of revenue can be measured reliably, it is prob-
able that the economic benefits associated with the
transaction will flow to the entity and costs incurred or
to be incurred in respect of the sale can be measured
reliably. Revenues are stated net of settlement discount,
bonuses and rebates. Revenues also include lease
rentals and interest income earned in conjunction with
financial services. Revenues from leasing instalments
relate to operating leases and are recognised in the in-
come statement on a straight line basis over the relevant
term of the lease. Interest income from finance leases
and from customer and dealer financing are recognised
using the effective interest method and reported as
revenues within the line item “Interest income on loan
financing”. If the sale of products includes a determi-
nable amount for subsequent services (multiple-compo-
nent contracts), the related revenues are deferred and
recognised as income over the relevant service period.
Amounts are normally 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 addi-
tion to directly attributable material and production
costs, it also includes research costs and development
costs not recognised as assets, the amortisation of
capitalised development costs as well as overheads (in-
cluding depreciation 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 business, including the ex-
pense 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

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

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

the asset will generate future economic benefits and
where the costs of the asset can be determined relia-
bly. Such assets are measured at acquisition and / or
manufacturing cost and, to the extent that they have
a finite useful life, amortised over their estimated use-
ful lives. With the exception of capitalised develop-
ment costs, intangible assets are generally amortised
over their estimated useful lives of between three and
five years.

Share-based remuneration programmes which are
expected to be settled in shares are, in accordance with
IFRS 2 (Share-based Payments), measured at their fair
value at grant date. The related expense is recognised
in the income statement (as personnel expense) over
the vesting period, with a contra (credit) entry recorded
against capital reserves.

Share-based remuneration programmes expected to be
settled in cash are revalued to their fair value at each
balance sheet date between the grant date and the set-
tlement date (and on the settlement date itself). The
expense for such programmes is recognised in the in-
come statement (as personnel expense) over the vesting
period of the programmes and recognised in the balance
sheet as a provision.

The share-based remuneration programme for Board
of Management members and senior heads of depart-
ment entitles BMW AG to elect whether to settle its
commitments in cash or with shares of BMW AG com-
mon stock. Following the decision to settle in cash,
this programme is accounted for as a cash-settled share-
based transaction.

Further information on share-based remuneration pro-
grammes is provided in note 18.

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

in years

Factory and office buildings, distribution facilities and residential buildings

Plant and machinery

Other equipment, factory and office equipment

Development costs for vehicle and engine projects are
capitalised at manufacturing cost, to the extent that
attributable costs can be measured reliably and both
technical feasibility and successful marketing are as-
sured. It must also be probable that the development
expenditure will generate future economic benefits.
Capitalised development costs comprise all expendi-
ture that can be attributed directly to the development
process, including development-related overheads.
Capitalised development costs are amortised system-
atically over the estimated product life (usually four
to eleven years) following start of production.

Goodwill arises on first-time consolidation of an ac-
quired business when the cost of acquisition exceeds
the Group’s share of the fair value of the individually
identifiable assets acquired and liabilities and contin-
gent liabilities assumed.

All items of property, plant and equipment are con-
sidered to have finite useful lives. They are recognised
at acquisition or manufacturing cost less scheduled
depreciation based on the estimated useful lives of the
assets. Depreciation on property, plant and equip-
ment reflects the pattern of their usage and is generally
computed using the straight-line method. Components
of items of property, plant and equipment with differ-
ent useful lives are depreciated separately.

Systematic depreciation is based on the following useful
lives, applied throughout the BMW Group:

8 to 50

4 to 21

3 to 10

91 GROUP FINANCIAL STATEMENTS

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 proportion
of production-related overheads. This includes produc-
tion-related depreciation and an appropriate proportion
of administrative and social costs.

As a general rule, borrowing costs are not included in
acquisition or manufacturing cost. Borrowing costs that
are directly attributable to the acquisition, construction
or production of a qualifying asset are recognised as a
part of the cost of that asset in accordance with IAS 23
(Borrowing Costs).

Non-current assets also include assets relating to leases.
The BMW Group uses property, plant and equipment
as lessee on the one hand and leases out vehicles pro-
duced by the Group and other brands as lessor on the
other. IAS 17 (Leases) contains rules for determining,
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 incep-
tion of the lease or at the present value of the lease pay-
ments, if lower. The assets are depreciated using the
straight-line method over their estimated useful lives
or over the lease period, if shorter. The obligations for
future lease instalments are recognised as financial
liabilities.

Where Group products are recognised by BMW Group
entities as leased products under operating leases,
they are measured at manufacturing cost. All other
leased products are measured at acquisition cost. All
leased products are depreciated over the period of the
lease using the straight-line method down to their
expected residual value. Changes in residual value ex-
pectations are recognised – in situations where the
recoverable amount of the lease exceeds the carrying

amount of the asset – by adjusting scheduled depre-
ciation prospectively over the remaining term of the
lease contract. If the recoverable amount is lower than
the expected residual value, an impairment loss is
recognised for the shortfall. A test is carried out at
each balance sheet date to determine whether an im-
pairment loss recognised in prior years no longer
exists or has decreased. In these cases, the carrying
amount of the asset is increased to the recoverable
amount. The higher carrying amount resulting from
the reversal may not, however, exceed the rolled-
forward amortised cost of the asset.

If there is any evidence of impairment of non-financial
assets (except inventories and deferred taxes), or if an
annual impairment test is required to be carried out –
i.e. for intangible assets not yet available for use, in-
tangible assets with an indefinite useful life and good-
will acquired as part of a business combination – an
impairment test pursuant to IAS 36 (Impairment of
Assets) is performed. Each individual asset is tested
separately unless the asset generates cash flows that are
largely independent of the cash flows from other assets
or groups of assets (cash-generating units / CGUs). For
the purposes of the impairment test, the asset’s carry-
ing amount is compared with its recoverable amount,
the latter defined as the higher of the asset’s fair value
less costs to sell and its value in use. An impairment
loss is recognised when the recoverable amount is lower
than the asset’s carrying amount. Fair value less costs
to sell corresponds to the amount obtainable from the
sale of an asset or groups of assets, less the costs of
disposal. The value in use corresponds to the present
value of future cash flows expected to be derived from
an asset or groups of assets.

The first step of the impairment test is to determine
the value in use of an asset. If the calculated value in use
is lower than the carrying amount of the asset, then its
fair value less costs to sell are also determined. If the
latter is also lower than the carrying amount of the asset,
then an impairment loss is recorded, reducing the car-
rying amount to the higher of the asset’s value in use
or fair value less costs to sell. The value in use is deter-
mined on the basis of a present value computation.
Cash flows used for the purposes of this calculation are

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GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

derived from long-term forecasts approved by manage-
ment and which cover a planning period of six years.
The long-term forecasts themselves are based on detailed
forecasts drawn up at an operational level. For the pur-
poses of calculating cash flows beyond the planning
period, the asset’s assumed residual value does not take
growth into account. Forecasting assumptions are con-
tinually brought up to date and take account of eco-
nomic developments and past experience. Cash flows of
the Automotive and Motorcycles CGUs are discounted
using a risk-adjusted pre-tax cost of capital (WACC) of
12.0 % (2011: 12.0 %). In the case of Financial Services
CGU, a sector-compatible pre-tax cost of equity capital
of 13.4 % (2011: 12.7 %) is applied.

If the reason for a previously recognised impairment
loss no longer exists, the impairment loss is reversed up
to the level of the recoverable amount, capped at the
level of rolled-forward amortised cost. This does not
apply to goodwill: previously recognised impairment
losses on goodwill are not reversed.

Investments accounted for using the equity method are
(except when the investment is impaired) measured at
the Group’s share of equity taking account of fair value
adjustments on acquisition. Investments accounted
for using the equity method comprise joint ventures and
significant associated companies.

Investments in non-consolidated Group companies
and interests in associated companies not accounted
for using the equity method are reported as Other
investments and 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, par-
ticipations 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 in-
cluded under this heading.

A financial instrument is a contract that gives rise to a
financial asset of one entity and a financial liability or

equity instrument of another entity. Once the BMW
Group becomes party to such to a contract, the financial
instrument is recognised either as a financial asset or
as a financial liability.

Financial assets are accounted for on the basis of the set-
tlement date. On initial recognition, they are measured
at their fair value. Transaction costs are included in the
fair value unless the financial assets are allocated to the
category “financial assets measured at fair value through
profit or loss”.

Subsequent to initial recognition, available-for-sale and
held-for-trading financial assets are measured at their
fair value. When market prices are not available, the fair
value of available-for-sale financial assets is measured
using appropriate valuation techniques e. g. discounted
cash flow analysis based on market information avail-
able at the balance sheet date.

Available-for-sale assets include non-current invest-
ments, securities and investment fund shares. This cate-
gory 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
and held-to-maturity financial investments with a fixed
term are measured at amortised cost using the effective
interest method. All financial assets for which pub-
lished price quotations in an active market are not avail-
able and whose fair value cannot be determined reliably
are required to be measured at cost.

In accordance with IAS 39 (Financial Instruments:
Recognition and Measurement), assessments are made
regularly as to whether there is any objective evidence
that a financial asset or group of assets may be im-
paired. 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 recog-
nised in equity is reclassified to profit or loss for the
period.

93 GROUP FINANCIAL STATEMENTS

With the exception of derivative financial instruments,
all receivables and other current assets relate to loans
and receivables which are not held for trading. All such
items are measured at amortised cost. Receivables with
maturities of over one year which bear no or a lower-
than-market interest rate are discounted. Appropriate
impairment losses are recognised to take account of all
identifiable risks.

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
methodology that is applied throughout the Group and
meets the requirements of IAS 39. This methodology
results in the recognition of impairment losses both on
individual assets and on groups of assets. If there is
objective evidence of impairment, the BMW Group rec-
ognises impairment losses on the basis of individual
assets. Within the retail customer business, the existence
of overdue balances or the incidence of similar events
in the past are examples of such objective evidence. In
the event of overdue receivables, 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 correspond-
ing rating category is also deemed to represent objec-
tive evidence of impairment. If there is no objective evi-
dence of impairment, impairment losses are recognised
on financial assets using a portfolio approach based on
similar groups of assets. Company-specific loss proba-
bilities and loss ratios, derived from historical data, are
used to measure impairment losses on similar groups of
assets.

The recognition of impairment losses on receivables
relating to industrial business is also, as far as possible,
based on the same procedures applied to financial
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 re-
duce currency, 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, forward currency and forward commodity con-
tracts) 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 infor-
mation and recognised valuation techniques. In those
cases where hedge accounting is applied, changes in
fair value are recognised either in income or directly in
equity under accumulated other equity, depending
on whether the transactions are classified as fair value
hedges or cash flow hedges. In the case of fair value
hedges, the results of the fair value measurement of the
derivative 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, unre-
alised gains and losses on the hedging instrument are
recognised 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 state-
ment. The portion of the gains or losses from fair value
measurement not relating to the hedged item is recog-
nised immediately in the income statement. If, con-
trary to the normal case within the BMW Group, hedge
accounting cannot be applied, the gains or losses from
the fair value measurement of derivative financial in-
struments are recognised immediately in the income
statement.

In accordance with IAS 12 (Income Taxes), deferred
taxes are recognised on all temporary differences
between the tax and accounting bases of assets and lia-
bilities and on consolidation procedures. Deferred tax
assets also include claims to future tax reductions which
arise from the expected usage of existing tax losses avail-
able for carryforward to the extent that future usage is
probable. Deferred taxes are computed using enacted
or planned tax rates which are expected to apply in the
relevant national jurisdictions when the amounts are
recovered.

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 appropriate proportion of production-related
overheads. This includes production-related deprecia-
tion and an appropriate proportion of administrative
and social costs.

Borrowing costs are not included in the acquisition or
manufacturing cost of inventories.

Cash and cash equivalents comprise mainly cash on
hand and cash at bank with an original term of up to
three months.

Assets held for sale and disposal groups held for sale
are presented separately in the balance sheet in accord-
ance with IFRS 5, if the carrying amount of the rele-
vant assets will be recovered principally through a sale
transaction rather than through continuing use. This
situation only arises if the assets can be sold immediately
in their present condition, the sale is expected to be
completed within one year from the date of classifica-
tion and the sale is highly probable. At the date of
classification, property, plant and equipment, intangi-
ble assets and disposal groups which are being held
for sale are written down to the lower of their carrying
amount and their fair value less costs to sell and sched-
uled depreciation / amortisation ceases. This does not
apply, however, to items within the disposal group which
are not covered by the measurement rules contained
in IFRS 5. Simultaneously, liabilities directly related to
the sale are presented separately on the equity and
liabilities side of the balance sheet as “Liabilities in con-
junction with assets held for sale”.

Provisions for pensions and similar obligations are rec-
ognised using the projected unit credit method in ac-

cordance with IAS 19 (Employee Benefits). Under
this method, not only obligations relating to known
vested benefits at the reporting date are recognised,
but also the effect of future increases in pensions
and salaries. This involves taking account of various
input factors which are evaluated on a prudent basis.
The calculation is based on an independent actuarial
valuation which takes into account all relevant bio-
metric factors.

Actuarial gains and losses arising on defined benefit
pension and similar obligations and on plan assets
are recognised, net of deferred tax, directly in equity
(revenue reserves). This accounting treatment is meant
to make it clear that these amounts will not be reclas-
sified to the income statement in future periods.

The expense related to the reversal of discounting on
pension obligations and the income from the expected
return on pension plan assets are reported separately
as part of the financial result. All other costs relating
to allocations to pension provisions are allocated to costs
by function in the income statement.

Other provisions are recognised when the BMW Group
has a present obligation arising from past events, the
settlement of which is probable and when a reliable
estimate can be made of the amount of the obligation.
Measurement is computed on the basis of fully attribut-
able costs. Non-current provisions with a remaining
period of more than one year are discounted to the pre-
sent 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 corresponds to the fair value of the
consideration given. Transaction costs are also taken into
account except for financial liabilities allocated to the
category “financial liabilities measured at fair value
through profit or loss”. Subsequent to initial recognition,
liabilities are – with the exception of derivative financial
instruments – measured at amortised cost using the
effective interest method. The BMW Group has no

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GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

95 GROUP FINANCIAL STATEMENTS

liabilities which are held for trading. Liabilities from
finance leases are stated at the present value of the

future lease payments and disclosed under other finan-
cial liabilities.

Assumptions, judgements and estimations
The preparation of the Group Financial Statements in
accordance with IFRSs requires management to make
certain assumptions and judgements and to use esti-
mations that can affect the reported amounts of assets
and liabilities, revenues and expenses and contingent
liabilities. Judgements have to be made in particular
when assessing whether the risks and rewards inciden-
tal to ownership of a leased asset have been transferred
and, hence, the classification of leasing arrangements.
Major items requiring assumptions and estimations are
described below. The assumptions used are continu-
ously checked for their validity. Actual amounts could
differ from the assumptions and estimations used if
business conditions develop differently to the Group’s
expectations.

Estimations are required to assess the recoverability of
a cash-generating unit (CGU). If the recoverability of an
asset is being tested at the level of a CGU, assumptions
must be made with regard to future cash inflows and out-
flows, involving in particular an assessment of the fore-
casting period to be used and of developments after
that period. Forecasting assumptions are determined by
management in order to calculate future cash flows, in-
cluding assumptions about future macroeconomic de-
velopments, market developments relevant for the auto-
motive sector and the legal environment.

The BMW Group regularly checks the recoverability of
its leased products. One of the main assumptions re-
quired for leased products relates to their residual value
since this represents a significant portion of future
cash inflows. In order to estimate the level of prices
likely to be achieved in the future, the BMW Group in-
corporates internally available historical data, current
market data and forecasts of external institutions into its
calculations. Internal back-testing is applied to validate

the estimations made. Further information is provided
in note 23.

The bad debt risk relating to receivables from sales
financing is assessed regularly by the BMW Group. For
these purposes, the main factors taken into considera-
tion are past experience, current market data (such as
the level of financing business arrears), rating classes
and scoring information. Further information is provided
in note 25.

The disposal of an asset or of a disposal group pursuant
to IFRS 5 is considered to be highly probable by the
BMW Group if management is committed to a sales plan,
an active programme to locate a buyer has begun, the
price offered is reasonable in relation to the fair value
of the asset / disposal group concerned and it is expected
at the date of classification that the final negotiations
with the buyer and completion of the sale will take place
within one year. Further details can be found in note 32.

Estimations are required for the purposes of recognising
and measuring provisions for guarantee and warranty
obligations. In addition to statutorily prescribed manu-
facturer warranties, the BMW Group also offers various
categories of guarantee depending on the product and
sales market concerned. Provisions for guarantee and
warranty obligations are recognised at the beginning of
a lease or sales contract or when a new category of
guarantee is introduced. Various factors are taken into
consideration when estimating the level of the provision,
including past experience with the nature and amount
of claims as well as an assessment of future potential
repair and maintenance costs. Further information is
provided in note 35.

In the event of involvement in legal proceedings or when
claims are brought against a Group entity, provisions

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GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

for litigation and liability risks are recognised when an
outflow of resources is probable and a reliable estimate
can be made of the amount of the obligation. Manage-
ment is required to make assumptions with respect to
the probability of occurrence, the amount involved and
the duration of the legal dispute. For these reasons,
the recognition and measurement of provisions for litiga-
tion and liability risks are subject to uncertainty. Fur-
ther information is provided in note 35.

The calculation of pension provisions requires assump-
tions to be made with regard to discount factors, salary
trends, employee fluctuation, the life expectancy of
employees and the expected rate of return on plan assets.
Discount factors are determined annually by reference
to market yields at the end of the reporting period on
high quality corporate bonds. A company-specific default
risk is not taken into account. The salary level trend re-
fers to the expected rate of salary increase which is esti-
mated annually depending on inflation and the career

development of employees within the Group. The ex-
pected rate of return on plan assets is based on market
expectations prevailing at the beginning of the report-
ing period for investment income over the remaining
period of the obligation and is determined for the
relevant asset classes in which plan assets are invested,
taking account of costs and unplanned risks. Further
information is provided in note 34.

The calculation of deferred tax assets requires assump-
tions to be made with regard to the level of future
taxable income and the timing of recovery of deferred
tax assets. These assumptions take account of forecast
operating results and the impact on earnings of the
reversal of taxable temporary differences. Since future
business developments cannot be predicted with cer-
tainty and to some extent cannot be influenced by the
BMW Group, the measurement of deferred tax assets
is subject to uncertainty. Further information is pro-
vided in note 15.

7 New financial reporting rules

(a) Financial reporting rules applied for the first time in the financial year 2012
The following revised Standard was applied for the first time in the financial year 2012.

Standard

IFRS 7

Disclosure Requirements in the Event of
the Transfer of Financial Assets

* Mandatory application in annual periods beginning on or after 1 July 2011.

Date of
issue by IASB

Date of
mandatory
application
IASB

Endorsed
by the EU

Expected impact
on BMW Group

7. 10. 2010

1. 7. 2011*

Insignificant

(b) Financial reporting pronouncements issued
by the IASB, but not yet applied
The following Standards, Revised Standards and Amend-
ments issued by the IASB during previous accounting

periods, were not mandatory for the period under report
and were not applied in the financial year 2012:

Standard / Interpretation

Date of
issue by IASB

Date of
mandatory
application
IASB

Date of
mandatory
application
EU

Expected impact
on BMW Group

IFRS 1

Amendments with Respect to Fixed
Transition Dates and Severe Inflation

20. 12. 2010

1. 7. 2011

1. 1. 2013

Amendments relating to Government
Loans at a Below Market Rate of Interest

13. 3. 2012

1. 1. 2013

None

97 GROUP FINANCIAL STATEMENTS

Standard / Interpretation

IFRS 7

Notes Disclosures: Offsetting
of Financial Assets and Financial Liabilities

IFRS 9

Financial Instruments

Date of
issue by IASB

Date of
mandatory
application
IASB

Date of
mandatory
application
EU

Expected impact
on BMW Group

16. 12. 2011

1. 1. 2013

Insignificant

1. 1. 2015

Significant in principle

12. 11. 2009 /
28. 10. 2010 /
16. 12. 2011

IFRS 10

Consolidated Financial Statements

12. 5. 2011

1. 1. 2013

1. 1. 2014

Significant in principle

IFRS 11

Joint Arrangements

12. 5. 2011

1. 1. 2013

1. 1. 2014

Significant in principle

IFRS 12

Disclosure of Interests in
Other Entities

Changes in Transitional Regulations
(IFRS 10, IFRS 11 and IFRS 12)

Investment Entities (Amendments to
IFRS 10, IFRS 12 and IAS 27)

12. 5. 2011

1. 1. 2013

1. 1. 2014

Significant in principle

28. 6. 2012

1. 1. 2013

31. 10. 2012

1. 1. 2014

Significant in principle

Insignificant

IFRS 13

Fair Value Measurement

12. 5. 2011

1. 1. 2013

Significant in principle

Changes to Presentation of
Items in Other Comprehensive
Income (OCI)

Amendments to Deferred Taxes:
Realisation of Underlying Assets

Changes in Accounting for
Employee Benefits, in particular for Termination
Benefits and Pensions

16. 6. 2011

1. 7. 2012

1. 7. 2012*

Significant in principle

20. 12. 2010

1. 1. 2012

1. 1. 2013

Insignificant

16. 6. 2011

1. 1. 2013

Significant in principle

Separate Financial Statements

12. 5. 2011

1. 1. 2013

1. 1. 2014

12. 5. 2011

1. 1. 2013

1. 1. 2014

None

IAS 1

IAS 12

IAS 19

IAS 27

IAS 28

IAS 32

16. 12. 2011

1. 1. 2014

Insignificant

Investments in Associates and
Joint Ventures

Presentation – Offsetting of Financial Assets
and Financial Liabilities

IFRIC 20

Stripping Costs in the Production Phase of
a Mine

19. 10. 2011

1. 1. 2013

None

Annual Improvements to IFRS 2009 – 2011

17. 5. 2012

1. 1. 2013

Insignificant

* Mandatory application in annual periods beginning on or after 1 July 2012.

In November 2009 the IASB issued IFRS 9 (Financial
Instruments: Disclosures) as the first part of its project
to change the accounting treatment for financial instru-
ments. This Standard marks the first of three phases of
the IASB project to replace the existing IAS 39 (Finan-
cial Instruments: Recognition and Measurement). The
first phase deals with financial assets. IFRS 9 amends
the recognition and measurement requirements for
financial assets, including various hybrid contracts. It

applies a uniform approach to accounting for a finan-
cial asset either at amortised cost or fair value and
replaces the various rules contained in IAS 39. Under
the new rules, there will only be two, instead of four,
measurement categories for financial instruments rec-
ognised on the assets side of the balance sheet. The
new categorisation is based partly on the entity’s busi-
ness model and partly on the contractual cash flow
characteristics of the financial assets.

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GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

In October 2010, additional rules for financial liabilities
were added. The requirements for financial liabilities
contained in IAS 39 remain unchanged with the excep-
tion of new requirements relating to an entity’s own
credit risk when it exercises the fair value option. IFRS 9
is mandatory for financial years beginning on or after
1 January 2015. The BMW Group will not apply IFRS 9
early. The impact of adoption of the Standard on the
Group Financial Statements is currently being assessed.

In May 2011 the IASB issued three new Standards –
IFRS 10 (Consolidated Financial Statements), IFRS 11
(Joint Arrangements), IFRS 12 (Disclosure of Interests
in Other Entities) – as well as amendments to IAS 27
(Consolidated and Separate Financial Statements) and
to IAS 28 (Investments in Associates) all relating to
accounting for business combinations. The Standards
are mandatory for the first time for annual periods
beginning on or after 1 January 2013. Early adoption is
permitted. The new Standards are required to be ap-
plied retrospectively. EU endorsement stipulates a later
mandatory date (from 1 January 2014) due to increased
implementation expense.

IFRS 10 replaces the consolidation guidelines contained
in IAS 27 and SIC-12 (Consolidation – Special Purpose
Entities). The requirements for separate financial state-
ments remain unchanged in the revised version of
IAS 27.

IFRS 10 introduces a uniform model which establishes
control as the basis for consolidation – control of a
subsidiary entity by a parent entity – and which can be
applied to all entities. The control concept must there-
fore be applied both to parent-subsidiary relationships
based on voting rights as well as to parent-subsidiary
relationships arising from other contractual arrange-
ments. Under the control concept established in IFRS 10,
an investor controls another entity when it is exposed
to or has rights to variable returns from its involvement
with the investee and has the ability to affect those re-
turns through its power over the investee.

IFRS 11 supersedes IAS 31 (Interests in Joint Ventures)
and SIC-13 (Jointly Controlled Entities – Non-Monetary
Contributions by Ventures). This Standard sets out the
requirements for accounting for joint arrangements and

places the emphasis on the rights and obligations that
arise from such arrangements. IFRS 11 distinguishes
between two types of joint arrangements, namely joint
operations and joint ventures, and therefore results
in a change in the classification of joint arrangements.
A joint operation is a joint arrangement whereby the
parties that have joint control of the arrangement have
rights to the assets, and obligations for the liabilities,
relating to the arrangement. A joint venture is a joint
arrangement whereby the parties that have joint control
of the arrangement have rights to the net assets of
the arrangement. IFRS 11 requires joint operators to ac-
count for their share of assets and liabilities in the joint
operation (and their share of income and expenses).
Joint venturers are required to account for their invest-
ment using the equity method. The withdrawal of
IAS 31 means the removal of the option to account for
joint ventures using either the proportionate consoli-
dation or the equity method. The equity method must
be applied in accordance with amended IAS 28.

IFRS 12 sets out the requirements for disclosures relating
to all types on interests in other entities, including
joint arrangements, associated companies, structured
entities and unconsolidated entities.

The amendments to the transitional regulations in
IFRS 10, IFRS 11 and IFRS 12 have the objective of mak-
ing it easier for entities to apply the Standards retro-
spectively. The amendments also restrict the requirement
to disclose comparative amounts to the immediately
preceding reporting period at the date of first-time ap-
plication.

The BMW Group is currently investigating the impact
on the Group Financial Statements of applying IFRS 10,
IFRS 11, IFRS 12, IAS 27 and IAS 28. The removal of
the option for accounting for joint ventures does not have
any impact since the BMW Group accounts for joint
ventures using the equity method. It is currently being
investigated whether any joint ventures will be required
to be reclassified as joint operations as a result of the
introduction of IFRS 11. The BMW Group does not in-
tend to adopt the Standard early.

In May 2011 the IASB published IFRS 13 (Fair Value
Measurement). IFRS 13 defines the term fair value, sets

The IASB has published various other Standards and
Interpretations. None of these, whether adopted or not
yet adopted by the BMW Group, will have a significant
impact on the Group Financial Statements.

99 GROUP FINANCIAL STATEMENTS

out the requirements for measuring fair value where
another IFRS prescribes fair value measurement (or fair
value disclosure) and stipulates uniform disclosure re-
quirements with respect to fair value measurement.
IFRS 13 is mandatory for financial years beginning on
or after 1 January 2013. The Standard is required to
be applied prospectively. Early adoption is permitted
but will not be applied by the BMW Group. IFRS 13 is
of relevance for the BMW Group in particular for the
measurement of derivatives.

The IASB published IAS 1 (Presentation of Financial
Statements) in June 2011. The amendments to IAS 1 re-
quire that items reported in accumulated other equity
(other comprehensive income or OCI) are sub-divided
into elements that will be “recycled” in the income
statement and those which will not. Tax associated with
items presented before tax are also required to be shown
separately for each of the two groups of OCI items.
The recognition of these items is regulated in separate
Standards. The amendments to IAS 1 are mandatory for
annual periods beginning on or after 1 July 2012. The
amendments are required to be applied retrospectively.
Early adoption is permitted but will not be applied by
the BMW Group. It is not expected that the change in
presentation of items in OCI will have a significant im-
pact on the Group Financial Statements.

In June 2011 the IASB published amendments to IAS 19
(Employee Benefits), in particular in relation to post-
retirement benefits and pensions. The main amendments
involve the removal of the option to defer actuarial
gains and losses (the so-called “corridor method”) and
the requirement to recognise actuarial gains and losses
in OCI. The amended IAS 19 also requires plan assets
to be discounted using the same rate that is applied to
discount pension obligations. It also results in changes
in the treatment of termination benefits and expands dis-
closure requirements compared to the previous IAS 19.
The amended IAS 19 is mandatory for annual periods
beginning on or after 1 January 2013. Early adoption is
permitted. The BMW Group does not expect that the
amendments to IAS 19 will have a significant impact on
the Group Financial Statements, since the BMW Group
does not apply the corridor method and actuarial gains
and losses are already recognised in OCI. The BMW
Group does not intend to adopt the Standard early.

100

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

Revenues
Revenues by activity comprise the following:

in € 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

2012

2011

58,039

52,331

6,900

6,399

2,954

2,556

5,628

6,226

2,774

1,862

76,848

68,821

An analysis of revenues by business segment and geographical region is shown in the segment information in
note 48.

78
78
78

80
82
84

Cost of sales
Cost of sales comprises:

in € million

Manufacturing costs

Research and development expenses

Warranty expenditure

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

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

Cost of sales include € 15,987 million (2011: € 14,068 mil-
lion) relating to financial services business.

As in the previous year, manufacturing costs do not con-
tain any impairment losses on intangible assets and
property, plant and equipment. Cost of sales is reduced
by public-sector subsidies in the form of reduced taxes on
assets and reduced consumption-based taxes amount-
ing to € 45 million (2011: € 47 million).

in € million

Research and development expenses

Amortisation

New expenditure for capitalised development costs

Total research and development expenditure

2012

2011

37,648

3,993

1,200

13,370

1,819

798

2,526

61,354

33,594

3,610

918

11,723

1,914

431

2,086

54,276

Total research and development expenditure, com-
prising research expenses, development costs not
recognised as assets on the one hand and capitalised
de velopment costs and the scheduled amortisation
thereof on the other, was as follows:

2012

2011

3,993

– 1,130

1,089

3,952

3,610

– 1,209

972

3,373

Selling and administrative expenses
Selling expenses amounted to € 5,147 million (2011:
€ 4,554 million) and comprise mainly marketing, adver-
tising and sales personnel costs.

Administrative expenses amounted to € 1,860 million
(2011: € 1,623 million) and comprise expenses for
administration not attributable to development, pro-
duction or sales functions.

101 GROUP FINANCIAL STATEMENTS

Other operating income and expenses

in € 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

Losses on the disposal of fixed assets

Sundry operating expenses

Other operating expenses

2012

2011

385

114

285

829

– 386

– 309

– 22

– 38

– 261

– 1,016

535

148

782

– 537

– 391

– 36

– 17

– 151

–1,132

Other operating income and expenses

– 187

– 350

Other operating income includes public-sector grants of € 19 million (2011: € 13 million).

Result from equity accounted investments
The profit from equity accounted investments
amounted to € 271 million (2011: € 162 million) and in-
cludes the results from the BMW Group’s interests in
the joint ventures BMW Brilliance Automotive Ltd.,
Shenyang, SGL Automotive Carbon Fibers GmbH &
Co. KG, Munich, SGL Automotive Carbon Fibers Ver-
waltungs GmbH, Munich, SGL Automotive Carbon

Fibers LLC, Dover, DE, DriveNow GmbH & Co. KG,
Munich, and DriveNow Verwaltungs GmbH, Munich.
Similarly, the BMW Group’s share of the joint venture
BMW Peugeot Citroën Electrification B. V., The Hague,
are also included in the result from equity accounted
investments up to the date of termination of the joint
venture arrangements.

Net interest result

in € million

Expected return on plan assets relating to pension plans and pre-retirement part-time work arrangements

Other interest and similar income

thereof from subsidiaries: € 19 million (2011: € 13 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: € – 7 million (2011: € – 5 million)

Interest and similar expenses

Net interest result

2012

2011

539

214

753

– 628

– 74

–

– 211

531

232

763

– 594

– 110

– 4

– 235

– 913

– 943

– 160

– 180

The expected return on plan assets includes the
expected income on assets used to secure obligations

relating to pension plans and pre-retirement part-time
work arrangements.

102

14 Other financial result

in € million

Income from investments

thereof from subsidiaries: € 1 million (2011: € 1 million)

Impairment losses on investments in subsidiaries and participations

Income from reversal of impairment losses on investments in subsidiaries and participations

Result on investments

Losses and gains relating to financial instruments

Sundry other financial result

2012

2011

– 175

–

– 170

– 422

– 8

–

– 7

– 610

Other financial result

– 592

– 617

The result on investments in 2012 was negatively
impacted by an impairment loss recognised on invest-
ments amounting to € 166 million.

The negative sundry other financial result was largely
attributable to net fair value losses on stand-alone
commodity and currency derivatives.

Income taxes
Taxes on income comprise the following:

in € million

Current tax expense

Deferred tax income

Income taxes

2012

2011

2,908

– 211

2,697

2,868

– 392

2,476

Current tax expense includes € 128 million (2011:
€ 201 million) relating to prior periods.

Deferred tax income of € 724 million (2011: income of
€ 352 million) is attributable to new temporary dif-
ferences arising in 2012 and the reversal of temporary
differences brought forward.

Tax expense was reduced by € 5 million (2011: € 12 mil-
lion) as a result of utilising tax losses / tax credits
brought forward for which deferred assets had not pre-
viously been recognised.

The change in the valuation allowance on deferred tax
assets relating to tax losses available for carryforward
and temporary differences resulted in a tax expense of
€ 3 million (2011: expense of € 6 million).

Deferred taxes are computed using enacted or planned
tax rates which are expected to apply in the relevant
national jurisdictions when the amounts are recovered.

A uniform corporation tax rate of 15.0 % plus solidarity
surcharge of 5.5 % applies in Germany, giving a tax
rate of 15.8 %. After taking account of an average mu-
nicipal trade tax multiplier rate (Hebesatz) of 420.0 %,
the municipal trade tax rate for German entities is
14.7 %. The overall income tax rate in Germany is there-
fore 30.5 %. All of these German tax rates are unchanged
from the previous year. Deferred taxes for non-Ger-
man entities are calculated on the basis of the relevant
country-specific tax rates and remained in a range
of between 12.5 % and 46.9 % in the financial year 2012.
Changes in tax rates resulted in a deferred tax expense
of € 21 million in 2012 (2011: € 36 million).

The actual tax expense for the financial year 2012 of
€ 2,697 million (2011: € 2,476 million) is € 312 million
(2011: € 224 million) higher than the expected tax ex-
pense of € 2,385 million (2011: € 2,252 million) which
would theoretically arise if the tax rate of 30.5 %, appli-
cable for German companies, was applied across the
Group.

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

103 GROUP FINANCIAL STATEMENTS

The difference between the expected and actual tax expense is explained in the following reconciliation:

in € million

Profit before tax

Tax rate applicable in Germany

Expected tax expense

Variances due to different tax rates

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

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

Other variances

Actual tax expense

Effective tax rate

2012

2011

7,819

30.5 %

2,385

– 56

302

128

– 62

2,697

34.5 %

7,383

30.5 %

2,252

– 70

201

2,476

33.5 %

Tax increases as a result of non-tax-deductible expenses
relate mainly to the impact of non-recoverable with-
holding taxes on intragroup dividends and transfer price
issues. Decreases in taxes due to tax-exempt income
amounted to € 89 million (2011: € 104 million).

