Obligation Volksfinance Intl N.V. 1.125% ( XS1586555861 ) en EUR

Volksfinance Intl N.V.

100 % ▲

Allemagne

XS1586555861 ( en EUR )

1.125% par an ( paiement annuel )

02/10/2023 - Obligation échue

Prospectus brochure de l'obligation Volkswagen Intl Finance N.V XS1586555861 en EUR 1.125%, échue

Volkswagen International Finance N.V. est une filiale de Volkswagen AG qui fournit des services financiers, notamment le financement et le leasing de véhicules, à des clients et concessionnaires dans le monde entier.

L'Obligation émise par Volksfinance Intl N.V. ( Allemagne ) , en EUR, avec le code ISIN XS1586555861, paye un coupon de 1.125% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le 02/10/2023

22 March 2017

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)
Floating Rate Notes due 2019
Issue Price: per cent.
per cent. Notes due 2021
Issue Price: per cent.
per cent. Notes due 2023
Issue Price: per cent.
per cent. Notes due 2027
Issue Price: 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") will issue on 30 March 2017 (the "Issue Date")
EUR floating rate Notes due 2019 (the "2019 Notes" or "Floating Rate Notes"), EUR per cent.
Notes due 2021 (the "2021 Notes"), EUR per cent. Notes due 2023 (the "2023 Notes"), EUR
per cent. Notes due 2027 (the "2027 Notes", and together with the 2021 Notes and 2023 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 2019 Notes will be redeemed at par on 30 March 2019, the 2021 Notes wil
be redeemed at par on 30 March 2021, the 2023 Notes wil be redeemed at par on 2 October 2023
and the 2027 Notes wil be redeemed at par on 30 March 2027. The 2019 Notes wil bear interest
from and including the Issue Date to, but excluding, 30 March 2019 at a floating interest rate payable
quarterly in arrears on 30 March, 30 June, 30 September and 30 December in each year,
commencing on 30 June 2017. The 2021 Notes wil bear interest from and including the Issue Date
to, but excluding, 30 March 2021 at a rate of per cent. per annum, payable annual y in arrears on
30 March in each year, commencing on 30 March 2018. The 2023 Notes wil bear interest from and
including the Issue Date to, but excluding, 2 October 2023 at a rate of per cent. per annum, payable
annually in arrears on 2 October in each year, commencing on 2 October 2017 (short first coupon).
The 2027 Notes will bear interest from and including the Issue Date to, but excluding, 30 March 2027
at a rate of per cent. per annum, payable annual y in arrears on 30 March in each year,
commencing on 30 March 2018.
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 al 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 issue price of the Notes, the aggregate principal amount of the Notes, the interest rate of the
Notes, the issue proceeds, and the yield of the Notes will be included in the Pricing Notice (as defined
in "Subscription, Sale and Offer of the Notes") which wil be published on the website of the
Luxembourg Stock Exchange (www.bourse.lu) on or prior to the Issue Date.
The Notes are issued in bearer form with a denomination of 100,000 each.
The 2019 Notes have been assigned the following securities codes: ISIN XS1586555515, Common
Code 158655551, WKN A19E9R.
The 2021 Notes have been assigned the following securities codes: ISIN XS1586555606, Common
Code 158655560, WKN A19E9S.
The 2023 Notes have been assigned the following securities codes: ISIN XS1586555861, Common
Code 158655586, WKN A19E9T.
The 2027 Notes have been assigned the following securities codes: ISIN XS1586555945, Common
Code 158655594, WKN A19E9U.
Joint Lead Managers
Barclays
BNP PARIBAS
Citigroup
Mizuho Securities
Société Générale Corporate &
UniCredit Bank
Investment Banking

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 Terms and Conditions 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 well 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 all
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; (ii ) 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 al 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 Barclays Bank
PLC, BNP Paribas, Citigroup Global Markets Limited, Mizuho International plc, Société Générale or
UniCredit Bank AG (together, the "Joint Lead Managers" or the "Managers"). Neither the delivery of
this Prospectus nor any offering or sale of any Notes made hereunder shall, 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 Aktiengesellschaft 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 material y 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
information contained in this Prospectus or any other document incorporated herein by reference, and

- i -

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 will 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 "Selling
Restrictions."
IN CONNECTION WITH THE ISSUE OF THE NOTES, BARCLAYS BANK PLC (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 all 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, al references
to "U.S.$" or "USD" are to United States dol ars, and all references to "Can$" or "CAD" are to
Canadian dollars.

