Bond Volksfinance Intl N.V. 4.125% ( XS1910948675 ) in EUR

Volksfinance Intl N.V.

100 % ▲

Germany

XS1910948675 ( in EUR )

4.125% per year ( payment 1 time a year)

16/11/2038 - Bond has expired

Prospectus brochure of the bond Volkswagen Intl Finance N.V XS1910948675 in EUR 4.125%, expired

Volkswagen International Finance N.V. is a Netherlands-based subsidiary of Volkswagen AG specializing in financing and leasing activities for Volkswagen Group brands worldwide.

The Bond issued by Volksfinance Intl N.V. ( Germany ) , in EUR, with the ISIN code XS1910948675, pays a coupon of 4.125% per year.
The coupons are paid 1 time per year and the Bond maturity is 16/11/2038

13 November 2018

Volkswagen International Finance N.V.
(public limited liability corporation (naamloze vennootschap) under the laws of The Netherlands,
having its corporate domicile in Amsterdam, The Netherlands)
1,250,000,000 Floating Rate Notes due 2024
Issue Price: 100.000 per cent.
750,000,000 2.625 per cent. Notes due 2027
Issue Price: 99.376 per cent.
1,000,000,000 3.250 per cent. Notes due 2030
Issue Price: 99.296 per cent.
1,250,000,000 4.125 per cent. Notes due 2038
Issue Price: 99.558 per cent.
£ 350,000,000 3.375 per cent. Notes due 2026
Issue Price: 99.377 per cent.
£ 450,000,000 4.125 per cent. Notes due 2031
Issue Price: 99.469 per cent.
each unconditionally and irrevocably guaranteed by
Volkswagen Aktiengesellschaft
(a stock corporation (Aktiengesellschaft) incorporated under the laws of the Federal Republic of
Germany, having its corporate domicile in
Wolfsburg, Federal Republic of Germany)
Volkswagen International Finance N.V. (the "Issuer") wil issue on 16 November 2018 (the "Issue
Date") EUR 1,250,000,000 floating rate Notes due 2024 (the "2024 Notes" or "Floating Rate
Notes"), EUR 750,000,000 2.625 per cent. Notes due 2027 (the "2027 Notes"),
EUR 1,000,000,000 3.250 per cent. Notes due 2030 (the "2030 Notes"), EUR 1,250,000,000
4.125 per cent. Notes due 2038 (the "2038 Notes", and together with the 2027 Notes and the
2030 Notes, the "Euro Notes"), GBP 350,000,000 3.375 per cent. Notes due 2026 (the "2026
Notes") and GBP 450,000,000 4.125 per cent. Notes due 2031 (the "2031 Notes", and together
with the 2026 Notes, the "Sterling Notes", and together with the Euro Notes, the "Fixed Rate
Notes" and, together with the Floating Rate Notes, the "Notes") under the unconditional and
irrevocable guarantee (the "Guarantee") of Volkswagen Aktiengesellschaft (the "Guarantor" or
"Volkswagen AG"). The 2024 Notes wil be redeemed at par on 16 November 2024, the 2027
Notes wil be redeemed at par on 16 November 2027, the 2030 Notes wil be redeemed at par on
18 November 2030, the 2038 Notes will be redeemed at par on 16 November 2038, the 2026
Notes wil be redeemed at par on 16 November 2026 and the 2031 Notes wil be redeemed at
par on 17 November 2031. The 2024 Notes will bear interest from and including the Issue Date
to, but excluding, 16 November 2024 at a floating interest rate payable quarterly in arrears on 16
February, 16 May, 16 August and 16 November in each year, commencing on 16 February 2019.
The 2027 Notes wil bear interest from and including the Issue Date to, but excluding, 16
November 2027 at a rate of 2.625 per cent. per annum, payable annual y in arrears on 16
November in each year, commencing on 16 November 2019. The 2030 Notes will bear interest
from and including the Issue Date to, but excluding, 18 November 2030 at a rate of 3.250 per
cent. per annum, payable annual y in arrears on 18 November in each year, commencing on 18