The net expense shown in the line “Tax expense / benefits
for prior periods” relates primarily to appropriate pro-
vision recognised for tax field audit issues and is lower
than the net expense reported in the previous year.

The line “Other variances” comprises primarily recon-
ciling items relating to the Group’s share of results of
equity accounted investments.

The allocation of deferred taxes tax assets and liabilities
to balance sheet line items at 31 December is shown in
the following table:

in € million

Intangible assets

Property, plant and equipment

Leased products

Investments

Other assets

Tax loss carryforwards

Provisions

Liabilities

Eliminations

Valuation allowance

Netting

Deferred taxes

Net

Deferred tax assets

Deferred tax liabilities

2012

2011

2012

2011

441

1,067

923

3,253

2,984

2,729

476

1,098

1,452

2,601

2,714

2,389

1,356

260

5,837

3,497

–

350

626

1,341

273

5,794

3,186

–

389

590

11,450

10,782

11,997

11,620

– 492

– 8,957

2,001

– 509

– 8,347

1,926

–

– 8,957

– 8,347

3,040

1,039

3,273

1,347

Deferred tax assets on tax loss carryforwards and capi-
tal losses before allowances totalled € 923 million (2011:
€ 1,452 million). After valuation allowances of € 492 mil-
lion (2011: € 509 million), their carrying amount stood at
€ 431 million (2011: € 943 million).

Tax losses available for carryforward – for the most part
usable without restriction – decreased to € 1.3 billion
(2011: € 2.6 billion). This includes an amount of € 92 mil-
lion (2011: € 58 million), for which a valuation allowance
of € 27 million (2011: € 17 million) was recognised on the

104

related deferred tax asset. For entities with tax losses
available for carryforward, a net surplus of deferred tax
assets over deferred tax liabilities is reported at 31 De-
cember 2012 amounting to € 204 million (2011: € 568 mil-
lion). Deferred tax assets are recognised on the basis
of management’s assessment of whether it is probable
that the relevant entities will generate sufficient future
taxable profits, against which deductible temporary
differences can be offset.

Capital losses available for carryforward in the United
Kingdom which do not relate to ongoing operations
amounted to €2.0 billion at the end of the reporting
period, unchanged from one year earlier. As in previous
years, deferred tax assets recognised on these tax losses
– amounting to € 465 million at 31 December 2012 after
tax rate changes in 2012 (2011: € 492 million) – were

fully written down since they can only be utilised against
future capital gains.

“Netting” relates to the offset of deferred tax assets and
liabilities within individual separate entities or tax groups
to the extent that they relate to the same tax authorities.

Deferred taxes recognised directly in equity amounted
to € 1,222 million (2011: € 1,202 million), an increase
of € 20 million (2011: € 446 million) compared to the end
of the previous year. The change in 2012 includes a
reduction in deferred taxes recognised in conjunction
with currency translation amounting to € 3 million (2011:
increase of € 17 million).

Changes in deferred tax assets and liabilities during the
reporting period can be summarised as follows:

in € million

Deferred taxes at 1 January

Deferred tax income / expense recognised through income statement

Change in deferred taxes recognised directly in equity
Exchange rate impact and other changes1, 2

Deferred taxes at 31 December

1 2011: including € 87 million resulting from the purchase of the ICL Group
2 Including impact of first-time consolidations

2012

2011

1,347

– 211

– 23

– 74

1,039

2,007

– 392

– 429

161

1,347

Changes in deferred taxes include changes relating to
items recognised either through the income statement
or directly in equity as well as the impact of exchange
rate and first-time consolidations. Net deferred liabili-
ties decreased overall by € 23 million (2011: € 429 mil-
lion). On the one hand they were increased by € 498 mil-
lion (2011: decreased by € 274 million) due to the fair
value measurement of derivative financial instruments
and marketable securities, shown in the summary
above in the line items “Other assets” and “Liabilities”.
They were reduced on the other hand by € 521 mil-
lion (2011: € 155 million) due to changes in actuarial
gains and losses on defined pension obligations and
plan assets recognised directly in equity. These amounts
are shown in the summary above in the line item “Pro-
visions”.

Deferred taxes are not recognised on retained profits of
€ 24.8 billion (2011: € 20.7 billion) of foreign subsidiaries,
as it is intended to invest these profits to maintain and
expand the business volume of the relevant companies.
A computation was not made of the potential impact
of income taxes on the grounds of disproportionate
expense.

The tax returns of BMW Group entities are checked
regularly by German and foreign tax authorities. Taking
account of a variety of factors – including existing in-
terpretations, commentaries and legal decisions taken
relating to the various tax jurisdictions and the BMW
Group’s past experience – adequate provision has, as
far as identifiable, been made for potential future tax
obligations.

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

105 GROUP FINANCIAL STATEMENTS

Earnings per share

Net profit for the year after minority interest

€ million

5,096.2

4,880.9

2012

2011

Profit attributable to common stock

Profit attributable to preferred stock

Average number of common stock shares in circulation

Average number of preferred stock shares in circulation

Earnings per share of common stock

Earnings per share of preferred stock

Dividend per share of common stock

Dividend per share of preferred stock

€ million

4,678.8

417.4

4,483.9

397.0

number

601,995,196

number

53,571,312

53,163,232

€

7.77

7.79

2.50

2.52

7.45

7.47

2.30

2.32

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. As in the previous year, diluted earn-
ings per share correspond to undiluted earnings per
share.

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

in € million

Wages and salaries

Social security, retirement and welfare costs

thereof pension costs: € 857 million (2011: € 789 million)

Personnel expenses

2012

2011

7,086

1,449

6,399

1,340

8,535

7,739

Personnel expenses include € 59 million (2011: € 70 mil-
lion) of expenditure incurred to adjust the workforce size.

The average number of employees during the year
was:

Employees

Apprentices and students gaining work experience

2012

2011

95,748

6,484

102,232

91,168

5,942

97,110

The number of employees at the end of the reporting period is disclosed in the Combined Group and Company
Management Report.

106

The fee expense pursuant to § 314 (1) no. 9 HGB recog-
nised in the financial year 2012 for the Group auditors

amounted to € 26 million (2011: € 22 million) and con-
sists of the following:

in € million

2012

2011

Audit of financial statements

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Other attestation services

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Tax advisory services

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Other services

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

Fee expense

thereof KPMG AG Wirtschaftsprüfungsgesellschaft

–

The total fee comprises expenses recorded by BMW AG,
Munich, and all consolidated subsidiaries.

The fee expense shown for KPMG AG Wirtschafts-
prüfungsgesellschaft, Berlin, relates only to services
provided on behalf of BMW AG, Munich, and its
German subsidiaries.

18 Share-based remuneration

The BMW Group operates three share-based remunera-
tion schemes, namely the Employee Share Scheme
(for entitled employees), share-based commitments to
members of the Board of Management members and
share-based commitments to senior heads of department.

In the case of the Employee Share Scheme, non-voting
shares of preferred stock in BMW AG were granted
to qualifying employees during the financial year 2012
at favourable conditions (see note 33 for the number
and price of issued shares). The holding period for these
shares is up to 31 December 2015. The BMW Group re-
corded a personnel expense of € 5 million (2011: € 5 mil-
lion) for the Employee Share Scheme in 2012, correspond-
ing to the difference between the market price and the
reduced price of the shares of preferred stock purchased
by employees. The Board of Management reserves
the right to decide anew each year with respect to an
Employee Share Scheme.

For financial years beginning after 1 January 2011,
BMW AG added a share-based remuneration component
to the compensation system for Board of Management
members.

Each Board of Management member is required to invest
20 % of his / her total bonus (after tax) in shares of
BMW AG common stock, which are recorded in a sepa-
rate custodian account for each member concerned
(annual tranche). Each annual tranche is subject to a
holding period of four years (vesting period). Once the

holding period is fulfilled, BMW AG grants one additional
share of BMW AG common stock for each three held or,
at its discretion, pays the equivalent amount in cash
(share-based remuneration component) provided that
the term of office has not been terminated before the
end of the agreed contract period (except in the case of
death or invalidity).

With effect from the financial year 2012, qualifying
senior heads of department are also entitled to opt for a
share-based remuneration component, which, in most
respects, is comparable to the share-based remuneration
arrangements for Board of Management members.

The share-based remuneration component is measured
at its fair value at each balance sheet date between grant
and settlement date, and on the settlement date itself.
The appropriate amounts are recognised as personnel
expense on a straight-line basis over the vesting period
and reported in the balance sheet as a provision.

The cash-settlement obligation for the share-based re-
muneration component is measured at its fair value at
the balance sheet date (based on the closing price of
BMW AG common stock in Xetra trading at 31 Decem-
ber 2012).

The total carrying amount of the provision for the share-
based remuneration component of Board of Management
members and senior heads of department at 31 Decem-
ber 2012 was € 657,276 (2011: € 115,114).

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

107 GROUP FINANCIAL STATEMENTS

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

The total expense recognised in 2012 for the share-
based remuneration component of Board of Manage-
ment members and senior heads of department was
€ 542,162 (2011: € 115,114).

The fair value of the two programmes at the grant
date of the share-based remuneration components
was € 1,379,723 (2011: € 668,854), based on a total of
22,915 shares (2011: 11,945 shares) of BMW AG com-

mon stock or a corresponding cash-based settlement
measured at the relevant market shares price prevailing
on the grant date.

Further details on the remuneration of the Board of
Management are provided in the 2012 Compensation
Report, which is part of the Combined Group and
Company Management Report.

19 Disclosures relating to total comprehensive income

Other comprehensive income for the period after tax comprises the following:

in € million

2012

2011

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 losses on defined benefit pension obligations, similar obligations and plan assets

Deferred taxes relating to components of other comprehensive income

Other comprehensive income for the period after tax from equity accounted investments

Other comprehensive income for the period after tax

174

214

770

532

1,302

– 123

– 1,881

– 357

– 64

– 8

–72

– 733

– 68

– 801

168

– 586

421

– 41

– 911

Deferred taxes on components of other comprehensive income are as follows:

in € million

Available-for-sale securities

Financial instruments used for hedging purposes

Exchange differences on translating foreign operations

Actuarial losses on defined benefit pension obligations,
similar obligations and plan assets

Other comprehensive income relating to
equity accounted investments

Other comprehensive income

2012

Deferred
taxes

2011

After
tax

Before
tax

Deferred
taxes

After
tax

– 45

– 437

169

865

–

– 123

– 72

– 801

168

252

–

– 70

– 549

168

Before
tax

214

1,302

– 123

– 1,881

531

– 1,350

– 586

167

– 419

111

-377

– 29

– 66

-357

–1,357

446

– 41

– 911

108

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

20 Analysis of changes in Group tangible, intangible and investment assets 2012

in € million

Development costs

Goodwill

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

8,393

374

1,040

9,807

7,776

25,625

2,170

992

36,563

–

– 3

– 26

– 24

– 11

– 8

– 69

1,089

–

123

1,212

366

1,311

218

2,133

4,028

Acquisition and manufacturing cost

1. 1. 20121

Translation
differences

Additions

Reclassi-
fications

Disposals

31. 12.
2012

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

Leased products

31,956

– 74

13,297

Investments accounted for using the equity method

Investments in non-consolidated subsidiaries

Participations

Non-current marketable securities

Other investments

1 Including impact of first-time consolidations
2 Including assets under construction of € 2,205 million

302

221

501

–

722

–

– 1

–

– 1

350

–

159

Analysis of changes in Group tangible, intangible and investment assets 2011

1. 1. 20111

Acquisition
ICL Group

Translation
differences

Additions

Reclassi-
fications

Disposals

31. 12.
2011

Acquisition and manufacturing cost

in € million

Development costs

Goodwill

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

9,147

116

796

10,059

7,571

24,166

2,143

700

34,580

–

258

153

411

–

972

–

122

1,094

1,483

163

862

138

2,598

Leased products

26,449

5,072

343

11,252

Investments accounted for using the equity method

212

Investments in non-consolidated subsidiaries

Participations

Non-current marketable securities

Other investments

251

–

263

–

113

489

–

543

1 Including the net cost of property, plant and equipment of entities consolidated for the first time (excluding the ICL Group)
2 Including assets under construction of € 718 million

–

994

–

156

1,150

8,488

374

1,007

9,869

8,166

26,802

2,312

2,605

39,885

517

635

11,883

33,295

125

117

–

117

514

205

571

–

776

407

– 504

– 2

– 1

– 13

–

464

– 565

– 41

–

1,727

–

1,805

567

183

775

8,392

374

1,039

9,805

7,758

25,625

2,160

992

36,535

11,160

31,956

–

302

222

501

–

723

109 GROUP FINANCIAL STATEMENTS

1. 1. 20121

4,004

558

4,567

Trans-
lation
differ-
ences

–

– 2

Depreciation and amortisation

Current
year

Reclassi-

Changes
fications not effect-
ing net
income

Dis-
posals

Reversal
of impair-
ment
losses

31. 12.
2012

Carrying amount

31. 12.
2012

31. 12.
2011

1,130

–

113

–

993

–

155

–

4,141

516

4,347

4,388

Development costs

369

491

369

Goodwill

481

Other intangible assets

1,243

–

1,148

–

4,662

5,207

5,238

Intangible assets

3,433

– 9

251

19,728

– 20

1,886

1,706

– 9

–

161

–

24,868

– 38

2,298

8,843

– 10

4,239

–

162

–

166

–

175

–

– 2

–

– 2

–

497

–

3,664

21,097

1,782

4,502

5,705

530
2,6042

4,335

Land, titles to land, buildings, including buildings on
third party land

5,896

Plant and machinery

463

Other facilities, factory and office equipment

991

Advance payments made and construction in progress

–

582

–

26,544

13,341

11,685

Property, plant and equipment

–

4,245

–

8,827

24,468

23,112

Leased products

–

– 68

–

– 68

–

170

–

228

514

302

Investments accounted for using the equity method

147

401

–

548

132

Investments in non-consolidated subsidiaries

429

Participations

–

Non-current marketable securities

561

Other investments

Depreciation and amortisation

1. 1. 2011

Acquisition
ICL Group

Current
year

Trans-
lation
differ-
ences

Reclassi-

Changes
fications not effect-
ing net
income

Dis-
posals

Reversal
of impair-
ment
losses

31. 12.
2011

Carrying amount

31. 12.
2011

31. 12.
2010

4,522

501

–

1,209

–

113

–

1,727

–

4,004

4,388

4,625

Development costs

558

369

481

111

Goodwill

295

Other intangible assets

5,028

1,322

–

1,805

–

4,567

5,238

5,031

Intangible assets

3,186

18,235

1,731

–

224

1,961

139

–

23,153

2,324

7,361

1,687

3,770

–

– 13

–

– 8

–

533

177

–

722

–

3,423

19,729

1,697

4,335

5,896

463
9912

4,385

Land, titles to land, buildings, including buildings on
third party land

5,931

Plant and machinery

412

Other facilities, factory and office equipment

699

Advance payments made and construction in progress

–

24,850

11,685

11,427

Property, plant and equipment

–

4,056

8,844

23,112

19,088

Leased products

–

162

302

212

Investments accounted for using the equity method

132

429

–

561

169

Investments in non-consolidated subsidiaries

Participations

–

Non-current marketable securities

177

Other investments

–

110

Intangible assets
Intangible assets mainly comprise capitalised develop-
ment costs on vehicle and engine projects as well as
subsidies for tool costs, licences, purchased develop-
ment projects, software and purchased customer bases.
Amortisation on intangible assets is presented in cost
of sales, selling expenses and administrative expenses.

In addition, intangible assets include a brand-name right
amounting to € 44 million (2011: € 43 million), goodwill
of € 33 million (2011: € 33 million) allocated to the Auto-
motive cash-generating unit (CGU) and goodwill of
€ 336 million (2011: € 336 million) allocated to the Finan-
cial Services CGU.

Intangible assets amounting to € 44 million (2011:
€ 43 million) are subject to restrictions on title.

As in the previous year, there was no requirement to
recognise impairment losses or reversals of impair-
ment losses on intangible assets in 2012.

No borrowing costs were recognised as a cost com-
ponent of intangible assets during the year under
report.

An analysis of changes in intangible assets is provided
in note 20.

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

Property, plant and equipment
No borrowing costs were recognised as a cost compo-
nent of property, plant and equipment during the year
under report.

As in the previous year, there was no requirement to
recognise impairment losses in 2012.

A break-down of the different classes of property, plant
and equipment disclosed in the balance sheet and
changes during the year are shown in the analysis of
changes in Group tangible, intangible and investment
assets in note 20.

Property, plant and equipment include a total of € 46 mil-
lion (2011: € 45 million) relating to land and operational
buildings used by BMW AG, BMW Tokyo Corp., BMW
Osaka Corp., and BMW of North America LLC, for
which economic ownership is attributable to the BMW

Group due to the nature of the lease arrangements
(finance leases). The leases to which BMW AG is party,
with a carrying amount of € 39 million (2011: € 41 mil-
lion) run for periods up to 2028 at the latest and contain
price adjustment clauses as well as extension and pur-
chase options. The asset leased by BMW Tokyo Corp.
has a carrying amount of € 3 million (2011: € – million)
under a lease with a remaining term of 19 years. BMW
Osaka Corp. is party to finance leases running until
2022 for operational buildings with a carrying amount
of € 2 million at 31 December 2012 (2011: € – million).
The finance lease contract accounted for at the level of
BMW of North America LLC has a remaining term of
three years and includes a purchase option for the un-
derlying asset which has a carrying amount of € 1 mil-
lion at 31 December 2012 (2011: € 1 million).

Minimum lease payments of the relevant leases are as
follows:

in € million

31. 12. 2012

31. 12. 2011

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

171

245

124

173

The decrease in minimum lease payments is primarily due to the early termination of finance leases relating to the
Hams Hall production plant.

111 GROUP FINANCIAL STATEMENTS

Leased products
The BMW Group, as lessor, leases out its own products
and those of other manufacturers as part of its finan-

cial services business. Minimum lease payments of
€ 12,797 million (2011: € 11,658 million) from non-can-
cellable operating leases fall due as follows:

in € million

within one year

between one and five years

later than five years

Minimum lease payments

31. 12. 2012

31. 12. 2011

6,215

6,570

12,797

5,749

5,900

11,658

Contingent rents of € 166 million (2011: € 174 million),
based principally on the distance driven, were recognised
in income. Some of the agreements contain price adjust-
ment clauses as well as extension and purchase options.

An analysis of changes in leased products is provided in
note 20.

Investments accounted for using the equity method
and other investments
Investments accounted for using the equity method
comprise the Group’s investments in the joint ventures
BMW Brilliance Automotive Ltd., Shenyang, SGL Auto-
motive Carbon Fibers GmbH & Co. KG, Munich, SGL
Automotive Carbon Fibers Verwaltungs GmbH, Munich,
SGL Automotive Carbon Fibers LLC, Dover, DE, Drive-
Now GmbH & Co. KG, Munich, and DriveNow Verwal-
tungs GmbH, Munich. The joint venture BMW Peugeot
Citroën Electrification B.V., The Hague, was terminated

at the end of November 2012, with the consequence that
only the Group’s share of earnings up to the date of
termination are included in the result from equity ac-
counted investments. In contrast to the end of the pre-
vious year, the joint venture BMW Peugeot Citroën
Electrification B.V., The Hague, is not included in the
balance sheet at 31 December 2012.

The Group’s share of results of joint ventures in 2012
and its accumulated interest in investments accounted
for using the equity method are as follows:

in € million

31. 12. 2012

31. 12. 2011

Disclosures relating to the income statement

Income

Expenses

Profit

Disclosures relating to the balance sheet

Non-current assets

Current assets

Equity

Non-current liabilities

Current liabilities

Balance sheet total

3,516

– 3,245

271

2,142

– 1,980

162

1,018

991

663

117

1,229

2,009

636

906

392

126

1,024

1,542

Capital commitments to the joint ventures SGL Auto-
motive Carbon Fibers GmbH & Co. KG, Munich, and
SGL Automotive Carbon Fibers LLC, Dover, DE, at
31 December 2012 totalled € 95 million.

Other investments relate to investments in non-con-
solidated subsidiaries, interests in associated companies
not accounted for using the equity method, participations
and non-current marketable securities.

112

Additions to investments in non-consolidated subsidiar-
ies relate primarily to a capital increase at the level of,
and purchase of the remaining shares of, BMW Peugeot
Citroën Electrification B. V., The Hague, on the one
hand and to a capital increase at the level of BMW Dis-
tribution S. A. S., Montigny-le-Bretonneux on the other.

Additions to participations relate primarily to the pur-
chase of available-for-sale marketable securities.

Disposals of investments in non-consolidated subsidiar-
ies primarily result from the first-time consolidation of
BMW India Financial Services Private Ltd., New Delhi,
and PT BMW Indonesia, Jakarta.

Impairment losses on participations – recognised with
income statement effect – related mainly to the invest-
ment in SGL Carbon SE, Wiesbaden, which was written
down after being tested for impairment.

The impairment loss of € 9 million on investments in non-
consolidated subsidiaries relates mainly to an invest-
ment in a dealership which was written down after being
tested for impairment.

A break-down of the different classes of other invest-
ments disclosed in the balance sheet and changes during
the year are shown in the analysis of changes in Group
tangible, intangible and investment assets in note 20.

25 Receivables from sales financing

Receivables from sales financing, totalling € 52,914 mil-
lion (2011: € 49,345 million), comprise € 40,650 million
(2011: € 38,295 million) for credit financing for retail

customers and dealers and € 12,264 million (2011:
€ 11,050 million) for finance leases. Finance leases are
analysed as follows:

in € million

31. 12. 2012

31. 12. 2011

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

4,580

8,938

118

13,636

4,094

8,060

110

12,264

4,217

7,933

102

12,252

3,725

7,233

11,050

Unrealised interest income

1,372

1,202

Contingent rents recognised as income (generally
relating to the distance driven) amounted to € 3 million
(2011: € 2 million). Write-downs on finance leases
amounting to € 149 million (2011: € 77 million) were
measured and recognised on the basis of specific credit
risks. Non-guaranteed residual values that fall to the

benefit of the lessor amounted to € 85 million (2011:
€ – million).

Receivables from sales financing include € 32,309 mil-
lion (2011: € 29,331 million) with a remaining term of
more than one year.

Allowance for impairment and credit risk

in € million

Gross carrying amount

Allowance for impairment

Net carrying amount

31. 12. 2012

31. 12. 2011

54,593

– 1,679

52,914

50,961

– 1,616

49,345

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

113 GROUP FINANCIAL STATEMENTS

Allowances for impairment on receivables from sales financing developed as follows during the year under report:

2012
in € 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

2011
in € 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

At the end of the reporting period, impairment allow-
ances of € 411 million (2011: € 262 million) were recog-
nised on a group basis on gross receivables from sales
financing totalling € 30,813 million (2011: € 28,991 mil-
lion). Impairment allowances of € 1,268 million (2011:
€ 1,354 million) were recognised at 31 December 2012
on a specific item basis on gross receivables from sales
financing totalling € 11,149 million (2011: € 10,981 million).

Receivables from sales financing which were not over-
due at the end of the reporting period amounted to

Allowance for impairment recognised on a
group basis

specific item basis

1,355

298

– 314

– 71

1,268

262

113

– 21

411

Allowance for impairment recognised on a
group basis

specific item basis

1,455

233

– 315

– 19

1,354

208

– 14

262

Total

1,617

411

– 335

– 14

1,679

Total

1,663

300

– 329

– 18

1,616

€ 12,631 million (2011: € 10,989 million). No impairment
losses were recognised for these balances.

The estimated fair value of collateral received for receiv-
ables on which impairment losses were recognised to-
talled € 21,649 million (2011: € 19,916 million) at the end
of the reporting period. This collateral related primarily
to vehicles. The carrying amount of assets held as col-
lateral and taken back as a result of payment default
amounted to € 37 million (2011: € 41 million).

26 Financial assets

Financial assets comprise:

in € 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. 2012

31. 12. 2011

2,992

2,655

234

835

6,760

2,148

4,612

2,358

2,330

249

493

5,453

1,702

3,751

The increase in derivative instruments was primarily
attributable to positive market price developments of
currency derivatives.

The rise in marketable securities and investment funds
reflects primarily an increase in the BMW Group’s
strategic liquidity reserve.

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

114

The amount by which the value of the investment funds
exceeds obligations for pre-retirement part-time work
arrangements (€ 57 million; 2011: € 30 million) is reported
under Other financial assets. Investment funds are held
to secure these obligations. These funds are managed by
BMW Trust e.V., Munich, as part of Contractual Trust

Arrangements (CTA) and are therefore netted against
the corresponding settlement arrears for pre-retirement
part-time work arrangements.

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

in € million

Stocks

Fixed income securities

Other debt securities

Marketable securities and investment funds

The contracted maturities of debt securities are as follows:

in € million

Fixed income securities

due within three months

due later than three months

Other debt 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 € million

Gross carrying amount

Allowance for impairment

Net carrying amount

31. 12. 2012

31. 12. 2011

2,566

2,655

2,329

–

2,330

31. 12. 2012

31. 12. 2011

161

2,405

–

241

2,088

–

2,603

2,329

31. 12. 2012

31. 12. 2011

247

– 13

234

267

– 18

249

Allowances for impairment losses on receivables relating to credit card business developed as follows during the
year under report:

2012
in € million

Balance at 1 January

Allocated / reversed

Utilised

Exchange rate impact and other changes

Balance at 31 December

2011
in € 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

– 13

–

Allowance for impairment recognised on a
group basis

specific item basis

– 18

–

Total

– 13

–

Total

– 18

115 GROUP FINANCIAL STATEMENTS

Income tax assets
Income tax assets totalling € 966 million (2011: € 1,194 mil-
lion) include claims amounting to € 638 million (2011:
€ 872 million) which are expected to be settled after more

than 12 months. Some of the claims may be settled
earlier than this depending on the timing of proceed-
ings.

28 Other assets

Other assets comprise:

in € 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

31. 12. 2012

31. 12. 2011

796

738

676

1,024

555

659

4,448

800

3,648

740

714

393

945

292

829

3,913

568

3,345

Receivables from subsidiaries include trade receivables
of € 189 million (2011: € 129 million) and financial re-
ceivables of € 549 million (2011: € 585 million). They in-
clude € 178 million (2011: € 116 million) with a remain-
ing term of more than one year.

Prepayments of € 1,024 million (2011: € 945 million) re-
late mainly to prepaid interest, insurance premiums
and commission paid to dealers. Prepayments of € 572 mil-
lion (2011: € 609 million) have a maturity of less than
one year.

Receivables from other companies in which an invest-
ment is held include € 608 million (2011: € 380 million)
due within one year.

Collateral receivables comprise mainly customary
collateral (bank deposits) arising on the sale of
receivables.

Inventories
Inventories comprise the following:

in € million

31. 12. 2012

31. 12. 2011

Raw materials and supplies

Work in progress, unbilled contracts

Finished goods and goods for resale

Inventories

786

827

8,112

9,725

704

908

8,026

9,638

At 31 December 2012, inventories measured at their net
realisable value amounted to € 639 million (2011: € 616 mil-
lion) and are included in total inventories of € 9,725 mil-
lion (2011: € 9,638 million). Write-downs to net realisable

value amounting to € 21 million (2011: € 28 million)
were recognised in 2012. There were no reversals of
write-downs in the year under report (2011: € 1 million).

116

Trade receivables
Trade receivables amounting in total to € 2,543 million (2011: € 3,286 million) include € 46 million due later than one
year (2011: € 37 million).

Allowance for impairment and credit risk

in € million

Gross carrying amount

Allowance for impairment

Net carrying amount

31. 12. 2012

31. 12. 2011

2,654

– 111

2,543

3,387

– 101

3,286

Allowances on trade receivables developed as following during the year under report:

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

2012
in € 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

2011
in € 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

– 6

– 4

105

– 2

–

Allowance for impairment recognised on a
group basis

specific item basis

– 8

– 5

– 2

Total

102

– 8

– 4

111

Total

– 13

– 1

101

Some trade receivables were overdue for which an impairment loss was not recognised. Overdue balances are
analysed into the following time windows:

in € million

1 – 30 days overdue

31 – 60 days overdue

61 – 90 days overdue

91 – 120 days overdue

More than 120 days overdue

31. 12. 2012

31. 12. 2011

139

247

140

242

Receivables that are overdue by between one and 30 days
do not normally result in bad debt losses since the over-
due 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 vehicle documents and bank guarantees so
that the risk of bad debt loss is extremely low.

Cash and cash equivalents
Cash and cash equivalents of € 8,370 million (2011: € 7,776 million) comprise cash on hand and at bank, all with an
original term of up to three months.

117 GROUP FINANCIAL STATEMENTS

Assets held for sale and liabilities in conjunction
with assets held for sale
In the fourth quarter of the financial year 2012 the Board
of Management of BMW AG decided to realign its stra-
tegic direction for the Motorcycles segment in view of
the changing nature of motorcycle markets, demographic
developments and stricter environmental requirements.
The BMW Group intends to broaden its product range,
in particular in the fields of urban mobility and e-mo-
bility, in order to open up future growth opportunities.
In line with the decision to focus on the BMW Motorrad
brand, and considering the declining size of the rele-
vant markets, it is considered a sensible move to sell the
Husqvarna Motorcycles brand.

In December 2012, BMW AG, Munich, and Pierer Industrie
AG, Wels, reached agreement with regard to the sale of
Husqvarna Motorcycles S.r.l., Cassinetta di Biandronno,
and Husqvarna Motorcycles NA, LLC, Wilmington, DE,
to Pierer Industrie AG, Wels. Subject to approval of the
transaction by the Austrian Merger Control Authorities,
the sale will be completed during the first half of 2013.

At 31 December 2012, the Husqvarna Group accordingly
meets the criteria for classification as a “disposal group”
in accordance with IFRS 5. The carrying amount of prop-
erty, plant and equipment and intangible assets attribut-
able to the Husqvarna Group has been written down
to fair value less costs to sell. All assets of the Husqvarna
Group are reported separately in the balance sheet on
the line “Assets held for sale” within the Motorcycles seg-
ment. Similarly, its liabilities are reported separately in
the balance sheet on the line “Liabilities in conjunction
with assets held for sale” within the Motorcycles segment.
The remeasurement of assets in accordance with IFRS 5
resulted in the recognition of an impairment loss of
€ 13 million on property, plant and equipment which is
reported in “Other operating expenses”.

Assets held for sale comprise mainly inventories (€ 24 mil-
lion), other assets (€ 10 million) and trade receivables
(€ 11 million). Liabilities in conjunction with assets held
for sale comprise mainly pension provisions (€ 2 million),
other provisions (€ 7 million), trade payables (€ 16 mil-
lion) and other liabilities (€ 3 million).

33 Equity

Number of shares issued

Preferred stock

Common stock

2012

2011

2012

2011

Shares issued / in circulation at 1 January

53,571,372

53,163,412

601,995,196

Shares issued in conjunction with Employee Share Scheme

422,905

408,140

less: shares repurchased and re-issued

180

–

Shares issued / in circulation at 31 December

53,994,217

53,571,372

601,995,196

At 31 December 2012 common stock issued by BMW AG
was divided, as at the end of the previous year, into
601,995,196 shares of common stock with a par-value of
€ 1. Preferred stock issued by BMW AG was divided into
53,994,217 shares (2011: 53,571,372 shares) with a par-
value of € 1. 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 addi-
tional dividend of € 0.02 per share.

In 2012, a total of 422,905 shares of preferred stock was
sold to employees at a reduced price of € 31.45 per share
in conjunction with an Employee Share Scheme. These
shares are entitled to receive dividends with effect from
the financial year 2013. 60 shares of preferred stock were
bought back via the stock exchange in conjunction with
the Company’s Employee Share Scheme.

Further information on share-based remuneration is pro-
vided in note 18.

Issued share capital increased by € 0.4 million as a result
of the issue to employees of 422,845 shares of non-voting
preferred stock. The Authorised Capital of BMW AG
amounted to € 3.2 million at the end of the reporting
period. The Company is authorised to issue shares of
non-voting preferred stock amounting to nominal
€ 5.0 million prior to 13 May 2014. The share premium
of € 18.2 million arising on the share capital increase in
2012 was transferred to capital reserves.

Capital reserves
Capital reserves include premiums arising from the
issue of shares and totalled € 1,973 million (2011:
€ 1,955 million). The change related to the share capital

118

increase in conjunction with the issue of shares of pre-
ferred stock to employees.

Revenue reserves
Revenue reserves comprise the post-acquisition and
non-distributed earnings of consolidated companies. In
addition, actuarial gains and losses relating to defined
benefit pension obligations, similar obligations and plan
assets (as well as deferred taxes recognised directly in
equity on these items) are also reported here, along with
positive and negative goodwill arising on the consoli-
dation of Group companies prior to 31 December 1994.

Revenue reserves increased during the year to € 28,340
million. They were increased by the amount of the net
profit attributable to shareholders of BMW AG for the
financial year 2012 amounting to € 5,096 million (2011:
€ 4,881 million) and reduced by the payment of the
dividend for 2011 amounting to € 1,508 million (2011:
€ 852 million). Actuarial losses relating to defined bene-
fit pension obligations, similar obligations and plan
assets (and related deferred taxes) reduced revenue re-
serves in 2012 by € 1,350 million (2011: € 419 million).

The unappropriated profit of BMW AG at 31 December
2012 amounts to € 1,640 million and will be proposed
to the Annual General Meeting for distribution. This
amount includes € 135 million relating to preferred stock.
The amount proposed for distribution represents an
amount of € 2.52 per share of preferred stock and € 2.50
per share of common stock. The proposed distribution
must be authorised by the shareholders at the Annual
General Meeting of BMW AG. It is therefore not recog-
nised as a liability in the Group Financial Statements.

the financial statements of foreign subsidiaries, the
effects of recognising changes in the fair value of deriva-
tive financial instruments and marketable securities
directly in equity and the related deferred taxes recog-
nised directly in equity.

Minority interests
Equity attributable to minority interests amounted to
€ 107 million (2011: € 65 million). This includes a mi-
nority interest of € 26 million in the results for the year
(2011: € 26 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 ade-
quate return to shareholders.

The BMW Group manages the capital structure and
makes adjustments to it in the light of changes in
economic conditions and the risk profile of the under-
lying assets.

In order to manage its capital structure, the BMW Group
uses various instruments including the amount of divi-
dends paid to shareholders and share buy-backs.

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 financ-
ing requirements. 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 opti-
mal diversification.

Accumulated other equity
Accumulated other equity comprises all amounts recog-
nised directly in equity resulting from the translation of

The capital structure at the end of the reporting period
was as follows:

in € million

31. 12. 2012

31. 12. 2011

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

30,295

30.4 %

39,095

30,412

69,507

69.6 %

99,802

27,038

28.5 %

37,597

30,380

67,977

71.5 %

95,015

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

119 GROUP FINANCIAL STATEMENTS

Equity attributable to shareholders of BMW AG in-
creased during the financial year by 1.9 percentage
points, mainly owing to the high net profit recorded
for the year.

