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Annual Report 2002
Applying strengths. Pursuing a distinctive course.
Rolls-Royce
Motor Cars Limited

Table of contents

  • Page 1
    Annual Report 2002 Applying strengths. Pursuing a distinctive course. Rolls-Royce Motor Cars Limited

  • Page 2
    Facts and figures BMW Group in figures 1998 1999 2000 2001 2002 Change in % Vehicle production BMW MINI 706,426 Â- 60,152 755,547 Â- 69,157 834,519 Â- 93,608 904,335 42,395 100,213 930,221 160,037 97,553 2.9 277.5 Â- 2.7 Motorcycles 1] Deliveries to customers BMW MINI 699,378 Â- 60,308 118...

  • Page 3
    ...822.2 699.4 751.3 BMW Group Profit from ordinary activities in euro million 1,100 1,000 900 800 700 600 500 400 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 3,242 3,297 2,032 1,663 1,061 1,111 98 * 99 00 01 02 98 HGB 99 HGB 00 HGB 00 IAS 01 IAS 02 IAS adjusted for Rover/Land Rover

  • Page 4
    Contents BMW Group in figures Report of the Supervisory Board Members of the Supervisory Board Members of the Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary ...

  • Page 5
    ... as well as risk management issues. The Supervisory Board has paid particular attention to the development and implementation of the Board of ManagementÂ's premium brand strategy. Worldwide demand for the cars of the BMW Group in the financial year 2002 outpaced demand in the market as a whole as...

  • Page 6
    ... issued by the EU Commission dated 31July 2002 relating to the sale of vehicles. The new regulations, which are intended to open up and diversify the current distribution system, pose a challenge to the BMW Group and its dealers to maintain in the future a high quality of accessible services...

  • Page 7
    ... Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index On 3 December 2002, the Supervisory Board and the Board of Management issued...

  • Page 8
    ... to convene during the financial year 2002. On 30 November 2002, Günter Lorenz ceased to be member of the Board of Management and left the enterprise after 15 years of service for the BMW Group. The Supervisory Board thanked Mr. Lorenz for the services he has provided to the enterprise. The term of...

  • Page 9
    ...106 112 114 116 120 BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Members of the...

  • Page 10
    ... Holding AG (Chairman) Fresenius Medical Care AG HeidelbergCement AG Allianz Dresdner Asset Management GmbH BNP PARIBAS S. A. Dresdner Bank Luxembourg S. A. (Président) Dresdner Kleinwort Benson North America Inc. Hans Glas* Director of the Dingolfing plant Konrad Gottinger* Member of the Works...

  • Page 11
    ...Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Prof. Dr.-Ing. Dr. h. c. Dr.-Ing. E. h. Joachim Milberg (from 16.05.2002) Former Member of the Board...

  • Page 12
    ...-AG BMW FS Funding Corp. BMW FS Receivables Corp. Prof. Dr.-Ing. Dr. h.c. Dr.-Ing. E.h. Joachim Milberg (until 16.05.2002) Chairman Dr.-Ing. Norbert Reithofer Mandates** BMW Motoren GmbH (Chairman) BMW Ã-sterreich Holding GmbH (Chairman) BMW (South Africa) (Pty) Ltd. (Chairman) Executive Director...

  • Page 13
    ... Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Group Management Report. The BMW Group achieved important milestones in the implementation of its product and market offensive in 2002...

  • Page 14
    ... Services segment also increased revenues by 9.3 % compared to the previous year, achieving euro 8,213 million. Expansion of product and brand portfolio The BMW Group achieved further important milestones in 2002 in the implementation of its product and market offensive. The new BMW 7 Series...

  • Page 15
    ...Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group Â- key automobile markets 2002 as a percentage of sales volume Germany USA United Kingdom...

  • Page 16
    ... of the BMW Group. Following the successful launch in markets outside Europe, MINI brand cars are now available in more than 70 markets around the world. The development in North America is particularly pleasing. After an excellent start in 2002, the USA, with sales of 24,590 cars, has already...

  • Page 17
    ... Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index MINI Cooper won the North American Car...

  • Page 18
    ... in the number of used vehicles financed. 36.1% of the new vehicles sold by the BMW Group worldwide were financed or leased in 2002 by the Financial Services segment. The highest rate for financing and leasing new cars was achieved on the North American market (44.9 %), followed by South-East Asia...

  • Page 19
    ... of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index More than 5,000 jobs created As a result of the continuing product and market offensive, additional employees...

  • Page 20
    ... scheme they wish to participate, pension benefits can be tailored to the individual life and financial situation of each employee. Over one million cars manufactured The BMW Group again increased automobile production in 2002 and, with 1,090,258 vehicles manufactured, exceeded the previous year...

  • Page 21
    ... Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Further expansion of customer-orientated sales and production processes The BMW GroupÂ's production...

  • Page 22
    ...the history of the BMW Group. First class innovation management The BMW Group received the Outstanding Corporate Innovator (OCI) Award 2002 for its innovative strength and sustained growth with successful products. The OCI award is presented annually by the American Product Development & Management...

  • Page 23
    ...research and development teams of the BMW Group work closely together in a worldwide innovation network to identify new trends and customer needs, working also within the sales markets. In addition to the BMW Group Research and Technic Centre (ZT) and the BMW Car IT in Munich, the BMW Group also has...