November 2019 (long first coupon). The 2038 Notes wil bear interest from and including the Issue
Date to, but excluding, 16 November 2038 at a rate of 4.125 per cent. per annum, payable
annually in arrears on 16 November in each year, commencing on 16 November, 2019. The 2026
Notes will bear interest from and including the Issue Date to, but excluding, 16 November 2026
at a rate of 3.375 per cent. per annum, payable annually in arrears on 16 November in each year,
commencing on 16 November 2019. The 2031 Notes will bear interest from and including the
Issue Date to, but excluding, 17 November 2031 at a rate of 4.125 per cent. per annum, payable
annually in arrears on 17 November in each year, commencing on 17 November 2019 (long first
coupon).
This prospectus (the "Prospectus") constitutes a prospectus within the meaning of Article 5.3 of
the Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 as
amended from time to time (the "Prospectus Directive"). This Prospectus will be published in
electronic form together with all documents incorporated by reference on the website of the
Luxembourg Stock Exchange (www.bourse.lu). This Prospectus has been approved by the
Commission de Surveil ance du Secteur Financier of the Grand Duchy of Luxembourg (the
"CSSF") in its capacity as competent authority under the Luxembourg law relating to prospectuses
for securities, as amended (Loi du 10 juil et 2005 relative aux prospectus pour valeurs mobilières
the "Prospectus Law"), which implements the Prospectus Directive into Luxembourg law.
Application has been made for the Notes to be listed on the official list of the Luxembourg Stock
Exchange and to be admitted to trading on the regulated market of the Luxembourg Stock
Exchange, which is a regulated market for the purposes of Directive 2014/65/EC of the European
Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments, as amended.
The Floating Rate Notes and the Euro Notes are issued in bearer form with a denomination of
100,000 each. The Sterling Notes are issued in bearer form with a denomination of £100,000
each.
Joint Lead Managers
BNP PARIBAS
Deutsche Bank
Goldman Sachs
MUFG
RBC Capital Markets
International

