BMW 2015 Annual Report Download - page 140

140
Plan assets in Germany, the UK and other countries comprised the following:
Employer contributions to plan assets are expected to
amount to € 692 million in the coming year. Plan assets
of the BMW Group include own transferable financial
instruments amounting to € 6 million (2014: € 5 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 gen-
erating
the higher rates of return necessary to cover
risks (such as changes in mortality tables) not taken into
account in the actuarial assumptions applied. The
financial risk of longer-than-assumed life expectancy is
hedged for the majority of participants of 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 re-
duced
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 internal reporting procedures and for in-
ternal 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 external con-
sultants, with the aim of ensuring that investments are
Components of plan assets
Germany United Kingdom Other To t a l
in € million 2015 2014 2015 2014 2015 2014 2015 2014
Equity instruments 1,807 1,865 1,340 1,230 224 203 3,371 3,298
Debt instruments 4,834 4,509 4,623 4,562 420 379 9,877 9,450
thereof investment grade 3,525 3,271 4,437 4,331 383 334 8,345 7,936
thereof non-investment grade 1,309 1,238 186 231 37 45 1,532 1,514
Real estate – – – 3 20 – 20 3
Money market funds – – 255 100 19 12 274 112
Absolute return funds – – 33 26 – – 33 26
Other – – – 5 – – – 5
Total with quoted market price 6,641 6,374 6,251 5,926 683 594 13,575 12,894
Debt instruments 189 183 207 298 3 12 399 493
thereof investment grade 189 183 2 111 1 12 192 306
thereof non-investment grade – – 205 187 2 – 207 187
Real estate 172 107 783 683 105 105 1,060 895
Cash and cash equivalents 17 11 24 9 – – 41 20
Absolute return funds 554 424 705 557 34 – 1,293 981
Other 282 224 183 261 97 93 562 578
Total without quoted market price 1,214 949 1,902 1,808 239 210 3,355 2,967
31 December 7,855 7,323 8,153 7,734 922 804 16,930 15,861
90 GROUP FINANCIAL STATEMENTS
90 Income Statements
90 Statement of
Comprehensive Income
92 Balance Sheets
94 Cash Flow Statements
96 Group Statement of Changes in
Equity
98 Notes
98 Accounting Principles and
Policies
113 Notes to the Income Statement
121 Notes to the Statement
of Comprehensive Income
122
Notes to the Balance Sheet
147 Other Disclosures
163 Segment Information