FINANCIAL STATEMENTS OF BMW AG Financial Year 2020

BMW AG IN FIGURES 2020 2019 Change in %

Revenues € million 75,040 84,691 – 11.4

Export ratio % 81.5 82.2

Production

Automobiles 1 Units 2,255,608 2,564,025 – 12.0

Motorcycles Units 168,115 187,116 – 10.2

Deliveries

Automobiles 1 Units 2,249,943 2,555,795 – 12.0

Motorcycles Units 170,918 180,941 – 5.5

Capital expenditure € million 2,790 3,233 – 13.7

Depreciation, amortisation and impairment losses € million 2,646 2,573 2.8

Workforce at end of year 2 84,668 86,700 – 2.3

Tangible, intangible and investment assets € million 16,834 16,640 1.2

Current assets, prepaid expenses and surplus of pension and similar plan assets over liabilities € million 40,806 39,179 4.2

Subscribed capital € million 660 659 0.2

Reserves € million 13,252 12,774 3.7

Equity € million 15,165 15,079 0.6

as % of tangible, intangible and investment assets % 90.1 90.6

Balance sheet total € million 57,640 55,819 3.3

Cost of materials € million 57,425 63,425 – 9.5

Personnel expense € million 8,565 8,631 – 0.8

Taxes € million 232 789 – 70.6

Net profit € million 1,702 2,107 – 19.2

Dividend € million 1,2533 1,646 – 23.9

per share of common stock with a par value of € 1 each € 1.903 2.50

per share of preferred stock with a par value of € 1 each € 1.923 2.52

1 Including supplies of series parts to BMW Brilliance Automotive Ltd., Shenyang. 2 Prior year figure adjusted due to a changed calculation method (details provided in BMW Group Annual Report 2019, BMW Group Management Report). 3 Proposed by the Board of Management.

2Financial Statements of BMW AG

BMW AG in Figures

FINANCIAL STATEMENTS

PUBLICATION

The BMW AG Financial Statements and Management Report for the financial year 2020 will be submitted electronically to the operator of the Federal Gazette and can be obtained via the Company Register website. The Management Report of BMW AG is combined with the Group Management Report and published in the BMW Integrated Group Report 2020.

The Annual Financial Statements and the Manage­ ment Report of BMW AG are also available on the BMW Group’s website at www.bmwgroup.com/ir