GENERAL INFORMATION
RESPONSIBILITY STATEMENT
Each of Volkswagen International Finance N.V. (the "Issuer" or "VIF") with its corporate domicile
in Amsterdam, The Netherlands, and Volkswagen Aktiengesellschaft (the "Guarantor" or
"Volkswagen AG" and, together with its direct and indirect subsidiaries and joint ventures at the
date of this Prospectus, "Volkswagen" or the "Volkswagen Group") having its corporate
domicile in Wolfsburg, Germany, accepts responsibility for the information contained in and
incorporated by reference into this Prospectus including the English language translations of the
Conditions of Issue and the Guarantee and hereby declares that, having taken all reasonable
care to ensure that such is the case, the information contained in this Prospectus is, to the best
of its knowledge, in accordance with the facts and does not omit anything likely to affect its import.
Each of the Issuer and the Guarantor further confirms that (i) this Prospectus contains all
information with respect to the Issuer as wel as to the Guarantor and their respective subsidiaries
and affiliates and to the Notes which is material in the context of the issue and offering of the
Notes, including al information which, according to the particular nature of the Issuer, the
Guarantor and the Notes is necessary to enable investors and their investment advisers to make
an informed assessment of the assets and liabilities, financial position, profits and losses, and
prospects of the Issuer and the Guarantor and of the rights attached to the Notes; (ii) the
statements contained in this Prospectus relating to the Issuer, the Guarantor and the Notes are
in every material particular true and accurate and not misleading; (i i) there are no other facts in
relation to the Issuer, the Guarantor or the Notes the omission of which would, in the context of
the issue and offering of the Notes, make any statement in the Prospectus misleading in any
material respect; and (iv) reasonable enquiries have been made by the Issuer to ascertain such
facts and to verify the accuracy of all such information and statements.
As per Article 7(7) of the Prospectus Law, the CSSF gives no undertaking as to the economic and
financial soundness of the issue of the Notes and the quality or solvency of the Issuer.
NOTICE
No person is authorised to give any information or to make any representations other than those
contained in this Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorised by or on behalf of the Issuer, the Guarantor or BNP
Paribas, Deutsche Bank AG, London Branch, Goldman Sachs International, MUFG Securities
EMEA plc or RBC Europe Limited (together, the "Joint Lead Managers" or the "Managers").
Neither the delivery of this Prospectus nor any offering or sale of any Notes made hereunder
shal , under any circumstances, create any implication that there has been no change in the affairs
of the Issuer or the Guarantor or any of its affiliates since the date of this Prospectus, or that the
information herein is correct at any time since its date.
This Prospectus contains certain forward-looking statements, in particular statements using the
words "believes", "anticipates", "intends", "expects" or other similar terms. This applies in
particular to statements under the captions "Volkswagen Aktiengesel schaft as Guarantor" and
"Volkswagen International Finance N.V. as Issuer" and statements elsewhere in this Prospectus
relating to, among other things, the future financial performance, potential synergies to be realised
in connection with potential acquisitions, plans and expectations regarding developments in the
business of the Issuer, the Guarantor and the Volkswagen Group. These forward-looking
statements are subject to a number of risks, uncertainties, assumptions and other factors that
may cause the actual results, including the financial position and profitability of the Issuer and the
Guarantor, to be materially different from or worse than those expressed or implied by these
forward-looking statements. Neither the Issuer nor the Guarantor assume any obligation to update
such forward-looking statements and to adapt them to future events or developments.
This Prospectus should be read and understood in conjunction with any supplement hereto and
with any other documents incorporated herein by reference.
To the fullest extent permitted by law, neither the Joint Lead Managers nor any other person
mentioned in this Prospectus, except for the Issuer and the Guarantor, is responsible for the
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information contained in this Prospectus or any other document incorporated herein by reference,
and accordingly, and to the extent permitted by the laws of any relevant jurisdiction, none of these
persons accepts any responsibility for the accuracy and completeness of the information
contained in any of these documents. The Joint Lead Managers have not independently verified
any such information and accept no responsibility for the accuracy thereof.
Each investor contemplating purchasing any Notes should make its own independent
investigation of the financial condition and affairs, and its own appraisal of the creditworthiness of
the Issuer and of the Guarantor. Neither this Prospectus nor any other information supplied in
connection with the Notes should be considered as a recommendation by the Issuer, the
Guarantor or the Joint Lead Managers to a recipient hereof and thereof that such recipient should
purchase any Notes.
This Prospectus does not constitute an offer to sel or a solicitation of an offer to buy any securities
other than the Notes offered hereby and does not constitute an offer to sell or a solicitation of an