  • Page 24
    ... BMW Group established its own sales company in Warsaw in June 2002. The MINI dealer network was expanded in 2002 to more than 1,400 dealerships located in some 70 countries. In 2002, the Group began to build up the sales network for the Rolls-Royce brand, some 60 dealership agreements being signed...

  • Page 25
    ... Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index sources used, meant it was possible to a large extent to avoid a corresponding increase in CO2 emissions. The new BMW Leipzig plant...

  • Page 26
    ... best prepared for the EU end-of life vehicle directive. The EU directive requires car manufacturers to take back, free of charge, all products registered for the first time after 1 July 2002. From 2007 onwards, this requirement is extended to all vehicles, irrespective of manufacture date. In order...

  • Page 27
    ... Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Risk management in the BMW Group As an enterprise with worldwide operations, the BMW Group...

  • Page 28
    ... emissions set high demands on engine and product development. Â- The tax changes proposed by the German Government, in particular the tax treatment of company cars, could have a negative impact on car sales of the BMW Group in Germany. Â- The decision of the EU Commission relating to the new Block...

  • Page 29
    ...Group Annual Comparison BMW Group Locations Glossary Index Â- The growth of the leasing business leads to an increase in the number of vehicles returned to the BMW Group at the end of lease contracts which must be sold. Changes in residual values of vehicles of the BMW Group on the used car markets...

  • Page 30
    ... of the worldwide political situation. The BMW Group believes that the USA will see a modest economic upswing in 2003 which should then accelerate in the course of the year. A similar development is expected in Western Europe, but with less growth momentum. The prospects for South-East Asia...

  • Page 31
    ... Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index The BMW Group in 2003 In 2003, the BMW Group will achieve important milestones in its product and market...

  • Page 32
    ...2001, the year 2002 also failed to meet investorsÂ' hopes. For the first time in its history, the DAX finished with a loss for three years in succession. Not a single DAX-30 enterprise was able to achieve a share price gain in 2002. After market price increases in the first quarter, during which the...

  • Page 33
    ...Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW stock 1998 1999 2000 2001 2002 Common stock Number of shares in 1,000 Stock exchange price...

  • Page 34
    ... In 2002, the BMW Group further expanded the range of information available on the internet. Investor Relations (www.bmwgroup.com/ir) was for example expanded to include corporate governance, directorsÂ' dealings and current analyst recommendations. Development in value of a BMW stock investment in...

  • Page 35
    ... and have developed a corporate governance code for the BMW Group taking account of the specific circumstances of the BMW Group. In addition, the BMW Group has appointed a coordinator for all issues relating to corporate governance who reports directly and regularly to the Board of Management and...

  • Page 36
    ... a of the German Securities Trading Act. Each notification is reported on the internet site for at least 30 days. The purchase or sale of shares in BMW AG by the members of the Board of Management and the Supervisory Board are only relevant for shareholders and other stakeholders at the date of the...

  • Page 37
    ...Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index The Corporate Governance Code for the BMW Group The Corporate Governance Code for the BMW Group On 3 December 2002, the Board...

  • Page 38
    ... between the Board of Management and Supervisory Board of BMW AG The Board of Management and the Supervisory Board cooperate closely and in a spirit of trust to the benefit of the enterprise. The Board of Management runs the business and bears responsibility for managing the group. It coordinates...

  • Page 39
    ... BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index 3. The Board of Management of BMW AG 3.1 Tasks and responsibilities The Board of Management is responsible for independently managing the enterprise...

  • Page 40
    ... on the strategy, business development and risk management of the BMW Group. The Chairman of the Supervisory Board is informed by the Chairman of the Board of Management without delay of important events which are essential for an assessment of the situation and development of the enterprise as well...

  • Page 41
    ... 1% of the stock issued by BMW AG, the total amount will be disclosed separately for the Board of Management and the Supervisory Board. As part of the groupÂ's regular information policy, the dates of essential regular publications (including the Annual Report, interim and quarterly reports, General...

  • Page 42
    ... 90 days of the end of the financial year; interim reports are made publicly accessible within 45 days of the end of the reporting period. BMW AG publishes a list of companies in which it has a shareholding that are not of minor importance to the group. The list includes the name and registered...

  • Page 43
    ...031 034 042 106 112 114 116 120 BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index 42

  • Page 44
    ... in Equity Notes to the Group Financial Statements Accounting principles and policies Notes to the Income Statement Notes to the Balance Sheet Other Disclosures Segment Information Disclosures pursuant to § 292 a HGB Independent AuditorsÂ' Report BMW AG Financial Statements Balance Sheet at 31...

  • Page 45
    ... BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group Financial Analysis Group Income Statement in euro million 4th quarter 2002 4th quarter 2001 2002 2001 Revenues Cost of sales Gross profit...

  • Page 46
    ....7%. This is due to the fact that income tax expenses in the previous year included write-downs on deferred tax assets. Segment revenues in euro million 4th quarter 2002 4th quarter 2001 2002 2001 Automobiles Motorcycles Financial Services Reconciliations BMW Group 9,356 242 1,834 Â- 1,488 9,944...

  • Page 47
    ... Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Segment results in euro million 4th quarter 2002 4th quarter 2001 2002 2001 Automobiles Motorcycles Financial Services...