3Financial Statements of BMW AG

Financial Statements

BALANCE SHEET AT 31 DECEMBER

in € million Notes 2020 2019

ASSETS

Intangible assets 1 488 405

Property, plant and equipment 2 12,520 12,473

Investments 3 3,826 3,762

Tangible, intangible and investment assets 16,834 16,640

Inventories 4 5,748 5,994

Trade receivables 5 778 964

Receivables from subsidiaries 5 18,939 16,698

Other receivables and other assets 5 3,849 3,513

Marketable securities 6 3,336 4,109

Cash and cash equivalents 7 6,822 6,757

Current assets 39,472 38,035

Prepaid expenses 8 73 58

Surplus of pension and similar plan assets over liabilities 9 1,261 1,086

Total assets 57,640 55,819

4Financial Statements of BMW AG

Balance Sheet at 31 December

in € million Notes 2020 2019

EQUITY AND LIABILITIES

Subscribed capital 10 660 659

Capital reserves 10 2,239 2,210

Revenue reserves 11 11,013 10,564

Unappropriated profit available for distribution 24 1,253 1,646

Equity 15,165 15,079

Registered profit-sharing certificates 12 27 28

Pension provisions 229 205

Other provisions 10,093 8,784

Provisions 13 10,322 8,989

Liabilities to banks 101 511

Trade payables 4,785 5,751

Liabilities to subsidiaries 23,404 21,777

Other liabilities 221 187

Liabilities 14 28,511 28,226

Deferred income 15 3,615 3,497

Total equity and liabilities 57,640 55,819

5Financial Statements of BMW AG

Balance Sheet at 31 December

INCOME STATEMENT

in € million Notes 2020 2019

Revenues 16 75,040 84,691

Cost of sales 17 – 63,726 – 70,178

Gross profit 11,314 14,513

Selling expenses – 4,030 – 3,979

Administrative expenses – 2,747 – 2,776

Research and development expenses – 5,394 – 5,528

Other operating income 18 1,237 1,295

Other operating expenses 19 – 1,250 – 2,526

Result on investments 20 3,084 1,858

Financial result 21 – 280 39

Income taxes 22 – 214 – 767

Profit after income tax 1,720 2,129

Other taxes – 18 – 22

Net profit 1,702 2,107

Transfer to revenue reserves 23 – 449 – 461

Unappropriated profit available for distribution 24 1,253 1,646

6Financial Statements of BMW AG

Income Statement

NOTES TO THE FINANCIAL STATEMENTS

BASIS OF PREPARATION

The financial statements of Bayerische Motoren Werke Aktiengesellschaft (BMW AG) have been drawn up in accordance with the accounting provisions contained in the German Commercial Code (HGB) and legislation applicable to stock corporations. Figures are presented in millions of euro (€ million) unless otherwise stated. BMW AG, which has its legal seat in Munich, is regis­ tered in the Commercial Register of the District Court of Munich under the number HRB 42243.

Key figures presented in the report have been round­ ed in accordance with standard commercial practise. In certain cases, this may mean that values do not add up exactly to the stated total and that percentages cannot be derived from the values shown.

The income statement is presented using the cost of sales method. The financial year is the same as the calendar year.

Financial Statements of BMW AG

Notes

Basis of Preparation

7

ACCOUNTING POLICIES

In order to improve clarity, individual items are aggregated in the balance sheet and income statement and presented separately in the notes to the financial statements.

Purchased intangible assets are valued at acquisi­ tion cost. Intangible assets with finite useful lives are amortised on a straight­line basis over their useful lives of between three and 20 years. Impairment losses are recognised where necessary. Internally generated intan­ gible assets are not capitalised.

Advance payments are stated at their nominal amount.

Property, plant and equipment are stated at acquisi­ tion or at manufacturing cost, less accumulated sched­ uled depreciation and impairment losses. Manufacturing cost includes direct material and production costs and an appropriate proportion of material and production overheads (including production­related depreciation). Production­related administrative costs, voluntary social costs and company pension costs are not included.

Property, plant and equipment are generally depre­ ciated straight­line. The reducing balance method is still also applied in specific cases. Items acquired during the year are depreciated on a time­apportioned basis. Im­ pairment losses are recorded when the decline in value of an asset is considered to be of a lasting nature. If the reasons for impairment no longer exist, impairment losses previously recorded are reversed, at a maximum up to their amortised acquisition and manufacturing cost. For simplification purposes, assets with an acquisition or manufacturing cost of up to € 250 are recognised directly as an expense in the year of purchase / construc­ tion. Assets with an acquisition or manufacturing cost of between € 250 and € 1,000 are depreciated using the straight­line method over a period of five years. Assets under construction are stated at their nominal amount.

The following useful lifes are applied:

in years

Factory and office buildings, residential buildings, fixed installations in buildings and outside facilities 8 to 50

Plant and machinery 3 to 21

Other equipment, factory and office equipment 2 to 25

For plant and equipment used in multiple­shift operations, depreciation rates are increased to account for the additional utilisation.

Investments in subsidiaries and participations are stated at cost or, if lower, at their fair value. If the reasons for impairment no longer exist, impairment losses previ­ ously recorded are reversed, at a maximum up to the level of original cost. Loans which bear no or a below­market rate of interest are discounted to their present value.

The composition of and changes in long­lived assets are shown in the Analysis of Changes in Tangible, Intan­ gible and Investment Assets.

Inventories of raw materials, supplies and goods for resale are stated at the lower of cost and net real­ isable value. Direct material and production costs and an appropriate proportion of material and production overheads (including production­related depreciation) are taken into account in the measurement of unfinished and finished goods. Production­related administrative costs, voluntary social costs and company pension costs are not included. Write­downs are made to cover risks arising from slow­moving items or reduced saleability. Inventories include advance payments made for raw ma­ terials and supplies as well as goods for resale. Advance payments are reported at their nominal amount.

Receivables and other assets are stated at the lower of their nominal value or net realisable value. Receivables whose collectability is associated with identifiable risks are written down appropriately; uncollectible receivables are written off.

Financial Statements of BMW AG

Notes

Accounting Policies

8

Investments in current marketable securities are measured at cost or, if lower, at their fair value at the end of the reporting period. Fair value corresponds to the market price.

Cash and cash equivalents are stated at their nominal value.

Prepayments relate to amounts disbursed before the balance sheet date, which represent expense for a specific period after the end of the reporting period.