offer to buy any Notes offered hereby to any person in any jurisdiction in which it is unlawful to
make any such offer or solicitation to such person.
The offer, sale and delivery of the Notes and the Guarantee and the distribution of this Prospectus
in certain jurisdictions are restricted by law. Persons into whose possession this Prospectus
comes are required by the Issuer, the Guarantor and the Joint Lead Managers to inform
themselves about and to observe any such restrictions. In particular, the Notes and the Guarantee
have not been and wil not be registered under the United States Securities Act of 1933, as
amended (the "Securities Act"). The Notes are subject to U.S. tax law requirements. Subject to
certain limited exceptions, the Notes and the Guarantee may not be offered, sold or delivered
within the United States of America (the "United States") or to U.S. persons. For a further
description of certain restrictions on offerings and sales of the Notes and the Guarantee and
distribution of this Prospectus (or of any part thereof) see "Sel ing Restrictions."
IN CONNECTION WITH THE ISSUE OF THE NOTES, DEUTSCHE BANK AG, LONDON
BRANCH (OR PERSONS ACTING ON ITS BEHALF) MAY OVER-ALLOT NOTES OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE PRICE OF THE NOTES AT A LEVEL
HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, STABILISATION
MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY BEGIN AT ANY TIME
AFTER THE ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE
NOTES AND, IF BEGUN, MAY CEASE AT ANY TIME, BUT IT MUST END NO LATER THAN
THE EARLIER OF 30 CALENDAR DAYS AFTER THE DATE OF THE RECEIPT OF THE
PROCEEDS OF THE ISSUE BY THE ISSUER AND 60 CALENDAR DAYS AFTER THE DATE
OF THE ALLOTMENT OF THE NOTES. SUCH STABILISING SHALL BE IN COMPLIANCE
WITH ALL LAWS, DIRECTIVES, REGULATIONS AND RULES OF ANY RELEVANT
JURISDICTION.
In this Prospectus al references to "", "EUR" or "Euro" are to the currency introduced at the start
of the third stage of the European economic and monetary union, and as defined in Article 2 of
Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the Euro, as amended,
all references to "£", "GBP" or "Pounds Sterling" are to the lawful currency for the time being of
the United Kingdom and Northern Ireland, all references to "U.S.$" or "USD" are to United States
dollars.
MiFID II PRODUCT GOVERNANCE / PROFESSIONAL INVESTORS AND ECPS ONLY
TARGET MARKET
Solely for the purposes of each manufacturer's product approval process, the target market
assessment in respect of the Notes has led to the conclusion that: (i) the target market for the
Notes is eligible counterparties and professional clients only, each as defined in Directive
2014/65/EU (as amended, "MiFID II"); and (ii) al channels for distribution of the Notes to eligible
counterparties and professional clients are appropriate. The targeted investors are expected to
have (1) at least advanced knowledge and/or experience with financial products, (2) in case of
the Fixed Rate Notes the ability to bear losses resulting from interest rate changes and no capital
loss bearing capacity if held to maturity and in case of Floating Rate Notes no capital loss bearing
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capacity if held to maturity, (3) a low risk profile, (4) a return profile preservation, growth and/or
income as investment objective, and (5) a long term investment horizon.
Any person subsequently offering, selling or recommending the Notes (a "distributor") should
take into consideration the manufacturers' target market assessment; however, a distributor
subject to MiFID II is responsible for undertaking its own target market assessment in respect of
the Notes (by either adopting or refining the manufacturers' target market assessment) and
determining appropriate distribution channels.
PRIIPs REGULATION / PROHIBITION OF SALES TO EEA RETAIL INVESTORS
The Notes are not intended to be offered, sold or otherwise made available to and should not be
offered, sold or otherwise made available to any retail investor in the European Economic Area
("EEA"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail
client as defined in point (11) of Article 4(1) of MiFID II; or (i ) a customer within the meaning of
Directive 2002/92/EC ("Insurance Mediation Directive"), where that customer would not qualify
as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key
information document required by Regulation (EU) No 1286/2014 (the "PRIIPs Regulation") for
offering or selling the Notes or otherwise making them available to retail investors in the EEA has
been prepared and therefore offering or selling the Notes or otherwise making them available to
any retail investor in the EEA may be unlawful under the PRIIPS Regulation.
BENCHMARK REGULATION
Interest amounts payable under the Notes may be calculated by reference to EURIBOR, which is
currently provided by the European Money Market Institute ("EMMI"). As at the date of this
Prospectus, EMMI does not appear on the register of administrators and benchmarks established
and maintained by the European Securities and Markets Authority pursuant to Article 36 of
Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial
contracts or to measure the performance of investment funds (the "Benchmark Regulation"). As
far as the Issuer is aware, the transitional provisions of Article 51 of the Benchmark Regulation
apply, such that EMMI is not currently required to obtain authorization or registration (or, if located
outside the European Union, recognition, endorsement or equivalence).
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Table of Contents