  • Page 48
    ..., to write-downs on deferred tax assets and, in 2002, to the reduction of deferred tax assets following the utilisation of tax loss carryforwards by BMW AG. Revenues of the Automobiles segment in the fourth quarter 2002 increased by 4.3 % compared to the equivalent period in 2001. The profit from...

  • Page 49
    ... Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Balance sheet structure Group in euro...

  • Page 50
    ... value measurement of financial instruments of euro 1.4 billion. The issue of employee shares increased shareholdersÂ' equity by euro 18 million. The payment of the dividend for the financial year 2001 and exchange rate changes reduced equity by euro 359 million. The equity ratio of the BMW Group...

  • Page 51
    ... due partly to the general expansion of business and partly to the fact that in the previous year the net investment in financial services activities fell noticeably as a result of discontinuing the financing of Rover and Land Rover vehicles. Capital expenditure on property, plant and equipment and...

  • Page 52
    ... from investing activities Cash flow from financing activities Currency translation, changes in group composition Cash and cash equivalents 31.12. 2002 After adjustment for the effects of exchange-rate fluctuations and changes in the composition of the BMW Group amounting to euro Â- 99 million...

  • Page 53
    ... Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group Financial figures 2002 2001 Gross Margin EBITDA Margin EBIT Margin Pre-tax return on sales...

  • Page 54
    BMW Group Group and sub-group Income Statements in euro million Notes Group 2001 2002 Industrial operations 1] 2002 2001 Financial operations 1] 2002 2001 Revenues Cost of sales Gross profit Sales and administrative costs Research and development costs Other operating income and expenses ...

  • Page 55
    ... euro million Notes Group 2001 2002 Industrial operations1] 2002 2001 Financial operations1] 2002 2001 Intangible assets Property, plant and equipment Financial assets Leased products Non-current assets Inventories Trade receivables Receivables from sales financing Other receivables Marketable...

  • Page 56
    ... Group 2001 2002 Industrial operations1] 2002 2001 Financial operations1] 2002 2001 Subscribed capital Capital reserve Revenue reserves Accumulated other equity Equity Minority interest Pension provisions Other provisions Provisions Debt Trade payables Other liabilities Liabilities Deferred tax...

  • Page 57
    ... Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group Group and sub-group Cash Flow Statements in euro million Notes 2002 Group 2001 Net profit...

  • Page 58
    ... companies Investment in leased products Disposals of leased products Additions to receivables from sales financing Payments received on receivables from sales financing Investment in marketable securities Proceeds from marketable securities Cash outflow from investing activities Proceeds from issue...

  • Page 59
    ... Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group Group Statement of Changes in Equity in euro million Subscribed...

  • Page 60
    ... of financial services business, a significant volume of receivables arising from customer and dealer financing are sold. Similarly, rights and obligations relating to leases are sold. The sale of receivables is a well established instrument used by industrial and financial companies. These...

  • Page 61
    ... BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Register of the Munich District...

  • Page 62
    ..., liabilities, financial position and earnings of the Group. [ 4 ] Consolidation principles The equity of subsidiaries is consolidated using the purchase method, whereby investments in subsidiaries are set off against the GroupÂ's share of the equity of consolidated subsidiaries at the date of...

  • Page 63
    ... of property, plant and equipment and amortisation of other intangible assets relating to production and write-downs on inventories. Cost of sales also includes costs which are directly attributable to the leasing business and interest expense arising from the refinancing of financial services...

  • Page 64
    ... be attributed, directly and indirectly, to the development process. Capitalised development costs are amortised on a systematic basis following the commencement of production over the estimated product life which is generally seven years. All items of property, plant and equipment are considered to...

  • Page 65
    ... BMW Group has no securities which are held for trading. Securities which are available for sale are measured at their market price and unrealised gains and losses are, as a general principle, recognised directly in equity (net of deferred taxes). If a market price is not available, the fair value...

  • Page 66
    ...to take account of general credit risk. Receivables from sales financing comprise receivables from customer, dealer and lease financing. Derivative financial instruments are only used within the BMW Group for hedging purposes in order to reduce the currency, interest rate and market price risks from...

  • Page 67
    ... 114 116 120 BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index value measurement is...

  • Page 68
    ... BMW Group financial statements. In May 2002, the IASB published changes to IAS 19 which are intended to prevent the situation where the performance of an enterprise is affected solely because of actuarial losses leading to accounting gains and actuarial gains leading to accounting losses relating...

  • Page 69
    ... financial year 2002 do not include any impairment losses (2001: euro 26 million). Interest expense on refinancing the entire financial services business of euro 1,012 million (2001: euro 1,162 million) is included in cost of sales. In addition, public sector subsidies in the form of reduced taxes...

  • Page 70
    ... operational purposes (euro 75 million), reimbursed value added taxes (euro 62 million) and gains relating to marketable securities (euro 55 million). The lower level of exchange gains on currency transactions (down by euro 78 million) is matched by a similar decrease in exchange losses on currency...

  • Page 71
    ... Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index [13 ] Financial result in euro million 2002 2001 Income from investments...

  • Page 72
    ...31 December were attributable to the following positions: in euro million Deferred tax assets 2002 2001 Deferred tax liabilities 2002 2001 Intangible assets and property, plant and equipment Financial assets Current assets Tax loss carryforwards Provisions Liabilities Consolidations 1,424 1 601...