Subscribed capital is stated at its nominal amount.

In order to meet obligations relating to pension plans, certain assets are managed on a trustee basis by BMW Trust e. V., Munich, in conjunction with Contractual Trust Arrangements (CTA). These assets are measured at their fair value, based on the market values of the corresponding fund management companies at the end of the reporting period. Designated plan assets are offset against the related obligations. A provision is recognised when obligations exceed assets. When assets exceed ob­ ligations, the surplus is reported in the balance sheet in the line item “Surplus of pension and similar plan assets over liabilities”.

Pension obligations are measured in accordance with the projected unit credit method and discounted using an average market interest rate for the past ten years, which corresponds to their remaining term. The calculation is based on independent actuarial valuations which take into account the relevant biometric factors. The differ­ ence in the carrying amount of the provision based on

using the average market interest rate for the past ten financial years and that for the past seven financial years is disclosed in the notes to the financial statements. The provisions for long­service awards and for pre­retirement part­time work arrangements are also measured using the projected unit credit method. Income arising on assets offset against liabilities, from the unwinding of discounting and from the effect of changes in the dis­ count rate are presented as part of the financial result. Changes in the fair value of designated plan assets held to meet securities­linked obligations are also reported as part of the financial result. All other components of pension expense are included in the income statement under costs by function.

Tax provisions are calculated in accordance with the principle of reasonable management judgement.

Other provisions are recognised to take account of all identified risks. Provisions are measured at their expected settlement amount. In the case of non­current provisions, amounts are discounted using the average market interest rate – calculated and published by the Deutsche Bundesbank – which corresponds to the re­ maining term of the provision.

The measurement of provisions for warranty obli­ gations and product guarantees (statutory, contractual and voluntary) involves estimations. These provisions are recognised as a general rule when the risks and rewards of ownership of the goods are transferred to the BMW Group’s sales companies, dealerships or re­ tail customers. In order to determine the level of the provision, various factors are taken into consideration,

including current estimations based on past experience with the nature and amount of claims relating to vehi­ cles delivered. In addition, the future level of potential repair costs (comprising materials and labour) as well as price increases per product are taken into account. In addition, the provision for warranty obligations and product guarantees also takes into account warranty­re­ lated events such as vehicle recalls on the date that the associated resolution is passed. Provisions for statutory and non­statutory warranty obligations and product guarantees are adjusted regularly to take account of new circumstances and the impact thereof recognised in the income statement. Expected reimbursement claims are estimated and offset against provisions for statutory and non­statutory warranty obligations and product guarantees.

Provisions pre­retirement part­time working ar­ rangements are measured at their expected settlement amount, discounted using the average market interest rate – calculated and published by the Deutsche Bundes­ bank – which corresponds to the remaining term of the obligations.

BMW AG assumes some of the residual value ob­ ligations arising at the level of BMW Group Financial Services entities in connection with the remarketing of vehicles and recognises provisions accordingly. For the purpose of measuring the provisions, contractual­ ly agreed residual values are compared with expected residual values on a contract­by­contract basis. The com­ putation of expected residual values also takes account of publicly available assessments of independent forecasting institutes as well as in­house forecasts.

Financial Statements of BMW AG

Notes

Accounting Policies

9

Liabilities are stated at their expected settlement amount at the balance sheet date.

The option of offsetting receivables from and payables to subsidiaries and companies in which an investment is held is not exercised.

Foreign currency receivables and payables are translated using the mid­spot exchange rate applicable at transaction date. Gains arising on the translation of period­end items are only recognised for receivables and payables with a remaining term of one year or less. Un­ realised losses resulting from changes in exchange rates are recognised by restating the foreign currency amount in the balance sheet to the closing rate.

BMW AG uses derivative financial instruments to hedge interest rate, currency and commodity price risks arising in conjunction with operating activities as well as the resulting financing requirements. Where there is a direct hedging relationship, the derivative financial instruments are aggregated together with recognised assets or liabilities and / or with forecast transactions into valuation units. Items denominated in foreign currency are accounted for using the “Valuation Freeze Method” (Einfrierungsmethode), translated using the relevant hedging rate.

BMW AG invoices affiliated sales companies that are based outside the eurozone in the relevant local currency. The resulting currency exposures are hedged by deriva­ tive currency instruments, and accounted for as portfolio hedges within valuation units. The hedged items relate to highly probable forecast transactions that will be subsequently invoiced in a foreign currency. The high probability of occurrence of these transactions is based on past experience and production planning. BMW AG has elected to apply the “Valuation Freeze Method” (Ein­ frierungsmethode) for these hedging relationships.