Page
1.
RISK FACTORS ................................................................................................................ 1
2.
DESCRIPTION OF THE ISSUER ................................................................................... 38
3.
DESCRIPTION OF THE GUARANTOR ......................................................................... 43
4.
CONDITIONS OF ISSUE FOR THE FLOATING RATE NOTES (ENGLISH LANGUAGE
VERSION) ....................................................................................................................... 87
5.
CONDITIONS OF ISSUE FOR THE EURO NOTES (ENGLISH LANGUAGE VERSION)
...................................................................................................................................... 101
6.
CONDITIONS OF ISSUE FOR THE STERLING NOTES (English language version) 111
7.
EMISSIONSBEDINGUNGEN DER INHABERSCHULDVERSCHREIBUNGEN BEI
VARIABLER VERZINSUNG (DEUTSCHE FASSUNG) .............................................. 121
8.
EMISSIONSBEDINGUNGEN DER EURO-SCHULDVERSCHREIBUNGEN BEI
FESTER VERZINSUNG (DEUTSCHE FASSUNG) ..................................................... 136
9.
EMISSIONSBEDINGUNGEN DER STERLING-SCHULDVERSCHREIBUNGEN
(DEUTSCHE FASSUNG).............................................................................................. 147
10.
GUARANTEE AND NEGATIVE PLEDGE .................................................................... 158
11.
GARANTIE UND NEGATIVVERPFLICHTUNG ........................................................... 160
12.
DESCRIPTION OF RULES REGARDING RESOLUTIONS OF HOLDERS ................ 163
13.
USE OF PROCEEDS .................................................................................................... 165
14.
TAXATION .................................................................................................................... 166
15.
GENERAL INFORMATION ........................................................................................... 175
16.
SUBSCRIPTION, SALE AND OFFER OF THE NOTES .............................................. 183
17.
SELLING RESTRICTIONS ........................................................................................... 184