  • Page 73
    ...write-downs, euro 99 million is attributable to exchange rate changes. Equity is reduced at the balance sheet date by deferred tax liabilities of euro 1,042 million (2001: euro 44 million) recognised directly in equity. This was the result of the positive market value changes of derivative financial...

  • Page 74
    ... costs: in euro million 2002 2001 Material costs Raw materials, supplies and purchased goods for resale Purchased services 21,189 1,049 22,238 Personnel costs Wages and salaries Social security, retirement and welfare costs Â- thereof for retirement costs: euro 603 million (2001: euro 560 million...

  • Page 75
    ... and office equipment Advance payments and construction in progress Property, plant and equipment Investments in subsidiaries Investments in associated companies Investments in other companies Non-current marketable securities Other non-current loans receivable Financial assets Leased products Non...

  • Page 76
    ...Translation differences Current year Disposals 31.12. 2002 Net book values 31.12. 2002 31.12. 2001 1,758 381 2,139 Â- Â-4 Â-4 534 63 1] 597 555 125 680 1,737 315 2,052 2,598 143 2,741 2,276 143 2,419 1,806 10,424 Â- 33 Â- ...

  • Page 77
    ... Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index [19 ] Intangible assets Intangible assets comprise mainly capitalised development costs on vehicle...

  • Page 78
    ... on investments in other companies in the year under report relate to shares in Rolls-Royce plc, London, which were written down to their market value at 31 December 2002. The write-down was recognised directly in accumulated other equity. [ 22] Leased products The BMW Group, as lessor, leases out...

  • Page 79
    ...Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index [ 23] Inventories Inventories comprise the following: in euro million 31.12. 2002 31...

  • Page 80
    in euro million 31.12. 2002 31.12. 2001 Gross investment in finance leases due within one year due between one and five years due later than five years 1,968 3,298 20 5,286 Present value of future minimum lease payments due within one year due between one and five years due later than five years ...

  • Page 81
    ... Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index to euro 2,278 million (2001: euro 992 million) and tax receivables of euro 932 million (2001: euro...

  • Page 82
    ... profit of BMW AG of euro 351 million will be proposed to the Annual General Meeting for distribution. The proposed dividend payment will give rise to a tax reduction of euro 50 million (2001: euro 58 million) which will reduce the tax expense in the financial year 2003. Tax reduction benefits...

  • Page 83
    ... of service and salary of employees. Due to their similar nature, the obligations of BMW Group companies in the U.S. for post-employment medical care are also disclosed as pension provisions. The provision for these other post-employment benefit obligations amounts to euro 19 million (2001: euro...

  • Page 84
    ... applies to the GroupÂ's pension plans: in euro million 31 December Germany 2002 2001 GB 2002 2001 Other countries 2002 2001 Total 2002 2001 Present value of pension benefits covered by accounting provisions Present value of funded pension benefits Defined benefit obligation Fair value of fund...

  • Page 85
    ...USA and euro 1 million in Switzerland. The current shortfall in Germany is attributable to the reduction in the discount factor from 6.0 % to 5.75 % in the light of capital market developments. The defined benefit plans of the BMW Group gave rise to a total pension expense in the financial year 2002...

  • Page 86
    ...actuarial gains or losses exceeds 10 % of the present value of the defined benefit obligations. The changes in the net obligation, resulting from the pension provision and pension asset disclosed in the balance sheet, are as follows: in euro million Germany 2002 2001 GB 2002 2001 Other countries...

  • Page 87
    ...Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index [ 30] Other provisions Other provisions comprise the following: in euro million Total 31.12. 2002...

  • Page 88
    ... the BMW Group at the relevant balance sheet dates. It comprises the following: 31 December 2002 in euro million Maturity within one year Maturity between one and five years Maturity later than five years Total Bonds Liabilities to banks Liabilities from customer deposits (banking) Commercial...

  • Page 89
    ... Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index The following bonds have either variable or fixed interest rates: Issuer Interest Issue...

  • Page 90
    ...Maturity later than five years Total Taxes payable Social security Employees Advance payments from customers Deposits received Interest Subsidiaries Fair values of derivative financial instruments Liabilities to associated and other companies in which an investment is held Sundry other liabilities...

  • Page 91
    ... BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index 31 December 2001 in euro million...

  • Page 92
    ... euro 17 million (2001: euro 28 million) in respect of non-consolidated subsidiaries. Several liability applies in the case of investments in general partnerships. The usual commercial guarantees have been given in relation to the sale of Rover Cars and Land Rover. Other financial commitments...

  • Page 93
    ... Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Obligations for future minimum lease payments on back-to-back finance leases were as follows: in euro million 31.12. 2002...

  • Page 94
    ...financial reporting procedures and control mechanisms used for financial instruments are set out in internal guidelines. These include, above all, a clear separation of duties between trading and processing. Exchange rate, interest rate and liquidity risks of the BMW Group are managed at a corporate...

  • Page 95
    ... Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index The nominal amount of derivative financial instruments are the purchase or sale...

  • Page 96
    ... which the BMW Group will realise in the future under the market conditions prevailing at that time. At 31 December 2002, the positive impact from the fair value measurement of financial instruments (net of deferred taxes) recognised directly in equity amounted to euro 709 million (2001: negative...

  • Page 97
    ... and operating policies of the BMW Group can arise when a party holds 20 % or more of the shares of BMW AG, is a member of the Board of Management or Supervisory Board of BMW AG or holds another key management position within the Group. In the case of the BMW Group in the financial year 2002, these...

