A Review of the Financial Year

Abbreviated BMW Group Annual Report 2011.

Record-breaking year for BMW Group

The BMW Group experienced the best year of its corporate history in 2011, selling 1,668,982 BMW, MINI and Rolls-Royce brand cars (+ 14.2 %); this was more than ever before in an annual period. With this performance, the BMW Group retains the pole position in the premium segment of the world’s car markets.

Sales volumes grew dynamically for all three car brands, each of them recording their best levels ever. Sales of BMW brand cars alone rose by 12.8 % to 1,380,384 units. A total of 285,060 units of the MINI brand were handed over to their new owners (+ 21.7 %). At 3,538 units, Rolls-Royce set a new sales volume record, posting an increase of 30.5 % on the previous year.

The Motorcycles segment put in another highly stable performance despite persistently unfavourable market conditions. In total, we handed over 113,572 BMW and Husqvarna brand motorcycles to customers during the year under report, 3.1 % more than in 2010.

Financial Services business also made an important contribution to the success of the BMW Group. With a portfolio of 3,592,093 contracts in place with dealers and retail customers at the end of the year, the segment recorded growth of 12.6 %.

New records set both for revenues and earnings

Group revenues and earnings broke all existing records on the back of dynamic car sales volume growth and flourishing financial services business. Revenues in 2011 totalled € 68,821 million, 13.8 % higher than in the previous year. Earnings were also strong, with profit before financial result (EBIT) up by 56.9 % to € 8,018 million and profit before tax up by 52.1 % to € 7,383 million.

The Automotive segment recorded a 16.8 % increase in revenues to € 63,229 million, with EBIT soaring to € 7,477 million (+ 71.7 %) and segment profit before tax reaching € 6,823 million (+ 75.5 %).

Motorcycle segment revenues grew by 10.1 % to € 1,436 million on the back of good sales volume performance. EBIT fell by 36.6 % to € 45 million, primarily due to restructuring measures taken at the level of Husqvarna. These measures also caused segment profit before tax to drop to € 41 million (– 36.9 %).

The Financial Services segment also performed extremely well, posting a 5.4 % increase in revenues to € 17,510 million. In earnings terms, segment EBIT rose by 46.8 % to € 1,763 million and segment profit before tax by 47.4 % to € 1,790 million.

Income tax expense for the year amounted to € 2,476 million (+ 53.8 %), resulting in an effective tax rate of 33.5 %, marginally up on the previous year’s 33.2 %. Group net profit was significantly higher than in 2010, rising by 51.3 % to € 4,907 million.

Sharp increase in dividend

Sharp increase in dividend Reflecting the very strong earnings performance, the Board of Management and the Supervisory Board will propose to the Annual General Meeting to use BMW AG’s unappropriated profit of € 1,508 million to pay a dividend of € 2.30 for each share of common stock (2010: € 1.30) and a dividend of € 2.32 for each share of preferred stock (2010: € 1.32), a distribution rate of 30.7 % for 2011 (2010: 26.5 %).

Capital expenditure increased

Capital expenditure on intangible assets and property, plant and equipment amounted to € 3,692 million in 2011, 13.1 % higher than in the previous year (2010: € 3,263 million). The main focus in 2011 was on product investments for new model start-ups (BMW 1 Series, 3 Series), on infrastructure investments aimed at expanding the production network and on the future production of electric cars (BMW i3 and i8).

The BMW Group invested € 2,720 million in property, plant and equipment and other intangible assets in 2011 (2010: € 2,312 million; + 17.6 %). Development expenditure of € 972 million was additionally recognised as assets (2010: € 951 million; + 2.2 %). The percentage of development costs capitalised decreased to 28.8 %, mainly due to model life cycle factors (2010: 34.3 %).

The capital expenditure ratio for the year was unchanged at 5.4 % and therefore remained – thanks to the efficient use of capital resources – well within the target range of below 7 % of Group revenues, despite substantial levels of investment in innovative products and technologies.

BMW Group strengthens market position in European fleet business

In July the BMW Group announced the purchase of ING Car Lease Group (ICL Group). This addition, combined with the existing Alphabet fleet business, increased the number of leasing and fleet management contracts handled by the BMW Group to approximately 540,000. Alphabet is now one of the top five fleet service providers on the European market, mainly concentrating on the growing sector of full-service leasing. The expansion of fleet management business provides the ideal foundation for developing forward-looking mobility solutions and services.

BMW Group and SGL Group open new carbon fibre production plant

In September 2011, SGL Automotive Carbon Fibers – a joint venture of the BMW Group and the SGL Group – opened a new state-of-the-art carbon fibre manufacturing plant in Moses Lake, USA. The facility plays a major strategic role in the manufacture of ultra-lightweight carbon-fibre reinforced plastics (CFRP), which will be used extensively in the BMW i vehicles to be launched by the BMW Group from 2013 onwards.

CFRP is becoming increasingly important in the quest for lighter materials that minimise vehicle weight and thereby reduce both fuel consumption and CO2 emissions. With their new production plant in Moses Lake, the BMW Group and the SGL Group are proving that targeted innovations can make a real eco-friendly contribution towards the future of individual mobility.

Investment in SGL Carbon SE

BMW AG acquired 15.81 % of the share capital of SGL Carbon SE during the period under report, thus reinforcing our engagement in the area of lightweight construction and the use of CFRP in carmaking.

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Updated March 13, 2012