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1.
RISK FACTORS
Prospective investors should carefully review the following risk factors in conjunction with
the other information contained in this Prospectus before making an investment in the
Notes. If these risks materialize, individually or together with other circumstances, they
may have a material adverse effect on Volkswagen's business, results of operations and
financial condition. The Issuer and the Guarantor believe that the factors described below
represent the principal risks inherent in investing in the Notes, but the Issuer and the
Guarantor may be unable to fulfill their respective obligations under the Notes and the
Guarantee for reasons other than those described below. Additional risks not currently
known to the Issuer or the Guarantor or that they currently believe are immaterial may also
adversely affect Volkswagen's business, results of operations and financial condition.
Should any of these risks materialize, the trading price of the Notes could decline, the
Issuer and the Guarantor may not be able to fulfill their respective obligations under the
Notes and the Guarantee, and investors could lose all or a part of their investment. The
order in which the individual risks are presented does not provide an indication of the
likelihood of their occurrence nor of the severity or significance of the individual risks.
Each prospective purchaser of Notes must determine, based on its own independent
review and such professional advice as it deems appropriate under the circumstances,
that its acquisition of the Notes is fully consistent with its financial needs, objectives and
condition, complies and is fully consistent with all investment policies, guidelines and
restrictions applicable to it and is a fit, proper and suitable investment for it,
notwithstanding the clear and substantial risks inherent in investing in or holding the
Notes. A prospective purchaser may not rely on the Issuer, the Guarantor, the Managers
or any of their respective affiliates in connection with its determination as to the legality
of its acquisition of the Notes or as to the other matters referred to above.
1.1
Risk Factors regarding Volkswagen Aktiengesellschaft and Volkswagen Group
1.1.1
Government authorities in a number of jurisdictions worldwide have conducted and
are continuing to conduct investigations of Volkswagen regarding findings of
irregularities relating to exhaust emissions from diesel engines in certain
Volkswagen Group vehicles. The results of these and any further investigations,
and related civil and criminal litigation, may have a material adverse effect on
Volkswagen's business, financial position, results of operations, and reputation, as
well as the prices of its securities, including the Notes, and its ability to make
payments under its securities.
On September 18, 2015, the U.S. Environmental Protection Agency ("EPA") publicly announced
in a "Notice of Violation" that irregularities in relation to nitrogen oxide ("NOx") emissions had
been discovered in emissions tests on certain vehicles of Volkswagen Group with type 2.0 l diesel
engines in the United States. In this context, Volkswagen AG announced that noticeable
discrepancies between the figures achieved in testing and in actual road use had been identified
in around eleven mil ion vehicles worldwide with type EA 189 diesel engines (2.0 liter and 3.0 liter
four-cylinder engines). On November 2, 2015, the EPA issued a "Notice of Violation" al eging that
irregularities had also been discovered in the software instal ed in U.S. vehicles with Generation
1 and Generation 2 six-cylinder (V6) 3.0 l diesel engines.
Numerous court and governmental proceedings were subsequently initiated in the United States,
Canada (which has the same NOx emissions limits as the U.S.), Germany and the rest of the
world. Volkswagen was able to end many significant court and governmental proceedings in the
United States by concluding settlement agreements. Outside the United States, Volkswagen also
reached agreements with regard to the implementation of technical measures with numerous
authorities. Alongside the U.S. and Canadian proceedings, the evolution of which is discussed in
more detail below, there are ongoing criminal, administrative, investor and consumer and/or
product-related proceedings in relation to the diesel issue in Germany and other countries.
In the United States, Volkswagen AG, AUDI AG, Volkswagen Group of America, Inc. and certain
affiliates reached settlement agreements with (i) the U.S. Department of Justice ("DoJ") on behalf
of the EPA and the State of California on behalf of the California Air Resources Board ("CARB")
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and the California Attorney General, (i ) the U.S. Federal Trade Commission, and (i i) private
plaintiffs represented by a Plaintiffs' Steering Committee in a multi-district litigation in California.
The settlement agreements resolved certain civil claims made in relation to affected diesel
vehicles in the United States. Depending on the type of diesel engine, under the settlement
agreements Volkswagen provides for, inter alia, free emissions modification of vehicles, buy-
backs/trade-ins or early lease terminations. Volkswagen will also make cash payments to affected
current owners or lessees as well as certain former owners or lessees. Several thousand
consumers have opted out of the settlement agreements, and many of these consumers have
filed civil lawsuits seeking monetary damages for fraud and violations of state consumer
protection acts.
Volkswagen AG has also entered into agreements to resolve U.S. federal criminal liability relating
to the diesel issue and to resolve civil penalties and injunctive relief under the Clean Air Act and
other civil claims relating to the diesel issue. As part of its plea agreement, Volkswagen AG has
pleaded guilty to three felony counts under United States law including conspiracy to commit
fraud, obstruction of justice and using false statements to import cars into the United States and
has been sentenced to three years' probation. DoJ investigations into the conduct of various
individuals who may be responsible for criminal violations relating to the diesel issue remain
ongoing. Volkswagen is required to cooperate with these investigations. In the event of non-
compliance with the terms of the plea agreement, Volkswagen could face further penalties and
prosecution. Volkswagen has also reached separate settlement agreements with the attorneys
general of most U.S. states to resolve existing or potential consumer protection, unfair trade
practices claims, and/or state environmental law claims. Certain states stil have pending