  • Page 98
    ...dependants are covered by pension provisions of euro 30.0 million (2001: euro 24.9 million), computed in accordance with IAS 19. Subject to the approval of the proposed dividend at the Annual General Meeting of Shareholders, the remuneration of the Supervisory Board for the financial years 2002 and...

  • Page 99
    ...of BMW AG and by independent, authorised dealers. Sales outside Germany are handled primarily by subsidiary companies and also by independent import companies. With effect from 1 January 2003, responsibility for the Rolls-Royce brand is with the BMW Group. The cost of developing a new Rolls-Royce as...

  • Page 100
    ..., Asia and Oceania, in line with internal management and reporting procedures. Segment information by region in euro million External sales 2002 2001 Capital expenditure 2002 2001 Assets 2002 2001 Germany Rest of Europe America Africa, Asia, Oceania Reconciliations Group 10,343 13,117 13,538...

  • Page 101
    ...Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Segment information by business segment in euro million 2002 Automobiles 2001 Revenues...

  • Page 102
    Motorcycles 2002 2001 Financial Services 2002 2001 Reconciliations 2002 2001 Group 2002 2001 1,128 6.9 2 Â- 50.0 1,130 6.7 113 51 62 5.1 Â-2 60 1.7 5.5 10 113 94 Â- 584 403 2,843 1,055 14.2 4 Â- 1,059 14.1 92 33 59 78.8 Â- 59 78.8 5.6 Â- 74 ...

  • Page 103
    ... AG from drawing up Group financial statements in accordance with German commercial law (HGB). The BMW Group financial statements and Group management report also comply with the European Union Directive on Group Accounting (83/349/ EEC), whereby this directive has been interpreted along the lines...

  • Page 104
    ...an asset. In the case of the BMW Group, this is an issue principally affecting the pension fund in Great Britain. Deferred taxes Under IAS, there is a general requirement to recognise deferred taxes on all temporary differences between the accounting and tax bases of assets and liabilities, whereby...

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    ...120 BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Provisions Pension commitments...

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    ...operations and cash flows of the Group for the business year in accordance with International Financial Reporting Standards. Our audit, which also extends to the group management report prepared by the CompanyÂ's management for the business year from 1 January to 31 December 2002, has not led to any...

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    ...Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW AG Balance Sheet at 31 December Assets in euro million 2002 2001 Intangible assets Property, plant...

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    ... in euro million 2002 2001 Subscribed capital Capital reserve Revenue reserves Unappropriated profit available for distribution Equity Registered profit-sharing certificates Special tax allowable reserve Pension provisions Other provisions Provisions Trade payables Liabilities to subsidiaries...

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    ... Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW AG Income Statement in euro million 2002 2001 Revenues Cost of sales Gross profit Sales...

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    ... of BMW AG, of which the balance sheet and the income statement are presented here. The financial statements are published in the German Federal Gazette and filed with the Trade Register of the Munich District Court. These financial statements are available from BMW AG, D-80788 Munich, Germany. 109

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    ... BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW AG Principal Subsidiaries Principal subsidiaries of BMW AG at 31 December 2002 Equity in euro million Net result in euro million Capital investment in % Domestic 1] BMW Bank GmbH, Munich 2] BMW...

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    ...BMW AG 3] below euro 500,000 4] profit and loss transfer agreement with a subsidiary of BMW AG 5] In the case of foreign affiliated companies, based on financial statements drawn up in accordance with uniform IAS accounting policies. ShareholdersÂ' equity and net result are translated at the closing...

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    ... Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group 10 year comparison 2002 IAS 2001 IAS Revenues Change Vehicle production...

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    ... 144.1 19,784 4,308 42,684 694 337 357 142 30.3 12.0 4,068 7,660 209.5 15,489 3,193 48,232 425 162 263 116 3] includes deliveries of C1 from 2000 4] from 1998 figures exclude suspended contracts of employment, employees in the vacation phase of pre-retirement, low-income earners 113

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    ... Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index BMW Group Locations. With 23 production and assembly plants, 27 sales subsidiaries and a research and development network the BMW Group is present in the worldwide markets...

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    ...BMW Technik, Munich BMW Car IT, Munich Designworks, Newbury Park, USA BMW Motoren, Steyr, Austria Production Berlin plant Dingolfing plant Eisenach plant Goodwood plant, GB Hams Hall plant, GB Landshut plant Munich plant Oxford plant, GB Regensburg plant Rosslyn plant, South Africa Spartanburg plant...

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    ... German stock corporations (by stock market capitalisation). [Deferred taxes] Accounting for deferred taxes is a method of allocating tax expense/benefit to the appropriate accounting period. [Derivatives] Financial products, whose measurement is derived principally from market price, market price...

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    ... supports the BMW GroupÂ's objective to grow profitably. All of the companyÂ's E-business activities are driven from the perspective of daily business, helping to optimise and improve processes. The primary focus is not on cost reduction, but rather on benefits, flexibility, quality and customer...

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    ... held, investments in other companies, long-term marketable securities, other loans. [Online ordering] Online ordering helps to significantly speed up change management in handling customer orders, expedites the order processing and enables, at the time of order, confirmation that the vehicle can be...