Micro hedges are designated for currency deriva­ tives used to hedge back­to­back derivative financial instruments with subsidiaries as well as for interest rate derivatives used to hedge financial receivables and liabilities. BMW AG has elected to apply the “Valuation Freeze Method” (Einfrierungsmethode) for these hedging relationships.

BMW AG negotiates contracts for the purchase of raw materials across the Group. The raw materials price risk resulting from the purchase of raw materials for production companies is borne either directly or indirectly by BMW AG. BMW AG enters into commod­ ity derivatives to hedge these risks. These derivatives are accounted for as portfolio hedges within valuation units. The hedged items relate to highly probable forecast transactions. The high probability of occurrence of these transactions is based on past experience and production planning. BMW AG has elected to apply the “Valuation Freeze Method” (Einfrierungsmethode) for these hedging relationships.

Since the principal features of the transactions in­ cluded in a valuation unit are matched to a large extent, changes in fair values or cash flows generally offset each other. Hedging is in place for the whole term of the hedged item. Effectiveness is ensured as a general rule by the use of a critical term match. The effectiveness of the valuation units relating to foreign­currency­denominated revenues billed to sales subsidiaries is measured on the basis of regression analysis. The Dollar­Offset method is used to calculate the absolute amounts attributable to non­validity and ineffectiveness. Realised gains and losses arising on valuation units created for back­to­ back derivative financial instruments entered into with subsidiaries and banks are presented in other operating income / expenses on a net basis.

If there is no hedging relationship, or if the hedging relationship is deemed to be insufficient, pending losses are recognised with income statement effect.

Deferred income relates to amounts received before the balance sheet date, which represent income for a specific period after the end of the reporting period. This also includes revenues billed for services which are rendered after the end of the reporting period. Revenues from sales with multiple components are analysed into the various performance components on the basis of fair values which can be determined objectively and reliably. The portion of revenues relating to services not per­ formed by the end of the reporting period is presented as deferred income.

Financial Statements of BMW AG

Notes

Accounting Policies

10

Deferred taxes are calculated for temporary differ­ ences between the tax base and accounting carrying amounts of assets, liabilities and deferred / prepaid items. Deferred tax assets and liabilities are measured using a combined income tax rate of 30.8 % relevant for the BMW AG tax group. This combined rate covers corpo­ ration tax, municipal trade tax and solidarity surcharge. In the case of temporary differences arising on assets, liabilities and deferred / prepaid items of partnership en­ tities, in which BMW AG participates in the capacity of a shareholder, deferred taxes are measured on the basis of an income tax rate of 15.83 % which covers corporation tax and solidarity surcharge. In the year under report, the BMW AG tax group has a surplus of deferred tax assets over deferred tax liabilities, mainly as a result of tempo­ rary differences between the tax base and accounting carrying amounts of provisions for pensions and similar obligations (before offset against designated plan assets), other provisions and property unused tax, plant and equipment and tax loss carryforward. BMW AG, as head of the German tax group, has elected not to recognise the surplus amount of deferred tax assets.

The share­based remuneration programmes for Board of Management members and senior heads of department entitle BMW AG to elect whether to settle its commitments in cash or with shares of BMW AG common stock. Based on the decision to settle in cash, the two share­based programmes are accounted for as cash­s ettled share­based transactions. Share­based pro­ grammes expected to be settled in cash are revalued to their fair value at each balance sheet date between the grant date and the settlement date and on the settlement date itself. The expense for such programmes is recog­ nised in the income statement (as personnel expense) over the vesting period of the options and in the balance sheet as a provision. Further information regarding the two share-based programmes is provided in note 41 to the BMW Group Financial Statements 2020.

