ANNUAL REPORT 2013 Contents 3 BMW GROUP IN FIGURES 6 REPORT OF THE SUPERVISORY BOARD 14 STATEMENT OF THE CHAIRMAN OF THE BOARD OF MANAGEMENT 18 COMBINED MANAGEMENT REPORT 18 General Information on the BMW Group 18 Business Model 20 Management System 23 Research and Development 24 Report on Economic Position 24 Overall Assessment by Management 24 General and Sector-specific Environment 27 Financial and Non-financial Performance Indicators 29 Review of Operations 47 Results of Operations, Financial Position and Net Assets 62 Events after the End of the Reporting Period 63 Report on Outlook, Risks and Opportunities 63 Outlook 68 Risks Report 77 Report on Opportunities 81 Internal Control System and Risk Management System Relevant for the Consolidated Financial Reporting Process 82 Disclosures Relevant forTakeovers 85 BMW Stock and Capital Market in 2013 88 GROUP FINANCIAL STATEMENTS 88 Income Statements for Group and Segments 88 Statement of Comprehensive Income for Group 90 Balance Sheets for Group and Segments 92 Cash Flow Statements for Group and Segments 94 Group Statement of Changes in Equity 96 Notes to the Group Financial Statements 96 Accounting Principles and Policies 114 Notes to the Income Statement 121 Notes to the Statement of Comprehensive Income 122 Notes to the Balance Sheet 145 Other Disclosures 161 Segment Information 166 STATEMENT ON CORPORATE GOVERNANCE (§ 289 a HGB) (Part of the Combined Management Report) 166 Information on the Company’s Governing Constitution 167 Declaration of the Board of Management and of the Supervisory Board pursuant to § 161 AktG 168 Members of the Board of Management 169 Members of the Supervisory Board 172 Composition and Work Procedures of the Board of Management of BMW AG and its Committees 174 Composition and Work Procedures of the Supervisory Board of BMW AG and its Committees 179 Information on Corporate Governance Practices Applied beyond Mandatory Requirements 180 Compliance in the BMW Group 185 Compensation Report 194 Responsibility Statement by the Company’s Legal Representatives 195 Auditor’s Report 196 OTHER INFORMATION 196 BMW Group Ten-year Comparison 198 BMW Group Locations 200 Glossary 202 Index 204 Financial Calendar 205 Contacts 3 BMW Group in figures 2009 2010 2011 2012 2013 %Change in Automotive segment Sales volume BMW 1 1,068,770 1,224,280 1,380,384 1,540,085 1,655,138 7.5 MINI 216,538 234,175 285,060 301,526 305,030 1.2 Rolls-Royce 1,002 2,711 3,538 3,575 3,630 1.5 Total 1,286,310 1,461,166 1,668,982 1,845,186 1,963,798 6.4 Production volume BMW 2 1,043,829 1,236,989 1,440,315 1,547,057 1,699,835 9.9 MINI 213,670 241,043 294,120 311,490 303,177 – 2.7 Rolls-Royce 918 3,221 3,725 3,279 3,354 2.3 Total 1,258,417 1,481,253 1,738,160 1,861,826 2,006,366 7.8 Motorcycles segment Sales volume3 BMW 87,306 98,047 104,286 106,358 115,215 8.3 Production volume4 BMW 82,631 99,236 110,360 113,811 110,127 – 3.2 Financial Services segment New contracts with retail customers 1,015,833 1,083,154 1,196,610 1,341,296 1,471,385 9.7 Workforce at end of year 5 BMW Group 96,230 95,453 100,306 105,876 110,351 4.2 1 Including automobiles from the joint venture BMW Brilliance (2009: 43,702 units, 2010: 53,701 units, 2011: 94,400 units, 2012: 141,165 units, 2013: 198,542 units). 2 Including automobiles from the joint venture BMW Brilliance (2009: 35,952 units, 2010: 55,588 units, 2011: 98,241 units, 2012: 150,052 units, 2013: 214,920 units). 3 Excluding Husqvarna, sales volume up to 2013: 59,776 units. 4 Excluding Husqvarna, production up to 2013: 59,426 units. 5 Figures exclude suspended contracts of employment, employees in the non-work phases of pre-retirement part-time arrangements and low income earners. 