BMW AG’s long-term and short-term ratings were raised
by one level in April 2012 by the rating agency Standard
& Poor’s from A– /A-2 to A /A-1 with a stable outlook.

This means that BMW AG currently enjoys the best rat-
ings of all European car manufacturers.

The improved rating and outlook reflect the worldwide
rise in demand for premium cars, the successful im-
plementation of measures in conjunction with Strategy
Number ONE and the stable financial position of the
BMW Group.

Non-current financial liabilities

Current financial liabilities

Outlook

Moody’s

Standard & Poor’s

P-1

stable

A-1

stable

With their current long-term ratings of A (S & P) and A2
(Moody’s), the agencies continue to confirm BMW AG’s
robust creditworthiness for debt with a term of more
than one year. BMW AG’s creditworthiness for short-term

debt is also classified by the rating agencies as good,
thus enabling it to obtain refinancing funds on competi-
tive conditions.

Pension provisions
Pension provisions are recognised as a result of com-
mitments to pay future vested pension benefits and
current pensions to present and former employees of
the BMW Group and their dependants. Depending on
the legal, economic and tax circumstances prevailing
in each country, various pension plans are used, based
generally on the length of service, final salary and re-
muneration 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-employment medical care
are also disclosed as pension provisions in accordance
with IAS 19.

Post-employment benefit plans are classified as either
defined contribution or defined benefit plans. Under
defined 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 defined contribution plans of the BMW
Group amounted to € 47 million (2011: € 40 million).

Employer contributions paid to state pension insur-
ance schemes totalled € 444 million (2011: € 400 mil-
lion).

Under defined benefit plans, the enterprise is required
to pay the benefits granted to present and past em-
ployees. Defined benefit plans may be funded or un-
funded, the latter sometimes covered by accounting
provisions. Pension commitments in Germany are
mostly covered by assets contributed to a separate
fund in conjunction with a Contractual Trust Arrange-
ment (CTA). The main other countries with funded
plans were the UK, the USA, Switzerland, the Nether-
lands, Belgium, South Africa and Japan. Obligations
not covered by assets held by the fund are covered by
pension provisions.

Pension obligations are computed on an actuarial basis
at the level of the defined benefit obligation. The actuarial
computation requires the use of estimates, based on
assumptions relating to life expectancy and the parame-
ters stated below that depend on the economic situation

120

in each particular country. The following weighted average values have been used for Germany, the UK and other
countries:

31 December

in %

Discount rate

Salary level trend

Pension level trend

Germany

2012

2011

United Kingdom

2012

2011

Other

2012

2011

3.00

3.18

2.18

4.75

3.35

2.35

4.25

3.50

2.92

4.75

3.65

3.09

3.82

3.57

1.84

4.57

3.43

1.59

The salary level trend refers to the expected rate of
salary increase which is estimated annually depending
on inflation and the career development of employees
within the Group.

In the case of externally funded plans, the defined bene-
fit obligation is offset against plan assets measured at
their fair value. Where the plan assets exceed the pen-
sion obligations and the enterprise has a right of reim-
bursement 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 externally funded plans, a liability is rec-
ognised under pension provisions where the benefit ob-
ligation exceeds fund assets.

Actuarial gains or losses may result from increases or
decreases in either the present value of the defined ben-
efit obligation or the fair value of the plan assets. Causes
of actuarial gains or losses include the effect of changes
in the measurement parameters, changes in estimates
caused by the actual development of risks impacting on
pension obligations and differences between the actual
and expected return on plan assets. Actuarial gains or
losses are recognised directly in revenue reserves within
equity. Past service cost arises where a BMW Group com-
pany introduces a defined benefit 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 pension plans:

31 December

in € million

Germany

United Kingdom

Other

Total

2012

2011

2012

2011

2012

2011

2012

2011

Present value of pension benefits covered by
accounting provisions

–

110

113

Present value of funded pension benefits

7,971

5,616

7,280

6,676

1,038

825 16,289

13,117

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

7,974

5,618

7,280

6,676

1,148

918 16,402

13,212

6,064

5,178

5,782

5,376

1,910

440

1,498

1,300

–

602

546

485 12,448

11,039

433

3,954

2,173

Balance sheet amounts at 31 December

1,910

440

1,498

1,300

556

442

3,964

2,182

thereof pension provision

thereof assets

1,910

440

1,498

1,300

–

557

– 1

443

3,965

2,183

– 1

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

121 GROUP FINANCIAL STATEMENTS

Pension provisions relating to pension plans in other
countries amounted to € 557 million (2011: € 443 million).
This includes € 447 million (2011: € 350 million) relating
to externally funded plans. The provision for pension-
like obligations for post-employment medical care in the
USA and South Africa amounts to € 119 million (2011:
€ 120 million) and is measured, similar to pension obli-
gations, 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
obligations in the financial year 2012 was € 12 million
(2011: € 9 million).

The increase in defined benefit obligations results mainly
from the change in the discount rate used for the actu-
arial computation in Germany, the UK and the USA.
The impact of this on pension provisions was not fully
offset by the better-than-expected return on fund assets
in these countries.

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

in € million

2012

2011

2012

2011

2012

2011

2012

2011

Germany

United Kingdom

Other

Total

Balance sheet amounts at 1 January

Effect of first-time consolidation

Expense from pension obligations

440

–

167

–

189

1,300

1,202

442

275

2,182

1,562

–

133

–

113

366

349

Pension payments or transfers to external funds

– 277

– 153

– 109

– 101

– 71

– 61

– 457

– 315

Actuarial gains (–) and losses (+)
on defined benefit obligations

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

Employee contributions

Translation differences and other changes

2,046

– 466

–

– 18

309

376

334

– 170

– 328

–

Balance sheet amounts at 31 December

1,910

440

1,498

1,300

thereof pension provision

thereof assets

1,910

440

1,498

1,300

–

166

– 33

–

– 16

556

557

– 1

135

2,521

493

–

– 669

–

442

3,964

2,182

443

3,965

2,183

– 1

The defined benefit plans of the BMW Group gave rise
to an expense from pension obligations in the financial

year 2012 of € 366 million (2011: € 349 million), compris-
ing the following components:

in € million

Current service cost

Expense from reversing the discounting of pension obligations

Past service cost

Expected return on plan assets

Germany

United Kingdom

Other

Total

2012

2011

2012

2011

2012

2011

2012

2011

148

264

142

248

321

311

– 12

– 3

267

628

–

240

594

– 247

– 249

– 260

– 249

– 22

– 24

– 529

– 522

Expense from pension obligations

167

189

133

113

366

349

122

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 income statement under costs by function.

Depending on the cash flow profile and risk structure
of the pension obligations involved, pension plan assets
are invested in various investment classes, the most
predominant one being bonds. The asset portfolio also

includes equity instruments, property and alternative
investments. 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. This approach resulted in the following expected
rates of return on plan assets (disclosed on the basis of
weighted averages):

in %

Germany

2012

2011

United Kingdom

2012

2011

Other

2012

2011

Expected rate of return on plan assets

4.75

5.30

4.48

5.35

Compared to the expected return of € 529 million (2011:
€ 522 million), fund assets actually increased in the
financial year 2012 by € 1,198 million (2011: increase in
fund assets of € 485 million), giving rise to actuarial
gains on fund assets of € 669 million (2011: actuarial
losses of € 37 million). Actuarial losses on obligations
amounted to € 2,521 million in 2012 (2011: actuarial
losses of € 493 million) and related mainly to the lower
discount rates used in Germany, the UK and the USA.
At 31 December 2012, accumulated actuarial gains and
losses arising on defined benefit pension and similar
obligations and on plan assets totalled € 4,976 million
(2011: € 3,095 million).

The level of the pension obligations differs depending
on the pension system applicable in each country. Since
the state pension system in the UK only provides a low
fixed amount benefit, retirement benefits are largely
organised in the form of company pensions on the one
hand and arrangements financed by the individual on
the other. The pension benefits in the UK therefore con-
tain contributions made by the employee.

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

Germany

in € million

1 January

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

2012

2011

2012

2011

2012

2011

5,618

5,292

– 5,178

– 5,207

440

414

–

– 143

2,046

–

438

–

– 131

– 18

–

– 247

– 249

– 153

– 39

– 466

–

– 32

– 34

334

–

167

– 153

–

– 124

1,580

–

1,910

189

– 32

– 121

316

–

440

31 December

7,974

5,618

– 6,064

– 5,178

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

123 GROUP FINANCIAL STATEMENTS

United Kingdom

in € million

1 January

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

2012

2011

2012

2011

2012

2011

6,676

6,014

– 5,376

– 4,812

1,300

1,202

393

362

–

– 280

– 276

309

181

376

199

– 260

– 249

– 109

– 101

– 1

280

– 170

– 146

– 1

276

– 328

– 161

133

113

– 109

– 101

–

139

–

31 December

7,280

6,676

– 5,782

– 5,376

1,498

1,300

Other

in € million

1 January

Effect of first-time consolidation

Expense from pension obligations and
expected return on plan assets

Payments to external funds

Employee contributions

Defined benefit obligation

Plan assets

Net obligation

2012

2011

2012

2011

2012

2011

918

–

702

–

– 485

– 436

–

– 3

– 22

– 67

– 4

– 33

– 9

– 602

– 24

– 56

– 2

– 13

– 485

433

– 67

–

– 4

133

– 17

546

266

– 56

–

– 5

166

433

Payments on account and pension payments

– 22

– 23

Actuarial gains (–) and losses (+)

Translation differences and other changes

31 December

166

– 8

1,148

135

918

Plan assets in Germany, the UK and other countries comprised the following:

Components of plan assets

in € million

2012

2011

2012

2011

2012

2011

2012

2011

Germany

United Kingdom

Other countries

Total

Equity instruments

Debt securities

Real estate

Other

31 December

1,447

4,277

256

1,384

3,556

162

1,091

3,441

532

718

1,055

2,927

501

893

6,064

5,178

5,782

5,376

184

268

602

211

183

485

2,722

7,986

680

2,650

6,666

617

1,060

1,106

12,448

11,039

A substantial portion of plan assets is invested in debt
securities 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 necessary to cover risks (such as changes

in morbidity tables) not taken into account in the ac-
tuarial assumptions applied. The financial risk of pen-
sion payments having to be made for longer than the
calculated period is also hedged for pensioners in the UK
by a so-called longevity hedge.

124

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 € million

2012

2011

2010

2009

2008

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

16,402

12,448

3,954

2,521

– 669

13,212

11,039

2,173

493

12,008

10,455

1,553

459

– 227

10,931

7,977

2,954

1,464

– 289

8,788

5,491

3,297

– 919

868

Actuarial gains on benefit obligations, mostly attribut-
able to experience adjustments, amounted to € 279 mil-
lion (2011: actuarial gains of € 60 million). Experience

adjustments relating to fund assets also resulted in actu-
arial gains of € 669 million in the financial year under re-
port (2011: actuarial losses of € 23 million).

35 Other provisions

Other provisions comprise the following items:

in € million

31. 12. 2012

31. 12. 2011

Obligations for personnel and social expenses

Obligations for ongoing operational expenses

Other obligations

Other provisions

Total

1,719

3,177

1,899

6,795

thereof
due within
one year

1,234

924

1,124

3,282

Total

1,632

2,953

1,668

6,253

thereof
due within
one year

1,190

1,023

891

3,104

Provisions for obligations for personnel and social ex-
penses comprise mainly performance-related remunera-
tion components, early retirement part-time working
arrangements and employee long-service awards. Obli-
gations for performance-related remuneration compo-
nents are normally settled in the following financial year.
Provisions for obligations for on-going operational ex-
penses comprise primarily warranty obligations and com-
prise both statutorily prescribed manufacturer warran-

ties and other guaranties offered by the BMW Group.
Depending on when claims are made, it is possible that
the BMW Group may be called upon to fulfil obligations
over the whole period of the warranty or guarantee.
Provisions for other obligations cover numerous specific
risks and obligations of uncertain timing and amount,
in particular for litigation and liability risks.

Other provisions changed during the year as follows:

in € million

1.1. 2012* Translation
differences

Additions

Reversal of
discounting

Utilised

Reversed

31. 12. 2012

Obligations for personnel and social expenses

Obligations for ongoing operational expenses

Other obligations

Other provisions

1,632

2,953

1,677

6,262

– 3

– 26

– 16

– 45

1,346

1,119

626

3,091

– 1,226

– 848

– 254

– 2,328

– 31

– 60

– 152

– 243

1,719

3,177

1,899

6,795

* including entities consolidated for the first time during the financial year

Income from the reversal of other provisions amounting to € 129 million (2011: € 308 million) is included in costs by
function in the income statement.

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

125 GROUP FINANCIAL STATEMENTS

Income tax liabilities
Current income tax liabilities totalling € 1,482 million
(2011: € 1,363 million) include claims amounting to € 806
million (2011: € 807 million) which are expected to be
settled after more than twelve months. Some of the lia-
bilities may be settled earlier than this depending on
the timing of proceedings.

Current tax liabilities of € 1,482 million (2011: € 1,363
million) comprise € 438 million (2011: € 122 million) for
taxes payable and € 1,044 million (2011: € 1,241 million)
for tax provisions. In 2012, tax provisions of € 23 million
were reversed (2011: € 27 million).

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 2012
in € million

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Other

Financial liabilities

31 December 2011
in € 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

7,427

4,595

10,076

4,577

2,097

865

775

17,234

4,232

2,942

–

7,212

903

233

5,191

657

–

102

367

Total

29,852

9,484

13,018

4,577

9,411

1,790

1,375

30,412

32,756

6,339

69,507

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

8,009

2,983

8,928

5,478

3,152

999

831

16,069

5,166

3,090

–

6,233

1,456

397

30,380

32,411

4,495

249

–

395

5,186

Total

28,573

8,398

12,041

5,478

9,385

2,479

1,623

67,977

The BMW Group uses various short-term and long-term
refinancing instruments on money and capital markets
to finance its operations. This diversification enables it to
obtain attractive market conditions.

Customer deposit liabilities arise in the BMW Group’s
banks in Germany and the USA, both of which offer a
range of investment products.

The main instruments used are corporate bonds, asset-
backed financing transactions, liabilities to banks and
liabilities from customer deposits (banking).

126

Bonds comprise:

Issuer

BMW Finance N. V., The Hague

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

BMW (UK) Capital plc, Bracknell

Notes
86

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

100

107

108
129
145

BMW US Capital, LLC, Wilmington, DE

BMW Australia Finance Ltd., Melbourne, Victoria

Other

78
78
78

80
82
84

Interest

variable

fixed

variable

fixed

variable

fixed

variable

fixed

variable

fixed

Issue volume
in relevant currency
(ISO-Code)

Weighted
average maturity
period (in years)

Weighted
average nominal
interest rate (in %)

AUD 200 million

EUR 1,240 million

HKD 300 million

JPY 12,500 million

SEK 2,640 million

USD 530 million

AUD 550 million

CAD 125 million

CHF 300 million

EUR 13,357 million

GBP 1,050 million

HKD 836 million

JPY 22,500 million

NOK 6,850 million

NZD 100 million

SEK 1,000 million

EUR 100 million

JPY 18,900 million

CHF 500 million

GBP 300 million

JPY 24,000 million

EUR 372 million

MXN 405 million

SEK 1,350 million

USD 355 million

CHF 325 million

EUR 3,250 million

MXN 725 million

NOK 1,500 million

USD 795 million

EUR 202 million

SEK 600 million

USD 175 million

AUD 230 million

CHF 200 million

JPY 11,000 million

USD 100 million

JPY 29,200 million

ZAR 600 million

INR 8,000 million

CAD 2,275 million

JPY 10,000 million

KRW 100,000 million

1.5

2.1

3.0

1.8

1.7

3.6

2.0

6.0

6.9

3.0

1.4

3.2

3.0

5.0

8.0

5.0

1.8

0.1

1.7

2.2

0.1

2.9

4.6

1.4

2.8

1.7

3.0

2.0

2.5

3.0

3.6

8.5

3.0

4.2

0.6

1.3

0.8

2.3

0.9

6.3

2.2

1.8

4.0

3.9

2.0

0.9

3.8

4.8

3.8

0.2

2.1

5.0

2.5

0.5

4.8

2.0

0.9

3.6

4.1

7.9

2.4

5.3

0.2

1.4

0.4

6.3

1.0

0.5

1.1

0.4

6.6

10.1

2.8

1.4

3.9

127 GROUP FINANCIAL STATEMENTS

The following details apply to the commercial paper:

Issuer

BMW AG, Munich

BMW Finance N. V., The Hague

BMW Malta Finance Ltd., St. Julians

BMW US Capital, LLC, Wilmington, DE

Other liabilities
Other liabilities comprise the following items:

31 December 2012
in € 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 2011
in € 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

Issue volume
in relevant currency
(ISO-Code)

Weighted
average maturity
period (in days)

Weighted
average nominal
interest rate (in %)

GBP 275 million

USD 200 million

EUR 2,175 million

EUR 100 million

USD 2,395 million

92.4

74.5

34.2

59.0

36.2

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

697

603

355

236

1,496

3,358

6,792

–

2,704

157

3,041

–

312

363

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

545

1,810

155

177

1,411

2,864

7,026

–

2,377

2,611

–

280

300

0.5

0.3

0.1

0.2

Total

713

668

466

236

4,512

3,524

10,196

Total

548

1,858

231

178

4,068

2,962

9,937

128

Deferred income comprises the following items:

in € million

31. 12. 2012

31. 12. 2011

Deferred income from lease financing

Deferred income relating to service contracts

Grants

Other deferred income

Deferred income

Total

1,743

2,478

196

4,512

thereof
due within
one year

791

615

1,496

Total

1,564

2,203

223

4,068

thereof
due within
one year

731

570

1,411

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 and which
have been invested in the production plants in Leipzig
and Berlin. The grants are subject to holding periods for

the assets concerned of up to five years and minimum
employment figures. All conditions attached to the
grants were complied with at 31 December 2012. In ac-
cordance with IAS 20, grant income is recognised over
the useful lives of the assets to which they relate. Other
deferred income includes primarily the effects of the
initial measurement of financial instruments.

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

Total

Trade payables

6,424

–

6,433

31 December 2011
in € million

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

Total

Trade payables

5,295

5,340

The total amount of financial liabilities, other liabilities and trade payables with a maturity later than five years
amounts to € 6,702 million (2011: € 5,488 million).

Trade payables

31 December 2012
in € million

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

129 GROUP FINANCIAL STATEMENTS

BMW Group
Notes to the Group Financial Statements
Other Disclosures

40 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 € million

Guarantees

Performance guarantees

Other

Contingent liabilities

31. 12. 2012

31. 12. 2011

–

138

Contingent liabilities relate entirely to non-group entities.

The usual commercial guarantees have been given in re-
lation to the sale of Rover Cars and Land Rover activities.

Other financial obligations
In addition to liabilities, provisions and contingent lia-
bilities, the BMW Group also has other financial com-
mitments, primarily under lease contracts for land,
buildings, plant and machinery, tools, office and other

facilities. The leases run for periods of one to 46 years
and in some cases contain extension and / or purchase
options. In 2012 an amount of € 296 million (2011:
€ 208 million) was recognised as an expense in conjunc-
tion with operating leases. All of these amounts relate
to minimum lease payments.

The total of future minimum lease payments under non-
cancellable and other operating leases can be analysed
by maturity as follows:

in € million

31. 12. 2012

31. 12. 2011

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

320

805

585

1,710

297

704

663

1,664

Other financial obligations include € 19 million (2011:
€ 10 million) in respect of non-consolidated subsidiaries
and € 2 million (2011: € 1 million) for back-to-back
operating leases.

Purchase commitments amounted to € 3,010 million
(2011: € 1,654 million) for property, plant and equip-
ment and to € 440 million (2011: € 186 million) for
intangible assets.

130

41 Financial instruments

The carrying amounts and fair values of financial instruments are assigned to IAS 39 categories and cash funds1
as follows:

31 December 2012
in € million

Cash funds

Loans
and receivables

Held-to-maturity
investments

Fair value

Carrying
amount

Fair value

Carrying
amount

Fair value

Carrying
amount

–

Assets

Other investments

Receivables from sales financing

Financial assets

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

–

Cash and cash equivalents

8,370

–

54,374

52,914

–

234

835

–

234

835

–

Trade receivables

Other assets

Receivables from subsidiaries

Receivables from companies in which
an investment is held

Collateral receivables

Other

Total

Liabilities

Financial liabilities

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Other

Trade payables

Other liabilities

Payables to subsidiaries

Payables to other companies in which
an investment is held

Other

Total

–

398

–

8,768

–

398

–

2,543

738

676

–

205

738

676

–

205

8,768

59,649

58,189

–

1 The carrying amounts of cash flow and fair value hedges are allocated to the category “Held for trading” for the sake of clarity.
2 Carrying amount corresponds to fair value.

–

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

131 GROUP FINANCIAL STATEMENTS

Other liabilities

Available-
for-sale

Fair value
option

Held for
trading

Fair value

Carrying
amount

Carrying
amount 2

–

29,966

9,484

13,098

4,577

9,369

–

1,375

6,433

29,852

9,484

13,018

4,577

9,411

–

1,375

6,433

236

4,084

78,623

4,084

78,471

548

–

2,655

–

157

–

3,360

–

925

1,457

610

–

Assets

Other investments

Receivables from sales financing

Financial assets

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

Cash and cash equivalents

Trade receivables

Other assets

Receivables from subsidiaries

Receivables from companies in which
an investment is held

Collateral receivables

Other

–

2,992

Total

Liabilities

Financial liabilities

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Other

Trade payables

Other liabilities

Payables to subsidiaries

Payables to other companies in which
an investment is held

Other

–

701

320

769

–

1,790

Total

132

31 December 2011
in € million

Cash funds

Loans
and receivables

Held-to-maturity
investments

Fair value

Carrying
amount

Fair value

Carrying
amount

Fair value

Carrying
amount

Assets

Other investments

Receivables from sales financing

Financial assets

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

–

Cash and cash equivalents

7,776

–

50,969

–

49,345

–

249

493

–

249

493

–

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Trade receivables

Other assets

Receivables from subsidiaries

Receivables from companies in which
an investment is held

Collateral receivables

Notes
86

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

100

107

108
129
145

Other

Total

Liabilities

Financial liabilities

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Other

Trade payables

Other liabilities

Payables to subsidiaries

Payables to other companies in which
an investment is held

Other

Total

* Carrying amount corresponds to fair value.

–

292

–

8,068

–

292

–

3,286

714

393

–

282

714

393

–

282

8,068

56,409

54,785

–

133 GROUP FINANCIAL STATEMENTS

Other liabilities

Available-
for-sale

Fair value
option

Held for
trading

Fair value

Carrying
amount

Carrying
amount *

–

561

–

2,330

–

281

1,230

847

–

Assets

Other investments

Receivables from sales financing

Financial assets

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Marketable securities and investment funds

Loans to third parties

Credit card receivables

Other

Cash and cash equivalents

Trade receivables

Other assets

Receivables from subsidiaries

Receivables from companies in which
an investment is held

Collateral receivables

Other

–

2,891

–

2,358

Total

28,686

8,398

12,127

5,478

9,337

–

1,623

5,340

178

4,497

75,689

28,573

8,398

12,041

5,478

9,385

–

1,623

5,340

178

4,497

75,538

Liabilities

Financial liabilities

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Cash flow hedges

Fair value hedges

Other derivative instruments

Other

Trade payables

Other liabilities

Payables to subsidiaries

Payables to other companies in which
an investment is held

Other

–

1,259

347

873

–

2,479

Total

134

Fair value measurement of financial instruments
The fair values shown are computed using market in-
formation available at the balance sheet date, on the
basis of prices quoted by the contract partners or using

appropriate measurement methods, e. g. discounted
cash flow models. In the latter case, amounts were
discounted at 31 December 2012 on the basis of the fol-
lowing interest rates:

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

0.10

0.77

1.61

0.21

0.23

0.84

1.82

0.49

1.03

1.92

0.16

0.24

0.30

0.84

Interest rates taken from interest rate curves were ad-
justed, where necessary, to take account of the credit
quality and risk of the underlying financial instrument.

Financial instruments measured at fair value are allo-
cated 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 instru-
ments are determined using measurement models, as
a consequence of which there is a risk that the amounts
calculated could differ from realisable market prices
on disposal. Observable financial market price spreads
(e. g. for liquidity risks) are taken into account in the
measurement of derivative financial instruments, thus
helping to minimise differences between the carrying
amounts of the instruments and the amounts that can
be realised on the financial markets on the disposal of
those instruments.

1. measured at their fair values in an active market for

identical financial instruments (level 1),

2. measured at their fair values in an active market for
comparable financial instruments or using measure-
ment models whose main input factors are based on
observable market data (level 2) or

3. using input factors not based on observable market

data (level 3).

The following table shows the amounts allocated to
each measurement level at 31 December 2012:

31 December 2012
in € million

Marketable securities, investment fund shares and collateral assets – available-for-sale

Other investments – available-for-sale

Derivative instruments (assets)

Cash flow hedges

Fair value hedges

Other derivative instruments

Derivative instruments (liabilities)

Cash flow hedges

Fair value hedges

Other derivative instruments

Level hierarchy in accordance with IFRS 7
Level 2

Level 3

Level 1

2,812

391

–

925

1,457

610

701

320

769

–

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

135 GROUP FINANCIAL STATEMENTS

31 December 2011
in € million

Marketable securities, investment fund shares and collateral assets – available-for-sale

Other investments – available-for-sale

Derivative instruments (assets)

Cash flow hedges

Fair value hedges

Other derivative instruments

Derivative instruments (liabilities)

Cash flow hedges

Fair value hedges

Other derivative instruments

Level hierarchy in accordance with IFRS 7
Level 2

Level 3

Level 1

2,330

419

–

281

1,230

827

1,259

347

873

–

Other investments (available-for-sale) amounting to
€ 157 million (2011: € 142 million) are measured at amor-
tised cost since quoted market prices are not available
or cannot be determined reliably. These are therefore not
included in the level hierarchy shown above. In addition,
other investments amounting to € 391 million (2011:
€ 419 million) are measured at fair value since quoted
market prices are available. These items are included in
Level 1. The option to an equity instrument classified
to Level 3 in 2011 was converted to cash in 2012.

As in the previous year, there were no significant reclas-
sifications within the level hierarchy during the financial
year 2012.

Gains and losses on financial instruments
The following table shows the net gains and losses arising
for each of the categories of financial instrument defined
by IAS 39:

in € million

Held for trading

2012

2011

Gains / losses from the use of derivative instruments

– 278

– 565

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

– 145

– 61

169

108

– 440

– 61

– 13

– 70

– 8

– 61

– 340

– 101

– 115

– 91

Gains / losses from the use of derivatives relate pri-
marily to fair value gains or losses arising on stand-
alone derivatives.

equity, were recognised as expenses in 2012. No rever-
sals of impairment losses on marketable securities
were recognised directly in equity (2011: € 2 million).

Net interest income from interest rate and interest
rate / currency swaps amounted to € 111 million (2011:
€ 57 million).

Impairment losses of € 166 million (2011: € 4 million) on
available-for-sale marketable securities, for which fair
value changes were previously recognised directly in

The disclosure of interest income resulting from the un-
winding of interest on future expected receipts would
normally only be relevant for the BMW Group where
assets have been discounted as part of the process of de-
termining impairment losses. However, as a result of
the assumption that most of the income that is subse-
quently recovered is received within one year and the

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

136

fact that the impact is not material, the BMW Group
does not discount assets for the purposes of determin-
ing impairment losses.

Cash flow hedges
The effect of cash flow hedges on accumulated other
equity was as follows:

in € 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

2012

2011

– 750

952

532

202

– 127

– 623

– 68

– 750

Fair value gains and losses recognised on derivatives and
recorded initially in accumulated other equity are re-
classified to cost of sales when the derivatives mature.

A net positive amount of € 1 million (2011: net negative
amount of € 2 million) attributable to forecasting errors
(and the resulting over-hedging of currency exposures)
was recognised within the line item “Financial Result” in
the financial year 2012. These forecasting errors, which all
related to the year under report, arise primarily as a result
of changes in sales forecasts in foreign currencies. In addi-
tion, cash flow hedges of raw materials gave rise to a net
expense of € 8 million (2011: € – million) from forecasting
errors and net income of € 67 million (2011: net expense
of € 52 million) from ineffectiveness, which were also rec-
ognised within the line item “Financial Result”.

At 31 December 2012 the BMW Group held derivative
instruments (mainly option and forward currency con-
tracts) with terms of up to 72 months (2011: 54 months),
as a general rule in order to hedge currency risks at-
tached to future transactions. These derivative instru-
ments are intended to hedge forecast sales denominated
in a foreign currency over the coming 72 months. The
income statement impact of the hedged cash flows will
be recognised as a general rule in the same periods in
which external revenues are recognised. It is expected
that € 26 million of net gains, recognised in equity at
the end of the reporting period, will be recognised in
the income statement in 2013.

At 31 December 2012 the BMW Group held derivative
instruments (mostly interest rate swaps) with terms
of up to 25 months (2011: 60 months) to hedge interest
rate risks. These derivative instruments are intended
to hedge interest rate risks arising on financial instru-
ments with variable interest payments over the coming
25 months. The income statement impact of the hedged
cash flows will be recognised as a general rule in the
same periods over which the relevant interest rates are
fixed. It is not expected that any net gains or net losses,
recognised in equity at the end of the reporting period,
will be reclassified to the income statement in 2013.

At 31 December 2012, the BMW Group held derivative
instruments (mostly commodity swaps) with terms of
up to 60 months (2011: 55 months) to hedge raw mate-
rials price risks attached to future transactions over the
coming 60 months. The income statement impact of
the hedged cash flows will be recognised as a general
rule in the same period in which the derivative instru-
ment matures. It is expected that € 5 million of net
gains, recognised in equity at the end of the reporting
period, will be recognised in the income statement in
2013.

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 € million

31. 12. 2012

31. 12. 2011

Gains / losses on hedging instruments designated as part of a fair value hedge relationship

Gains / loss from hedged items

Ineffectiveness of fair value hedges

127

– 140

– 13

213

– 225

–12

The difference between the gains / losses on hedging
instruments (mostly interest rate swaps) and the results
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, other financial liabilities and receivables
from sales financing.

Bad debt 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 € 969 million (2011:

137 GROUP FINANCIAL STATEMENTS

€ 1,031 million). The equivalent figure for dealer financ-
ing is € 18,157 million (2011: € 16,699 million).

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 pat-
terns to date) reviewed in order to minimise the credit
risk, all depending on the nature and amount of the
exposure that the BMW Group is proposing to enter
into.

Creditworthiness testing is an important aspect of the
BMW Group’s credit risk management. Every borrower’s
creditworthiness is tested for all credit financing and
lease contracts entered into by the BMW Group. In the
case of retail customers, creditworthiness is assessed
using validated scoring systems integrated into the pur-
chasing process. In the area of dealer financing, credit-
worthiness is assessed by means of ongoing credit moni-
toring and an internal rating system that takes account
not only of the tangible situation of the borrower but
also of qualitative factors such as past reliability in busi-
ness relations.

Within the financial services business, the financed
items (e. g. vehicles, equipment and property) in the
retail customer and dealer lines of business serve as
first-ranking collateral with a recoverable value. Secu-
rity is also put up by customers in the form of collat-
eral asset pledges, asset assignment and first-ranking
mortgages, supplemented where appropriate by war-
ranties and guarantees. If an item previously accepted
as collateral is acquired, it undergoes a multi-stage
process of repossession and disposal in accordance
with the legal situation prevailing in the relevant mar-
ket. The assets involved are generally vehicles which
can be converted into cash at any time via the dealer
organisation.

The credit risk relating to derivative financial instruments
is minimised by the fact that the Group only enters into
such contracts with parties of first-class credit standing.
The general credit risk on derivative financial instru-
ments utilised by the BMW Group is therefore not con-
sidered to be significant.

A concentration of credit risk with particular borrowers
or groups of borrowers has not been identified in con-
junction with financial instruments.

Further disclosures relating to credit risk – in particular
with regard to the amounts of impairment losses recog-
nised – are provided in the explanatory notes to the
relevant categories of receivables in notes 25, 26 and 30.

Impairment losses are recorded as soon as credit risks
are identified on individual financial assets, using a
methodology specifically designed by the BMW Group.
More detailed information regarding this methodology is
provided in note 5 in the section on accounting policies.

Liquidity risk
The following table shows the maturity structure of ex-
pected contractual cash flows (undiscounted) for finan-
cial liabilities:

31 December 2012
in € million

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Trade payables

Other financial liabilities

Total

Maturity
within
one year

Maturity
between one
and five years

– 8,482

– 4,866

– 10,139

– 4,578

– 2,170

– 1,146

– 6,424

– 787

– 18,375

– 4,469

– 3,028

–

– 7,346

– 1,085

– 9

– 249

– 38,592

– 34,561

Maturity
later than
five years

– 5,071

– 678

–

– 137

– 1

–

– 424

– 6,311

Total

– 31,928

– 10,013

– 13,167

– 4,578

– 9,653

– 2,232

– 6,433

– 1,460

– 79,464

138

31 December 2011
in € million

Bonds

Liabilities to banks

Liabilities from customer deposits (banking)

Commercial paper

Asset backed financing transactions

Derivative instruments

Trade payables

Other financial liabilities

Total

Maturity
within
one year

Maturity
between one
and five years

Maturity
later than
five years

Total

– 9,100

– 3,197

– 8,968

– 5,486

– 3,191

– 1,410

– 5,295

– 847

– 17,430

– 5,449

– 3,254

–

– 6,474

– 2,218

– 43

– 483

– 37,494

– 35,351

– 4,509

– 31,039

– 268

– 24

–

– 7

– 2

– 488

– 5,298

– 8,914

– 12,246

– 5,486

– 9,665

– 3,635

– 5,340

– 1,818

–78,143

The cash flows shown comprise principal repayments
and the related interest. The amounts disclosed for de-
rivatives comprise only cash flows relating to derivatives
that have a negative fair value at the balance sheet date.
Irrevocable credit commitments to dealers which had
not been called upon at the end of the reporting period
amounted to € 6,044 million (2011: € 5,764 million).

values of non-derivative financial instruments have
matching maturities and amounts (netting). Derivative
financial instruments are used to reduce the risk re-
maining after netting. Financial instruments are only
used to hedge underlying positions or forecast trans-
actions.

Solvency is assured at all times by managing and moni-
toring the liquidity situation on the basis of a rolling
cash flow forecast. The resulting funding requirements
are secured by a variety of instruments placed on the
world’s financial markets. The objective is to minimise
risk by matching maturities for the Group’s financing
requirements within the framework of the target debt
ratio. The BMW Group has good access to capital mar-
kets as a result of its solid financial position and a diver-
sified refinancing strategy. This is underpinned by the
longstanding long- and short-term ratings issued by
Moody’s and S & P.