Financial Statements of BMW AG

Notes

Accounting Policies

11

ANALYSIS OF CHANGES IN TANGIBLE, INTANGIBLE AND INVESTMENT ASSETS

Acquisition or manufacturing costs Depreciation, amortisation and impairment losses Carrying amount

in € million 1. 1. 2020  Additions Reclassifications Disposals 31. 12. 2020  1. 1. 2020  Current year Disposals 31. 12. 2020  31. 12. 2020  31. 12. 2019 

Intangible assets 1,127 213 – 536 804 722 130 536 316 488 405

Land, titles to land, buildings, including buildings on third party land 6,808 284 391 11 7,472 3,170 190 11 3,349 4,123 3,638

Plant and machinery 27,473 1,464 549 1,187 28,299 20,553 2,158 1,178 21,533 6,766 6,920

Other facilities, factory and office equipment 1,587 145 12 95 1,649 1,132 168 90 1,210 439 455

Advance payments made and construction in progress 1,460 684 – 952 – 1,192 – – – – 1,192 1,460

Property, plant and equipment 37,328 2,577 – 1,293 38,612 24,855 2,516 1,279 26,092 12,520 12,473

Investments in subsidiaries 3,643 88 – – 3,731 1 – – 1 3,730 3,642

Participations 625 34 – 34 625 513 33 7 539 86 112

Other non-current loans receivable 9 1 – – 10 1 – 1 – 10 8

Investments 4,277 123 – 34 4,366 515 33 8 540 3,826 3,762

Tangible, intangible and investment assets 42,732 2,913 – 1,863 43,782 26,092 2,679 1,823 26,948 16,834 16,640

Financial Statements of BMW AG

Notes

Analysis of Changes in Tangible, Intangible and Investment Assets

12

NOTES TO THE BALANCE SHEET

01 INTANGIBLE ASSETS

Intangible assets comprise mainly purchased soft­ ware, franchises and licenses. Scheduled amortisation in the year under report totalled € 130 million (2019: € 105 million). Advance payments for intangible assets amounted to € 41 million (2019: € 29 million).

02 PROPERTY, PLANT AND EQUIPMENT

Additions to property, plant and equipment relate primarily to infrastructure improvements and product­ related investments in plant and machinery. Scheduled depreciation in the year under report totalled € 2,516 mil­ lion (2019: € 2,468 million).

03 INVESTMENTS

Additions to investments related to a transfer to capital reserves made at the level of BMW Bank GmbH, Munich, amounting to € 88 million.

BMW AG holds an investment in SGL Carbon SE, Wiesbaden. An impairment loss of € 26 million (2019: € 30 million) was recognised on the investment in the financial year under report since its fair value at the balance sheet date was lower than its carrying amount.

04 INVENTORIES

in € million 31. 12. 2020 31. 12. 2019

Raw materials and supplies 1,145 1,156

Work in progress, unbilled contracts 398 357

Finished goods and goods for resale 3,783 3,969

Prepayments 422 512

Inventories 5,748 5,994

05 RECEIVABLES AND OTHER ASSETS

in € million 31. 12. 2020 31. 12. 2019

Trade receivables 778 964

Receivables from subsidiaries 18,939 16,698

thereof due later than one year 21 21

Other receivables and other assets 3,849 3,513

Receivables from other companies in which an investment is held 1,903 1,136

Other assets 1,946 2,377

thereof due later than one year 18 36

Receivables and other assets 23,566 21,175

Receivables from subsidiaries comprise finan­ cial receivables amounting to € 13,543 million (2019: € 12,748 million) and trade receivables amounting to € 5,396 million (2019: € 3,950 million).

Financial Statements of BMW AG

Notes

Notes to the Balance Sheet

13

Other assets include primarily tax receivables and advance payments on orders.

Unless stated otherwise, receivables and other assets are due within one year.

06 MARKETABLE SECURITIES

Marketable securities relate primarily to one special investment fund and to money market funds.

BMW AG holds all of the shares of the special invest­ ment fund. The fund is not subject to any restrictions in terms of the daily redemption amount. The acquisi­ tion cost for the shares in the special investment fund amounted to € 3,077 million (2019: € 3,672 million). The result for the financial year 2020 includes income from the sale of marketable securities amounting to € 106 mil­ lion. In the previous financial year, a profit distribution amounting to € 122 million was received.

The following table shows the acquisition cost and fair value of investments held by the special investment fund at the end of the reporting period:

Acquisition cost Fair value

in € million 31. 12. 2020 31. 12. 2019 31. 12. 2020 31. 12. 2019

Fixed-income securities 2,887 3,437 2,902 3,436

Investment certificates 428 722 441 781

Shares 177 – 176 –

Cash and cash equivalents 20 8 20 8

Other marketable securities 3 24 3 24

Receivables and payables 5 3 5 3

Derivative instruments – – – 1

Special investment fund 3,520 4,194 3,547 4,253

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