4 BMW Group in figures 2009 2010 2011 2012 2013 %Change in Financial figures in € million Capital expenditure 3,471 3,263 3,692 5,240 6,687 27.6 Depreciation and amortisation 3,600 3,682 3,646 3,541 3,739 5.6 Operating cash flow 1 4,921 8,149 8,110 9,167 9,450 3.1 Revenues 50,681 60,477 68,821 76,848 76,058 – 1.0 Automotive 43,737 54,137 63,229 70,208 70,629 0.6 Motorcycles 1,069 1,304 1,436 1,490 1,504 0.9 Financial Services 15,798 16,617 17,510 19,550 19,874 1.7 Other Entities 3 4 5 5 6 20.0 Eliminations – 9,926 – 11,585 – 13,359 – 14,405 – 15,955 – 10.8 Profit before financial result (EBIT) 289 5,111 8,018 8,2752 7,986 – 3.5 Automotive – 265 4,355 7,477 7,5992 6,657 – 12.4 Motorcycles 19 71 45 9 79 – Financial Services 355 1,201 1,763 1,558 1,643 5.5 Other Entities 30 – 41 – 19 58 44 – 24.1 Eliminations 150 – 475 – 1,248 – 949 – 437 54.0 Profit before tax 413 4,853 7,383 7,8032 7,913 1.4 Automotive – 588 3,887 6,823 7,1702 6,561 – 8.5 Motorcycles 11 65 41 6 76 – Financial Services 365 1,214 1,790 1,561 1,639 5.0 Other Entities 51 45 – 168 32 164 – Eliminations 574 – 358 – 1,103 – 937 – 527 43.8 Income taxes – 203 – 1,610 – 2,476 – 2,6922 – 2,573 4.4 Net profit 210 3,243 4,907 5,1112 5,340 4.5 Earnings per share3 in € 0.31 / 0.33 4.93 / 4.95 7.45 / 7.47 7.752 / 7.772 08.1 / 8.12 4.5 / 4.5 1 Cash inflow from operating activities of the Automotive segment. 2 Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7. 3 Common / preferred stock. In computing earnings per share of preferred stock, earnings to cover the additional dividend of € 0.02 per share of pr eferred stock are spread over the quarters of the corresponding financial year. 5 BMW Group in figures Sales volume of automobiles* Revenues in thousand units in € billion 1,900 75 1,800 70 1,700 65 1,600 60 1,500 55 1,400 50 1,300 45 09 10 11 12 13 09 10 11 12 13 1,286.3 1,461.2 1,669.0 1,845.2 1,963.8 50.7 60.5 68.8 76.8 76.1 * Includes cars manufactured by the BMW Brilliance joint venture. Profit before financial result Profit before tax in € million in € million 8,400 8,400 7,200 7,200 6,000 6,000 4,800 4,800 3,600 3,600 2,400 2,400 1,200 1,200 09 10 11 12 13 09 10 11 12 13 289 5,111 8,018 8,275* 7,986 413 4,853 7,383 7,803* 7,913 * Prior year figures have been adjusted in accordance with the revised version of IAS 19, * Prior year figures have been adjusted in accordance with the revised version of IAS 19, see note 7. see note 7. 6 Joachim Milberg Chairman of the Supervisory Board 7 REPO RT OF THE SUPERVISORY BOARD Dear Shareholders and Shareholder Representatives, The BMW Group has again fared extremely well over the past financial year. Throughout the twelve- month period, we diligently supervised the Board of Management’s running of the business and, in joint consultations, supported it in an advisory capacity. Our work within the Supervisory Board and in con- junction with the Board of Management was conducted openly, constructively and in a spirit of trust. Main emphases of the Supervisory Board’s monitoring and advisory activities In a total of five meet- ings, we deliberated on the BMW Group’s current situation. Other matters at the forefront of our consulta- tions were corporate strategy and planning for the BMW Group as a whole, the strategy being pursued for the Financial Services segment in particular, risk management and levels of risk provision. Decisions were also taken with respect to the composition and compensation of the Board of Management and an examination of corporate governance within the enterprise was carried out. In 2013 we paid particular attention to the progress being made in the field of electromobility and to the efforts expended and the challenges arising for the BMW Group regarding the necessity to continue to reduce emissions. We carefully monitored the performance of the BMW Group and were regularly kept informed of sales performance, workforce developments and other significant matters, both at scheduled meetings and at other times as the need arose. Moreover, the Chairman of the Board of Management, Dr Reithofer, informed me directly about major business transactions and projects. In addition to scheduled meetings, Dr Kley, the Chairman of the Supervisory Board’s Audit Committee, and Dr Eichiner, the Board of Management member responsible for Finance and Financial Reporting, remained in direct contact at other times. In its regular reports on the financial condition of the Group, the Board of Management presented its assessment of economic developments in important regions of the world, commented on sales volume and competitive issues within the Automotive and Motorcycles segments and highlighted fluctuations in the size of the workforce. We were also kept informed of the performance of the Financial Services segment, including new retail business volumes, the size of the contract portfolio with dealers and retail customers, total business volume and the development of vehicle residual values on major markets.