Short-term liquidity is managed primarily by issuing
money market instruments (commercial paper). In this
area too, competitive refinancing conditions can be
achieved thanks to Moody’s and S & P short-term rat-
ings of P-1 and A-1 respectively.

Also reducing liquidity risk, additional secured and
unsecured lines of credit are in place with first-class in-
ternational banks. Intragroup cash flow fluctuations
are evened out by the use of daily cash pooling arrange-
ments.

Market risks
The principal market risks to which the BMW Group is
exposed are currency risk, interest rate risk and raw
materials price risk.

Protection against such risks is provided in the first in-
stance through natural hedging which arises when the

The scope of permitted transactions, responsibilities,
financial reporting procedures and control mechanisms
used for financial instruments are set out in internal
guidelines. This includes, above all, a clear separation
of duties between trading and processing. Currency,
interest rate and raw material price risks of the BMW
Group are managed at a corporate level.

Further information is provided in the Combined Group
and Company Management Report (“Risk management”
section).

Currency risk
As an enterprise with worldwide operations, business
is conducted in a variety of currencies, from which cur-
rency risks arise. Since a significant portion of Group
revenues are generated outside the euro currency region
and the procurement of production material and fund-
ing is also organised on a worldwide basis, the cur-
rency risk is an extremely important factor for Group
earnings.

At 31 December 2012 derivative financial instruments
were in place to hedge exchange rate risks, in particular
for the currencies Chinese renminbi, US dollar, British
pound, Japanese yen and Russian rouble. The currency
hedging contracts comprise mainly option and forward
currency contracts.

A description of the management of this risk is provided
in the Combined Group and Company Management
Report. The BMW Group measures currency risk using
a cash-flow-at-risk model.

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

139 GROUP FINANCIAL STATEMENTS

The starting point for analysing currency risk with this
model is the identification of forecast foreign currency
transactions or “exposures”. At the end of the reporting

period, the principal exposures for the relevant coming
year were as follows:

in € million

Euro / Chinese Renminbi

Euro / US Dollar

Euro / British Pound

Euro / Japanese Yen

Euro / Russian Rouble

31. 12. 2012

31. 12. 2011

8,429

5,311

3,206

1,585

1,638

7,114

4,281

3,266

1,334

1,330

In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow surplus
represents an uncovered risk position. The cash-flow-at-
risk approach involves allocating the impact of poten-
tial exchange rate fluctuations to operating cash flows
on the basis of probability distributions. Volatilities
and correlations serve as input factors to assess the rele-
vant probability distributions.

The potential negative impact on earnings is computed
for each currency for the following financial year on
the basis of current market prices and exposures to a

confidence level of 95 % and a holding period of up to
one year. Correlations between the various currencies
are taken into account when the risks are aggregated,
thus reducing the overall risk.

The following table shows the potential negative impact
for the BMW Group – measured on the basis of the cash-
flow-at-risk approach – attributable to unfavourable
changes in exchange rates. The impact for the principal
currencies, in each case for the following financial year,
is as follows:

in € million

Euro / Chinese Renminbi

Euro / US Dollar

Euro / British Pound

Euro / Japanese Yen

Euro / Russian Rouble

31. 12. 2012

31. 12. 2011

246

163

180

121

182

Currency risk for the BMW Group is concentrated on the
currencies referred to above.

Interest rate risk
The BMW Group’s financial management system in-
volves the use of standard financial instruments such as
short-term deposits, investments in variable and fixed-
income securities as well as securities funds. The BMW
Group is therefore exposed to risks resulting from
changes in interest rates.

These risks arise when funds with differing fixed-rate
periods or differing terms are borrowed and invested.
All items subject to, or bearing, interest are exposed to
interest rate risk. Interest rate risks can affect either side
of the balance sheet.

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 € million

Euro

US Dollar

British Pound

31. 12. 2012

31. 12. 2011

12,736

10,489

3,814

6,066

8,684

3,278

140

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 desig-
nated as a fair value hedge or as a cash flow hedge.
A description of the management of interest risk is
provided in the Combined Group and Company
Management Report.

folios are compared across the Group with expected
amounts measured on the basis of a holding period of
250 days and a confidence level of 99.98 %. Aggregation
of these results creates a risk reduction effect due to
correlations between the various portfolios. The meth-
odology applied was refined during the year under
report, primarily in order to take account of new regula-
tory requirements.

As stated there, the BMW Group applies a group-wide
value-at-risk approach for internal reporting purposes
and to manage interest rate risks. This is based on a
state-of-the-art historical simulation, in which the po-
tential future fair value losses of the interest rate port-

In the following table the potential volumes of fair value
fluctuations – 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 € million

Euro

US Dollar

British Pound

31. 12. 2012

31. 12. 2011

269

271

Raw materials price risk
The BMW Group is exposed to the risk of price fluctua-
tions for raw materials. A description of the manage-
ment of these risks is provided in the Combined Group
and Company Management Report.

The first step in the analysis of the raw materials price
risk is to determine the volume of planned purchases
of raw materials (and components containing those raw
materials). These amounts, which represent the gross
exposure, were as follows at each reporting date for the
following financial year:

in € million

Raw materials price exposures

31. 12. 2012

31. 12. 2011

3,370

3,300

In the next stage, these exposures are compared to all
hedges that are in place. The net cash flow amount
represents an uncovered risk position. The cash-flow-at-
risk approach now applied – which should generate
a more accurate picture than the sensitivity analysis
approach previously used – involves allocating the im-
pact of potential fluctuations in raw materials prices
to operating cash flows on the basis of probability distri-
butions. Volatilities and correlations serve as input fac-
tors to assess the relevant probability distributions.

The potential negative impact on earnings is computed
for each raw material category for the following financial

year on the basis of current market prices and expo-
sure to a confidence level of 95 % and a holding period
of up to one year. Correlations between the various
categories of raw materials are taken into account
when the risks are aggregated, thus reducing the over-
all risk.

The following table shows the potential negative impact
for the BMW Group – measured on the basis of the cash-
flow-at-risk approach – attributable to fluctuations in
prices across all categories of raw materials. The risk at
each reporting date for the following financial year was
as follows:

in € million

Cash flow at risk

31. 12. 2012

31. 12. 2011

350

305

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

141 GROUP FINANCIAL STATEMENTS

Other risks
A further exposure relates to the residual value risk on
vehicles returned to the BMW Group at the end of lease
contracts. The risk from financial instruments used in
this context was not material to the Group in the past
and /or at the end of the reporting period. A description

of the management of this risk is provided in the Com-
bined Group and Company Management Report. Infor-
mation regarding the residual value risk from operating
leases is provided in the section on accounting policies
in note 5.

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 Automotive
and Financial Services segments have changed in the
course of the year as a result of cash inflows and cash
outflows. In accordance with IAS 7 (Statement of Cash
Flows), cash flows are classified into cash flows from
operating, investing and financing activities.

Cash and cash equivalents included in the cash flow
statement comprise cash in hand, cheques, and cash at
bank, to the extent that they are available within three
months from the end of the reporting period and are sub-
ject to an insignificant risk of changes in value.

The cash flows from investing and financing activities are
based on actual payments and receipts. By contrast, the
cash flow from operating activities is derived indirectly
from the net profit for the year. Under this method,
changes in assets and liabilities relating to operating ac-
tivities 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.

Cash inflows and outflows relating to operating leases,
where the BMW Group is either lessee or lessor, are
aggregated and shown on the line “Change in leased
products” within cash flows from operating activities.

The net change in receivables from sales financing (in-
cluding finance leases, where the BMW Group is either

lessee or lessor) is also reported within cash flows from
operating activities.

Income taxes paid and interest received are classified
as cash flows from operating activities in accordance
with IAS 7.31 and IAS 7.35. Interest paid is presented
on a separate line within cash flows from financing
activities. Dividends received in the financial year 2012
amounted to € 4 million (2011: € 1 million).

The BMW Group used various sources of funds for
internal financing purposes. In addition to the issue of
interest-bearing debt, cash funds are also allocated
internally in line with business requirements, including
the use of dividends and similar transactions. In this
context, it is possible that cash funds may be trans-
ferred from one segment to another. Up to the first
quarter 2012, these cash inflows and outflows were
reported in the Cash Flow Statements of the Automo-
tive and Financial Services segments as part of cash
flows from operating activities. Due to the increasing
importance of inter-segment transactions, the method
of presentation was changed with effect from the sec-
ond quarter 2012. Intragroup inter-segment dividends
and similar transactions are now reported as part
of cash flows from financing activities. The reclassifi-
cation from operating activities to financing activities
resulted in an increase in the operating cash flow.
The previous year’s figures were restated accordingly
(impact in 2011: € 1,033 million for the Automotive
segment, € 411 million for the Financial Services seg-
ment).

Related party relationships
In accordance with IAS 24 (Related Party Disclosures),
related individuals or entities which have the ability to
control the BMW Group or which are controlled by
the BMW Group, must be disclosed unless such parties
are not already included in the Group Financial State-
ments 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 agree-

ment, the financial and operating policies of the man-
agement of the Group.

In addition, the disclosure requirements of IAS 24 also
cover transactions with associated companies, joint
ventures and individuals that have the ability to exercise
significant influence over the financial and operating
policies of the BMW Group. This also includes close rela-
tives and intermediary entities. Significant influence

142

over the financial and operating policies of the BMW
Group is presumed when a party holds 20 % or more of
the voting power of BMW AG. In addition, the require-
ments contained in IAS 24 relating to key management
personnel and close members of their families or inter-
mediary entities are also applied. In the case of the
BMW Group, this applies to members of the Board of
Management and Supervisory Board.

In the financial year 2012, the disclosure requirements
contained in IAS 24 affect the BMW Group with regard
to business relationships with non-consolidated sub-
sidiaries, joint ventures and associated companies as well
as with members of the Board of Management and Super-
visory Board of BMW AG.

The BMW Group maintains normal business relation-
ships with non-consolidated subsidiaries. Transactions
with these companies are small in scale, arise in the nor-
mal 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 arise in the normal course of business and are con-
ducted on the basis of arm’s length principles. Group
companies sold goods and services to BMW Brilliance
Automotive Ltd., Shenyang, during 2012 for an amount
of € 2,962 million (2011: € 1,729 million). At 31 Decem-
ber 2012, receivables of Group companies from BMW
Brilliance Automotive Ltd., Shenyang, totalled € 608 mil-
lion (2011: € 381 million). There were no payables from
Group companies to BMW Brilliance Automotive Ltd.,
Shenyang, at the end of the reporting period (2011:
€ 89 million). Group companies received goods and ser-
vices from BMW Brilliance Automotive Ltd., Shenyang,
during the financial year under report for an amount
of € 26 million (2011: € 15 million).

All relationships of BMW Group entities with the joint
ventures SGL Automotive Carbon Fibers GmbH &
Co. KG, Munich, and SGL Automotive Carbon Fibers
LLC, Dover, DE, arise in the normal course of business.
All transactions with these entities were conducted
on the basis of arm’s length principles. At 31 December
2012 receivables of Group companies for loans dis-
bursed to the joint ventures amounted to € 68 million
(2011: € 61 million). Realised interest income earned
on these intragroup loans in 2012 amounted to € 2 mil-

lion (2011: € 1 million). Goods and services received
by Group companies from the joint ventures during the
period under report totalled € 9 million (2011: € 4 mil-
lion). At 31 December 2012 payables of Group compa-
nies to the joint ventures amounted to € 1 million (2011:
€ 1 million).

Transactions of BMW Group companies with the joint
venture, BMW Peugeot Citroën Electrification B. V.,
The Hague, all arose in the normal course of business
and were conducted on the basis of arm’s length princi-
ples. Up to the date of termination of the joint venture
arrangements, Group companies sold goods and ser-
vices to the joint venture amounting to € 4 million (2011:
€ – million). During the first eleven months of the year,
the joint venture sold goods and services to Group com-
panies amounting to € 82 million (2011: € – million).

All relationships of BMW Group companies with the
joint ventures DriveNow GmbH & Co. KG, Munich,
and DriveNow Verwaltungs GmbH, Munich, are con-
ducted on the basis of arm’s length principles. Trans-
actions with these entities arise in the normal course of
business and are small in scale.

The BMW Group maintains normal business relation-
ships with associated companies. Transactions with
these companies are small in scale, arise in the normal
course of business and are conducted on the basis of
arm’s length principles.

Stefan Quandt is a shareholder and member of the
Supervisory Board of BMW AG. He is also the sole share-
holder and Chairman of the Supervisory Board of
DELTON AG, Bad Homburg v. d. H., which, via its sub-
sidiaries, performed logistic-related services for the
BMW Group during the financial year 2012. In addition,
companies of the DELTON Group acquired vehicles
on the basis of arm’s length principles from the BMW
Group, mostly in the form of leasing contracts. These
service and lease contracts, which are not material for
the BMW Group, all arise in the normal course of busi-
ness and are conducted 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. Altana AG, Wesel, acquired vehicles

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

143 GROUP FINANCIAL STATEMENTS

from the BMW Group during the financial year 2012,
mostly in the form of lease contracts. These contracts
are not material for the BMW Group, arise in the course
of ordinary activities and are made, without exception,
on the basis of arm’s length principles.

Apart from the transactions referred to above, compa-
nies of the BMW Group did not enter into any contracts
with members of the Board of Management or Super-
visory Board of BMW AG. The same applies to close mem-
bers of the families of those persons.

BMW Trust e.V., Munich, administers assets on a
trustee basis to secure obligations relating to pensions
and pre-retirement part-time work arrangements in
Germany and is therefore a related party of the BMW
Group in accordance with IAS 24. This entity, which
is a registered association (eingetragener Verein) under
German law, does not have any assets of its own. It
did not have any income or expenses during the period
under report. BMW AG bears expenses on a minor scale
and renders services on behalf of BMW Trust e.V.,
Munich.

Declaration with respect to the Corporate
Governance Code
The Board of Management and the Supervisory Board of
Bayerische Motoren Werke Aktiengesellschaft have is-
sued the prescribed Declaration of Compliance pursuant

to § 161 of the German Stock Corporation Act. It is repro-
duced in the Annual Report 2012 of the BMW Group and
is also available to shareholders on the BMW Group web-
site at www.bmwgroup.com/ir.

Shareholdings of members of the
Board of Management and Supervisory Board
The members of the Supervisory Board of BMW AG hold
in total 27.63 % (2011: 27.65 %) of the issued common
and preferred stock shares, of which 16.08 % (2011:
16.09 %) relates to Stefan Quandt, Bad Homburg v. d. H.

and 11.55 % (2011: 11.56 %) to Susanne Klatten, Munich.
As at the end of the previous financial year, sharehold-
ings of members of the BMW AG Board of Management
account, in total, for less than 1 % of issued shares.

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

€ 36.4 million (2011: € 32.1 million) and comprised the
following:

in € million

Short-term employment benefits

Post-employment benefits

Compensation

2012

2011

35.2

1.2

36.4

31.0

1.1

32.1

The total compensation of the current Board of Manage-
ment members for 2012 amounted to € 31.4 million
(2011: € 27.3 million). This comprised fixed components
of € 7.5 million (2011: € 4.7 million), variable compo-
nents of € 23.2 million (2011: € 21.9 million) and a share-
based compensation component totalling € 0.7 million
(2011: € 0.7 million).

In addition, an expense of € 1.2 million (2011: € 1.1 mil-
lion) was recognised for current members of the
Board of Management for the period after the end of
their employment relationship. This relates to the ex-

pense for allocations to pension provisions. Pension ob-
ligations to current members of the Board of Manage-
ment are covered by pension provisions amounting to
€ 29.4 million (2011: € 19.0 million), computed in accord-
ance with IAS 19 (Employee Benefits).

The remuneration of former members of the Board of
Management and their dependants amounted to € 3.8 mil-
lion (2011: € 3.7 million).

Pension obligations to former members of the Board of
Management and their surviving dependants are fully

144

covered by pension provisions amounting to € 61.2 mil-
lion (2011: € 51.6 million), computed in accordance with
IAS 19.

The compensation of the members of the Supervisory
Board for the financial year 2012 amounted to € 4.5 mil-
lion (2011: € 4.5 million). This comprised fixed com-
ponents of € 1.6 million (2011: € 1.6 million) and variable
components of € 2.9 million (2011: € 2.9 million).

The compensation systems for members of the Super-
visory Board do not include any stock options, value
appreciation rights comparable to stock options or any

other stock-based compensation components. Apart from
vehicle lease contracts entered into on customary mar-
ket conditions, no advances and loans were granted to
members of the Board of Management and the Super-
visory Board, nor were any contingent liabilities entered
into on their behalf.

Further details about the remuneration of current mem-
bers of the Board of Management and the Supervisory
Board can be found in the Compensation Report, which
is part of the Combined Group and Company Manage-
ment Report.

Application of exemptions pursuant to § 264 (3)
and § 264 b HGB
A number of companies and incorporated partnerships
(as defined by § 264 a HGB) which are consolidated sub-
sidiaries of BMW AG and for which the Group Financial
Statements of BMW AG represent exempting consoli-
dated financial statements, apply the exemptions availa-
ble in § 264 (3) and § 264 b HGB with regard to the draw-
ing up of a management report. The exemptions have
been applied by:

– Bavaria Wirtschaftsagentur GmbH, Munich
– BMW Fahrzeugtechnik GmbH, Eisenach
– BMW Hams Hall Motoren GmbH, Munich
– BMW M GmbH Gesellschaft für individuelle Auto-

mobile, Munich

– Rolls-Royce Motor Cars GmbH, Munich

In addition, the following entities apply the exemption
available in § 264 (3) and § 264 b HGB with regard to
publication:

– Bavaria Wirtschaftsagentur GmbH, Munich
– Alphabet International GmbH, Munich
– BMW Hams Hall Motoren GmbH, Munich
– BMW M GmbH Gesellschaft für individuelle Auto-

mobile, Munich

– BMW INTEC Beteiligungs GmbH, Munich
– BMW Verwaltungs GmbH, Munich
– Rolls-Royce Motor Cars GmbH, Munich

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

145 GROUP FINANCIAL STATEMENTS

BMW Group
Notes to the Group Financial Statements
Segment Information

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 IFRS 8 (Operating Seg-
ments). Operating segments are identified on the same
basis that is used internally to manage and report on per-
formance and takes account of the organisational struc-
ture 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 Automotive, Motorcycles, Finan-
cial Services and Other Entities.

The Automotive segment develops, manufactures, as-
sembles and sells cars and off-road vehicles, under the
brands BMW, MINI and Rolls-Royce as well as spare
parts and accessories. BMW and MINI brand products
are sold in Germany through branches of BMW AG
and by independent, authorised dealers. Sales outside
Germany are handled primarily by subsidiary com-
panies and, in a number of markets, by independent
import companies. Rolls-Royce brand vehicles are sold
in the USA via a subsidiary company and elsewhere
by independent, authorised dealers.

The BMW Motorcycles segment develops, manufac-
tures, assembles and sells BMW and Husqvarna brand
motorcycles as well as spare parts and accessories.

The principal lines of business of the Financial Services
segment are car leasing, fleet business, retail customer
and dealer financing, customer deposit business and in-
surance 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.

Eliminations comprise the effects of eliminating
business relationships between the operating seg-
ments.

Internal management and reporting
Segment information is prepared in conformity with
the accounting policies adopted for preparing and pre-
senting the Group Financial Statements. The only ex-
ception to this general principle is the treatment of in-
ter-segment warranties, the earnings impact of which
is allocated to the Automotive and Financial Services seg-
ments on the basis used internally to manage the busi-
ness. Inter-segment receivables and payables, provi-
sions, income, expenses and profits are eliminated in
the column “Eliminations”. Inter-segment sales take
place at arm’s length prices.

The role of “chief operating decision maker” with re-
spect to resource allocation and performance assess-
ment 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 segment assets have been set for the various
operating segments.

The Automotive and Motorcycles segments are managed
on the basis of the profit before financial result. Capital
employed is the corresponding measure of segment
assets used to determine how to allocate resources. Cap-
ital employed comprises all current and non-current
operational assets of the segment, after deduction of lia-
bilities used operationally which are not subject to inter-
est (e. g. trade payables).

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 as-
sessed 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 assets and investments.

146

Segment information by operating segment is as follows:

Segment information by operating segment

in € million

External revenues

Inter-segment revenues

Total revenues

Segment result

Capital expenditure on non-current assets

Depreciation and amortisation on non-current assets

Automotive

Motorcycles

2012

2011

2012

2011

57,499

12,709

70,208

7,624

5,325

3,437

51,684

11,545

63,229

7,477

3,728

3,568

1,478

1,490

125

1,427

1,436

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

in € million

Segment assets

Automotive

Motorcycles

31. 12. 2012

31. 12. 2011

31. 12. 2012

31. 12. 2011

10,864

10,016

405

551

Notes
86

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

100

107

108
129
145

78
78
78

80
82
84

147 GROUP FINANCIAL STATEMENTS

Financial
Services

Other Entities

Reconciliation to
Group figures

Group

2012

2011

2012

2011

2012

2011

2012

2011

17,869

1,681

19,550

1,561

15,988

6,112

15,709

1,801

17,510

1,790

13,493

4,972

– 6

–

76,848

68,821

External revenues

– 14,405

– 13,359

–

Inter-segment revenues

– 14,405

–13,359

76,848

68,821

Total revenues

– 168

–

– 1,369

– 2,901

– 1,838

– 1,761

– 2,366

– 1,186

7,819

18,537

7,780

7,383

Segment result

14,944

Capital expenditure on non-current assets

7,416

Depreciation and amortisation on non-current assets

Financial
Services

Other Entities

Reconciliation to
Group figures

Group

31. 12. 2012

31. 12. 2011

31. 12. 2012

31. 12. 2011

31. 12. 2012

31. 12. 2011

31. 12. 2012

31. 12. 2011

7,631

7,169

50,685

47,875

62,265

57,818

131,850

123,429

Segment assets

148

The segment result of the Motorcycles segment was
negatively impacted by an impairment loss of € 13 mil-
lion (2011: € – million) on property, plant and equip-
ment in accordance with IFRS 5 and by an expense of
€ 57 million (2011: € – million) for an allocation to pro-
visions at 31 December 2012.

Interest and similar income of the Financial Services
segment is included in the segment result and totalled
€ 5 million in both 2011 and 2012. Interest and similar
expenses of the Financial Services segment amounted
to € 9 million (2011: € 15 million). The Other Entities
segment result includes interest and similar income
amounting to € 1,792 million (2011: € 1,739 million) and
interest and similar expenses amounting to € 1,758 mil-
lion (2011: € 1,841 million).

The result from equity accounted investments did not
have any impact on the segment result of the Other

in € million

Reconciliation of segment result

Total for reportable segments

Financial result of Automotive 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

Entities segment in 2012 (2011: negative impact of
€ 2 million). The segment result is stated after an im-
pairment loss on other investments amounting to
€ 7 million (2011: € 8 million).

Segment assets of the Other Entities segment at 31 De-
cember 2012 do not contain any investments accounted
for using the equity method (2011: € 21 million).

The information disclosed for capital expenditure and
depreciation and amortisation relates to non-current
property, plant and equipment, intangible assets and
leased products.

Segment figures can be reconciled to the corresponding
Group figures as follows:

2012

2011

9,188

– 432

– 937

7,819

21,438

– 2,901

18,537

9,618

– 1,838

7,780

9,144

– 658

– 1,103

7,383

17,310

– 2,366

14,944

8,602

– 1,186

7,416

in € million

31. 12. 2012

31. 12. 2011

Reconciliation of segment assets

Total for reportable segments

Non-operating assets – Other Entities segment

Operating liabilities – Financial Services segment

Interest-bearing assets – Automotive and Motorcycles segments

Liabilities of Automotive and Motorcycles segments not subject to interest

Elimination of inter-segment items

Total Group assets

69,585

6,097

81,066

36,323

22,051

– 83,272

131,850

65,611

6,045

75,540

32,584

21,226

– 77,577

123,429

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity

Notes
86

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

100

107

108
129
145

149 GROUP FINANCIAL STATEMENTS

In the case of information by geographical region, ex-
ternal sales are based on the location of the customer’s
registered office. Revenues with major customers were
not material overall. The information disclosed for non-

current assets relates to property, plant and equip-
ment, intangible assets and leased products. The
reconciling item disclosed for non-current assets re-
lates to leased products.

External
revenues

Non-current
assets

2012

2011

2012

2011

12,186

13,447

14,448

22,971

2,824

10,972

–

12,859

11,516

11,591

20,956

2,771

9,128

–

76,848

68,821

22,954

11,195

9,887

1,548

1,137

– 3,720

43,016

21,519

10,073

9,066

1,345

961

– 2,939

40,035

Information by region

in € million

Germany

USA

China

Rest of Europe

Rest of the Americas

Other

Eliminations

Group

Munich, 19 February 2013

Bayerische Motoren Werke
Aktiengesellschaft

The Board of Management

Dr.-Ing. Dr.-Ing. E. h. Norbert Reithofer

Frank-Peter Arndt

Milagros Caiña Carreiro-Andree

Dr.-Ing. Herbert Diess

Dr.-Ing. Klaus Draeger

Dr. Friedrich Eichiner

Harald Krüger

Dr. Ian Robertson (HonDSc)

150

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 development and performance of
the business and the position of the Group, together
with a description of the principal opportunities and
risks associated with the expected development of the
Group.”

Munich, 19 February 2013

Bayerische Motoren Werke
Aktiengesellschaft

The Board of Management

Dr.-Ing. Dr.-Ing. E. h. Norbert Reithofer

Frank-Peter Arndt

Milagros Caiña Carreiro-Andree

Dr.-Ing. Herbert Diess

Dr.-Ing. Klaus Draeger

Dr. Friedrich Eichiner

Harald Krüger

Dr. Ian Robertson (HonDSc)

78
78
78

80
82
84

GROUP FINANCIAL STATEMENTS
Income Statements
Statement of
Comprehensive Income
Balance Sheets
Cash Flow Statements
Group Statement of Changes
in Equity
Notes
86

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

100

107

108
129
145

151 GROUP FINANCIAL STATEMENTS

BMW Group
Auditor’s Report

We have audited the consolidated financial statements
prepared by Bayerische Motoren Werke Aktiengesell-
schaft, comprising the income statement for group and
statement of comprehensive income for group, the
balance sheet for group, cash flow statement for group,
group statement of changes in equity and the notes to
the group financial statements and its report on the
position of the Company and the Group for the business
year from 1 January to 31 December 2012. The prepara-
tion of the consolidated finan cial statements and Group
Management Report in accordance with IFRSs, as
adopted by the EU, and the additional requirements of
German commercial law pur suant to § 315 a (1) HGB
(Handelsgesetzbuch “German Commercial Code”) are
the responsibility of the parent company’s management.
Our responsibility is to express an opinion on the con-
solidated financial statements and on the Group Manage-
ment Report based on our audit.

We conducted our audit of the consolidated financial
statements in accordance with § 317 HGB and German
generally accepted standards for the audit of financial
statements promulgated by the Institut der Wirtschafts-
prüfer (Institute of Public Auditors in Germany) (IDW).
Those standards require that we plan and perform the
audit such that misstatements materially affecting the
presentation of the net assets, financial position and
results of operations in the consolidated financial state-
ments in accordance with the applicable financial report-
ing framework and in the Group Management Report
are detected with reasonable assurance. Knowledge of

the business activities and the economic and legal
environment of the Group and expectations as to possi-
ble misstatements are taken into account in the deter-
mination of audit procedures. The effectiveness of the
accounting-related internal control system and the evi-
dence supporting the disclosures in the consolidated
financial statements and in the Group Management
Report are examined primarily on a test basis with in the
framework of the audit. The audit also includes assess-
ing the annual financial statements of those entities
included in consolidation, the determination of entities
to be included in consolidation, the accounting and
consolidation principles used and significant estimates
made by the management, as well as evaluating the
overall presentation of the con solidated finan cial state-
ments and Group Management Report. We believe that
our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the
consolidated financial statements comply with IFRSs,
as adopted by the EU, the additional 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 in ac-
cordance with these requirements. The Group Manage-
ment Report is consistent with the consolidated finan-
cial statements and as a whole provides a suitable
view of the Group’s position and suitably presents the
opportunities and risks of future development.

Munich, 1 March 2013

KPMG AG
Wirtschaftsprüfungsgesellschaft

Prof. Dr. Schindler
Wirtschaftsprüfer

Huber-Straßer
Wirtschaftsprüferin

152

STATEMENT ON CORPORATE GOVERNANCE

Good corporate governance – acting in accordance with
the principles of responsible management aimed at in-
creasing the value of the business on a sustainable basis –
is an essential requirement for the BMW Group em-
bracing all areas of the business. Corporate culture within
the BMW Group is founded on transparent reporting
and internal communication, a policy of corporate
governance aimed at the interests of stakeholders, fair
and open dealings between the Board of Management,
the Supervisory Board and employees and compliance
with the law. The Board of Management reports in this
declaration, also on behalf of the Supervisory Board,
on important aspects of corporate governance pursuant
to § 289 a HGB and section 3.10 of the German Corporate
Governance Code (GCGC).

Information on the Company’s Governing Constitution
The designation “BMW Group” comprises Bayerische
Motoren Werke Aktiengesellschaft (BMW AG) and its
group entities. BMW AG is a stock corporation (Aktien-
gesellschaft) based on the German Stock Corporation
Act (Aktiengesetz) and has its registered office in
Munich, Germany. It has three representative bodies:
the Annual General Meeting, the Supervisory Board
and the Board of Management. The duties and authori-
ties of those bodies derive from the Stock Corporation
Act and the Articles of Incorporation of BMW AG.
Shareholders, as the owners of the business, exercise
their rights at the Annual General Meeting. The Annual
General Meeting also provides an opportunity to
shareholders to engage in dialogue with the Board of
Management and the Supervisory Board. The Annual
General Meeting decides in particular on the utilisation
of unappropriated profit, the ratification of the acts
of the members of the Board of Management and of the
Supervisory Board, the appointment of the external
auditor, changes to the Articles of Incorporation, speci-
fied capital measures and elects the shareholders’ re-
presentatives to the Supervisory Board. The Board of
Management manages the enterprise under its own
responsibility. Within this framework, it is monitored
and advised by the Supervisory Board. The Supervisory
Board appoints the members of the Board of Manage-
ment and can, at any time, revoke an appointment if
there is an important reason. The Board of Management
keeps the Supervisory Board informed of all signifi-
cant matters regularly, promptly and comprehensively,
following the principles of conscientious and faithful
accountability and in accordance with prevailing law
and the reporting duties allocated to it by the Supervisory
Board. The Board of Management requires the approval
of the Supervisory Board for certain major transactions.
The Supervisory Board is not, however, authorised to
undertake management measures itself.

In accordance with the requirements of the German
Co-determination Act for companies that generally em-
ploy more than 20,000 people, the Supervisory Board
of BMW AG is required to comprise ten shareholder
representatives elected at the Annual General Meeting
(Supervisory Board members representing equity or
shareholders) and ten employees elected in accordance
with the provisions of the Co-determination Act (Super-
visory Board members representing employees). The
ten Supervisory Board members representing employees
comprise seven Company employees, including one
executive staff representative, and three members elected
following nomination by unions.

The close interaction between the Board of Management
and the Supervisory Board in the interests of the enter-
prise as described above is also known as a “two-tier
board structure”.

Declaration of Compliance and the BMW Group
Corporate Governance Code
Management and supervisory boards of companies listed
in Germany are required by law (§ 161 German Stock
Corporation Act) to report once a year whether the offi-
cially published and relevant recommendations issued
by the “German Government Corporate Governance
Code Commission”, as valid at the date of the declara-
tion, have been, and are being, complied with. Com-
panies affected are also required to state which of the
recommendations of the Code have not been or are not
being applied, stating the reason or reasons. The full
text of the declaration, together with explanatory com-
ments, is shown on the following page of this Annual
Report.

The Board of Management and the Supervisory Board
approved the Group’s own Corporate Governance Code
based on the GCGC in previous years in order to pro-
vide interested parties with a comprehensive and stand-
alone document covering the corporate governance
practices applied by the BMW Group. A coordinator
responsible for all corporate governance issues reports
directly and on a regular basis to the Board of Manage-
ment and Supervisory Board.

The Corporate Governance Code for the BMW Group,
together with the Declaration of Compliance, Articles
of Incorporation and other information, can be viewed
and / or downloaded from the BMW Group’s website at
www.bmwgroup.com/ir under the menu items “Corpo-
rate Facts” and “Corporate Governance”.

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

153 STATEMENT ON CORPORATE GOVERNANCE

Declaration of the Board of Management and of the Supervisory Board of
Bayerische Motoren Werke Aktiengesellschaft with respect to the recommendations
of the “Government Commission on the German Corporate Governance Code”
pursuant to § 161 German Stock Corporation Act

The Board of Management and Supervisory Board of
Bayerische Motoren Werke Aktiengesellschaft (“BMW AG”)
declare the following regarding the recommendations of
the “Government Commission on the German Corporate
Governance Code”:

Since issuance of the last Declaration in December 2011,
BMW AG has complied with all of the recommenda-
tions published officially on 2 July 2010 in the electronic
Federal Gazette (Code version dated 26 May 2010).

BMW AG will comply with all of the recommendations
published officially on 15 June 2012 in the electronic
Federal Gazette (Code version dated 15 May 2012), with
the exception of the amended recommendation contained
in section 5.4.6 paragraph 2 sentence 2 (“If members of
the Supervisory Board are promised performance-related
compensation, it shall be oriented toward sustainable
growth of the enterprise.”).

The Articles of Incorporation of BMW AG provide for the
members of the Supervisory Board to receive, in addi-
tion to a fixed compensation component, a performance-
related compensation component which is subject to a
cap and which is based on earnings per share of common
stock in the past financial year. This regulation in the
Articles of Incorporation, which was resolved by the share-
holders at the Annual General Meeting in 2008, complied
with the previous recommendation of the Government
Commission contained in section 5.4.6 paragraph 2 sen-
tence 1 (“Members of the Supervisory Board shall receive
fixed as well as performance-related compensation.”, Code
version dated 26 May 2010).

The Board of Management and Supervisory Board will sub-
mit a proposal at the Annual General Meeting 2013 to
amend the Articles of Incorporation with a view to changing
the basis for Supervisory Board compensation. In line
with the Code’s revised recommendation on supervisory
board compensation, the performance-related compensa-
tion component will in future take more than one financial
year into account and will be oriented toward sustainable
growth of the enterprise.