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    ... a new market segment. [Steer-by-wire] A fully-fledged steer-by-wire system dispenses with any mechanical link between the steering wheel and the vehicleÂ's wheels and sends steering signals via data lines. The BMW Active Steering system features a steering column which connects the steering wheel...

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    ... BMW Group in figures Report of the Supervisory Board Supervisory Board Board of Management Group Management Report BMW Stock Corporate Governance Group Financial Statements BMW AG Financial Statements BMW Group Annual Comparison BMW Group Locations Glossary Index Index [A] Accounting principles...

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    ... (VOC) per unit produced 25 Consumption of BMW Group car fleet in Germany in % 25 Process effluent per manufactured car 25 [Stock] Development of BMW stock compared to stock exchange indices 31 Development in value of a BMW stock investment 33 This version of the Annual Report is a translation...

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    Driving ahead.

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    Contents Preface by the Chairman of the Board of Management Driving ahead Thinking the new Go where the markets are Develop new segments Create the extraordinary Purely premium Assuming responsibility New products BMW brand MINI brand Rolls-Royce brand 04 08 10 18 28 34 40 44 50 52 60 62

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    ... drive for improvement. From this aspiration flows the energy that makes the company successful. The commanding freedom to take courageous decisions and to beat new paths, certain that they are the way to the goal. Paths that open up leads and secure profitable growth. Long term. Driving ahead. 3

  • Page 126
    ... first time in company history, we delivered more than a million BMW and MINI brand cars in a single year. At the same time, we sold more BMW motorcycles than ever before, and in the Financial Services segment as well, our positive business development has continued. In addition, 2002 was a year in...

  • Page 127
    ... long-term growth with our established model ranges in existing markets, while at the same time expanding into new markets and with new models. Our current product and market offensive will propel our company into a new dimension: deliveries by the BMW Group are to rise to 1.4 million automobiles by...

  • Page 128
    ...resources to further our corporate strategy and to advance the BMW GroupÂ's product and market offensive. In doing so, we remain committed to managing and financing our growth by ourselves. We will again be investing a good part of our profits into our future, just as we did in 2002. By doing so, we...

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    national automobile and motorcycle markets. BMW, MINI and, more recently, Rolls-Royce provide us with brands to build on which could not be stronger. These brands will enable us to go on writing the BMW GroupÂ's successful history and to prove this companyÂ's strength once again in 2003. It is a ...

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    8

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    Driving ahead. Again and again. Think ahead. Anticipate. What are the concepts for tomorrow? In technology, business and does the customer want, though he may not yet know it? Discover possibilities. Accelerate. society. What Generate visions. Challenge the conventional.

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    Find new ways.

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    .... How much future is feasible? What does research tell us? What are societyÂ's needs? The technical options? Assume responsibility. For humankind and the environment. Explore opportunities. Above all: remain independent. Pursue a distinctive course. Power ahead. Make decisions. What are the goals?

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    Cost. Benefit. Efficiency. Petrol in the veins, numbers in mind. And always: a passion. courage. For mobility. Technology and design. Show But bear in mind the laws of physics. Power ahead. Implement. Combine abilities. Motivate. The company: a networked system, working towards a goal. Improve. ...

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    9

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    ... for innovation at the BMW Group. Technology needs to serve the individual. This is the all-embracing theme for all efforts in research and development. Witness the mobility concept ConnectedDrive: innovative telematics and on-line services as well as driver assistance systems provide more safety...

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    .... Leave behind the conventional to learn to think differently. To take new paths. To network knowledge. Find innovations. And translate them into advantage. Technology for a new understanding between driver, vehicle and environment. For more safety. Driving pleasure. And less consumption. Act...

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    11

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    ... speed Â- the onboard navigation system, for instance, operating on the basis of a navigation DVD containing exact information on road topography. Radar sensors also deliver important data. If a slow-moving vehicle is detected ahead, counterpressure from the accelerator pedal reminds the driver...

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    ...becomes a real danger. 25 years of BMW Driver Training. The BMW Group has been offering professional Driver Training for car drivers and motorcycle riders for as long as 25 years. In 2002 alone, more than 15,000 participants took part in over 1,100 BMW Driver Trainings, where they were taught how to...

  • Page 142
    ...BMW Group has developed Â"Floating Car DataÂ" (FCD), a vehiclebased data capture system. Effective autumn of 2001, this system is available in all BMW automobiles equipped with the BMW ASSIST telematics service. This turns each of these vehicles into a mobile sensor, transmitting traffic information...

  • Page 143
    ... introduced in series production vehicles bearing the BMW brand. Two orientable headlights can swivel up to 15 degrees to the right or left and so illuminate the road ahead more effectively. The algorithms developed by the BMW Group steer the light beam as the driver turns the wheel, adjusting for...

  • Page 144
    ... new solutions. 24 per cent shorter journey times are feasible. In Germany alone, congestion entails an annual economic cost of euro 100 billion. The BMW Group has been researching innovations to optimise existing traffic systems for more than a decade now. Latest highlights include ACCEZZ (Adaptive...

  • Page 145
    ... end of 2002, further improves exhaust emissions while reducing fuel consumption at the same time. Integral ABS Â- on or off. As early as the late eighties, BMW was breaking new ground with the first series production anti-lock braking system (ABS) for motorcycles. Continuous development eventually...

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    18

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    .... Going for growth means following the markets. Having clear goals. Watching the world closely. Probing. Analysing. Being courageous. Going where the opportunities are. Putting down roots. And linking each site into a global strategy. Witness Spartanburg, USA. Power ahead. Worldwide.