consumer protection, unfair trade practices and state environmental law claims against
Volkswagen.
Investigations by various U.S. regulatory and other government authorities, including in areas
relating to securities, tax and financing, are ongoing. For example, the U.S. Securities and
Exchange Commission (the "SEC") has requested information regarding potential violations of
securities laws in connection with issuances of bonds and asset-backed securities sponsored by
Volkswagen entities, as a result of nondisclosure of certain Volkswagen diesel vehicles'
noncompliance with U.S. emission standards. In January 2017, the SEC informed Volkswagen
that it had issued a formal order of investigation; the investigation is ongoing, and the SEC could
bring an enforcement action against Volkswagen arising out of this investigation.
In Canada, which has the same NOx emissions limits as the United States, civil consumer claims
and regulatory investigations have been initiated for vehicles with 2.0 liter and 3.0 liter diesel
engines. Volkswagen reached settlements in Canada with consumers relating to 2.0 l and 3.0 l
diesel vehicles, in December 2016 and January 2018, respectively, which, inter alia, provide for
cash payments, free vehicle emissions modification, buy-backs/trade-ins and lease terminations,
as applicable. Also, concurrent with the timing of the consumer settlements, Volkswagen Group
Canada agreed with the Commissioner of Competition in Canada to a civil resolution of its
regulatory inquiries into consumer protection issues as to 2.0 l and 3.0 l diesel vehicles. As to
pending matters in Canada, a criminal enforcement related investigation by the federal
environmental regulator is ongoing as to Volkswagen AG and Volkswagen Group Canada.
Additionally, in the case of one provincial environmental regulator in Canada, Volkswagen AG
was charged in September 2017 with a quasi-criminal offense al eging that the company caused
or permitted the operation of model year 2010-2014 Volkswagen and Audi 2.0 l diesel vehicles
that did not comply with prescribed emission standards. This matter has been postponed to a
December 5, 2018 case conference, pending ongoing evidence disclosure. No trial date has been
set in the matter. On September 17, 2018, Volkswagen, Audi and certain affiliates sought leave
to appeal to the Canadian Supreme Court further to a decision by the Quebec provincial court on
January 24, 2018, authorizing an environmental class action seeking to assess whether punitive
damages could be recovered. Moreover, putative class action and joinder lawsuits by consumers
remain pending in certain provincial courts in Canada.
In addition to the 2.0 l and 3.0 l proceedings, since November 2016, Volkswagen has been
responding to information requests from the EPA and CARB related to automatic transmissions
in certain vehicles. In addition, approximately fourteen putative class actions have been filed
against AUDI and certain affiliates al eging that defendants concealed the existence of these
"defeat devices" in Audi brand vehicles with automatic transmissions. On December 22, 2017, a
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mass action on behalf of approximately 75 individual plaintiffs was filed in a California state court
alleging similar claims with respect to the existence of "defeat devices" in Audi brand vehicles
with automatic transmissions. In Canada, two similar putative class actions have been filed in
Ontario and Quebec provincial courts against Audi AG, Volkswagen AG and U.S. and Canadian
affiliates. Both the Canadian actions are in the pre-certification stage.
In addition to the above-described U.S. and Canadian proceedings, criminal
investigations/misdemeanor proceedings have been opened in Germany (for example, by the
public prosecutor's offices in Braunschweig and Munich) and other countries. Some of these
proceedings have been terminated, with the authorities issuing administrative notices imposing
fines on Volkswagen Group companies.
The public prosecutor's office in Braunschweig has also initiated investigations against one
current and two former Volkswagen AG Board of Management members regarding their possible
involvement in potential market manipulation in connection with the diesel issue. In July 2018, the
public prosecutor's office in Braunschweig formally opened a misdemeanor proceeding in this
regard against Volkswagen AG. The Stuttgart public prosecutor's office also confirmed that it is
investigating, among others, the former CEO of Volkswagen AG in his capacity as member of the
management board of Porsche SE, regarding his possible involvement in potential market
manipulation in connection with this same issue. Moreover, the Stuttgart public prosecutor's office
has commenced a criminal investigation into the diesel issue against one board member and two
employees of Porsche AG on suspicion of fraud and illegal advertising. Furthermore, the public
prosecutor's office in Munich II is investigating certain current and former employees in connection
with the al eged anomalies in the NOx emissions of certain Audi vehicles with diesel engines in
the United States and Europe, among others against the former CEO of AUDI AG, who is also a
former member of Volkswagen AG's Board of Management.
In addition, in May 2018, U.S. federal prosecutors unsealed charges in Detroit against, among
others, former Volkswagen CEO Martin Winterkorn, which had been filed under seal in March
2018. Mr. Winterkorn is charged with a conspiracy to defraud the United States, to commit wire
fraud, and to violate the Clean Air Act from at least May 2006 through at least November 2015,
as wel as three counts of wire fraud. Should these investigations result in adverse findings against
the individuals involved, this could have a negative impact on the outcome of other proceedings
against Volkswagen and/or could have other material adverse financial consequences.
There are additional regulatory, criminal and/or civil proceedings in several jurisdictions worldwide,
particularly in South Korea, but also including Andorra, Argentina, Austria, Australia, Belgium,
Brazil, Chile, China, Czech Republic, France, Greece, India, Ireland, Israel, Italy, Luxembourg,
Mexico, the Netherlands, Norway, Poland, Portugal, Romania, Singapore, Slovenia, South Africa,
Spain, Switzerland, Taiwan, Turkey and the United Kingdom. Further claims can be expected.
Customers, consumer associations and/or environmental associations in the affected markets
have filed civil lawsuits against Volkswagen AG, other Volkswagen Group companies and non-
Volkswagen Group importers and dealers involved in the sales process. In addition, it is possible