Munich, December 2012

Bayerische Motoren Werke
Aktiengesellschaft

On behalf of the
Supervisory Board

On behalf of the
Board of Management

Prof. Dr.-Ing. Dr. h. c.
Dr.-Ing. E. h. Joachim Milberg
Chairman

Dr.-Ing. Dr.-Ing. E. h.
Norbert Reithofer
Chairman

154

Members of the Board of Management

Dr.-Ing. Dr.-Ing. E. h. Norbert Reithofer (born 1956)
Chairman

Dr. Friedrich Eichiner (born 1955)
Finance

Mandates

Henkel AG & Co. KGaA

Mandates

Allianz Deutschland AG
BMW Brilliance Automotive Ltd. (Deputy Chairman)

Frank-Peter Arndt (born 1956)
Production

Mandates

BMW Motoren GmbH (Chairman)
TÜV Süd AG
BMW (South Africa) (Pty) Ltd. (Chairman)
Leipziger Messe GmbH

Milagros Caiña Carreiro-Andree (born 1962)

(since 01. 07. 2012)

Human Resources, Industrial Relations Director

Dr.-Ing. Herbert Diess (born 1958)
Purchasing and Supplier Network (until 31. 03. 2012)
Development (since 01. 04. 2012)

Dr.-Ing. Klaus Draeger (born 1956)
Development (until 31. 03. 2012)
Purchasing and Supplier Network (since 01. 04. 2012)

Harald Krüger (born 1965)

Human Resources, Industrial Relations Director
(until 30. 06. 2012)
MINI, Motorcycles, Rolls-Royce,
After Sales BMW Group (since 01. 04. 2012)

Mandates

Rolls-Royce Motor Cars Limited (Chairman)
(since 01. 05. 2012)

Dr. Ian Robertson (HonDSc) (born 1958)
Sales and Marketing (until 31. 03. 2012)
Sales and Marketing BMW, Sales Channels
BMW Group (since 01. 04. 2012)

Mandates

Rolls-Royce Motor Cars Limited (Chairman)
(until 30. 04. 2012)
Dyson James Group Limited (since 20. 07. 2012)

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

General Counsel:
Dr. Dieter Löchelt

Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards of business enterprises

Stefan Schmid1 (born 1965)
Deputy Chairman
Chairman of the Works Council, Dingolfing

Member of the Presiding Board, Personnel Committee,
Audit Committee and Mediation Committee

Dr. jur. Karl-Ludwig Kley (born 1951)
Deputy Chairman

Chairman of the Executive Management of
Merck KGaA

Chairman of the Audit Committee and Independent
Finance Expert; member of the Presiding Board,
Personnel Committee and Nomination Committee

Mandates

Bertelsmann Management SE (since 04. 05. 2012)
Bertelsmann SE & Co. KGaA
1. FC Köln GmbH & Co. KGaA (Chairman)

Bertin Eichler 2 (born 1952)
Executive Member of the
Executive Board of IG Metall

Mandates

BGAG Beteiligungsgesellschaft der
Gewerkschaften GmbH (Chairman)

ThyssenKrupp AG (Deputy Chairman)

155 STATEMENT ON CORPORATE GOVERNANCE

Members of the Supervisory Board

Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h.
Joachim Milberg (born 1943)

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 Management SE (since 04. 05. 2012)
(Deputy Chairman since 11. 05. 2012)
Bertelsmann SE & Co. KGaA (Deputy Chairman)
FESTO Aktiengesellschaft (Chairman)
SAP AG (until 23. 05. 2012)
Deere & Company
FESTO Management Aktiengesellschaft (Chairman)

Manfred Schoch1 (born 1955)
Deputy Chairman

Chairman of the European and
General Works Council
Industrial Engineer

Member of the Presiding Board, Personnel Committee,
Audit Committee and Mediation Committee

Stefan Quandt (born 1966)
Deputy Chairman
Entrepreneur

Member of the Presiding Board, Personnel Committee,
Audit Committee, Nomination Committee and Mediation
Committee

Mandates

DELTON AG (Chairman)
AQTON SE (Chairman)
DataCard Corp.

1 Employee representatives (company employees).
2 Employee representatives (union representatives).
3 Employee representative (member of senior management).
Membership of other statutory supervisory boards
Membership of equivalent national or foreign boards of business enterprises

156

Franz Haniel (born 1955)
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
TBG Limited

Prof. Dr. rer. nat. Dr. h. c. Reinhard Hüttl (born 1957)

Chairman of the Executive Board of
Helmholtz-Zentrum Potsdam Deutsches
GeoForschungsZentrum – GFZ

University professor

Prof. Dr. rer. nat. Dr.-Ing. E. h.
Henning Kagermann (born 1947)

President of acatech – Deutsche Akademie der
Technikwissenschaften e. V.

Mandates

Deutsche Bank AG
Deutsche Post AG
Franz Haniel & Cie GmbH (since 27. 11. 2012)
Münchener Rückversicherungs-Gesellschaft
Aktiengesellschaft in München
Nokia Corporation
Wipro Limited

Susanne Klatten (born 1962)
Entrepreneur

Member of the Nomination Committee

Mandates

ALTANA AG (Deputy Chairman)
SGL Carbon SE (Deputy Chairman since 16. 08. 2012)
UnternehmerTUM GmbH (Chairman)

Prof. Dr. rer. pol. Renate Köcher (born 1952)

Director of Institut für Demoskopie Allensbach
Gesellschaft zum Studium der öffentlichen
Meinung mbH

Mandates

Allianz SE
Infineon Technologies AG
Nestlé Deutschland AG (since 25. 05. 2012)
Robert Bosch GmbH (since 30. 03. 2012)

Dr. h. c. Robert W. Lane (born 1949)

Former Chairman and Chief Executive Officer of
Deere & Company

Mandates

General Electric Company
Northern Trust Corporation
Verizon Communications Inc.

Horst Lischka2 (born 1963)
General Representative of IG Metall Munich

Mandates

KraussMaffei GmbH
MAN Truck & Bus AG

Willibald Löw1 (born 1956)
Chairman of the Works Council, Landshut

Wolfgang Mayrhuber (born 1947)
Former Chairman of the Board of Management of
Deutsche Lufthansa Aktiengesellschaft

Mandates

Infineon Technologies AG (Chairman)
Lufthansa Technik Aktiengesellschaft
Münchener Rückversicherungs-Gesellschaft
Aktiengesellschaft in München
Austrian Airlines AG
HEICO Corporation
UBS AG

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

157 STATEMENT ON CORPORATE GOVERNANCE

Dr. Dominique Mohabeer1 (born 1963)

(since 01. 06. 2012)

Member of the Works Council, Munich

Franz Oberländer1 (born 1952)

(until 31. 05. 2012)

Member of the Works Council, Munich

Anton Ruf3 (born 1953)
(until 31. 10. 2012)

Head of Development “Small Model Series”

Maria Schmidt1 (born 1954)
Member of the Works Council, Dingolfing

Jürgen Wechsler 2 (born 1955)

Regional Head of IG Metall Bavaria

Mandates

Schaeffler AG (Deputy Chairman)

Werner Zierer1 (born 1959)
Chairman of the Works Council, Regensburg

Oliver Zipse3 (born 1964)

(since 01. 11. 2012)

Head of Brand and Product Strategies

158

Composition and work procedures of the Board of
Management of BMW AG and its committees
The Board of Management governs 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
orientation of the enterprise, agrees upon it with the
Supervisory Board and ensures its implementation.
The Board of Management is responsible for ensuring
that all provisions of law and internal regulations are
complied with. Further details about compliance within
the BMW Group can be found in the “Corporate
Governance” section of the Annual Report. The Board
of Management is also responsible for ensuring that
appropriate risk management and risk controlling sys-
tems are in place throughout the Group.

During their period of employment for BMW AG, mem-
bers of the Board of Management are bound by a com-
prehensive non-competition clause. They are required
to act in the enterprise’s best interests and may not
pursue personal interests in their decisions or take ad-
vantage of business opportunities intended for the
enterprise. They may only undertake ancillary activities,
in particular supervisory board mandates outside
the BMW Group, with the approval of the Supervisory
Board’s Personnel Committee. Each member of the
Board of Management of 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 framework
conditions under which the board member’s duties are
to be carried out – in particular those enshrined in the
BMW Group’s Corporate Governance Code – as well
as the duty to cooperate when a transaction or event
triggers reporting requirements or requires the approval
of the Supervisory Board.

The Board of Management consults and takes decisions
as a collegiate body in meetings of the Board of Manage-
ment, the Sustainability Board, the Operations Com-
mittee and the Committee for Executive Management
Matters. At its meetings, the Board of Management
defines the overall framework for business strategies
and the use of resources, takes decisions regarding the
implementation of strategies and deals with issues of
particular importance to the BMW Group. The full board

also 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.
The Board of Management and its committees may, as
required and depending on the subject matters being
discussed, invite non-voting advisers to participate at
meetings.

Terms of reference approved by the Board of Manage-
ment contain a planned allocation of divisional respon-
sibilities between the individual board members. These
terms of reference also incorporate the principle that
the full Board of Management bears joint responsibility
for all matters of particular importance and scope. In
addition, members of the Board of Management man-
age the relevant portfolio of duties under their responsi-
bility, whereby case-by-case rules can be put in place
for cross-divisional projects. Board members continually
provide the Chairman of the Board of Management
with all information regarding major transactions and
developments within their area of responsibility. The
Chairman of the Board of Management coordinates
cross-divisional matters with the overall targets and plans
of the BMW Group, involving other board members to
the extent that divisions within their area of responsi-
bility are affected.

The Board of Management takes its decisions at meetings
generally held on a weekly basis which are convened,
coordinated and headed by the Chairman of the Board
of Management. At the request of the Chairman, de-
cisions can also be taken outside of board meetings if
none of the board members object to this procedure. A
meeting is quorate if all Board of Management members
are invited to the meeting in good time. Members unable
to attend any meeting are entitled to vote in writing,
by fax or by telephone. Votes cast by phone must be sub-
sequently confirmed in writing. Except in urgent cases,
matters relating to a division for which the responsible
board member is not present will only be discussed and
decided upon with that member’s consent.

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 simple majority of board members. In the
event of a tied vote, the Chairman of the Board of
Management has the casting vote. Any changes to the
board’s terms of reference must be passed unanimously.
A board meeting may only be held if more than half of
the board members are present.

In the event that the Chairman of the Board of Manage-
ment is not present or is unable to attend a meeting, the

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

159 STATEMENT ON CORPORATE GOVERNANCE

Member of the Board responsible for Finances will
represent him.

Minutes are taken of all meetings and the Board of
Management’s resolutions and signed by the Chairman.
Decisions taken by the Board of Management are
binding for all employees.

The rules relating to meetings and resolutions taken
by the full Board of Management are also applicable for
its committees.

Members of the Board of Management not represented
in a committee are provided with the agendas and
minutes of committee meetings. Committee matters are
dealt with in full board meetings if the committee con-
siders it necessary or at the request of a member of the
Board of Management.

The secretariat for Board of Management matters assists
the Chairman and other board members with the
preparation and follow-up work connected with board
meetings.

At meetings of the Operations Committee (generally held
three times a month), decisions are reached in connec-
tion with automobile product projects, based on the
strategic orientation and decision framework stipulated
at Board of Management meetings. The Operations
Committee comprises the Board of Management mem-
ber responsible for Development (who also chairs the
meetings), together with the board members responsible
for the following areas: Purchases and Supplier Network;
Production; Sales and Marketing BMW, Sales Channels
BMW Group; and MINI, Motorcycles, Rolls-Royce,
Aftersales BMW Group. If the committee chairman is
not present or unable to attend a meeting, the Member
of the Board responsible for Production represents
him. Resolutions taken at meetings of the Operations
Committee are made online.

The full board usually convenes twice a year in its func-
tion as Sustainability Board in order to define strategy
with regard to sustainability and decide upon measures
to implement that strategy. The Head of Group Com-
munication and the Group Representative for Sustain-
ability and Environmental Protection participate in
these meetings in an advisory capacity.

The Board’s Committee for Executive Management
Matters deals with enterprise-wide issues affecting ex-
ecutive managers of the BMW Group, either in their
entirety or individually (such as the executive manage-
ment structure, potential candidates for executive
management, nominations for or promotions to senior

management positions). This committee has, on the
one hand, an advisory and preparatory role (e. g.
making suggestions for promotions to the two remu-
neration groups below board level and preparing
decisions to be taken at board meetings with regard
to human resources principles with the emphasis on
executive management issues) and a decision-taking
function on the other (e. g. deciding on appointments
to senior management positions and promotions to
higher remuneration groups or the wording of human
resources principles decided on by the full board).
The Committee has two members who are entitled to
vote at meetings, namely the Chairman of the Board
of Management (who also chairs the meetings) and
the board member responsible for Human Resources.
The Head of Human Resources, Personnel Network
and Human Resources International and the Head of
Human Resources Senior Management also partici-
pate in an advisory function. At the request of the
Chairman, resolutions may also be passed outside of
committee meetings by casting votes in writing, by
fax or by telephone if the other member entitled to
vote does not object immediately. As a general rule,
between five and ten meetings are held each year.

The Board of Management is represented by its Chair-
man in its dealings with the Supervisory Board. The
Chairman of the Board of Management maintains
regular contact with the Chairman of the Supervisory
Board and keeps him informed of all important mat-
ters. The Supervisory Board has passed a resolution
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 Manage-
ment submits its reports to the Supervisory Board in
writing. To the extent possible, documents required as
a basis for taking decisions are sent to the members of
the Supervisory Board in good time before the relevant
meeting. Regarding transactions of fundamental im-
portance, the Supervisory Board has stipulated specific
transactions which require the approval of the Super-
visory Board. Whenever necessary, the Chairman of
the Board of Management obtains the approval of the
Supervisory Board and ensures that reporting duties
to the Supervisory Board are complied with. In order
to fulfil these tasks, the Chairman is supported by all
members of the Board of Management. The fundamen-
tal principle followed when reporting to the Supervi-
sory Board is that the latter should be kept informed
regularly, without delay and comprehensively of all
significant matters relating to planning, business per-
formance, risk exposures, risk management and com-
pliance, as well as any major variances between actual
and budgeted figures.

160

Composition and work procedures of the Supervisory
Board of BMW AG and its committees
BMW AG’s Supervisory Board, comprising ten share-
holder representatives (elected by the Annual General
Meeting) and ten employee representatives (elected
by employees in accordance with the German Co-deter-
mination Act), has the task of advising and supervising
the Board of Management in its governance of the
BMW Group. It is involved in all decisions of fundamen-
tal importance for the BMW Group. The Supervisory
Board appoints the members of the Board of Manage-
ment and decides upon the level of compensation
they are to receive. The Supervisory Board can revoke
appointments for important reasons.

Together with the Personnel Committee and the Board
of Management, the Supervisory Board ensures that
long-term successor planning is in place. In their assess-
ment of candidates for a post on the Board of Manage-
ment, the underlying criteria applied by the Supervisory
Board for determining the suitability of candidates are
their expertise in the relevant area of board responsi-
bility, outstanding leadership qualities, a proven track
record and an understanding of the BMW Group’s busi-
ness. The Supervisory Board takes diversity into ac-
count when assessing, on balance, which individual will
best complement the Board of Management as a repre-
sentative body of the Company. “Diversity” in the con-
text of the decision process is understood by the Super-
visory Board to encompass different, complementary
individual profiles, work and life experiences, at both a
national and international level, as well as appropriate
representation of both genders. The Supervisory Board
strives to ensure appropriate female representation
on the Board of Management. The Board of Management
reports accordingly to the Personnel Committee – at
regular intervals and, on request, prior to personnel
decisions being taken by the Supervisory Board – on the
proportion of, and changes in, management positions
held by women, in particular below senior executive
level and at uppermost management level. When actu-
ally selecting an individual for a post on the Board of
Management, the Supervisory Board decides in the best
interests of the Company and after taking account of all
relevant circumstances.

The Supervisory Board holds a minimum of two meet-
ings in each of the first and second six-month periods
of the calendar year. Normally, five plenary meetings
are held per calendar year, as was the case in 2012. 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. The
main emphases of meetings in 2012 are described in the
Report of the Supervisory Board. As a general rule, the

shareholder representatives and employee representa-
tives prepare the Supervisory Board meetings sepa-
rately 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 meet-
ings, handles the external affairs of the Supervisory
Board and represents it in its dealings with the Board
of Management.

The Supervisory Board is quorate if all members have
been invited to the meeting and at least half of its
members participate in the vote on a particular resolu-
tion. A resolution relating to an agenda item not in-
cluded in the invitation is only valid if none of the mem-
bers of the Supervisory Board who were not present
at the meeting object to the resolution and a minimum
of two-thirds of the members are present.

As a basic rule, resolutions are passed by the Super-
visory Board by simple majority. The German Co-deter-
mination Act contains specific requirements with regard
to majority voting and technical procedures, particu-
larly with regard to the appointment and revocation of
appointment of management board members and the
election of a supervisory board chairman or deputy
chairman. In the event of a tied vote in the Supervisory
Board, the Chairman of the Supervisory Board has
two votes in a renewed vote, even if this also results in
a tied vote.

In practice, resolutions are taken by the Supervisory
Board and its committees at the relevant meetings. A
Supervisory Board member who is not present at a
meeting can have his / her vote cast by another Super-
visory Board member if an appropriate request has
been made in writing, by fax or in electronic form. This
rule also applies to the casting of the second vote by
the Chairman of the Supervisory Board. The Chairman
of the Supervisory Board can also accept the retrospec-
tive casting of votes by any members not present at a
meeting if this is done within the time limit previously
set. In special cases, resolutions may also be taken
outside of meetings, i.e. in writing, by fax or by elec-
tronic means. Minutes are taken of each meeting and
any resolutions made are signed by the Chairman of
the Supervisory Board.

After its meetings, the Supervisory Board is generally
provided 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

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

161 STATEMENT ON CORPORATE GOVERNANCE

the new member of the principal issues affecting his or
her duties – in particular those enshrined in the BMW
Group Corporate Governance Code – including the
duty to cooperate when a transaction or event triggers
reporting requirements or is subject to the approval of
the Supervisory Board. New Supervisory Board mem-
bers are also given the opportunity to become better ac-
quainted with the business outside of Supervisory Board
meetings by means of an information programme.

All members of the Supervisory Board of BMW AG are
required to ensure that they have sufficient time to
perform their mandate. If members of the Supervisory
Board of BMW AG are also members of the management
board of a listed company, they may not accept more
than a total of three mandates on non-BMW Group super-
visory boards of listed companies or in other bodies
with comparable requirements.

The Supervisory Board examines the efficiency of its
activities on a regular basis. Joint discussions are also
held at plenum meetings, prepared on the basis of a
questionnaire previously devised by and distributed to
the members of the Supervisory Board. The Chairman
of the Supervisory Board is open to suggestions for
improvement at all times.

Each member of the Supervisory Board of BMW AG is
bound to act in the enterprise’s best interests. Members
of the Supervisory Board may not pursue personal in-
terests in their decisions or take advantage of business
opportunities intended for the benefit of the enterprise.

Members of the Supervisory Board are obliged to in-
form the full Supervisory Board of any conflicts of inter-
est which may result from a consultant or directorship
function with clients, suppliers, lenders or other busi-
ness partners, enabling 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 Super-
visory Board in its entirety has the required knowledge,
skills and expert experience to perform its tasks in a
proper manner.

The Supervisory Board has set out specific targets for its
own composition (see section “Composition targets for
the Supervisory Board”).

The members of the Supervisory Board are responsible
for undertaking appropriate basic and further training

measures such as that may be necessary to carry out
the tasks assigned to them. The Company provides
appropriate assistance to members of the Supervisory
Board in this respect.

The ability of the Supervisory Board to supervise and
advise the Board of Management independently is also
assisted by the fact that the Supervisory Board is required,
based on its own assessment, to have an appropriate
number of independent members. Prof. Dr.-Ing. Dr. h. c.
Dr.-Ing. E. h. Joachim Milberg is the only person on the
Supervisory Board to have previously served on the
Board of Management, of which he ceased to be a mem-
ber in 2002. Supervisory Board members do not exercise
directorships or similar positions or undertake advisory
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
Supervisory Board has set up a Presiding Board and
four committees, namely the Personnel Committee, the
Audit Committee, the Nomination Committee and
the Mediation Committee (see Overview of Supervisory
Board committees, meetings). Such committees serve
to raise the efficiency of the Supervisory Board’s work
and facilitate the handling of complex issues. The estab-
lishment and function of a mediation committee is pre-
scribed by law. The person chairing a committee reports
in detail on its work at each plenum meeting.

The composition of the Presiding Board and the various
committees is based on legal requirements, BMW AG’s
Articles of Incorporation, terms of reference and corpo-
rate governance principles. The expertise and technical
skills of its members are also taken into account.

According to the relevant terms of reference, the Chair-
man of the Supervisory Board is, in this capacity, auto-
matically a member of the Presiding Board, the Personnel
Committee and the Nomination Committee, and also
chairs these committees.

The number of meetings held by the Presiding Board
and the committees depends on current requirements.
The Presiding Board, the Personnel Committee and
the Audit Committee normally hold several meetings in
the course of the year (see Overview of Supervisory
Board committees, meetings for details of the number
of meetings held in 2012).

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 com-
mittees. The committees are only quorate if all members
are present. Resolutions taken by the committees are
passed by simple majority unless stipulated otherwise

162

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 dealings 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.

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
committees are sufficiently equipped to carry out their
duties. This includes the services provided by a cen-
tralised secretariat to support the chairmen in coordi-
nating the work of the Supervisory Board.

In accordance with the relevant terms of reference, the
Presiding Board comprises the Chairman of the Super-
visory Board and board deputies. The Presiding Board
prepares Supervisory Board meetings to the extent that
the subject matter to be discussed does not fall within
the remit of a committee. This includes, for example,
preparing the annual Declaration of Compliance with
the German Corporate Governance Code and the Super-
visory Board’s efficiency examination.

The Personnel Committee prepares the decisions of the
Supervisory Board with regard to the appointment and
revocation of appointment of members of the Board
of Management and, together with the full Supervisory
Board and the Board of Management, ensures that long-
term successor planning is in place. The Personnel
Committee also prepares the decisions of the Super-
visory Board with regard to the Board of Management’s
compensation and the Supervisory Board’s regular
review of the Board of Management’s compensation
system. In conjunction with the resolutions taken by
the Supervisory Board regarding the compensation of
the Board of Management, the Personnel Committee
is responsible for drawing up, amending and revoking
service / employment contracts or, when necessary,
other relevant contracts with members of the Board of
Management. In specified cases, the Personnel Com-
mittee also has the authority to give the necessary ap-
proval for a particular transaction (instead of the Super-
visory Board). This includes loans to members of the
Board of Management or Supervisory Board, specified
contracts with members of the Supervisory Board (in

each case taking account of the consequences of related
party transactions), as well as other activities of mem-
bers of the Board of Management, including the accept-
ance of non-BMW Group supervisory board mandates.

The Audit Committee deals in particular with issues
relating to the supervision of the financial reporting
process, the effectiveness of the internal control system,
the risk management system, internal audit arrange-
ments and compliance. It also monitors the external
audit, auditor independence and any additional work
performed by the external auditor. It prepares the pro-
posal for the election of the external auditor at the An-
nual General Meeting, makes a recommendation re-
garding the election of the external auditor, issues the
audit engagement letter and agrees on points of em-
phasis as well as the auditor’s fee. The Audit Committee
prepares the Supervisory Board’s resolution relating
to the Company and Group Financial Statements and
discusses interim reports with the Board of Manage-
ment before publication. The Audit Committee also
decides on the Supervisory Board’s agreement to use
the Authorised Capital 2009 (Article 4 no. 5 of the
Articles of Incorporation) and on amendments to the
Articles of Incorporation which only affect its wording.

In line with the recommendations of the German Cor-
porate Governance Code, the Chairman of the Audit
Committee is independent and not a former Chairman
of the Board of Management and has specific know-how
and experience in applying financial reporting stand-
ards and internal control procedures. He also fulfils the
requirements of being an independent financial expert
as defined by § 100 (5) and § 107 (4) AktG.

The Nomination Committee is charged with the task
of finding suitable candidates for election to the Super-
visory Board (as shareholder representatives) and for
inclusion in the Supervisory Board’s proposals for elec-
tion at the Annual General Meeting. In line with the
recommendations of the German Corporate Governance
Code, the Nomination Committee comprises only share-
holder representatives.

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
proposals to the Supervisory Board if a resolution for
the appointment of a member of the Board of Manage-
ment has not been carried by the necessary two-thirds
majority of members’ votes. In accordance with statu-
tory requirements, the Mediation Committee comprises
the Chairman and the Deputy Chairman of the Super-
visory Board and one member each selected by share-
holder representatives and employee representatives.

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

163 STATEMENT ON CORPORATE GOVERNANCE

Overview of Supervisory Board Committees, Meetings

Principal duties,
basis for activities

Presiding Board

– preparation of Supervisory Board meetings to the extent that the subject mat-

ter to be discussed does not fall within the remit of a committee

– activities based on terms of reference

Personnel Committee

– preparation of decisions relating to the appointment and revocation of appoint-
ment of members of the Board of Management, the compen sation and the
regular review of the Board of Management‘s compensation system

– conclusion, amendment and revocation of employment contracts (in conjunc-
tion with the resolutions taken by the Supervisory Board regarding the com-
pensation of the Board of Management) and other contracts with members of
the Board of Management

– decisions relating to the approval of ancillary activities of Board of Manage ment
members, including acceptance of non-BMW Group supervisory mandates as
well as the approval of transactions requiring Supervisory Board approval by dint
of law (e. g. loans to Board of Management or Supervisory Board members)

– set up in accordance with the recommendation contained in the German

Corporate Governance Code, activities based on terms of reference

Members

Joachim Milberg1
Manfred Schoch
Stefan Quandt
Stefan Schmid
Karl-Ludwig Kley

Number
of meetings
2012

Average
attendance

97 %

4
plus
2 telephone
conferences

95 %

Audit Committee

– supervision of the financial reporting process, effectiveness of the internal
control system, risk management system, internal audit arrangements and
compliance

– supervision of external audit, in particular auditor independence and addi-

tional work performed by external auditor

Karl-Ludwig Kley 1, 2
Joachim Milberg
Manfred Schoch
Stefan Quandt
Stefan Schmid

97 %

3
plus
3 telephone
conferences

– preparation of proposals for election of external auditor at Annual General Meet-
ing, engagement of external auditor and compliance of audit engagement, de-
termination of areas of audit emphasis and fee agreements with external auditor

– preparation of Supervisory Board’s resolution on Company and Group Finan-

cial Statements

– discussion of interim reports with Board of Management prior to publication

– decision on approval for utilisation of Authorised Capital 2009

– amendments to Articles of Incorporation only affecting wording

– establishment in accordance with the recommendation contained in the

German Corporate Governance Code, activities based on terms of reference

Nomination Committee

– identification of suitable candidates (male / female) as shareholder representa-
tives on the Supervisory Board, to be put forward for inclusion in the Super-
visory Board’s proposals for election at the Annual General Meeting

– establishment in accordance with the recommendation contained in the

German Corporate Governance Code, activities based on terms of reference

100 %

Joachim Milberg1
Susanne Klatten
Karl-Ludwig Kley
Stefan Quandt

(In line with the recommendations of the
German Corporate Governance Code,
the Nomination Committee comprises
only shareholder representatives.)

Mediation Committee

– proposal to Supervisory Board if resolution for appointment of Board of

Management member has not been carried by the necessary two-thirds
majority of Supervisory Board members’ votes

– committee required by law

Joachim Milberg
Manfred Schoch
Stefan Quandt
Stefan Schmid

–

(In accordance with statutory require-
ments, the Mediation Committee
comprises the Chairman and Deputy
Chairman of the Supervisory Board and
one member each selected by share-
holder representatives and employee
representatives.)

1 Chair
2 Independent financial expert within the meaning of § 100 (5) AktG and § 107 (4) AktG

164

Composition objectives of the Supervisory Board
The Supervisory Board must be composed in such a
way that its members as a group possess the knowledge,
skills and experience required to properly complete its
tasks. To this end, the Supervisory Board has formally
specified the following concrete objectives regarding
its composition, taking into account the recommenda-
tions contained in the German Corporate Governance
Code:
– At least four of the members of the Supervisory

Board should have international experience or spe-
cialist knowledge with regard to one or more of the
non-German markets important to the Company.
– If possible, the Supervisory Board should include

seven members who have acquired in-depth knowl-
edge and experience from within the Company.
The Supervisory Board should not, however, include
more than two former members of the Board of
Management.

– At least three of the shareholder representatives in
the Supervisory Board should be entrepreneurs or
persons who have already gained experience in the
management or supervision of another medium-sized
or large company.

– Ideally, three members of the Supervisory Board

should be figures from the worlds of business, science
or research who have gained experience in areas
relevant to the BMW Group, e. g. chemistry, energy
supply, information technology, or who have acquired
specialist knowledge in subjects relevant for the fu-
ture of the BMW Group, e. g. customer requirements,
mobility, resources and sustainability.

– When seeking suitably qualified individuals for the
Supervisory Board whose specialist skills and leader-
ship qualities are most likely to strengthen the Board
as a whole, consideration should also be given to
diversity. When preparing nominations, the extent
to which the work of the Supervisory Board would
benefit from diversified professional and personal
backgrounds (including international aspects) and
from an appropriate representation of both genders
should also be taken into account. In view of the pro-
portion of women in the workforce at 31 December
2012 (BMW AG: 14.2 %; BMW Group 17.3 %), the
Supervisory Board is of the opinion that a propor-
tion of three female members out of a total of twenty
members (15 %) is satisfactory as far as gender mix
is concerned, but that an increase to at least four fe-
male members (20 %) would be desirable. The Super-
visory Board therefore considers it appropriate that
opportunities available in conjunction with selec-
tion pro cedures through to the end of the ordinary
Annual General Meeting in 2015 should be used to
maintain the current proportion of 20 % female repre-

sentation. The Supervisory Board believes it is the
joint responsibility of all persons and groupings
participating in the nomination and election process
to ensure that the Supervisory Board comprises an
appropriate number of qualified women.

– At least twelve of the twenty members of the Super-

visory Board should be independent members within
the meaning of section 5.4.2 of the German Corpo-
rate Governance Code in the version dated 15 June
2012, including at least six members representing the
Company’s shareholders. Two independent members
in the Supervisory Board should have expert knowl-
edge of accounting or auditing.

– No persons carrying out directorship functions or ad-
visory tasks for important competitors of the BMW
Group may belong to the Supervisory Board. In com-
pliance with prevailing legislation, the members of
the Supervisory Board will strive to ensure that no
persons will be nominated for election with whom
serious conflicts of interest could arise (other than
temporarily) due to other activities and functions car-
ried out by them outside the BMW Group; this in-
cludes in particular advisory activities or directorships
with customers, suppliers, creditors or other business
partners.

– As a general rule, the age limit for membership of
the Supervisory Board should be set at 70 years. In
exceptional cases, members may be allowed to remain
on the Board up until the end of the Annual General
Meeting following their 73rd birthday in order to
fulfil legal requirements or to facilitate smooth succes-
sion in the case of persons with key roles or specialist
qualifications.

The time schedule set by the Supervisory Board for
achieving the above-mentioned composition targets is
the Annual General Meeting in 2015, by which time
elections will have taken place for all positions on the
Supervisory Board. Future proposals for nomination
made by the Super visory Board at the Annual General
Meeting – insofar as they apply to shareholder Super-
visory Board members – should take account of these
objectives in such a way that they can be achieved with
the support of the appropriate resolutions at the An-
nual General Meeting. The Annual General Meeting is
not bound by nominations for election proposed by the
Supervisory Board. The freedom of employees to vote
for the employee members of the Supervisory Board is
also protected. Under the procedural rules stipulated
by the German Co- Determination Act, the Supervisory
Board does not have the right to nominate employee
representatives for election. The objectives which the
Supervisory Board has set itself with regard to its compo-
sition are therefore not intended to be instructions to

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

165 STATEMENT ON CORPORATE GOVERNANCE

those entitled to vote or restrictions on their freedom
to vote. More to the point, they reflect the compo-
sition which the current Supervisory Board believes
should be striven for in future by those entitled to
nominate and elect board members, in view of the
advisory and supervisory needs of BMW AG’s Super-
visory Board.

In the Supervisory Board’s opinion, its own composition
at 31 December 2012 fulfils the composition objectives
detailed above. Brief curricula vitae of the current mem-
bers of the Supervisory Board can be found on the Com-
pany’s website at www.bmwgroup.com.

Information on corporate governance practices
applied beyond mandatory requirements
Core principles
Within the BMW Group, the Board of Management, the
Supervisory Board and the employees base their actions
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 valued 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. When working in a
team, each employee must assume personal responsibility
for his or her actions. We are fully aware that we are
working to achieve the Company’s goals. For this reason,
we work together in the best interests of the Company.

Effectiveness
The only results that count for the Company are those
which have a sustainable impact. In assessing leader-
ship, we must consider the effectiveness of performance
on results.

Adaptability
In order to ensure our long-term success we must adapt
to new challenges with speed and flexibility. We there-
fore see change as an opportunity – adaptability is essen-
tial to be able to capitalise on it.

Frankness
As we strive to find the best solution, it is each em-
ployee’s duty to express any opposing opinions they
may have. The solutions we agree upon will then be
consistently implemented by all those involved.

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 strong-
est factor in our success, which means our personnel
decisions will be among the most important we ever
make.

Leading by example
Every manager must lead by example.

Sustainability
In our view, sustainability constitutes a lasting con-
tribution to the success of the Company. This is the
basis upon which we assume ecological and social
responsibility.

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.bmw-
group.com under the menu items “Responsibility” and
“Employees”.

Social responsibility towards employees and along
the supplier chain
The BMW Group stands by its social responsibilities. Our
corporate culture combines the drive for success with
a willingness to be open, trustworthy and transparent.
We are well aware of our responsibility towards society.
Our models for sustainable social responsibility towards
employees and for ensuring compliance with inter-
national social standards are based on various inter-
nationally recognised guidelines. The BMW Group is
committed to adhering to the OECD’s guidelines for
multinational companies and the contents of the ICC
Business Charter for Sustainable Development. De-
tails of the contents of these guidelines and other rele-
vant information can be found at www.oecd.org and
www.iccwbo.org. The Board of Management signed the
United Nations Global Compact in 2001 and, in 2005,

166

together with employee representatives, issued a “Joint
Declaration on Human Rights and Working Conditions
in the BMW Group”. This Joint Declaration was recon-
firmed in 2010. With the signature of these documents,
we have given our commitment to abide worldwide
by internationally recognised human rights and with the
fundamental working standards of the International
Labour Organization (ILO). The most important of these
are freedom of employment, the prohibition of discrimi-
nation, the freedom of association and the right to col-
lective bargaining, the prohibition of child labour, the
right to appropriate remuneration, 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 infor-
mation can be found at www.unglobalcompact.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 “Respon-
sibility” (Services / downloads / topics: “Employees and
Society”).

Further information regarding employees is provided
in the “Personnel” section of the Group Management
Report.

It goes without saying that the BMW Group abides by
these fundamental principles and rights worldwide.
Employees have therefore been sensitised to this issue
since 2005 by means of regular internal communica-
tions. Further training was provided again in 2012 on
recent developments in this area. A dedicated helpline –
the “Human Rights Contact” – is available to employees
wishing to raise queries or complaints relating to hu-
man rights issues. The BMW Group also conducted its
own “Human Rights Impact Assessment” in 2012 with
a view to ensuring that human rights are respected
throughout the organisation.

