BMW 2013 Annual Report Download - page 139

139 GROUP FINANCIAL STATEMENTS
Plan assets in Germany, the UK and other countries comprised the following:
Employer contributions to plan assets are expected to
amount to € 415 million in the coming year. Plan assets
of the BMW Group include own transferable financial
instruments amounting to € 4 million (2012: € 2 million).
The BMW Group is exposed to risks arising from defined
benefit plans on the one hand and defined contribution
plans with a minimum return guarantee on the other.
Pension obligations to employees under such plans are
measured on the basis of actuarial reports.
Future pen-
sion payments are discounted by reference
to market
yields on high quality corporate bonds. These yields are
subject to market fluctuation and influence the level
of pension obligations. Furthermore, changes in other
actuarial parameters, such as expected rates of inflation,
also have an impact on pension obligations.
A substantial portion of plan assets is invested in debt
instruments in order to minimise the effect of capital
market fluctuations on the net liability. The asset port-
folio also includes equity instruments, property and
alternative investments – asset classes capable of gener-
ating the higher rates of return necessary to cover risks
(such as changes in mortality tables) not taken into ac-
count in the actuarial assumptions applied. The finan-
cial
risk of longer-than-assumed life expectancy is
hedged for the BMW Group’s largest pension plan in
the UK by means of a so-called “longevity hedge”.
In order to reduce currency exposures, a substantial
portion of plan assets are either invested in the same
currency as the underlying plan or hedged by means
of
currency derivatives.
Pension fund assets are monitored continuously and
managed from a risk-and-yield perspective. Risk is
reduced by ensuring a broad spread of investments. In
this context, the BMW Group continuously monitors
the degree of coverage of pension plans as well as ad-
herence
to the stipulated investment strategy.
As part of the reporting procedures and for internal
management purposes, financial risks relating to the
pension plans are reported on using a deficit-value-at-
risk approach. The investment strategy is also subjected
to regular review together with investment consultants,
with the aim of ensuring that investments are structured
to coincide with the timing of pension payments and
Components of plan assets
Germany United Kingdom Other Total
in € million 2013 2012 2013 2012 2013 2012* 2013 2012*
Equity instruments 1,718 1,462 1,030 1,055 133 137 2,881 2,654
Debt instruments 4,143 3,905 3,333 3,079 263 251 7,739 7,235
thereof investment grade 2,987 3,030 3,160 2,901 243 231 6,390 6,162
thereof non-investment grade 1,156 875 173 178 20 20 1,349 1,073
Real estate – – 3 3 19 6 22 9
Money market funds 89 65 113 191 43 37 245 293
Absolute return funds – – 21 21 – – 21 21
Other – – 26 19 1 2 27 21
Total with quoted market price 5,950 5,432 4,526 4,368 459 433 10,935 10,233
Debt instruments 177 170 310 423 12 19 499 612
thereof investment grade 177 170 136 383 9 3 322 556
thereof non-investment grade – – 174 40 3 16 177 56
Real estate 99 87 570 550 64 58 733 695
Cash and cash equivalents 1 18 – 3 1 – 2 21
Absolute return funds 361 232 454 369 – – 815 601
Other 161 125 216 69 100 91 477 285
Total without quoted market price 799 632 1,550 1,414 177 168 2,526 2,214
31 December 6,749 6,064 6,076 5,782 636 601 13,461 12,447
* Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7.