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    ... it constituted a key motivating factor for the employees in South Carolina. One of the challenges in setting up the plant was to export processes and corporate culture from the BMW Group to the USA and to adapt them. That has been a success: consider, for example, the fact that the BMW Z4 reached...

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    Go where the markets are 20

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    ... programmes as well as a frequent exchange of employees between South Carolina and the other sites in the worldwide production network of the BMW Group. This has steadily enabled the BMW plant at Spartanburg to recruit its specialists and managers on the local labour market: ten years ago, only 40...

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    Go where the markets are [1] 22

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    ... has been a change in the way education is valued in this state. Without the new companies that have come here, this journey would have been much more difficult.Â" Dr. Douglas P . Woodward, University of South Carolina, Columbia, SC. [ 2 ] Â"South Carolina is in a much better shape today relative to...

  • Page 154
    Go where the markets are [3] David Swenson, Greer Development Corporation, Spartanburg County, SC. [3] Â"Our cityÂ's population has expanded by 63 per cent since 1990. The community has experienced improvements in the education system, healthcare facilities, cultural and recreational amenities, ...

  • Page 155
    ... children and is supported by BMW. Having the KidsÂ' Planet and BMWÂ's driverÂ's training course attracts a large number of folks to our city. Our motto at the Police Department is Â'policing is a partnershipÂ', and BMW has proven to be one of our best partners. The BMW plant has been a tremendous...

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    Go where the markets are 26

  • Page 157
    ... for Rolls-Royce motor cars have just been completed. In Oxford, capacity for MINI production has been significantly increased. In the other plants of the BMW Group as well, extensive investments are being undertaken year after year, to expand and further develop production. The fact that the plants...

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    28

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    .... And do not know yet. Develop strategies. Then make the right decision, strike the right tone. Position a brand clearly. Capture a market. Small size. Great enthusiasm. 100 per cent premium. MINI Â- a strong brand. An exceptional story. Tremendous success. All over the world. Power ahead.

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    29

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    ... 2002: MINI Cooper and MINI Cooper S return to America. 35 years after the last Mini was sold in the USA, the MINI brand experiences a unique success story. Under the motto Â"LetÂ's motorÂ", the MINI hitches a ride into major cities on the back of big SUVs (sports utility vehicles) or vans. Â"Monday...

  • Page 163
    ... about vehicle details. Unusual marketing activities underscore what the MINI is about: MINI = fresh and unconventional. Mission MINI Â- fiction becomes reality. June 2002: Mission MINI begins. Best-selling author Val McDermid writes a short detective novel with an open ending. The story: in...

  • Page 164
    ... and North America. To meet the large demand for the MINI models, capacity at the Oxford plant has been continuously expanded. The BMW Group has invested some £230 million, or around euro 340 million there. During 2002 production capacity was increased step by step, making use of flexible working...

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    33

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    34

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    ... on its for perfection. People in search of the unique, of perfection and presence. Rolls-Royce. Almost 100 years of automobile manufacturing in peerless coherence. Created by specialists. To a standard so high only the own time in its drive best of ...

  • Page 168

  • Page 169
    ...elegance, its perfect proportions and by a level of craftsmanship that is unmatched. These are the true roots of Rolls-Royce. Charles Rolls and Sir Henry Royce did not just found a motor car company in 1904: they created a philosophy which will accept only the best solutions an era has to offer. 35

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    ... plant and to whom it is an honour to take part in the creation of such a vehicle, and whose passion it is to build the best motor car in the world. It takes specialists steeped in a time-honoured tradition that makes them past masters in the finest work in leather and wood. It takes a quality...

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    ... combined with the latest production technology, a lot of passion and a great deal of time. The result of all this is a motor car in which the most sought-after attributes of the past meld with the most innovative solutions of today: Rolls-Royce. And for the BMW Group a commitment to this legend...

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    39

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    40

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    Driving ahead. Premium. Nothing else. A clear strategy. Without exceptions. Understand the power of brands. And put it to use. Do what one does best. Less risk. More opportunities. Profitable growth. Longterm. Power ahead.

  • Page 176

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    41

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    ... the current product and market offensive will propel the BMW Group and its brands into a new dimension. The aim is to provide premium vehicles geared to those market segments where the company can best play to its strengths and where an aboveaverage potential for profits and growth potential is...

  • Page 179
    ... Activity Vehicle and the new 1 Series, which considerably broaden the product portfolio of the BMW brand and let the BMW Group expand into new segments, Â- in the MINI brand, with which the BMW Group is developing new market segments and tapping new customer groups, Â- in the Rolls-Royce brand...

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    44

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    Driving ahead. Assume responsibility. Be successful. Not opposites. Quite the opposite. Come up with answers. For company and employees, for the environment and society. The BMW Group takes a responsibility. Learns. Researches. Becomes involved. Starts dialogue. Driving ahead. Today. For ...

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    ... in this field? Answers to these questions were given at the United NationsÂ' Johannesburg Summit 2002. The goal is not new: it is to ensure for the long term the economic success and growth in value of the BMW Group. The companyÂ's economic efficiency, after all, is a prerequisite for social and...