Activities can only be sustainable, however, if they en-
compass 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 and strives con-
tinually to improve the efficiency of processes, measures
and activities.

Sustainability criteria play an integral part in all aspects
of our purchasing terms and conditions as well as for
the purposes of evaluating suppliers. Potential suppliers
must submit a full disclosure when completing BMW’s
modularly structured sustainability questionnaire, an
inherent component of the acceptance procedure for

potential new suppliers. The BMW Group also insists
that its suppliers ensure that their sub-contractors com-
ply with set standards. Purchasing terms and condi-
tions 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.

We foster close relations with our suppliers, providing
encouragement and practical assistance to those
interested in wishing to make progress in the area of
sustainability.

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. In order to ensure to
protect itself systematically against compliance-related
and reputational risks, the Board of Management created
a Compliance Committee back in 2007, mandated to
establish a worldwide Compliance Organisation through-
out the BMW Group.

The BMW Group Compliance Committee comprises
the heads of the following departments: Legal Affairs,
Corporate and Governmental Affairs, Corporate Audit,
Organisational Development and Corporate Human
Resources. It manages and monitors activities necessary
to avoid non-compliance with the law (Legal Compli-
ance). These activities include training, information and
communication measures, compliance controls and fol-
lowing up cases of non-compliance.

The BMW Group Compliance Committee reports reg-
ularly to the Board of Management on all compliance-
related issues, including the progress made in develop-
ing the BMW Group Compliance Organisation, details
of investigations performed, known infringements
of the law, sanctions imposed and corrective / preventa-
tive measures implemented. The decisions taken by
the BMW Group Compliance Committee are drafted in
concept, and implemented operationally, by the BMW
Group Compliance Committee Office. The BMW Group
Compliance Committee Office is allocated in organisa-
tional terms to the Chairman of the Board of Manage-
ment.

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

167 STATEMENT ON CORPORATE GOVERNANCE

The Chairman of the BMW Group Compliance Com-
mittee 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 Board of Management keeps track of and analyses
compliance-related developments and trends on the
basis of the Group’s compliance reporting and input
from the BMW Group Compliance Committee. Measures
to improve compliance systems are initiated on the ba-
sis of identified requirements.

A coordinated set of instruments and measures are em-
ployed to ensure that the BMW Group, its representative
bodies, its managers and its staff act in a lawful manner.
Particular emphasis has been placed on compliance
with antitrust legislation and the avoidance of corrup-
tion risks. Compliance measures are supplemented by
a whole range of internal policies, guidelines and in-
structions, which in part reflect applicable legislation.
The BMW Group Policy “Corruption Prevention” de-
serves particular mention: this document sets out the

BMW Group Compliance Organisation

Supervisory Board BMW AG

Board of Management BMW AG

BMW Group Compliance Committee

BMW Group Compliance Committee Office

Compliance Operations Network
of all BMW Group
Compliance Responsibles

Annual
Report

Annual
Compliance
Reporting Run

Compliance Risk
Analysis

Legal Compliance
Code and Regulations

Compliance
Investigations
and Controls

Compliance
Reporting

Compliance
Instruments and
Measures of
the BMW Group

Compliance
Communication

Compliance
Trainings

Compliance
Contact and
SpeakUP Line

Compliance
Governance and
Processes

framework for dealing with gifts, hospitalities and other
benefits in compliance with the law and defines appro-
priate value limits and approval procedures for specified
actions.

Compliance measures are determined and prioritised
on the basis of a group-wide compliance risk assessment
covering 250 business units and functions worldwide
within the BMW Group. The assessment of compliance
risks is updated annually. Measures are realised with
the aid of a regionally structured compliance manage-
ment team covering all parts of the BMW Group and
overseeing more than 200 Compliance Responsibles.

The various elements of the BMW Group Compliance
Organisation are shown in the diagram on the left and
are applicable for all BMW Group entities worldwide.
To the extent that additional compliance requirements
apply to individual countries or specific lines of busi-
ness, these are covered by supplementary compliance
measures.

The BMW Group Legal Compliance Code is the corner-
stone of the Group’s Compliance Organisation, spelling
out the Board of Management’s acknowledgement of
the fact that compliance is a joint responsibility (“Tone
from the Top”). This document, which explains the
significance of legal compliance and provides an over-
view of the various areas relevant for the BMW Group,
is available both as a printed brochure and to down-
load in German and English. In addition, translations
into eleven other languages are available (French, Italian,
Japanese, Korean, Mandarin, Dutch, Polish, Portuguese,
Russian, Spanish and Thai).

Managers in particular bear a high degree of responsi-
bility and must set a good example in the process of
preventing infringements. Managers throughout the
BMW Group accept this principle by signing a written
declaration, in which they also undertake to inform
staff working for them of the content and significance
of the Legal Compliance Code and to make staff aware
of legal risks. Managers must, at regular intervals and
on their own initiative, check compliance with the law
and communicate regularly with staff on this issue.
Any indication of non-compliance with the law must
be rigorously investigated.

More than 16,500 managers and staff have received
training worldwide in essential compliance matters
since the introduction of the BMW Group Compliance
Organisation. The training material is available on an
internet-based training platform in German and English
and includes a final test. Successful participation in

168

the training programme, which is documented by a
certificate, is mandatory for all BMW Group managers.
Appropriate processes are in place to ensure that all
newly recruited managers and promoted staff undergo
compliance training. In this way, the BMW Group
ensures full training coverage for its managers in com-
pliance matters.

In addition to this basic training, in-depth training is
also provided to certain groups of staff on specific
compliance issues. This includes a training programme
(Compliance Advanced – Competition and Antitrust
Law) aimed at employees who come into contact with
antitrust-related issues as a result of their functions
within sales, purchasing or development.

Compliance with and the implementation of the Legal
Compliance Code are audited regularly by Corporate
Audit and subjected to control checks by Corporate
Security and the BMW Group Compliance Committee
Office. As part of its regular activities, Corporate Audit
carries out on-site audits. The BMW Group Compliance
Committee also engages Corporate Audit to perform
compliance-specific tests. In addition, sample checks
(BMW Group Compliance Spot Checks) specifically de-
signed to identify potential risks of corruption are car-
ried out. Compliance control activities are coordinated
by the BMW Group Panel Compliance Controls estab-
lished in 2011. Any necessary follow-up measures are
organised by the BMW Group Compliance Committee
Office.

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
particular Legal Affairs, Corporate Audit and Corporate
Security. As a further point of contact, the BMW Group
Com pliance Contact has also been set up both for em-
ployees and non-employees to answer any questions
that may arise regarding compliance.

Employees also have the opportunity to submit informa-
tion – anonymously and confidentially – via the BMW
Group SpeakUP Line about possible breaches of the law
within the company. The BMW Group SpeakUP Line
is available in a total of 34 languages and can be reached
via local free-of-charge telephone numbers in all of the
countries in which BMW Group employees carry out
activities.

Compliance-related queries and all matters to which
attention has been drawn are documented and followed
up by the BMW Group Compliance Committee Office
using an electronic Case Management System. If neces-
sary, Corporate Audit, Corporate Security, the Works
Council and Legal Affairs may be called upon to assist
in the investigation process.

A group-wide reporting system ensures the systematic re-
cording of compliance-relevant information. Through
this system, Compliance Responsibles throughout the
BMW Group report on compliance-relevant issues to
the Compliance Committee on a regular basis, and, if
necessary, on an ad hoc basis. This includes reporting
on the compliance status of the relevant entities, on
identified legal risks and incidences of non-compliance
as well as on corrective / preventative measures imple-
mented.

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
violations of law result in employment-contract sanc-
tions and may involve personal liability consequences
for the employee involved.

In order to avoid this, the BMW Group’s employees are
kept fully informed of the instruments 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 employees can find compliance-related informa-
tion and also have access to training materials in both
German and English. Employees can use the website to
access frequently asked questions (and answers) on
compliance-related issues. The website contains a spe-
cial service area where various practical tools and aids
are made available to employees, which help them deal
with typical compliance-related matters. BMW Group
employees also have access on the website to an elec-
tronically supported approval process for invitations
in connection with business partners.

In the same way that the BMW Group is committed to
acting responsibly and conducting business in full com-
pliance with the law, it also expects no less from its
business partners. During 2012 the BMW Group de-
veloped a new Business Relations Compliance pro-
gramme aimed at ensuring the reliability of its business
relations. Relevant business partners are checked and
evaluated with a view to identifying potential compli-
ance risks. These procedures are particularly relevant
for relations with sales partners and service providers,
such as agencies and advisers / consultants. Depending
on the results of the evaluation, appropriate measures –

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

169 STATEMENT ON CORPORATE GOVERNANCE

such as communication measures, training and possible
monitoring – are implemented to manage compliance
risks. The Business Relations Compliance programme
was introduced in selected pilot markets in 2012 and, over
the coming years, will be rolled out successively through-
out the BMW Group’s worldwide sales organisation.

Compliance is also an important factor in terms of safe-
guarding the future of the BMW Group’s workforce.
With this in mind, the Board of Management and the
national and international employee representative
bodies of the BMW Group signed a set of Joint Principles
for Lawful Conduct in 2009. In doing so, all parties in-
volved gave a commitment to the principles contained
in the BMW Group Legal Compliance Code and to trust-
ful cooperation in all matters relating to compliance.
Employee representatives are therefore regularly involved
in the process of developing compliance systems within
the BMW Group.

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 consisting of representatives of various
specialist departments and whose members examine
the relevance of issues for ad-hoc disclosure purposes.
All persons working on behalf 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.

Reportable securities transactions
(“Directors Dealings”)
Pursuant to § 15 a of the German Securities Trading Act
(WpHG), members of the Board of Management and
the Supervisory Board and any persons related to those
members, are required to give notice to BMW AG and
the Federal Agency for the Supervision of Financial Ser-
vices of transactions with BMW stock or related finan-
cial instruments if the total sum of such transactions
exceeds an amount of € 5,000 during any given 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 pursuant to § 10 (1) of the German
Securities Prospectus Act. No securities transactions
pursuant to § 15 a WpHG were notified to the Company
during the 2012 financial year. The acquisition of finan-
cial instruments based on employment contracts or as
a compensation component is excepted from the report-
ing requirement pursuant to § 15 a WpHG.

Shareholdings of members of the Board of Manage-
ment and the Supervisory Board
The members of the Supervisory Board of BMW AG hold
in total 27.63 % of the Company’s shares of common
and preferred stock (2011: 27.65 %), of which 16.08 %
(2011: 16.09 %) relates to Stefan Quandt, Bad Homburg
v. d. H. and 11.55 % (2011: 11.56 %) to Susanne Klatten,
Munich. The shareholding of the members of the
Board of Management totals less than 1 % of the issued
shares.

Share-based remuneration schemes for employees and
Board of Management members
Three share-based remuneration schemes were in place
at BMW AG during the year under report, namely the
Employee Share Scheme (under which entitled employees
of BMW AG participate in the enterprise’s success),
share-based commitments to members of the Board of
Management members and share-based commitments
to department heads (see also page 171 of the Com-
pensation Report and note 18 to the Group Financial
Statements).

As in the previous year, employees were able in 2012
under the terms of the Employee Share Scheme to
acquire packages of between five and 20 shares of non-
voting preferred stock with a discount of € 12.50 per
share compared to the market price (average closing
price in Xetra trading during the period from 8 Novem-
ber to 14 November 2012: € 43.95). 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 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 employees ac-
quired the shares. In total, 422,905 (2011: 408,140) shares
of preferred stock were issued to employees in 2012,
with 422,845 (2011: 407,960) drawn from the Authorised
Capital 2009 and the remainder bought back via the
stock exchange. Every year the Board of Management of
BMW AG decides whether the scheme is to be contin-
ued. Further information is provided in notes 18 and 33
to the Group Financial Statements.

170

Compensation report
The following section describes the principles relating
to the compensation of the Board of Management and
the stipulations set out in the statutes relating to the
compensation of the Supervisory Board. In addition to
discussing the compensation system, the components
of compensation are also disclosed in absolute figures.
Furthermore, the compensation of each member of
the Board of Management and the Supervisory Board
for the financial year 2012 is disclosed by individual
and analysed into components.

1. Management Board compensation
Responsibilities; approval by shareholders in 2012
The Supervisory Board is responsible for determining
and regularly reviewing the Board of Management’s
compensation. The Personnel Committee plays a pre-
paratory role in this process.

The compensation system applicable to the Board of
Management was presented most recently for approval
by shareholders at the Annual General Meeting on
16 May 2012 as part of a voluntary consultative process
(“Say on Pay”). The compensation system was approved
with a majority vote of 95.45 %.

Principles of compensation
The compensation system for the Board of Management
at BMW AG is designed to encourage a management
approach focused on sustainable development. One im-
portant principle applied when designing remuneration
systems at BMW is that of consistency at different levels.
In other words, compensation systems for the Board
of Management, senior management and employees of
BMW AG should all have a similar structure and contain
similar components. The Supervisory Board carries out
regular checks to ensure that all Board of Management
compensation components are appropriate, both indi-
vidually and in total, and do not encourage the Board of
Management to take inappropriate risks for the BMW
Group. At the same time, the compensation model used
for the Board of Management should be attractive in
the context of the competitive environment for highly
qualified executives.

The compensation of members of the Board of Manage-
ment is determined by the full Supervisory Board on
the basis of performance criteria and after taking into
account any remuneration received from Group com-
panies. The principal performance criteria are the nature
of the tasks allocated to each member of the Board of
Management, the economic situation and the perfor-
mance and future prospects of the BMW Group. The
Supervisory Board sets demanding and relevant pa-
rameters as the basis for variable compensation. It also

takes care to ensure that variable components based on
multi-year assessment criteria take account of both pos-
itive and negative developments and that the package
as a whole encourages a long-term approach to business
performance. Targets and other parameters may not be
changed retrospectively.

The Supervisory Board reviews the appropriateness of
the compensation system annually. The Personnel
Committee also makes use of remuneration studies. The
Supervisory Board reviews the appropriateness of the
compensation system in horizontal terms by comparing
compensation paid by DAX companies and in vertical
terms by comparing board compensation with the sala-
ries of the two top levels of management below board
level and with the average salaries of employees. Rec-
ommendations made by an independent external remu-
neration expert and suggestions made by investors and
analysts are also considered in the consultative process.

Compensation system, compensation components
The compensation of the Board of Management com-
prises both fixed and variable remuneration as well
as a share-based component. Retirement and surviving
dependants’ benefit entitlements are also in place.

Fixed compensation
Fixed remuneration consists of a base salary (paid
monthly) and other remuneration elements. Other re-
muneration elements comprise mainly the use of com-
pany and lease cars as well as the payment of insurance
premiums, contributions towards security systems and
an annual medical check-up. Members of the Board of
Management are also entitled to purchase vehicles and
other services of the BMW Group at conditions that also
apply in each relevant case for employees.

The basic remuneration of members of the Board of
Management were set in 2011 for financial years
beginning after 1 January 2012 at € 750,000 p. a. (2011:
€ 510,000) for a board member during the first period
of office, at € 900,000 p. a. (2011: € 590,000) for a board
member during the second period of office and at
€ 1,500,000 p. a. (2011: € 1,020,000) for the Chairman of
the Board of Management.

Variable remuneration
The variable remuneration of Board of Management
members comprises variable cash remuneration on the
one hand and share-based remuneration components
on the other.

Variable cash remuneration, in particular bonuses
Variable cash remuneration consists of a cash bonus
and a share-based remuneration component equivalent

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

171 STATEMENT ON CORPORATE GOVERNANCE

to 20 % of the board member’s total bonus after taxes,
which the board member is required to invest in
BMW AG common stock. Taxes and social insurance
relating to the share-based remuneration component
are also borne by the Company. In substantiated cases,
the Super visory Board also has the option of paying
an additional special bonus.

The bonus is made up of two components, each equally
weighted, namely a corporate earnings-related bonus
and a personal performance-related bonus. The target
bonus (100 %) of a Board of Management member, for
both components of the variable compensation, totals
€ 1.5 million p. a. and € 1.75 million p. a. with effect from
the second term of appointment. The equivalent figure
for the Chairman of the Board of Management is € 3 mil-
lion p. a. Upper limits for the amount of the bonus are
in place for all Board of Management members (250 % of
the relevant target bonus).

The corporate earnings-related bonus is based on the
BMW Group’s net profit and post-tax return on sales
(which are combined in a single earnings factor) and
the level of the dividend (common stock). The corporate
earnings-related bonus is derived by multiplying the
target amount fixed for each member of the Board of
Management 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
corporate earnings-based bonus of € 0.75 million for
the relevant financial year for a member of the Board of
Management during the first period of office and one of
€ 0.875 million during the second period of office. The
equivalent bonus for the Chairman of the Board of
Management is € 1.5 million. The earnings factor is 1.00
in the event of a Group net profit of € 3.1 billion and a
post-tax return on sales of 5.6 %. The dividend factor
is 1.00 in the event that the dividend paid on the shares
of common stock is between 101 and 110 cents. If the
Group net profit is below € 1 billion or if the post-tax re-
turn 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 consist-
ency at all levels, this rule is also applicable in determin-
ing the corporate earnings-related variable compensa-
tion components of all managers and staff of BMW AG.

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 perfor-
mance and decisions taken in previous forecasting
periods, key decisions affecting the future development
of the business and the effectiveness of measures taken
in response to changing external conditions as well as
other activities aimed at safeguarding the future viability
of the business to the extent not included directly in
the basis of measurement. Performance factor criteria
include innovation (economic and ecological, e. g. reduc-
tion of CO2 emissions), customer focus, ability to adapt,
leadership accomplishments, contributions to the Com-
pany’s attractiveness as an employer, progress in imple-
menting the diversity concept and activities that foster
corporate social responsibility. The target bonus and
the key figures used to determine the corporate earn-
ings-related bonus have been fixed for a period of three
financial years, during which time they may not be
amended retrospectively.

Share-based remuneration programme
The compensation system includes a share-based remu-
neration programme, in which the level of share-based
remuneration is based on the amount of the bonus
paid. The system is aimed at creating further long-term
incentives to encourage sustainable governance.

This programme envisages a share-based remuneration
component equivalent to 20 % of the board member´s
total bonus after taxes, which the board member is re-
quired to invest in BMW AG common stock. Taxes and
social insurance relating to the share-based remunera-
tion component are also borne by the Company. As a
general rule, the shares must be held for a minimum of
four years. As part of a matching plan, the Board of
Management members will, at the end of the holding
period, receive from the Company either one additional
share of common stock or an equivalent cash amount for
three shares of common stock held, to be decided at the
discretion of the Company (share-based remuneration
component / matching component), unless the employ-
ment relationship was ended before expiry of the agreed
contractual period (except where caused by death or
invalidity). Special rules apply in the case of death or
invalidity of a Board of Management member before
fulfilment of the holding period.

Retirement and surviving dependants’ benefits
The provision of retirement and surviving dependants’
benefits for existing and future members of the Board
of Management was changed to a defined contribution
system with a guaranteed minimum return with effect
from 1 January 2010. However, given the fact that board

172

members appointed for the first time prior to 1 January
2010 had a legal right to receive the benefits already
promised to them, these board members were given the
option to choose between the previous system and the
new one.

In the event of the termination of mandate, Board of
Management members appointed for the first time
prior to 1 January 2010 are entitled to receive certain
defined benefits in accordance with the old pension
scheme rules. Pensions are paid to former members
of the Board of Management who have either reached
the age of 65 or, if their mandate was terminated earlier
and not 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 is unchanged from the previous year
and comprises a basic monthly amount of € 10,000 or
€ 15,000 (Chairman of the Board of Management) plus a
fixed amount. The fixed amount is made up of approxi-
mately € 75 for each year of service in the Company be-
fore becoming a member of the Board of Management
plus between € 400 and € 600 for each full year of service
on the board (up to a maximum of 15 years). Pension
payments are adjusted by analogy to the rules applicable
for the adjustment of civil servants’ pensions: the pen-
sions of members of the Board of Management are
adjusted when the civil servants remuneration level B6
(excluding allowances) is increased by more than 5 % or
in accordance with the Company Pension Act.

When a mandate is terminated, the new defined contri-
bution 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 retire-
ment – depending on the wish of the ex-board member
concerned – in the form of a lifelong monthly pension,
as a one-off amount, in a maximum of ten annual instal-
ments, 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 pen-
sion scheme in Germany or, if their mandate had termi-
nated earlier and had not been extended, to members
who have either reached the age of 60 or are perma-
nently 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 mem-
ber who has elected to receive a lifelong pension, 60 %
of that amount is paid as a lifelong widow’s pension.

Pensions are increased annually by an amount of at
least 1 %.

The amount of the retirement pension to be paid is
determined on the basis of the amount accrued in each
board member’s individual pension savings account.
The amount on this account arises from annual con-
tributions paid in plus interest earned depending on the
type of investment.

The annual contribution to be paid amounts to € 300,000
(2011: € 270,000) for each member of the Board of
Management and € 525,000 (2011: € 475,000) for the Chair-
man of the Board of Management. The contributions
are credited, along with interest earned, to the personal
savings accounts of board members in monthly amounts.
The guaranteed minimum rate of return p. a. corre-
sponds to the maximum interest rate used to calculate
insurance reserves for life insurance policies (guaranteed
interest on life insurance policies).

In the case of invalidity or death, a minimum of the po-
tential annual contributions will be paid until the person
concerned would have reached the age of 60.

Contributions falling due under the defined contribution
scheme are paid into an external fund in conjunction
with a trust model that is also used to fund pension ob-
ligations to employees.

Income earned on an employed or a self-employed basis
up to the age of 63 is offset against the pension entitle-
ment. In addition, certain circumstances have been
specified, in the event of which the Company no longer
has any obligation to pay benefits. In such cases, no
transitional payments will be made, either.

Board of Management members who retire immediately
after their service on the board and who draw a retire-
ment pension are entitled to purchase vehicles and
other services of the BMW Group at conditions that also
apply in each relevant case for pensioners and to lease
BMW Group vehicles in accordance with the guidelines
applicable to senior heads of departments.

Compensation claims, entitlements to receive amounts
from third parties
If a board member’s mandate is terminated early with-
out important reason, there are no contractual commit-
ments to pay compensation. Similarly, there are no com-
mitments to pay compensation for early termi nation in
the event of a change of control or a takeover offer.

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

173 STATEMENT ON CORPORATE GOVERNANCE

No members of the Board of Management received any
payments or benefits from third parties in 2012 on ac-

count of their activities as members of the Board of
Management of BMW AG.

Overview of compensation system and compensation components

Component

Salary

Variable compensation

Bonus

a) Corporate earnings-related bonus

(corresponds to 50 % of target bonus if target is 100 %
achieved)

b) Performance-related bonus

(corresponds to 50 % of target bonus if target is 100 %
achieved)

Parameter / measurement base

Member of the Board of Management:
– € 0.75 million p. a. (first term of appointment)
– € 0.90 million p. a. (from second term of appointment onwards)

Chairman of the Board of Management:
– € 1.50 million p. a.

Target bonuses (if target is 100 % achieved):
– € 1.50 million p. a. (first term of appointment)
– € 1.75 million p. a. (from second term of appointment onwards)
– € 3.00 million p. a. (Chairman of the Board of Management)
– Upper limit: 250 %
– Quantitative criteria fixed in advance for a period of three financial years
– Formula: 50 % of target bonus x earnings factor x dividend factor (common stock)
– The earnings factor is derived from the Group net profit and the Group post-tax return

on sales

– Primarily qualitative criteria, expressed in terms of a performance factor aimed at

measuring the board members contribution to sustainable and long-term performance
and the future viability of the business

– Formula: 50 % of target bonus x performance factor
– Criteria for the performance factor also include: innovation (economic and ecological,
e. g. reduction of CO2 emissions), customer orientation, ability to adapt, leadership ac-
complishments and attractiveness as employer, progress in implementing the diversity
concept and activities that foster corporate social responsibility

Special bonus payments

May be paid in justified circumstances on appropriate basis, contractual basis, no
entitlement

Share-based remuneration programme

– Requirement for Board of Management members to each invest an amount equivalent

a) Cash remuneration component

– Earmarked cash remuneration equivalent to the amount required to be invested in

to 20 % of their total bonus (after tax) in BMW AG common stock

b) Share-based remuneration component

– Once the four-year holding period requirement is fulfilled, Board of Management

BMW AG shares, plus taxes and social insurance contributions

(matching component)

Other remuneration

members receive for each three common stock shares held either – at the Company’s
option – one further share of common stock or the equivalent amount in cash, unless
the employment relationship was ended before expiry of the agreed contractual period
(except where caused by death or invalidity).

Contractual agreement, main points: use of company cars, insurance premiums,
contributions towards security systems, medical check-up

Compensation entitlements on termination of contract, compensation entitlements in event of change of control or takeover bid

No contractual entitlements

Retirement and surviving dependants’ benefits
Model

Principal features

a) Defined benefits

(only applies to board members appointed for the first
time before 1 January 2010; based on legal right to
receive the benefits already promised to them, this group
of persons is entitled to opt between (a) and (b))

Pension of € 120,000 (Chairman: € 180,000) p. a. plus fixed amounts based on length of
Company and board service

b) Defined contribution system with guaranteed minimum

rate of return

Pension based on amounts credited to individual savings accounts for contributions paid
and interest earned

Annual contribution for board member (Chairman)
€ 300,000 (€ 525,000)

Various forms of disbursement

174

Compensation of the Board of Management for the
financial year 2012 (total)
With effect from 1 July 2012, the Board of Management
was expanded by one to a total of eight members. The
total compensation of the eight current members of the
Board of Management of BMW AG for 2012 amounted
to € 31.4 million (2011: € 27.3 million), of which € 7.5 mil-
lion (2011: € 4.7 million) relates to fixed components
(including other remuneration). These figures include
the impact of the rise in basic remuneration resolved in
2011 for financial years commencing after 1 January
2012. Variable components amounted to € 23.2 million
(2011: € 21.9 million) and share-based remuneration
component to € 0.7 million (2011: € 0.7 million).

members of the Board of Management for the period
after the end of their service relationship. This relates to
the expense for allocations to pension provisions.

in € million

2012

2011

Amount Proportion
in %

Amount Proportion

in %

Fixed compensation

7.5

23.9

4.7

17.2

Variable cash
compensation

Share-based compen-
sation component*

Total compensation

23.2

73.9

21.9

80.2

0.7

31.4

2.2

100.0

0.7

27.3

2.6

100.0

In addition, an expense of € 1.2 million (2011: € 1.1 mil-
lion) was recognised in the financial year 2012 for current

* Matching component; provisional number or provisional monetary value calculated
at grant date (date on which the entitlement became binding in law). The final number
of matching shares is determined in each case when the requirement to invest in
BMW AG common stock has been fulfilled.

Compensation of the individual members of the Board of Management for the financial year 2012 (2011)

in € or
number of
matching shares

Fixed compensation

Basic
compen-
sation

Other
compen-
sation

Total

Variable
com-
pensation

Share-based
compensation
component
(matching
component)1

Com-
pensation
Total

Number Monetary
value

Expense for
share-based
compensation
component
in year under
report in
accordance with
HGB and IFRS

Provision at
31.12. 2012 for
share-based
remuneration
component in
accordance
with HGB
and IFRS2

Norbert Reithofer

1,500,000
(1,020,000)

112,835
(22,455)

1,612,835
(1,042,455)

Frank-Peter Arndt

Milagros Caiña
Carreiro-Andree3

Herbert Diess

Klaus Draeger

Friedrich Eichiner

Harald Krüger

Ian Robertson

900,000
(590,000)

375,000
(–)

900,000
(590,000)

900,000
(518,333)

900,000
(578,065)

27,336
(22,081)

11,526
(–)

22,007
(72,190)

22,948
(16,008)

27,366
(26,842)

19,036
(20,148)

14,881
(14,106)

927,336
(612,081)

386,526
(–)

922,007
(662,190)

922,948
(606,008)

927,366
(616,842)

919,036
(538,481)

914,881
(592,171)

4,881,600
(4,971,600)

2,847,600
(2,900,100)

1,220,400
(–)

2,847,600
(2,900,100)

2,847,600
(2,520,325)

2,847,600
(2,817,686)

2,495
(2,610)

1,455
(1,522)

514
(–)

1,563
(1,634)

1,455
(1,323)

1,563
(1,588)

132,634
(142,480)

6,627,069
(6,156,535)

77,348
(87,302)

35,569
(–)

83,089
(88,710)

83,089
(95,998)

83,089
(90,311)

77,348
(73,347)

83,089
(90,707)

3,852,284
(3,599,483)

1,642,495
(–)

3,852,696
(3,651,000)

3,853,637
(3,602,106)

3,858,055
(3,607,253)

3,843,984
(3,132,153)

3,845,570
(3,500,564)

75,826
(21,443)

70,099
(18,757)

6,248
(–)

55,238
(15,377)

71,283
(19,222)

61,522
(16,915)

37,608
(9,924)

48,583
(13,475)

97,269
(21,443)

88,856
(18,757)

6,248
(–)

70,615
(15,377)

90,505
(19,222)

78,437
(16,915)

47,532
(9,924)

62,058
(13,475)

Total

7,275,000

257,935

7,532,935

23,187,600

12,171

655,255 31,375,790

(4,476,398)

(193,830)

(4,670,228)

(21,910,011)

(11,945)

(668,855)

(27,249,094)

426,407

(115,113)

541,520

(115,113)

1 Provisional number or provisional monetary value calculated at grant date (date on which the entitlement became binding in law). The final number of matching shares is

determined in each case when the requirement to invest in BMW AG common stock has been fulfilled. See note 18 to the Group Financial Statements for a description of the
accounting treatment of the share-based compensation component.

2 Monetary value calculated on the basis of the closing price of BMW common stock in the XETRA trading system on 28 December 2012 (€ 72.93) (fair value at reporting date).
3 Member of the Board of Management since 1 July 2012

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

175 STATEMENT ON CORPORATE GOVERNANCE

Pension benefits of the individual members of the Board of Management

in €

Allocated to
pension provisions in
financial year
20121

Present value of
pension obligations
(defined benefit plans),
in accordance with
IFRS2, 3

Present value of
pension obligations
(defined benefit plans),
in accordance with HGB2

Balance on accounts
at 31.12. 2012
(defined benefit plans)2

Norbert Reithofer

Frank-Peter Arndt

Milagros Caiña Carreiro-Andree4

Herbert Diess

Klaus Draeger

Friedrich Eichiner

Harald Krüger

Ian Robertson

Total2

217,462
(196,016)

108,769
(110,826)

150,000
(–)

145,829
(147,280)

114,531
(112,163)

127,028
(127,016)

88,004
(87,282)

281,416
(278,587)

1,233,039

(1,059,170)

7,770,956
(5,093,510)

4,390,861
(3,027,171)

169,119
(–)

3,459,608
(2,201,981)

4,357,273
(2,908,811)

4,443,313
(3,058,014)

2,911,534
(1,669,436)

1,872,190
(994,200)

29,374,854

(18,953,123)

5,263,483
(4,733,729)

3,258,422
(2,839,571)

168,608
(–)

2,407,993
(2,041,544)

3,078,164
(2,711,411)

3,203,857
(2,872,538)

1,934,608
(1,508,167)

1,274,502
(924,011)

20,589,637

(17,630,971)

4,960,974
(3,858,278)

3,268,852
(2,584,455)

151,882

(–)

2,402,944
(1,817,002)

3,088,017
(2,426,238)

3,214,112
(2,536,562)

1,911,397
(1,382,823)

1,197,553
(768,936)

20,195,731

(15,374,294)

1 With the exception of Milagros Caiña Carreiro-Andree, the amount disclosed corresponds to service cost in accordance with IFRS
2 Based on legal right to receive the benefits already promised to them, Board of Management members appointed for the first time prior to 1 January 2010 were given the option

of choosing between the old and new models at the time the Company changed from a defined benefit to a defined contribution system.

3 Defined Benefit Obligations
4 Member of the Board of Management since 1 July 2012. The pension expense for Milagros Caiña Carreiro-Andree in the financial year 2012 corresponds to the defined

contribution amount

The amount paid to former members of the Board of
Management and their dependants was € 3.8 million
(2011: € 3.7 million). Pension obligations to former mem-
bers of the Board of Management and their surviving
dependants are fully covered by pension provisions
amounting to € 61.2 million (2011: € 51.6 million), com-
puted in accordance with IAS 19. The increase in the
present value of defined benefit obligations for current
Board of Management and pension obligations to for-
mer Board of Management members and their surviving
dependants, measured in accordance with IFRS, was
primarily attributable to interest rate factors.

2. Supervisory Board compensation
Responsibilities, regulation pursuant to Articles of
Incorporation
The compensation of the Supervisory Board is deter-
mined by shareholders’ resolution at the Annual
General Meeting. The compensation regulation valid
for the financial year 2012 was resolved by shareholders
at the Annual General Meeting on 8 May 2008 and
is set out in Article 15 of BMW AG’s Articles of Incor-
poration, which can be viewed and / or downloaded
at www.bmwgroup.com/ir under the menu items “Cor-
porate Facts” and “Corporate Governance”.

Compensation principles, compensation components
The Supervisory Board of BMW AG receives both fixed
and corporate performance-related compensation.
Earnings per share of common stock form the basis for
corporate performance-related compensation.

In accordance with rules contained in BMW AG’s Arti-
cles of Incorporation, each member of the Supervisory
Board receives, in addition to the reimbursement of
reasonable expenses, a fixed amount of € 55,000 (payable
at the end of the year) as well as a performance-related
compensation of € 220 for each full € 0.01 by which the
earnings per share (EPS) of common stock reported in
the Group Financial Statements for the financial year
(remuneration year) exceed a minimum amount of
€ 2.30 (payable after the Annual General Meeting held
in the following year). An upper limit corresponding to
twice the amount of the fixed compensation (€ 110,000)
is in place for the corporate performance-related com-
pensation.

With this combination of fixed and corporate perfor-
mance-related compensation, the compensation struc-
ture in place for BMW AG’s Supervisory Board has
complied up to now with the recommendation con-

176

tained in paragraph 2 of section 5.4.6 of the German
Corporate Governance Code (version dated 26 May
2010). The Supervisory Board and Board of Management
intend to submit a proposal to the Annual General
Meeting 2013 to change Supervisory Board compensa-
tion for financial years beginning after 1 January 2013
by way of an amendment to the Articles of Incorpora-
tion. In line with the revised recommendation on super-
visory board compensation contained in section 5.4.6
paragraph 2 sentence 2 of the Code (version dated 15
May 2012), the corporate performance-related compen-
sation component will in future take more than one
financial year into account and be oriented toward sus-
tainable growth of the enterprise.

The German Corporate Governance Code also recom-
mends that the exercising of chair and deputy chair
positions in the Supervisory Board as well as the chair
and membership of committees should also be con-
sidered when determining the level of compensation.

