BMW 2006 Annual Report Download - page 43

42 Group Management Report
10 Group Management Report
10 A Review of the Financial Year
12 General EconomicEnvironment
15 Review of operations
38 BMW Stock and Bonds
41 Disclosures pursuant to §289 (4)
and §315 (4) HGB
43 Financial Analysis
43 – Internal Management System
44 – Earnings performance
46 – Financial position
48 – Net assets position
50 – Subsequent events report
50 – Value added statement
53 – Key performance figures
54 – Comments on BMW AG
58 Risk Management
62 Outlook
ing the impact of the change of control on the co-
operation arrangements are not allayed during the
subsequent discussion process.
– Under the terms of a contractual agreement with
DaimlerChrysler and General Motors, BMW AG
acquires intellectual property rights in conjunc-
tion with a cooperation for the development of a
hybrid propulsion system. The cooperation can
be terminated with immediate effect by either
party if a change of control occurs with respect to
any other contractual party or an affiliate of an-
other contractual party. Examples of a change of
control are the acquisition of beneficial owner-
ship of securities which confer the majority of
voting power or the acquisition of beneficial own-
ership of securities which confer 20 % of the
voting power provided that within18 months a
majority of the shareholder-elected members of
the Supervisory Board are the nominees of the
new beneficial owner as well as certain merger
transactions and the transfer of all or substantially
all of the assets involved in the performance of
the cooperation agreement.
–BMW AG acts as the guarantor for all of the obli-
gations arising from the joint venture agreement
relating to BMW Brilliance Automotive Ltd. in
China. This agreement grants an extraordinary
right of termination to either joint venture partner
in the event that, either directly or indirectly, more
than 25% of the shares of the other party are ac-
quired by a third party or the other party is merged
with another legal entity. The termination of the
joint venture agreement may result in the sale of
the shares to the other joint venture partner or in
the liquidation of the joint venture entity.
– Regarding the trading of derivative financial instru-
ments, framework agreements are in place with
financial institutions and banks (ISDA Master
Agreements), each of which contain extraordinary
rights of termination, which trigger the immediate
settlement of all current transactions, in the event
that the creditworthiness of the respective con-
tractual party is materially weaker following the di-
rect or indirect acquisition of the beneficial owner-
ship of equity securities having the power to elect
a majority of the Supervisory Board of a contrac-
tual party or any other ownership interest enabling
the acquirer to exercise control of a contractual
party or a merger or transfer of assets.
The BMW Group has not concluded any
compen-
sation agreements with members of the Board of
Management or with employees for situations in-
volving a take-over offer.
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
Incorporation). Resolutions are passed at the Annual
General Meeting by simple majority of shares unless
otherwise explicitly required by binding provisions
of law (§20 of the Articles of Incorporation).
There is no authorised or conditional capital at
the reporting date.
In accordance with the resolution passed at the
Annual General Meeting on 16 May 2006, the Board
of Management is authorised, up to 15 November
2007 and subject to the price limits stipulated in the
resolution, to acquire common and/or non-voting
preferred shares via the stock exchange, up to a
maximum of 10% of the share capital in place at the
date of the resolution.
The Board of Management is also authorised,
without any further resolution by the Annual General
Meeting, to withdraw from circulation the treasury
shares (common and/or non-voting preferred
shares) acquired in accordance with the authorisa-
tion described above.
Furthermore, the Board of Management is
authorised to buy back shares and sell bought-back
shares in situations specified in §71 AktG.
The BMW AGis party to the following significant
agreements which contain special provisions for the
event of a change of control or the acquisition of
control which could arise, for example, from a take-
over offer:
– An agreement, concluded with an international
consortium of banks relating to a syndicated credit
line (which was not being utilised at the balance
sheet date), entitles the lending banks to give ex-
traordinary notice to terminate the credit line
(such that all outstanding amounts, including in-
terest, would fall due immediately) if one or more
parties jointly acquire direct or indirect control of
BMW AG. The term “control” is defined as the
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 produc-
tion of a new family of small (1 to 1.6 litre) petrol-
driven engines entitles each of the cooperation
partners to give extraordinary notification of termi-
nation in the event of a competitor acquiring
control over the other contractual party and if any
concerns of the other contractual party concern-