that importers and dealers could assert claims against Volkswagen, for example through recourse
claims. Further lawsuits are possible. Product related class action, col ective or mass proceedings
against Volkswagen AG and other Volkswagen Group companies are pending in various
countries such as Argentina, Australia, Austria, Belgium, Brazil, China, the Czech Republic,
Germany, Israel, Italy, Mexico, the Netherlands, Poland, Portugal, South Africa, South Korea,
Spain, Switzerland, Taiwan and the United Kingdom. These proceedings are lawsuits aimed
among other things at asserting damages, rescission of the purchase contracts or, as is the case
in the Netherlands, at a declaratory judgment that customers are entitled to damages. Most of
these proceedings with the exception of Brazil, where there has already been a non-binding
judgment in the first instance are in the early stages and it is difficult to assess their prospects
of success, the allegations and the claimants' precise causes of action or to quantify the exposure.
However, should these actions be resolved in favor of the claimants, they could result in significant
civil damages, fines, the imposition of penalties, sanctions, injunctions and other consequences.
Moreover, private and institutional investors from Germany and other jurisdictions (including the
U.S. and Canada) are pursuing claims seeking significant damages against Volkswagen AG for
allegedly omitting or delaying the immediate publication of price sensitive insider information
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relating to the diesel issue and making wrongful financial reporting or false or misleading
statements, as well as, in some cases, alleging tort and prospectus liability claims. The claims
relate to Volkswagen AG's shares and other securities, including bonds, issued by Volkswagen
Group companies, as well as third-party securities.
In Germany, as of the date of this Prospectus, approximately 3,800 actions (including conciliatory
proceedings, legal default actions and registrations of claims pursuant to the German Capital
Markets Model Case Act (Kapitalanleger-Musterverfahrensgesetz -- "KapMuG") have been
served on Volkswagen AG. Currently, the actions still pending have an overall dispute value
totaling around EUR 9 bil ion. Almost the entire volume is currently pending in approximately
1,600 lawsuits at the District Court (Landgericht) in Braunschweig. On August 5, 2016, the
Braunschweig District Court ordered that common questions of law and fact relevant to the
lawsuits pending at the Braunschweig District Court be referred to the Higher Regional Court
(Oberlandesgericht) in Braunschweig for a binding declaratory decision pursuant to the KapMuG,
which establishes a procedure for consolidated adjudication in a higher regional court of legal and
factual questions common to numerous securities actions. In this proceeding, common questions
of law and fact relevant to these actions shal be adjudicated in a consolidated manner by the
Higher Regional Court in Braunschweig. All lawsuits at the Braunschweig District Court wil be
stayed pending resolution of the common issues, unless they can be dismissed for reasons
independent of the common issues that are adjudicated in the model case proceedings. The
resolution of the common issues in the model case proceedings will be binding on al pending
cases in the stayed lawsuits. The model case proceedings oral hearings began in September
2018.
In Canada, a class action filed in Quebec provincial court has been authorized as to claims
relating to Volkswagen AG's shares and American Depositary Receipts ("ADRs"), and a similar
class action was also filed in the Province of Ontario. On August 15, 2018, the Ontario proceeding
was dismissed by the Ontario court. An appeal from this Ontario court ruling was noticed on
September 14, 2018. Further investor claims could be brought.
Volkswagen is working intensively to eliminate the emissions level deviations through technical
improvements and is cooperating with the relevant agencies. A final decision has not been made
regarding all necessary technical remedies for the affected vehicles. In particular, Volkswagen is
continuing discussions with the EPA and the CARB concerning technical solutions for the U.S.
(and, by extension, Canadian) market. The buyback/retrofit program for vehicles in the United
States, which is part of the settlements in North America, is proving to be more technical y
complex and time consuming than anticipated.
Since 2016, AUDI AG has been checking all diesel concepts for possible discrepancies and
retrofit potentials. A systematic review process for all engine and gear variants has been
underway. On July 21, 2017, AUDI AG offered a software-based retrofit program for up to 850,000
vehicles with V6 and V8 TDI engines meeting the Euro 5 and Euro 6 emission standards in Europe
and other markets except the United States and Canada. This will be done in close cooperation
with the authorities, especial y the German Federal Ministry of Transport and the German Federal
Motor Transport Authority (Kraftfahrt-Bundesamt, the "KBA"). The retrofit package comprises
voluntary measures and, to a small extent, measures directed by the authorities; these are
measures which were proposed by AUDI AG itself, reported to and taken up by the KBA and
formally ordered by the latter. The tests for the voluntary measures and those which have been
formally ordered have already reached an advanced stage but have not yet been completed.
Therefore, additional measures cannot be excluded. The measures formally ordered by the KBA
so far involved different models of the AUDI, Volkswagen and Porsche brand with a V6 or V8 TDI
engine meeting the Euro 6 emission standard, for which the KBA categorized certain emission
strategies as an unlawful defeat device. Should additional measures become necessary as a
result of the investigations by AUDI AG and the consultations with the KBA, AUDI AG will
implement these as part of or in addition to the retrofit program. This is the case for a software
update for 83,000 Audi A6 and A7 models worldwide with 3.0 liter TDI Generation 2evo engines
for which measures have been formally ordered by the KBA. Furthermore on April 4, 2018, the
Korean Ministry of Environment has ordered a recal after it has categorized (i) certain emissions
strategies in the engine control software of various AUDI, Volkswagen and Porsche brand diesel
vehicles with a V6 or V8 engine and the Euro 6 emissions classification, and (i ) the Dynamic Shift
Program (DSP) in the gearbox control in some AUDI vehicle models, as prohibited defeat devices.
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