Accordingly, the Articles of Incorporation of BMW AG
stipulate that the Chairman of the Supervisory Board
shall receive three times the amount and each Deputy
Chairman shall receive twice the amount of the remu-
neration of a Supervisory Board member. Provided the
relevant committee convened for meetings on at least
three days during the financial year, each chairman of
the Supervisory Board’s committees receives twice the
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 Super-
visory Board exercises more than one of the functions
referred to above, the compensation is measured only
on the basis of the function which is remunerated with
the highest amount.

of the Supervisory Board (Plenum) which the member
has attended (payable at the end of the financial year).
Attendance at more than one meeting on the same day
is not remunerated separately.

The Company also reimburses to each member of the
Supervisory Board reasonable expenses and any value-
added tax arising on the member’s remuneration. The
amounts disclosed below are net amounts.

In order to be able to perform his duties, the Chairman
of the Supervisory Board is provided with secretariat
and chauffeur services.

Compensation of the Supervisory Board for the
financial year 2012 (total)
In accordance with § 15 of the Articles of Incorporation,
the compensation of the Supervisory Board for activities
during the financial year 2012 amounted to € 4.5 million
(2011: € 4.5 million). This includes fixed compensation
of € 1.6 million (2011: € 1.6 million) and variable compen-
sation of € 2.9 million (2011: € 2.9 million). As a result
of the earnings per share of € 7.77 (see note 16 to the
Group Financial Statements) (2011: € 7.45), the stipu-
lated upper limits for Supervisory Board variable com-
pensation were again applied for the financial year
ended 31 December 2012.

in € million

2012

2011

Amount Proportion
in %

Amount Proportion

Fixed compensation

Variable compensation

Total compensation

1.6

2.9

4.5

35.6

64.4

100.0

1.6

2.9

4.5

in %

35.6

64.4

100.0

In addition, each member of the Supervisory Board re-
ceives an attendance fee of € 2,000 for each full meeting

Supervisory Board members did not receive any fur-
ther compensation or benefits from the BMW Group for
advisory and agency services personally rendered.

152

STATEMENT ON

152

153

CORPORATE GOVERNANCE
(Part 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

154

Members of the Board of

Management

155
158

160

Members of the Supervisory Board
Work Procedures of the
Board of Management
Work Procedures of the

Supervisory Board

165

Information on Corporate

Governance Practices

166
170

Compliance in the BMW Group
Compensation Report

177 STATEMENT ON CORPORATE GOVERNANCE

Compensation of the individual members of the Supervisory Board for the financial year 2012 (2011)

in €

Fixed compensation

Attendance fee

Variable
compensation

Total

Joachim Milberg (Chairman)

Manfred Schoch (Deputy Chairman)1

Stefan Quandt (Deputy Chairman)

Stefan Schmid (Deputy Chairman)1

Karl-Ludwig Kley (Deputy Chairman)

Bertin Eichler1

Franz Haniel

Reinhard Hüttl

Henning Kagermann

Susanne Klatten

Renate Köcher

Robert W. Lane

Horst Lischka1

Willibald Löw1

Wolfgang Mayrhuber

Dr. Dominique Mohabeer 1, 2

Franz Oberländer1, 3

Anton Ruf 4

Maria Schmidt1

Jürgen Wechsler 1

Werner Zierer1

Oliver Zipse5

Total

165,000
(165,000)

110,000
(110,000)

55,000
(55,000)

32,158
(–)

22,842
(55,000)

45,833
(55,000)

55,000
(55,000)

55,000
(48,973)

55,000
(55,000)

9,167
(–)

10,000
(10,000)

8,000
(10,000)

10,000
(8,000)

10,000
(10,000)

8,000
(8,000)

8,000
(10,000)

6,000
(8,000)

10,000
(10,000)

8,000
(8,000)

6,000
(–)

4,000
(8,000)

8,000
(8,000)

8,000
(10,000)

10,000
(6,000)

10,000
(10,000)

2,000
(–)

330,000
(330,000)

220,000
(220,000)

110,000
(110,000)

64,317
(–)

45,683
(110,000)

91,667
(110,000)

110,000
(110,000)

110,000
(97,045)

110,000
(110,000)

18,333
(–)

505,000
(505,000)

340,000
(340,000)

338,000
(340,000)

175,000
(173,000)

175,000
(175,000)

173,000
(173,000)

173,000
(175,000)

171,000
(173,000)

175,000
(175,000)

173,000
(173,000)

102,475

(–)

72,525

(173,000)

145,500
(173,000)

173,000
(175,000)

175,000
(152,018)

175,000
(175,000)

29,500

(–)

1,430,000

(1,423,973)

186,000

(184,000)

2,860,000

(2,847,045)

4,476,000

(4,455,018)

1 These employee representatives have – in line with the guidelines of the Deutsche Gewerkschaftsbund – requested that their remuneration be paid into the
Hans-Böckler-Foundation.
2 Member of the Supervisory Board since 1 June 2012
3 Member of the Supervisory Board until 31 May 2012
4 Member of the Supervisory Board until 31 October 2012
5 Member of the Supervisory Board since 1 November 2012

3. Other
Apart from vehicle lease contracts entered into on
customary market conditions, no advances and loans
were granted by the Company to members of the

Board of Management and the Supervisory Board, nor
were any contingent liabilities entered into on their
behalf.

178

OTHER INFORMATION

BMW Group Ten-year Comparison

Deliveries to customers

Automobiles
Motorcycles2

Production

Automobiles

Motorcycles

Financial Services

2012

2011

2010

2009

units

1,845,186

1,668,982

1,461,166

1,286,310

117,109

113,572

110,113

100,358

1,861,826

1,738,160

1,481,253

1,258,417

125,284

118,865

112,271

93,243

Contract portfolio
Business volume (based on balance sheet carrying amounts) 3

contracts

3,846,364

3,592,093

3,190,353

3,085,946

€ million

80,974

75,245

66,233

61,202

Income Statement

Revenues
Gross profit margin Group4

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 5

Capital expenditure

Capital expenditure ratio (capital expenditure / revenues)

Personnel
Workforce at the end of year 7

Personnel cost per employee

Dividend

Dividend total

€ million

76,848

68,821

60,477

50,681

€ million

20.2

8,300

7,819

10.2

2,697

34.5

5,122

81,336

50,514

30,402

23.1

53,074

48,374

21.1

8,018

7,383

10.7

2,476

33.5

4,907

74,425

49,004

27,103

22.0

49,113

47,213

18.1

5,111

4,853

8.0

1,610

33.1

3,243

67,013

43,151

23,930

21.7

46,100

40,134

10.5

289

413

0.8

203

49.2

210

62,009

39,944

19,915

19.5

45,119

36,919

131,850

123,429

110,164

101,953

8,370

9,167

5,240

6.8

7,776
8,110 6

3,692

5.4

7,432

8,149

3,263

5.4

7,767

4,921

3,471

6.8

105,876

89,140

100,306

84,887

€

95,453

83,141

96,230

72,349

€ million

1,640

1,508

852

197

Dividend per share of common stock / preferred stock

€

2.50 /2.52

2.30 / 2.32

1.30 /1.32

0.30 / 0.32

178
178
180
182
184
185
186
187

OTHER INFORMATION
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 Excluding C1, sales volume to 2003: 32,859 units
3 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
4 Research and development costs included in cost of sales with the effect from 2008
5 Figures are reported in the cash flow statement up to 2006 as cash inflow from operating activities of Industrial Operations and from 2007 as cash inflow from

operating activities of the Automotive segment.

6 Adjusted for reclassifications as described in note 42.
7 Figures exclude dormant employment contracts, employees in the non-work phases of pre-retirement part-time arrangements and low wage earners.
8 Adjustment to dividend due to buy-back of treasury shares

179 OTHER INFORMATION

2008

2007

2006

2005

20041

2003

1,435,876

1,500,678

1,373,970

1,327,992

1,208,732

1,104,916

115,196

102,467

100,064

97,474

92,266

92,962

Deliveries to customers

Automobiles
Motorcycles2

Production

1,439,918

1,541,503

1,366,838

1,323,119

1,250,345

1,118,940

Automobiles

118,452

104,396

103,759

92,012

93,836

89,745

Motorcycles

3,031,935

2,629,949

2,270,528

2,087,368

1,843,399

1,623,425

60,653

51,257

44,010

40,428

32,556

28,647

Contract portfolio
Business volume (based on balance sheet carrying amounts) 3

Financial Services

53,197

56,018

48,999

46,656

44,335

11.4

921

351

0.7

6.0

330

62,416

38,670

20,273

20.1

41,526

39,287

101,086

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

100,041

75,612

107,539

76,704

106,575

76,621

105,798

75,238

105,972

73,241

Income Statement

41,525

22.7

Revenues
Gross profit margin Group4

3,353

Profit before financial result

3,205

Profit before tax

7.7

Return on sales (earnings before tax / revenues)

1,258

Income taxes

39.3

Effective tax rate

1,947

Net profit for the year

Balance Sheet

36,921

Non-current assets

24,554

Current assets

16,150

Equity

26.3

Equity ratio Group

22,090

Non-current provisions and liabilities

23,235

Current provisions and liabilities

61,475

Balance sheet total

Cash Flow Statement

1,659

4,970

Cash and cash equivalents at balance sheet date
Operating cash flow 5

4,245

Capital expenditure

10.2

Capital expenditure ratio (capital expenditure / revenues)

104,342

Personnel
Workforce at the end of year 7

73,499

Personnel cost per employee

Dividend

197

694

458

4198

419

392

Dividend total

0.30 / 0.32

1.06 / 1.08

0.70 / 0.72

0.64 / 0.66

0.62 / 0.64

0.58 / 0.60

Dividend per share of common stock / preferred stock

180

BMW Group
Locations

— P

— R
— R
— R

— S

— R

— P

— S

— A

— S

— A

— S

— A

— S

— P

— S

The BMW Group is present in the world markets with
29 production and assembly plants, 43 sales subsidiaries
and a research and development network.

178
178
180
182
184
185
186
187

OTHER INFORMATION
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of Graphs
Financial Calendar
Contacts

— H Headquarters

— R Research and Development

BMW Group Research and Innovation Centre (FIZ),
Munich, Germany
BMW Group Research and Technology, Munich,
Germany
BMW Car IT, Munich, Germany
BMW Innovation and Technology Centre, Landshut,
Germany
BMW Diesel Competence Centre, Steyr, Austria
BMW Group Designworks, Newbury Park, USA
BMW Group Technology Office USA, Mountain View,
USA
BMW Group Engineering and Emission Test Center,
Oxnard, USA
BMW Group ConnectedDrive Lab China, Shanghai,
China
BMW Group Designworks USA, Shanghai, China
BMW Group Engineering China, Beijing, China
BMW Group Engineering Japan, Tokyo, Japan
BMW Group Engineering USA, Woodcliff Lake, USA

181 OTHER INFORMATION

— P

— R

— S

— S
— R

— R

— S

— A

— S
— A
— S

— A

— S

— A

— S

— P

— P
— P
— P

— S

— P

— S
— P

— S

— R

— H

— P

— P
— R

— P
— P

— P

— S
— C

— P

— R

— S

— P

— S

— P Production

— C Contract production

— S Sales subsidiary markets / Locations Financial Services

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 Manaus, Brazil
CKD production Rayong, Thailand

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 – 3 plants)
Spartanburg plant, USA
Steyr plant, Austria
Swindon plant, GB
Wackersdorf plant
BMW – SGL joint venture (2 plants)
Husqvarna Motorcycles S. r. l., Cassinetta di Biandronno, Italy

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
Slovakia
Slovenia

South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
USA

* sales locations only

182

Glossary

CFRP
Abbreviation for carbon-fibre reinforced polymer. CFRP
is a composite material, consisting of carbon-fibres sur-
rounded by a plastic matrix (resin). On a comparative
basis, CFRP is approximately 50 % lighter than steel and
30 % lighter than aluminium.

Common stock
Stock with voting rights (cf. preferred stock).

Connected Drive
Under the term Connected Drive, the BMW Group
already unites a unique portfolio of innovative features
that enhance comfort, raise infotainment to new levels
and significantly boost safety in BMW Group vehicles.

Cost of materials
Comprises all expenditure to purchase raw materials
and supplies.

EBITDA
Abbreviation for “Earnings Before Interest, Taxes, Depre-
ciation and Amortisation”. The profit before income
taxes, minority interest, financial result and depreciation /
amortisation.

Effectiveness
The degree to which offsetting changes in fair value or
cash flows attributable to a hedged risk are achieved by
the hedging instrument.

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 construc-
tion to comprehensive energy and heat management
inside the vehicle.

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).

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 oper-
ating activities of the Automotive segment less the cash
outflow for investing activities of the Automotive seg-
ment adjusted for net investment in marketable securities.

Gross margin
Gross profit as a percentage of revenues.

IFRSs
International Financial Reporting Standards, intended
to ensure global comparability of financial reporting
and consistent presentation of financial statements.
The IFRSs are issued by the International Accounting
Standards Board and include the International
Accounting Standards (IASs), which are still valid.

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
principally from market price, market price fluctuations
and expected 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.

178
178
180
182
184
185
186
187

OTHER INFORMATION
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of Graphs
Financial Calendar
Contacts

183 OTHER INFORMATION

Indicator for water consumption
The indicators for water consumption refer to the pro-
duction 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 sani-
tation facilities.

Operating cash flow
Cash inflow from the operating activities of the Auto-
motive segment.

Preferred stock
Stock which receives a higher dividend than common
stock, but without voting rights.

Production network
The BMW Group production network consists world-
wide of 17 plants, seven assembly plants and one con-
tract production plant. Within this network, the plants
supply one another with systems and components
and are all characterised by a high level of productivity,
agility and flexibility.

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: Profit before tax as a percentage of revenues.
Post-tax: Profit as a percentage of revenues.

Risk management
An integral component of all business processes. Following
enactment of the German Law on Control and Trans-
parency within Businesses (KonTraG), all companies
listed on a stock exchange in Germany are required to
set up a risk management system. The purpose of this
system is to identify risks at an early stage which could
have a significant adverse effect on the assets, liabilities,
financial position and results of operations, and which
could endanger the continued existence of the Company.
This applies in particular to transactions involving risk,
errors in accounting or financial reporting and violations
of legal requirements. The Board of Management is
required to set up an appropriate system, to document
that system and monitor it regularly with the aid of the
internal audit department.

Sales locations
Sales locations include separate legal entities, non-sepa-
rate entities and regional offices. In addition, 105 markets
are serviced by 97 importers.

Subsidiaries
Subsidiaries are those enterprises which, either directly
or indirectly, are under the uniform control of the
management of BMW AG or in which BMW AG, either
directly or indirectly
– holds the majority of the voting rights
– has the right to appoint or remove the majority of the
members of the Board of Management or equivalent
governing body, and in which BMW AG is at the same
time (directly or indirectly) a shareholder

– has control (directly or indirectly) over another enter-

prise on the basis of a control agreement or a provision
in the statutes of that enterprise.

Supplier relationship management
Supplier relationship management (SRM) uses focused
procurement strategies to organise networked supplier
relationships, optimise processes for supplier qualifica-
tion and selection, ensure the application of uniform
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
development as development that meets the needs of
the present without compromising the ability of future
generations to meet their own needs. The economic
relevance of corporate sustainability to the BMW Group
is evident in three areas: resources, reputation and risk.

184

Index

A
Accounting policies
39, 105
Apprentices
Automotive segment

89 et seq.

24 et seq.

B
Balance sheet structure
126
Bonds

5, 19, 53 et seq.

55 et seq., 94, 116, 141

41 et seq., 67 et seq.

143 et seq., 170 et seq.

5, 19, 54 et seq., 82, 141

54 et seq., 82, 141

28, 34, 36, 42, 76

C
Capital expenditure
Cash and cash equivalents
Cash flow
Cash flow statement
CFRP
CO2 emissions
Compensation Report
Compliance
Connected Drive
Consolidated companies entity
Consolidation principles
Contingent liabilities
Corporate Governance
Cost of materials
Cost of sales

166 et seq.
34

53, 89, 100

59 et seq.

129

152 et seq.

D
Dealer organisation /dealerships
Declaration with respect to the Corporate Governance
Code
Dividend
Dow Jones Sustainability Index World

37, 41, 45

19, 105

153

E
Earnings per share
Efficient Dynamics
Employees
Equity
Exchange rates

39 et seq.

45, 89 et seq., 105
33, 76

50 et seq., 57 et seq., 62 et seq., 80, 117 et seq.
22, 74, 88 et seq., 138 et seq.

G
Group tangible, intangible and investment
assets

108

52, 64, 78, 100 et seq.
19, 54, 93, 102 et seq., 125
19, 53 et seq., 90, 110

I
Income statement
Income taxes
Intangible assets
Inventories
Investments accounted for using the equity method
and other investments

55, 62, 94, 115

92, 111

K
Key data per share

L
Lease business
Leased products
Locations

111
180 et seq.

31 et seq., 71

M
Mandates of members of the Board of
154
Management
Mandates of members of the Supervisory
Board
Marketable securities
Motorcycles segment

56 et seq., 114
30

155 et seq.

N
Net profit
New financial reporting rules

5, 19, 52 et seq.

96 et seq.

102

O
Other financial result
Other investments
Other operating income and expenses
Other provisions
Outlook

111 et seq., 135

74 et seq.

124

101

57, 93, 113

F
Financial assets
Financial instruments
Financial liabilities
118 et seq., 125 et seq.
53, 62, 102
Financial result
Financial Services segment
43, 76
Fleet consumption

93, 130 et seq.

50, 57 et seq., 94 et seq.,

57 et seq., 63, 94, 119 et seq.

105

5, 27 et seq., 62

P
Pension provisions
Personnel costs
Production
Production network
Profit before financial result
Profit before tax
Property, plant and equipment
110
Purchasing

36 et seq.

5, 19, 54

27, et seq., 76

5, 19, 54

31 et seq.

19, 57, 62, 90 et seq.,

178
178
180
182
184
185
186
187

OTHER INFORMATION
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of Graphs
Financial Calendar
Contacts

185 OTHER INFORMATION

Index of Graphs

57, 93, 112 et seq.

141 et seq.

170 et seq.

R
45, 119, 138
Rating
Receivables from sales financing
Related party relationships
Remuneration System
Report of the Supervisory Board
Research and development
Result from equity accounted investments
Return on sales
Revenue reserves
Revenues
Risk management

5, 18, 52 et seq., 62, 89, 100

52 et seq.
118

66 et seq., 138 et seq.

33 et seq.

6 et seq.

101

53, 100

5, 18, 24 et seq., 77
145 et seq.

S
Selling and administrative expenses
Sales volume
Segment information
Shareholdings of members of the Board of
Management and the Supervisory Board
Statement of Comprehensive Income
Stock
Suppliers
Sustainability

36 et seq., 166

44 et seq.

37, 41 et seq., 45 et seq., 159

78, 107

143, 169

T
Tangible, intangible and investment assets
59, 128
Trade payables
Trade receivables

57, 116

108

Finances
BMW Group in figures
BMW Group revenues by region
18
BMW Group Capital expenditure and
operating cash flow
Exchange rates compared to the euro
Oil price trend
22
Steel price trend
Precious metals price trend
BMW Group new vehicles financed by
Financial Services segment
Contract portfolio of Financial Services segment
Contract portfolio retail customer financing of
32
Financial Services segment
Development of credit loss ratio
Regional mix of purchase volumes
Change in cash and cash equivalents
Balance sheet structure – Automotive segment
Balance sheet structure – Group
BMW Group value added
Risk Management within the BMW Group

Production and sales volume
BMW Group – key automobile markets
BMW Group sales volume of vehicles by region
and market
MINI brand cars – analysis by model variant
Vehicle production by plant
BMW Group – key motorcycle markets
30
BMW sales volume of motorcycles

Workforce
BMW Group apprentices at 31 December
Employee fluctuation ratio at BMW AG
40
Proportion of non-tariff female employees

Environment
Energy consumed per vehicle produced
Water consumption per vehicle produced
42
CO2 emissions per vehicle produced
Process wastewater per vehicle produced
Volatile organic compounds per vehicle produced
Waste for disposal per vehicle produced

Stock
Development of BMW stock

Compliance
BMW Group Compliance Organisation

167

This version of the Annual Report is a translation
from the German version. Only the original German
version is binding.

186

Financial Calendar

Annual Accounts Press Conference
Analyst and Investor Conference
Quarterly Report to 31 March 2013
Annual General Meeting
Quarterly Report to 30 June 2013
Quarterly Report to 30 September 2013

Annual Report 2013
Annual Accounts Press Conference
Analyst and Investor Conference
Quarterly Report to 31 March 2014
Annual General Meeting
Quarterly Report to 30 June 2014
Quarterly Report to 30 September 2014

19 March 2013
20 March 2013
2 May 2013
14 May 2013
1 August 2013
5 November 2013

19 March 2014
19 March 2014
20 March 2014
6 May 2014
15 May 2014
5 August 2014
4 November 2014

178
178
180
182
184
185
186
187

OTHER INFORMATION
BMW Group Ten-year Comparison
BMW Group Locations
Glossary
Index
Index of Graphs
Financial Calendar
Contacts

187 OTHER INFORMATION

Contacts

Business and Finance Press
Telephone

Fax
E-mail

Investor Relations
Telephone

Fax
E-mail

+49 89 382-2 45 44
+49 89 382-2 41 18
+49 89 382-2 44 18
presse@bmwgroup.com

+49 89 382-2 42 72
+49 89 382-2 53 87
+49 89 382-1 46 61
ir@bmwgroup.com

The BMW Group on the Internet
Further information about the BMW Group is available online at www.bmwgroup.com.
Investor Relations information is available directly at www.bmwgroup.com/ir. Information
about the various BMW Group brands is available at www.bmw.com, www.mini.com
and www.rolls-roycemotorcars.com.

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http://annual-report2012.bmwgroup.com

PUBLISHED BY
Bayerische Motoren Werke
Aktiengesellschaft
80788 Munich
Germany
Tel. +49 89 382-0

VIEWS

2012

CONNECTING

The BMW Group’s global production network
combines groundbreaking new approaches and
production concepts to create an increasingly
high-performance manufacturing organisation.
Flexibility, efficiency and effectiveness are the
primary targets. As the world’s most sustainable
car company, we have reduced resource con-
sumption and emissions in this way by more than
a third since 2006.

The mobility of the future will be determined not
by premium products and premium services alone,
but also by flexible and sustainable production.

Read how Clean Production brings together
associates and partners from around the world.

United by premium standards.

Every year, “Views” as part of our Annual Report provides information on
selected BMW Group topics. But more than that, our aim is to generate
discussion and present our view of matters. Because it is important to us.

For the success of the BMW Group. For the society. For the future of mobility.

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TALKING
WITH OUR FUTURE.

We connect the ideas of today and tomorrow.

Recognising society’s needs
and thinking ahead.

Dr. Norbert Reithofer talks to BMW Group apprentices
about the future of individual mobility.

31 January 2013, Double cone at BMW Welt, Munich

“ Our Strategy Number ONE
will enable us to maintain our success.”

Dr. Norbert Reithofer
Dr. Norbert Reithofer

Carola Hensel
We sold more cars in 2012 than ever
before. But there is also a lot in the news
about the euro crisis. How will future
crises affect us? Does this mean we will
sell fewer cars?

Dr. Norbert Reithofer
We have every reason to be confident
about the future. We have great
vehicles, a highly flexible production
system and will be bringing innova-
tive cars like the BMW i3 onto the
market this year. Of course, we have
to keep a close eye on developments
in Europe and around the globe
because of the increasing volatility
worldwide. Our Strategy Number
ONE will enable us to maintain our

success. It is also important to keep
costs under control – that is the only
way we can steer successfully through
crises and invest in the future.

“ We have great vehicles, a highly ﬂ exible
production system and will be bringing
innovative cars like the BMW i3 onto the
market this year.”

Dr. Norbert Reithofer

“ I believe that everyone should con tribute
to greater sustainability.”

Dr. Norbert Reithofer

Simon Huber and Cennet Sahin
You already mentioned that the
BMW i3 will be coming out this year.
When do you think we will stop
seeing cars with com bustion engines
and all just drive electric?

Dr. Norbert Reithofer
You have to look far into the future
for that. We will be driving mostly
combustion engines for many years
to come. But those engines will
have to be even more efficient in
the future. We need new approaches,
like the three-cylinder engine, as
well as new technologies, such as
electromobility. We have already
made tremendous progress in re-
ducing CO2 emissions, but we cannot
afford to take it easy. We will only
be able to meet ambitious CO2
legislation in the future if we have
efficient combustion engines and
electric motors.

Albian Ibraimi
This shows how much sustainability
means to the BMW Group. But why
is sustainability so important to the
company?

Dr. Norbert Reithofer
I believe that everyone – individuals
and companies alike – should con-
tribute to greater sustainability. And
that applies to us as an automobile
company, in particular. With all our
improvements in production, such
as the reduction of energy and water
consumption at our plants, the
BMW i3 and the i8 capture exactly
our direction.

“ We have already made
tremendous progress
in re ducing CO2 emissions.”

Dr. Norbert Reithofer

“ Our high sustainability standards
apply to all our plants, wherever
they are built.”

Dr. Norbert Reithofer

Sebastian Forster and Duc Huy Cao
Now that we’re also building a plant in
Brazil, will the same standards apply there,
too? Will young associates be able to go
to Brazil in the future? People are the BMW
Group’s capital, after all.

Dr. Norbert Reithofer
Our high sustainability standards
apply to all our plants, wherever they
are built. And we would certainly
like to see young people go abroad to
help set up the plant or develop the
market, and gain work experience.
That is something I can recommend
to anyone. I learned a lot myself from
my time abroad. That is the kind
of experience that enriches our lives
and helps us grow into global citizens.

Miriam Wittmann
If you look ahead 20 years from now,
where do you see BMW? Will we still
be number one?

Dr. Norbert Reithofer
Yes, I am sure we will. But we will
have to keep on working hard to stay
ahead. Highly motivated people
and innovation are the key. That is
what makes cars like the i3 and the
6 Series Gran Coupé so important.
They are icons with a positive impact
on all our vehicles.

Representing all BMW Group apprentices, seven young men and women interviewed
Chairman of the Board of Management Dr. Norbert Reithofer about the future of the BMW Group:
[1] Carola Hensel, Munich
[2] Duc Huy Cao, Munich
[3] Miriam Wittmann, Munich
[4] Sebastian Forster, Munich
[5] Simon Huber, Dingolfing
[6] Albian Ibraimi, Munich
[7] Cennet Sahin, Munich

Contents

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AN INTERVIEW
Talking to our future.
We connect the ideas of today and tomorrow.

Page 1

PASSION UNITES US
Clean Production at Leipzig plant / Germany.

Page 11

PARTNERSHIP UNITES US
Clean Production at Spartanburg plant / USA.

Page 27

KNOW-HOW UNITES US
Clean Production at Tiexi plant / China.

Page 45

JOY BRINGS PEOPLE TOGETHER
Creating moments of sheer pleasure for our customers.

Page 59

Key technical data, fuel consumption and CO2 emission ratings for the presented vehicles referred
to in this report can be found on page 85.

Experience the BMW Group online.

OUR COMPANY
www.bmwgroup.com

OUR BRANDS
www.bmw.com
www.mini.com
www.rolls-roycemotorcars.com
www.bmw-motorrad.com

THE PLANTS PRESENTED
www.bmw-werk-leipzig.de (Germany)
www.bmwusfactory.com (USA)
www.bmw-brilliance.cn (China)

FURTHER INFORMATION
www.press.bmwgroup.com (PressClub)
www.bmwgroup.com/IR (Investor Relations)
www.bmwgroup.com/careers (Carreers)
www.bmwgroup.com/responsibility (Sustainability)
www.bmwgroup.com/production (Production)
www.bmw-welt.com/de (BMW Welt / BMW Museum)

THE BMW GROUP ON SOCIAL NETWORKS
Facebook
www.facebook.com/BMWGroup

Twitter
www.twitter.com/BMWGroup

YouTube
www.youtube.com/BMWGroupview

Google+
www.google.com/+BMWGroup

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http://annual-report2012.bmwgroup.com

PASSION UNITES US – CLEAN PRODUCTION

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LEIPZIG

Germany 51° 20' N, 12° 22' E

Evolution and revolution in automobile manufacturing

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Energy-optimised body shop
Lowers energy consumption and costs

Page 18

Efficient paint shop
Utilises its own thermal energy

Page 16

Intelligent energy supply
Anticipates energy price ﬂ uctuations and production data

Page 20

Leipzig plant profile

Construction:

Vehicle production (2012):

BMW vehicles:

2005

164,282

BMW X1, 1 Series five-door, 1 Series
Coupé, 1 Series Convertible, BMW i3
(from late 2013 onwards)

Associates:

Plant grounds:

over 3,000

229 ha

New buildings for BMW i production:

4 production halls

Investment in BMW i production:

€ 400 million

Energy savings from current efficiency projects: 6.4 GWh / year

High-performance wind turbines
Generate 100 % renewable energy

Page 25

The BMW Leipzig plant has
achieved something no other car
plant has attempted before:
automotive evolution and revolu-
tion under the same roof.
Passion unites us.

The mobility of the future comes from Leipzig. Teams of process and
air-conditioning engineers work together to boost plant efficiency and
lower energy consumption significantly. At the same time, this is where
the mobility and automobile manufacturing of the future are being created.
The production of our revolutionary BMW i models uses 70 per cent less
water and 50 per cent less energy per vehicle produced than the average
for our already efficient production network. The electricity required for
BMW i production is generated in a resource-efficient and climate-neutral
process by four specially built wind turbines situated on the plant grounds.

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http://annual-report2012.bmwgroup.com/leipzig/

Path-breaking production solutions
developed by specialist project teams throughout
the BMW Group’s worldwide production network

Team Heat Recovery

Page 16

Efficiency

Olaf Merboth
Control of paint shop heating
and electrical systems

Robert Hache
Paint shop control technology

Sylvia Arlt
Paint shop installation planning

Analysis

Jeannine Sagner
BMW i assembly

Joy

Evolution

Pilot projects

BMW GROUP PRODUCTION

NETWORK

Great ideas are born when the best brains
come together – at the Leipzig plant, and at the
BMW Group’s 28 other production locations
in 14 countries worldwide.

Ambition

Benchmark solutions

Know-how

BMW plant Leipzig
14

Synergies

Team Production BMW i

Page 22

Intelligent cooperation

Revolution

Jürgen Laube
BMW i production project manager

Hanne Dinkel
Production control and
structural planning

Mutual learning

Alexandra Pfeifer
BMW i assembly

Curiosity

Veit Melzer
Building management, Leipzig plant

Networking

Drive

Page 18 Team Energy Efficiency

Stefan Köhn
Energy and object management

Stefan Thalheim
Body shop control technology

Dr. Rainer Angerhöfer
Energy monitoring and management

Frank Böttger
Energy supply

Dialogue

Leadership

Following the success of the Leipzig pilot project,

the team is now looking to capitalise on similar potential

at other paint shops in the production network.

– 55 %

Paint shop heat recovery project. Sylvia Arlt and her co-workers have accomplished in
rudimentary form a feat that has eluded physicists since time immemorial: the creation of per-
petual motion. On the roof of the paint shop, the process engineer has installed a powerful
heat exchanger, which collects thermal energy from exhaust air systems and feeds it back
into the paint shop’s drying plant as warm fresh air. Although this pilot installation does not
capture all of the waste heat, it still reduces carbon dioxide emissions by 300,000 kilogrammes
a year and lowers the amount of natural gas previously required by 55 per cent – enough
to heat up to 100 households.

Exhaust gas

Energy recycling using heat exchangers

Warming
fresh air to

150 °C

using the plant’s
own exhaust gas

A vehicle paint shop inevitably needs a substantial amount of
heat for drying and exhaust air treatment. The Leipzig plant uses
a heat exchanger to recover a signiﬁ cant percentage (far left).

BMW plant Leipzig
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fossil energy

“ The most efficient kind of energy doesn’t
need to be generated in the first place.”

Sylvia Arlt (left), installation planner at BMW plant Leipzig

—

Sylvia Arlt – Process engineer

responsible for the paint shop waste heat
utilisation project

has worked for the BMW Group production
network since 2010

“Free, climate-neutral energy from waste
heat – for me, that’s the most intelligent
resource possible.”

Robert Hache – Electrical engineer

responsible for paint shop control
technology

has worked for the BMW Group production
network since 2003

“Retrofitting a well-running paint shop is
no trivial matter. The solution we have
developed here will benefit other paint
shops in the BMW production network.”

– 21 % energy require

“ Lower power consumption. Same
performance. Perfect balance.”

Frank Böttger (left), energy supply, BMW plant Leipzig

Frank Böttger – Air-conditioning and
drying technology engineer

—

responsible for energy supply

—

has worked for the BMW Group produc-
tion network since 2004

“Planning is one thing. But you only see
the real energy requirements – and
the corresponding savings potential –
when the plant comes on stream.”

Stefan Thalheim – Control
technology engineer

—

responsible for body shop control
technology

has worked for the BMW Group produc-
tion network since 2005

“It’s hard to uncover energy reserves in
an efficient plant, of course. But we still
manage to find some.”

BMW plant Leipzig
18

ments

Intelligent robot control

also lowers energy costs

at the Tiexi plant. Page 54

Every stage in the body construction process was
evaluated in detail by energy analysts – including
welding robots (right), which assemble the car
bodies in a fully automated process.

Body shop energy efficiency project. Over a period of three years, the Leipzig plant’s energy
experts worked side-by-side with scientists, industrial partners and energy management con-
sultants on the energy efficiency controlling project. They analysed the motion sequence
of welding robots, simulated the flow configuration of the ventilation system and measured
waste heat from compressors at the energy headquarters. The pilot project found that energy
requirements could be reduced by almost a quarter in the body shop alone – with invest-
ments that would pay for themselves within a year and a half.

– 5,000,

A plant only operates at full capacity in certain phases.
In partial load operation, the new, more efﬁ cient heat
pumps (right) are fully adequate.

Energy supply efficiency controlling project. In the final analysis, a vehicle plant is little more
than a highly active organism that works and breathes, with some periods of rest and other
periods where it operates at full tilt. The trick is to adjust its energy supply accordingly.
Intelligent control systems developed at the Leipzig plant ensure that weather and production
data, electricity prices and many other factors are evaluated to manage production and
energy supply. This not only saves five million kilowatt hours of electricity per year, but
also enables the power required to be used more efficiently and purchased more cheaply.

Similar energy efficiency projects are also in progress

at the Munich Research and Innovation Centre (FIZ)

and the BMW Group’s Steyr plant.

BMW plant Leipzig
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000 kilowatt hours

“ We use intelligence and know-how
to reduce our energy usage.”

Stefan Köhn (left), energy and installation management at BMW plant Leipzig

—

Stefan Köhn – Mechanical engineer

responsible for energy and facility
management

has worked for the BMW Group production
network since 1998

“The issue of energy has become incredibly
important in recent years. It is amazing
what I am able to achieve here today.”