  • Page 184
    ... for the use of liquid hydrogen as an energy source for combustion engines in automobiles. Solving important questions relating to the future will take more than the networked thought and work processes already in place at the BMW Group. It will require creating Clean Production: Powder-based...

  • Page 185
    ... of the Earth also sought a critical dialogue with the BMW Group. The BMW Group used the summit to add new building blocks to its involvement in sustainability. In Johannesburg the company endowed a professorship in sustainability at South AfricaÂ's famous University of the Witwatersrand. The aim of...

  • Page 186
    ... managing events. In South Africa, where the BMW Group has already been economically active for 30 years, the company is also taking an active part in the war against HIV/AIDS. Having guaranteed free counselling and medical care for all employees and their families for some time now, the BMW Group...

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    BMW CleanEnergy: Driving into the future with regenerative-energy-based hydrogen Free medical consultation and care for all employees Â- in the war against HIV/AIDS as well 49

  • Page 188
    ...-cylinder motor expand the 7 Series engine offerings. BMW motorcycle product range expanded with the models K 1200 GT, R 1200 CL, R 850 R and the R 1100 S BoxerCup Replika. MINI brand. High-performance model MINI Cooper S launched. Rolls-Royce brand. Newly introduced Rolls-Royce Phantom marks BMW...

  • Page 189
    ...BMW 3 Series Limousine BMW 3 Series Coupé BMW 3 Series Cabrio BMW 3 Series Touring MINI One BMW Z4 BMW M3 Coupé BMW 5 Series Touring BMW 5 Series Limousine BMW X5 MINI Cooper Rolls-Royce Phantom BMW M5 BMW 7 Series Limousine BMW Z8 BMW C1 BMW F 650 CS MINI Cooper S BMW Group 2002...

  • Page 190
    ... bhp) Brand MINI 5 Series Limousine 520i 2.171...Motorcycles Scarver F 650 CS 652 cc, 37 kw (50 bhp) or 25 kw (34 bhp) MINI One 1.598 cc, 66 kw (90 bhp) MINI Cooper 1.598 cc, 85 kw (115 bhp) MINI Cooper S 1.598 cc, 120 kw (163 bhp) BMW Group 2002 Brand Rolls-Royce Rolls-Royce...wheel drive as an option

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    51

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    ... a wider grab handle on the luggage compartment lid, new rear lights in LED technology as well as a new bumper cover. In the US version Â- as already with the BMW 7 Series Â- the LED rear lights are supplied with the dynamic Brake Force Display. This brake light changes the area and strength of...

  • Page 193
    ... and yaw rates to recognise in advance where the driver will steer the vehicle. Thus, this optional light technology lights up the bend in advance for the driver. 6-speed manual gearbox and SMG. The BMW 330Ci Cabrio is now equipped with a close-ratio 6-speed manual gearbox as standard, which is also...

  • Page 194
    ... when driving straight ahead without any movement of the steering wheel, since no energy is required. The new folding roof saves space and thus makes a larger luggage compartment possible. The frontmost part of the roof takes on the function of a cover over the soft top. The rear window is made of...

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    55

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    ...-cylinder engine worldwide to feature direct fuel injection. Its four-valve technology and fully variable valve control VALVETRONIC lower fuel consumption to only 13.4 litres in the EU cycle, despite high performance data. The top speed is limited to 250 km/h. A powerful braking unit guarantees...

  • Page 197
    ... choose from: a 3-litre, six-cylinder power unit with 160 kW/218 bhp and a 4-litre eight-cylinder power unit with 190 kW/258 bhp. For the first time in the world in a diesel vehicle, performance is delivered through a six-speed automatic transmission. Both models are equipped with the latest common...

  • Page 198
    ... of the front end, and to offer good protection against splashwater, it extends down the side, close to the wheel rim. Two hard shell cases and a removable top case at the rear form one harmonious whole with the vehicle. The R 1200 CL is powered by the tried and tested boxer engine with 1,179...

  • Page 199
    ... version of BMWÂ's Integral ABS is available as an option. The cylinder head covers and the engine spoiler have both been directly derived from the racing machine. They are made of carbon-fibre reinforced plastic Â- a material that is also used in Formula 1 because of its particular lightness and...

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    MINI Brand 60

  • Page 201
    ...with high product substance. The attractive body of the MINI holds the latest in vehicle technology. For example the electronic architecture with data bus, or the multi-arm rear axle, unique in this segment of the vehicle market. Together with the very direct electrohydraulic power steering, the low...

  • Page 202
    ...doors open to the rear and can even be closed elegantly from the inside with the press of a button. The famed radiator figure Â"Spirit of EcstasyÂ" can be retracted into the radiator grille. Synchronised wheel hubs ensure that the Rolls-Royce badges are always in an upright position, whether the car...

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    ....com The BMW Group on the Internet Further information on the BMW Group is available at the internet address www.bmwgroup.com. The investor relations section may be reached directly at www.bmwgroup.com/ir. Information on the BMW Group brands is available at www.bmw.com, www.mini.com and www.rolls...

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    Financial Calendar Interim Report to 31 March 2003 Annual General Meeting Interim Report to 30 June 2003 Interim Report to 30 September 2003 Letter to Shareholders 8 May 2003 15 May 2003 7 August 2003 6 November 2003 January 2004

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    Published by Bayerische Motoren Werke Aktiengesellschaft Petuelring 130 D-80788 Munich Telephone +49 (0) 89-3 82-0