Dr. Rainer Angerhöfer – Supply
engineer

responsible for energy monitoring and
management

has worked for the BMW Group production
network since 2001

“We analysed our energy supply in detail
with partners from the fields of science
and industry – with a fresh perspective,
we were able to discover new savings
potential.”

BMW i

“ A new kind of production concept
for a new kind of mobility.”

Jürgen Laube, BMW i production project manager

BMW plant Leipzig
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Series production of the
BMW i3 and BMW i8

Four 2.5 MW wind power stations
located at the plant

100%

renewable energy for BMW i production

Resource-efﬁ cient automobile production

1 The entire production concept for the

BMW i Series is designed for sustainability.

2 The four wind turbines reach almost

200 metres into the sky to harness power
for the plant.

3 Structural planner Hanne Dinkel and

production project manager Jürgen Laube
with a model of a wind turbine.

Renewable energy for BMW i. When the first electric BMW i3 rolls off the assembly
line at the Leipzig plant later this year, it will mark the beginning of a new era of auto-
mobile manufacturing: production of the BMW i3 and the BMW i8 is designed to be
just as sustainable as the vehicles themselves. Thanks to totally new materials, tech-
nologies and manufacturing processes, production uses 70 per cent less water
and 50 per cent less energy. The remaining electricity is generated by four 2.5 MW
wind turbines located directly on our plant grounds.

The carbon fibre used as a raw material

for passenger cells is also

produced using only renewable energy.

4 Before the start of series production, the team examines the first

production prototype from Leipzig.

5 Formula for the future of electromobility: BMW i3.

6 At least as stable as steel and aluminium, but even lighter: a car

roof made of high-performance carbon ﬁ bre.

7 Checking the details before production

ramp-up.

8 Sustainable from the start: the ﬁ rst

BMW i3 models.

Freedom for ideas. From the manufacture of carbon fibres using renewable hydrogen to
highly efficient assembly at the Leipzig plant, we have taken a completely new approach to
the entire BMW i Series production chain. Four new production halls were designed to meet
the high standards required for American LEED certification. With its resource-efficient
architecture and highly efficient production processes, the Leipzig plant sets new standards
for automobile production. As a result, the pure electric BMW i3 and the BMW i8 hybrid sports
car are already paragons of sustainability – even before they drive their first mile.

The start of production of the BMW i
Series at the Leipzig plant marks a new
chapter in automotive history: com-
bining a totally new vehicle concept
with revolutionary progress in clean
production technology and sustain-
ability to bring us closer to our goal of
emission-free automobile production.
United by a shared vision.

BMW plant Leipzig
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PARTNERSHIP UNITES US – CLEAN PRODUCTION

SPARTANBURG

USA 34° 57' N, 81° 56' W

Dynamic growth with steadily decreasing emissions

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Recycling Center (Zero Waste Center)
Gives waste a second life

Page 40

Hydrogen store
Supplies virtually emission-free fuel

Page 36

Spartanburg plant profile

Construction:

Vehicle production (2012):

BMW vehicles:

Associates:

1994

301,519

X3, X5, X6, X5 M, X6 M

around 5,000

Sustainable energy from landfill gases:

around 50 %

Reduction in CO2 emissions:

92,000 tons / year

Energy headquarters
Burns environmentally friendly landﬁ ll gas –
instead of natural gas

Page 32

Resource-efficient production
using environmentally friendly
energy sources and knowledge
transfer with local institutions.
Partnership unites us.

BMW plant Spartanburg has not only grown dynamically, but also
developed an extensive network. Through projects with local partners,
we are able to continually reduce the plant’s dependence on fossil fuels
and enhance our flexibility and efficiency, as well as our sustainability
balance sheet. The plant’s capacity expansion to around 350,000 vehicles
per year goes hand in hand with higher productivity and lower emissions
per vehicle.

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The State House in the heart of Columbia is home to the
government of South Carolina.

BMW plant Spartanburg
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PARTNERSHIP UNITES US:
BMW PLANT SPARTANBURG
AND LOCAL PARTNERS
IN SOUTH CAROLINA, USA

With a large number of research institutes, highly qualiﬁ ed
skilled workers and active citizens, South Carolina is the
ideal location for the BMW Group’s US plant. In consultation
with them, we continue to evolve and reﬁ ne our plant.

Three of the many local partners discuss their reasons and goals
for collaboration:

Robert M. Hitt
South Carolina Secretary of Commerce

Page 32

Russ Keller
South Carolina Research Authority

Page 36

Shelley Robbins
Environmental organisation Upstate Forever

Page 40

CLEAN PRODUCTION
MILESTONES AT
BMW PLANT SPARTANBURG

The BMW Group was the ﬁ rst German premium automobile
manufacturer to launch its own production operations in
the US back in 1994. Since then, the number of pioneering
Clean Production projects has continued to increase in
line with our production ﬁ gures.

85 logistics vehicles
powered by fuel cells

Solar power for
visitors’ centre

Expansion of
methane gas usage

Recycling project
(Zero Waste
Project)

Energy generation
from methane gas

Hydrogen
generation
field trial

230 logistics
vehicles powered
by fuel cells

301,519
vehicles

Production
start

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Automobile production at plant Spartanburg

The Spartanburg plant has plenty of room for ideas and
sustainable innovations.

BMW plant Spartanburg
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METHANE GAS SUPPLIES
SUSTAINABLE ENERGY

Robert M. Hitt
South Carolina Secretary of Commerce

“ We should think more
about which sustainable
resources we can utilise,
rather than depleting
fossil fuels.”

Our answer

METHANE GAS SUPPLIES
SUSTAINABLE ENERGY

Beth Phillips
Energy manager at BMW plant Spartanburg

“ By using excess landﬁ ll gas,
we are tapping into one of
the most sustainable energy
sources.”

Our challenge

METHANE GAS SUPPLIES
SUSTAINABLE ENERGY
The plant obtains around half of its energy from waste landﬁ ll gases.

CH4

Pilot system
generates hydrogen from
methane gas

Palmetto Landfill
Extraction of methane gas

BMW plant energy headquarters
Conversion into electricity and heat

BMW plant
Usage of electricity and heat

Microorganisms produce methane gas from old
waste at the Palmetto Landﬁ ll. Wellheads extract
the gas, which is then pumped to the Spartanburg
plant through a 15-kilometre pipeline.

BMW plant Spartanburg
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Beth Phillips and her co-workers at the energy headquarters
convert the greenhouse gas into renewable electricity and heat.
This spares the environment about 92,000 tons of greenhouse
gas emissions annually – and saves the BMW Group almost
seven million US dollars a year in energy costs.

BMW plant Spartanburg
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HYDROGEN FOR
SUSTAINABLE LOGISTICS

Russ Keller
Vice President South Carolina Research Authority

“ Our primary goal is
mobility that uses
emission-free,
renewable energy.”

Our answer

HYDROGEN FOR
SUSTAINABLE LOGISTICS

Cleve Beaufort
Energy manager at BMW plant Spartanburg

“ Hydrogen-powered fuel
cells turn the vision of
zero-emission driving into
reality.”

Our challenge

HYDROGEN FOR
SUSTAINABLE LOGISTICS
Forklift trucks and trailers powered by environment-friendly hydrogen.

The use of hydrogen in fuel cells generates only
steam and heat.

Hydrogen provides the fuel for 85 fuel-cell vehicles,
which not only operate emission-free, but are also
much faster to refuel. Over the course of this year, the
plant ﬂ eet will expand to 230 vehicles. At the same
time, Cleve Beaufort and his co-workers are exploring
how to obtain renewable hydrogen from methane gas
at the Palmetto Landﬁ ll – a groundbreaking experi-
ment that the US Department of Energy has classiﬁ ed
as the most important of its kind.

BMW plant Spartanburg
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2013

230
85

2011

Fleet expands
to 230 vehicles

plant vehicles powered
by hydrogen-fed fuel
cells

Hydrogen station

BMW plant Spartanburg
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EASING THE BURDEN ON
LANDFILLS AND THE SOUTH
CAROLINA ENVIRONMENT

Shelley Robbins
of the environmental organisation Upstate Forever

“ Today, we need smarter
solutions than landﬁ ll
for our waste materials.”

Our answer

EASING THE BURDEN ON
LANDFILLS AND THE SOUTH
CAROLINA ENVIRONMENT

Veronica Taylor
Production planner at BMW plant Spartanburg

“ We are already feeding
almost all of our
waste back into the
raw materials cycle.”

Our challenge

EASING THE BURDEN ON LANDFILLS
AND THE SOUTH CAROLINA ENVIRONMENT
The Zero Waste Project gives waste a second life.

491

tons of paper waste per month

217,000

tons of metal residues per month

100 % recycling

tons of plastic waste per month

BMW plant Spartanburg
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Where others see waste, Veronica Taylor and her
co-worker, Wes Westbrooks, see valuable resources.
They spent months analysing the amount of waste
generated by the plant, training co-workers and
ﬁ nding suitable customers for everything left over
from production, administration and even the
canteen.

Finally, in August 2012, the last truck with reusable
waste headed to the landﬁ ll. Since then, all waste
has been collected, sorted and reused. With its zero
waste policy, the Spartanburg plant is recognised
as a pioneer nationwide.

Our plants also collaborate with
one another, as well as local
partners, on new approaches
for resource-efficient vehicle
production. In this way, Clean
Production innovations become
worldwide standards – and solu-
tions become the new point of
reference. Using this approach, we
aim to lower resource consump-
tion and emissions per vehicle
produced by an ambitious 45 per
cent from 2006 levels by 2020.
United by common standards.

BMW plant Spartanburg
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KNOW-HOW UNITES US – CLEAN PRODUCTION

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TIEXI

CHINA 41° 48' N, 123° 21' E

A leader in efﬁ ciency and sustainability

Regional suppliers
For cooperation and reliability

Page 56

Integrated production
For ﬂ exibility and climate protection

Page 54

Tiexi plant profile

Construction:

Vehicles per year (2013):

Vehicles per year (2015):

Associates:

Plant grounds:

Plant building:

2011 / 2012

100,000

200,000

around 4,000

2.07 square kilometres

220,000 square metres

High-speed servo press
For speed and efﬁ ciency

Page 50

Smart plant architecture. Highly
efficient pressing machines.
Local suppliers. The cleanest paint
shop in the world – and almost
five dozen other sustainability
measures: the newest plant in the
BMW Group production network
sets a new global benchmark.
Know-how unites us.

The highest standards of sustainability in a highly dynamic market:
With the opening of its Tiexi plant in northern China, the BMW Group and its
partner, Brilliance China Automotive, have built one of the most sustainable
vehicle production sites in China and one of the best examples of environ-
mentally conscious manufacturing world wide. Here, in the world’s largest
automobile market, the company demonstrates how to deliver maximum
productivity with unbeatably low environmental impact.

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“What do we do when we plan
a new plant? We bring
the best ideas in the world together
in one place.”

Fiona Zhang, environmental expert at BMW Brilliance Automotive (BBA)

Shenyang, a 90-minute flight northeast of Beijing, is a
place of extremes. In winter, temperatures drop as low as
35 below freezing; in summer, they soar to a tropical
40 degrees Celsius. Not so long ago, this industrial city
used to belong to China’s notorious north-eastern “rust
belt” of mines and steelworks, coal-polluted air and
natural devastation. Today, it is home to a world-class
example of resource-efficient production.

To the north-east of this city of eight million people, the
BMW Group and its joint venture partner, Brilliance China
Automotive Holdings, have built the most sustainable
automotive manufacturing facility in China. The ultra-
modern car plant, with an annual capacity of 200,000 vehi-
cles, was raised from the ground in just two years on a
plot of land roughly two square kilometres, located in the
district of Tiexi. Environmental experts like Fiona Zhang
from China and her South-African colleague, Sean Dempsey,
brought fresh ideas and tried-and-tested approaches
from around the world to Tiexi. At the same time, BMW
Brilliance Automotive’s (BBA) newest plant also took local
factors into account, choosing an architecture to fit the
surroundings and bringing in regional suppliers. “We were
pretty much able to give the plant the best of both worlds
from the beginning,” says Dempsey, “which is a lot easier
than optimising a production facility further down the line.”

A tour of the plant with Zhang and Dempsey reveals no
fewer than five dozen measures, small and large, to reduce
energy and water consumption, solvent emissions, process
wastewater and waste for disposal. Many of them involve
smart optimisation of details – but together they make a
huge difference. In this respect also, Shenyang is a city of
extremes – in the most sustainable sense.

The work day begins at what is currently China’s most sustainable car plant.

Rush hour in Shenyang,

a city which has rapidly grown to

eight million inhabitants.

The Tiexi plant uses

proven Clean Production technologies

from many other BMW Group plants.

Fiona Zhang is amazed how
quickly her country is catch-
ing up in the field of environ-
mental protection. “What
takes much longer, though,
is changing people’s mind-
set,” explains the environ-
mental expert. Nevertheless,
she hopes to speed up
progress here, too, through
compulsory environmental
training for all associates.

Sean Dempsey worked as
an industrial engineer at the
BMW plant in Rosslyn, South
Africa, for 14 years. Almost
two years ago, the environ-
mental expert moved with
his family from Rosslyn to
Shenyang to assist with con-
struction of the Tiexi plant.
While his children are enjoy-
ing their very first ex perience
of snow, Dempsey himself
is relishing the unique chal-
lenge of “helping design and
build a completely new pro-
duction site.”

Two of around 4,000 experts: Sean Dempsey and Fiona Zhang

The high-speed servo press
is undeniably worthy of its
name: while the press line
itself works at record-break-
ing speed, a new equipment
architecture also enables
tools to be changed within
minutes. In this way, body
panels for totally different
BMW models can be pro-
duced within a very short
time.

– 67 %
production time at the press line

Six generators in the base-
ment recapture some of the
energy released by pressing
processes. Overall, the
new pressing machine cuts
energy consumption by more
than half.

– 60 %
energy consumption per work step

One of the fastest, most efﬁ cient press shops today.

Low-emission dry separation

is used at the Leipzig plant,

among others.

BMW plant Tiexi
50

HIGH-SPEED
SERVO PRESS

A powerful crane peeps a warning as it hovers over
Sean Dempsey’s head; a press line with the dimensions of
a substantial apartment building towers in front of him,
while, at the other end of the enormous hall, an army of
pressing tools weighing several tons awaits. “Small” is
the last word anyone would use to describe the brand-new
press shop. And yet, as the BBA environmental expert
explains, many aspects here have been minimised: shorter
tool change times and ultra-high-speed stroke rhythms
ensure faster production cycles. Economical warehousing
takes up less space and therefore reduces the area to be
cooled, heated, cleaned and maintained.

“This giant here,” says Dempsey, pointing at the huge press
line, “is something of a miracle when it comes to flexibility
and efficiency.” In fact, the so-called high-speed servo
press technology used at the plants in Leipzig, Regensburg
and Munich, and now also in Tiexi, is capable of up
to 17 strokes per minute. Compared with conventional
hydraulic presses, this not only reduces space requirements
and production time per unit (– 67 %), but also power
consumption per work step (– 60 %) and noise emissions
(– 13 %). In other words: the “titan of Tiexi” is much
faster, more efficient, more flexible and therefore more
economical than conventional presses – and quieter, too.

No less impressive are the performance figures for the
paint shop – the most resource-intensive section of any
car plant. Sean Dempsey explains how resources are
conserved and emissions prevented through use of an
integrated paint process developed at the Oxford plant,
so-called dry separation (used in the Leipzig, Regensburg
and Spartanburg plants) and the RoDip dip-painting
process for corrosion protection. The environmental
expert is proud to point out that, all in all, Tiexi currently
boasts one of the most sustainable paint shop in the auto-
motive industry.

Every body part is

re-examined at the end

of the pressing process.

Environmental experts in the pressing tool store.

“Higher speed and efficiency
ensure low energy
consumption and increased
productivity.”

Sean Dempsey on the high-speed servo press installed at the Tiexi plant

Resource-efficient production
through consistent best-practice implementation

S
C
I
T
S
G
O
L

100 % reusable packaging

for locally manufactured goods.

Container warehouses

on plant grounds and a rail link between port and
plant reduce truck transportation.

Location of high-volume suppliers

on plant grounds reduces transportation distances.

P
O
H
S
T
N
A
P

Dry separation

uses a stone dust-coated filter to eliminate paint mist
and save water.

RoDip dip-painting

rotates the car body on its own axis in an immersion tank
to apply corrosion protection.

Integrated Paint Process

using wet-on-wet cycles allows car bodies to be painted
without applying primer.

Highly efficient electric motors

supply the building with economical and efficient energy.

Integrated production

houses assembly, body shop and logistics under one roof. The building’s
limited exterior surface area helps optimise temperature regulation.

District heating plants and thermal insulation

contribute to low-resource energy usage and efficient temperature regulation.

P
O
H
S
Y
D
O
B

Optimised robot control

reduces energy consumption by switching on and off as demand requires.

Cooled welding guns

save energy through warm water exchange between
building and technology.

BMW plant Tiexi
52

G
N
N
N
A
L
P
G
N
D
L
I
U
B

Cold aisle containment
saves energy and reduces CO2 emissions through
strict separation of heated and cooled zones.

E
R
T
N
E
C
T
I

Water cycles

in car wash facilities and leak tests are designed
to allow 90 % of the water to be recycled.

Y
L
B
M
E
S
S
A

Ground collectors and aquifers

conduct the summer heat from the main building into
the ground for storage.

The BMW Group has brought
technologies and experience from
many different sites in its global
production network to the Tiexi
plant.

The overview below lists the most
important elements of resource-
friendly production.

X
E
I
T
W
M
B
T
N
A
L
P

Shenyang

Beijing

Shanghai

Hong Kong

P
O
H
S
S
S
E
R
P

High-speed servo presses

simultaneously reduce energy consumption, production time and noise.

Scan the QR code to go directly
to the Tiexi plant.

In Tiexi, for the first time,
assembly, body shop and
logistics are all located in one
production hall. Highly
efficient heating and cooling
technologies ensure resource-
efficient temperature control.

– 32 % CO2 emissions
through sustainable architecture

355 latest-generation pro-
duction robots weld together
body parts at the Tiexi plant.
Their waste heat will be used in
future to heat the plant. They
already revert to an especially
energy-efficient standby mode
as soon as they are no longer
in use – lowering their power
consumption by one quarter.

– 25 % electrical power
through efficient standby mode

Employees and vehicles under one roof

Intelligent plant architecture

For the ﬁ rst time 4 production areas

under one roof

press shop

body shop

assembly

logistics

“The compact building
more or less protects itself
from the climate.”

Sean Dempsey

INTEGRATED
PRODUCTION

The most striking feature of the new vehicle plant is the
220,000-square-metre building, which, for the first time
in the BMW Group production network, houses press
shop, body shop, assembly and logistics under one roof.
The integration of all these areas under one roof provides
a kind of natural climate protection for the BBA plant.
The building’s limited exterior surface area, second front
of permanently installed slats, mostly north-facing
windows and a white, sunlight-reflecting roof minimise
exposure to sun and wind.

Inside the building, a slew of resource-efficient measures
maintain a constant indoor climate, despite outdoor
temperature differences of more than 70 degrees. Produc-
tion halls are naturally ventilated through strategically
placed skylights. One method of cooling uses ground-
water that is pumped back into its natural reservoirs after
it has done its job – an environmentally compatible
concept that has been used successfully for years at the
BMW Group’s “Project House” in Munich. “For heating,
besides district heating, we mostly use the energy-
efficient low-temperature and high-temperature systems
familiar from the Munich and Leipzig plants,” explains
Fiona Zhang.

Besides the primacy of efficiency, the main paradigm for
the plant’s architecture is maximum flexibility. The new
manufacturing facility is designed in such a way that
the planned capacity expansion from 100,000 vehicles
per year initially to up to 200,000 units can be completed
without disrupting on-going operations. The plant will
then be able to produce any additional BMW model re-
quired at any time alongside the BMW X1 and the BMW
3 Series Sedan long-wheelbase version – with everything
still under the same roof.

The Tiexi plant is already a model for others.

A network of local suppliers
ensures that the Tiexi plant
is supplied with parts in a
reliable, fast and resource-
efficient manner. Partners
from the region were also in-
volved in developing and
building the production fa-
cilities. In a first for China,
four suppliers with 500 asso-
ciates currently operate
directly on site at the plant.

For the first time in the BMW
Group production network,
only reusable packaging
is used for local cargo han-
dling. This means 100 per
cent protection for products
and material, and zero per
cent waste.

100 % reusable

packaging

for locally manufactured goods

Key suppliers are also located

on-site at other

BMW Group plants.

Efﬁ cient logistics

Suppliers with

500 associates

operate directly on-site at the plant

REGIONAL
SUPPLIERS

Every 20 minutes, on the dot, a heavily laden tugger
train jolts to a start at the Tiexi plant’s supplier building.
Materials are transported through a 300-metre tunnel
directly to the assembly lines, where the supplied parts
are immediately built into new BMW vehicles. The parts
are manufactured right next door in the plant’s supplier
hall, where four partner companies with around 500 as-
sociates currently produce car seats, axles, roof liners and
shock absorbers for BBA. The concept of housing major
volume suppliers directly on-site, unique in China, gen-
erates a whole range of benefits, both for BBA and the
regional partners themselves. “It gives us a real home ad-
vantage,” says Sherman Du, general manager of a seat
manufacturer based at the plant. “Because our produc-
tion is here on-site, we are able to meet demand from the
plant straight away – and, if problems arise, we can fix
them right on the assembly line.”

Many of the materials and vehicle parts that have to be
shipped from farther afield will be delivered to the Tiexi
plant by rail in the future. The completion of a direct
train link between port and plant will allow a significant
percentage of transport volumes to be switched to rail,
largely eliminating the need for truck delivery. This will
not only improve the plant’s CO2 balance sheet, but also
its supply security. In icy temperatures and difficult road
conditions, truck delivery is much riskier than rail.

Material carriers deliver supplier

parts directly to the assembly line

just in time.

Sherman Du’s company builds car seats.

“The plant and the region
strengthen each other
through jobs, advanced
technology and constant learning
from one another.”

Fiona Zhang

Incorporating a large number of
pioneering concepts from all over the
world, the Tiexi plant is currently con-
sidered best practice. For us, however,
it is just one more step on the road
towards increasingly resource-friendly
production of our vehicles. The BMW
Group’s global production network
constantly generates new ideas for this.
For one another and with one another.
United by common goals.

BMW plant Tiexi
58

JOY BRINGS

PEOPLE TOGETHER

Creating moments of sheer pleasure for our customers

Moments of sheer pleasure 2012

Our latest models presented to their new owners

Klaus Schulten / BMW 640d Gran Coupé
Petra Bräuhauser / MINI Cooper Roadster
Dr. Klaus-Peter Fritzsche / BMW 750i
Linda Bätz / BMW X1 xDrive28i
Patrick Shuao-Fong Chung / BMW ActiveHybrid 5

Page 70

Page 72

Page 64
Page 68

Page 74

Helmut Berner / BMW C 650 GT
Fabrice Rustler and Enrico Lepschi / BMW 318d Touring
Manuela Gruschwitz / MINI John Cooper Works
Herbert Geiss / Rolls-Royce Phantom Series II

Page 76

Page 82

Page 80

Page 78

Scan the QR code to go directly to the online Annual Report for tablets.
http://annual-report2012.bmwgroup.com/moments-of-sheer-pleasure/

Final preparations for the big moment –
ten stages before presentation of a BMW 640d Gran Coupé

9 October 2012, BMW plant in Dingolﬁ ng

The new BMW 640d Gran Coupé receives a ﬁ nal polish. Johannes Schütz [01] smiles at
his reﬂ ection in the gleaming paintwork. Muhammet Asik [02] checks that everything is
exactly as it should be. He is proud of his role in bringing the vehicle to life.

Only a few more hours at the plant –
Finishing touches at BMW Welt

9 October 2012, BMW plant in Dingolﬁ ng | 19 November 2012, BMW Welt vehicle storage facility

Moments of sheer pleasure
62

The car is only allowed to leave the plant once Renate Hauer [03 / 04]
has performed an expert check of its technology. The ﬁ nal detail is
complete when Daileen Böhme [05] mounts the BMW logo on the Gran
Coupé. From that moment on, everything is ready for the customer.

The excitement grows as the new car arrives at BMW Welt. Sascha
Zahreddin [06 / 07] is the man in charge of the ﬁ ner details. Every inch
of the car is carefully scrutinised one last time – until not a speck of
dust remains. [08] The new BMW 640d Gran Coupé is now ready for its
entrance and its ultimate premiere at BMW Welt.

Klaus Schulten [09] will get to see his new car for the ﬁ rst time in just a few moments.
He took his time carefully choosing equipment options as well as the colour.
Full of anticipation, he tries to catch a glimpse of his new car. [10] And then, there it is.

Moments of sheer pleasure
64

Moments of sheer pleasure for our customers –
the fascination of the ﬁ rst encounter

20 November 2012, BMW Welt vehicle delivery

Attributes that impressed me right away …

dynamic
great acoustics

superior

sporty

Klaus Schulten, BMW Welt, Munich, 20 November 2012

Moments of sheer pleasure
66

BMW 640d Gran Coupé

A design that perfectly combines
sportiness with comfort, inside and
out. For those who like to express
their individuality.

Resource-efﬁ cient production

The BMW 640d Gran Coupé is produced at the
BMW plant in Dingolfing.
Almost 70 % of new vehicles leaving the Dingolfing
plant are shipped by emission-friendly rail.
As a result, over 100 fewer trucks are needed per day.

Scan the QR code to go directly to the
BMW 640d Gran Coupé website.

What I am most looking forward to …

“ Listening to the Vienna Philhar-
monic New Year’s concert with
Mariss Jansons on the drive
home and enjoying the unique
sound in this fantastic interior.
And, of course, trying out
everything else right away.”

MINI Cooper Roadster

Powerful, aerodynamic and impressively
agile. For those who like to combine
adventure with comfort. With its spacious
design, the new MINI Roadster is the
perfect choice.

Resource-efﬁ cient production

The MINI Cooper Roadster is produced at the MINI plant
in Oxford.
Thanks to a new painting technology, the paint shop uses
8,000 MWh less energy and generates 1,600 tons less CO2.

What I am most looking forward to …

“ Driving through Italy for the ﬁ rst time with the top down.
But mostly, I’m happy to own a MINI again. It has been
a cult car to me for more than 20 years.”

Petra Bräuhauser, MINI Munich, 6 December 2012

Moments of sheer pleasure
68

Scan the QR code to go directly to the
MINI Cooper Roadster website.

Attributes that impressed me right away …

smooth-running

responsive

free

pure

agile

What I am most looking forward to …

“ My next business trip, when I’ll be driving for several hours
again. It should be nice and relaxed in this model. The 7 Series
is such a quiet ride, you hardly hear any noise at all. No stress
or strain for me or my body. So I’ll arrive as fresh as I left.”

BMW 750i

For visionaries who seek the ideal
combination of luxurious comfort and
the ultimate in intelligent safety for a
unique driving experience.

Resource-efﬁ cient production

The BMW 750i is produced at the BMW plant in Dingolfing.
More than half of the plant’s water requirements are met by
groundwater that is unsuitable for drinking. This conserves
valuable resources.

Dr. Klaus-Peter Fritzsche, BMW Welt, Munich, 8 November 2012

Scan the QR code to go directly to the
BMW 750i website.

Moments of sheer pleasure
70

Attributes that impressed me
right away …

safe

powerful

innovative
luxurious

Attributes that impressed me
right away …

ﬂ exible

convenient

Linda Bätz, BMW Welt, Munich, 9 November 2012

BMW X1 xDrive28i

The perfect car for anyone who likes
to add their own personal touch
and appreciates functional versatility.

Resource-efﬁ cient production

The BMW X1 xDrive28i is produced at the BMW plant in Leipzig.
Heat recovery in the paint shop: reclaimed waste heat is
reused at other stages of the production process. This lowers
gas consumption and demand for electrical power by 32 %.

Moments of sheer pleasure
72

athletic

nimble

strong

Scan the QR code to go directly to the
BMW X1 xDrive28i website.

What I am most looking forward to …

“ I am going to drive straight to my daughter’s and take her
on a shopping trip. I decided on a smaller car, because
my children are grown up – but there is still plenty of space
in the luggage compartment.”

Scan the QR code to go directly to the
BMW ActiveHybrid 5 website.

Patrick Shuao-Fong Chung, BMW Welt, Munich, 21 November 2012

Attributes that impressed me right away …

connected

reliable

uncompromising

environmentally friendly

Moments of sheer pleasure
74

What I am most looking forward to …

“ The ﬁ rst time I drive in California, I want to open the sun
roof and cruise along the roads silently and emission-free –
just so I can be at one with nature.”

BMW ActiveHybrid 5

With its highly intelligent drive concept,
this hybrid is the right choice for anyone
looking for an environmentally friendly
car with the ideal dimensions of a sedan,
but unwilling to compromise on dynamic
performance.

Resource-efﬁ cient production

The BMW ActiveHybrid 5 is produced at the BMW plant
in Dingolfing.
The paint shop reconditions up to 40,000 litres of water per
hour, which it then feeds back into the production processes.

Scan the QR code to go directly to the
BMW C 650 GT website.

BMW C 650 GT

For sprints and long distances: the new
Maxi-Scooter conveys an amazing feeling
of freedom and independence. It is
extremely economical and features many
practical details, such as LED daytime
running lights for added safety.

Resource-efﬁ cient production

The BMW C 650 GT is produced at the BMW plant in Berlin.
Electrostatic coating of plastic parts significantly reduces
emissions.

What I am most looking forward to …

“ When I get to ride my new scooter in the mountains for the ﬁ rst
time, or cruise past all those RVs during the summer holidays.
Now I have the driving performance of a motorcycle with all the
comfort of a scooter.”

Moments of sheer pleasure
76

Attributes that impressed me right away …

comfortable

mobile
outdoorsy

efficient

independent

Helmut Berner, Karl Maier Motorrad, Neufinsing near Munich, 5 December 2012

What we are most looking forward to …

“ We are going snowboarding in just a few days. It should be
a nice, smooth drive in this car and we’ll have plenty of room
for all our equipment. And for our dog, Nika, too.”

BMW 318d Touring

Consistently smart design for maximum
ﬂ exibility. The authentic feel of the new
BMW 318d Touring is also part of its appeal.

Resource-efﬁ cient production

The BMW 318d Touring is produced at the BMW plant in Munich.
99.8 % of the waste generated at the BMW plant in Munich is
recycled.

Scan the QR code to go directly to the
BMW 318d Touring website.

Moments of sheer pleasure
78

Fabrice Rustler and Enrico Lepschi, BMW Welt, Munich, 19 December 2012

Attributes that impressed us right away…

spacious

harmonious
smooth

dependable

fuel-eﬃ cient

Scan the QR code to go directly to the
MINI John Cooper Works website.

Manuela Gruschwitz, MINI Munich, 20 December 2012

Attributes that impressed me right away …

bold

unusual

likeable

thrilling

clever

Moments of sheer pleasure
80

What I am most looking forward to …

“ We have set up a whole ﬂ eet of MINI for our company.
MINI is a way of life for me – a holiday I can look forward
to every day.”

MINI John Cooper Works

The fastest MINI on the road today, with
exceptional traction control combined with
intelligent technology for top performance.

Resource-efﬁ cient production

The MINI John Cooper Works is produced at the MINI plant
in Oxford.
The paint shop ventilation system recycles heated air back
into the system to supply the main paint spraying unit. This saves
6,000 MWh of energy and 1,250 tons of CO2 per year.

What I am most looking forward to …

“ I’m going to drive all the way down to Nuremberg this weekend,
so I can enjoy the car to the full. Normally, I only drive a car for
a short while. But I want to drive my new Rolls-Royce for longer.
There’s no alternative to the Phantom for me anymore.”

Rolls-Royce Phantom Series II

A combination of the latest technology and
engineering expertise with timeless, con-
temporary design: for all those who seek to
redeﬁ ne luxury.

Resource-efﬁ cient production

The Rolls-Royce Phantom Series II is produced at the Rolls-Royce plant
in Goodwood.
The Goodwood plant pursues a rigorous recycling and waste
prevention policy. Parts are delivered in recyclable packaging to
avoid waste.

Scan the QR code to go directly to the
Rolls-Royce Phantom Series II website.

Moments of sheer pleasure
82

Herbert Geiss, Rolls-Royce, Cologne, 4 February 2013

Attributes that impressed me
right away …

quiet
top-quality workmanship
refined

exclusive

Contacts

BUSINESS AND FINANCE PRESS

Telephone

Fax
E-mail

INVESTOR RELATIONS

Telephone

Fax
E-mail

+49 89 382-2 45 44
+49 89 382-2 41 18
+49 89 382-2 44 18
presse@bmwgroup.com

+49 89 382-2 42 72
+49 89 382-2 53 87
+49 89 382-1 46 61
ir@bmwgroup.com

THE BMW GROUP ON THE INTERNET

Further information about the BMW Group is available online at www.bmwgroup.com.
Investor Relations information is available directly at www.bmwgroup.com/ir. Information
about the various BMW Group brands is available at www.bmw.com, www.mini.com and
www.rolls-roycemotorcars.com

Scan the QR code to go directly to the online Annual Report for tablets.
http://annual-report2012.bmwgroup.com

A
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Consumption data

Model

BMW

BMW X1 xDrive28i

BMW 750i
BMW 640d Gran Coupé
BMW ActiveHybrid 5
BMW 318d Touring

MINI
MINI Cooper Roadster

MINI John Cooper Works (Hatch)

Urban (l / 100 km)

Extra-urban (l / 100 km)

Combined (l / 100 km)

CO2 emissions (g / km)
combined

Manual transmission
Automatic transmission
Automatic transmission
Automatic transmission
Automatic transmission
Manual transmission
Automatic transmission

Manual transmission
Automatic transmission
Manual transmission
Automatic transmission

9.9 – 9.7
9.3 – 9.1
11.9
6.9 – 6.8
6.2 – 5.7
5.8 – 5.6
5.7 – 5.5

7.2
8.9
8.8
10.1

6.6 – 6.4
6.2 – 6.1
6.6
4.9 – 4.8
7.4 – 6.7
4.1 – 3.9
4.1 – 4.0

4.9
5.3
5.3
5.3

10.2

7.8 – 7.7
7.3 – 7.2
8.6
5.7 – 5.5
7.0 – 6.4
4.7 – 4.5
4.7 – 4.5

5.7
6.6
6.6
7.1

14.8

182 –179
171 –168
199
149 –146
163 –149
123 –119
123 –119

133
154
153
165

347

Rolls-Royce
Rolls-Royce Phantom Series II

Automatic transmission

22.8

Fuel consumption and CO2 emissions are dependent on wheel and tyre size.
Further, regularly updated information on vehicles can be found on the www.bmw.com, www.mini.com and www.rolls-roycemotorcars.com websites.
Fuel consumption is determined in accordance with the ECE driving cycle. Valid for vehicles with a European country specification.
All engines comply with Euro-5 emissions standards.

PUBLISHED BY
Bayerische Motoren Werke
Aktiengesellschaft
80788 Munich
Germany
Tel. +49 89 382-0