- ii -

Table of Contents
RISK FACTORS ...................................................................................................................................... 1
Risk Factors regarding Volkswagen Aktiengesel schaft and Volkswagen Group ......................... 1
Risk Factors regarding Volkswagen International Finance N.V. ................................................. 27
Risk Factors regarding the Notes ................................................................................................ 29
VOLKSWAGEN AKTIENGESELLSCHAFT AS GUARANTOR ............................................................ 32
VOLKSWAGEN INTERNATIONAL FINANCE N.V. AS ISSUER ......................................................... 65
CONDITIONS OF ISSUE FOR FLOATING RATE NOTES (ENGLISH LANGUAGE VERSION) ........ 71
CONDITIONS OF ISSUE FOR FIXED RATE NOTES (ENGLISH LANGUAGE VERSION)................ 82
EMISSIONSBEDINGUNGEN DER INHABERSCHULDVERSCHREIBUNGEN BEI VARIABLER
VERZINSUNG (DEUTSCHE FASSUNG) .................................................................................... 92
EMISSIONSBEDINGUNGEN DER INHABERSCHULDVERSCHREIBUNGEN BEI FESTER
VERZINSUNG (DEUTSCHE FASSUNG) .................................................................................. 104
GUARANTEE AND NEGATIVE PLEDGE .......................................................................................... 115
GARANTIE UND NEGATIVVERPFLICHTUNG.................................................................................. 117
DESCRIPTION OF RULES REGARDING RESOLUTIONS OF HOLDERS ...................................... 119
USE OF PROCEEDS .......................................................................................................................... 121
TAXATION .......................................................................................................................................... 122
GENERAL INFORMATION ................................................................................................................. 130
SUBSCRIPTION, SALE AND OFFER OF THE NOTES .................................................................... 132
SELLING RESTRICTIONS ................................................................................................................. 133
DOCUMENTS INCORPORATED BY REFERENCE .......................................................................... 135
NAMES AND ADDRESSES................................................................................................................ 138

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 are conducting
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 may have a material adverse effect on
Volkswagen's business, financial position, results of operations, reputation, the price
of its securities, including the Notes, and its ability to make payments under its
securities.
On 18 September 2015, the U.S. Environmental Protection Agency (the "EPA") publicly announced in
a "Notice of Violation" of the U.S. Clean Air Act that irregularities in the level of nitrogen oxide ("NOx")
emissions had been discovered in emissions tests of certain vehicles with Volkswagen Group 2.0 liter
TDI diesel engines. The EPA al eged that Volkswagen had installed undisclosed engine management
software in certain four-cylinder diesel engines used in certain model year 2009 to 2015 vehicles to
circumvent NOx emissions testing regulations in the United States in order to comply with certification
requirements. The environmental regulatory authority of California, the California Air Resources Board
("CARB"), announced its own enforcement investigation related to this issue as well. Following these
announcements by the EPA and CARB, authorities in various jurisdictions worldwide commenced
their own investigations.
On 22 September 2015, in its ad hoc release pursuant to section 15 of the German Securities Trading
Act (Wertpapierhandelsgesetz), Volkswagen announced that discrepancies in the level of NOx
emissions figures achieved in testing and in actual road use had been identified in around 11 mil ion
Volkswagen Group vehicles worldwide with certain types of 1.2-liter, 1.6-liter and 2.0 liter TDI diesel
engines, the latter also including those vehicles with 2.0 liter TDI diesel engines sold in the United
States. This predominantly concerns type EA 189 engines and includes vehicles from the VW
Passenger Cars, VW Commercial Vehicles, SEAT, SKODA and Audi brands. The software being
used in these engines enabled a test bench situation to be recognized by the vehicle and enabled the
engine control system to optimize NOx emission levels during the test cycle.

- 1 -

On 2 November 2015, the EPA issued an additional "Notice of Violation" of the U.S. Clean Air Act
announcing that it had determined that engine management software installed in certain vehicles with
Volkswagen Group's six-cylinder 3.0 liter TDI diesel engines contained "auxiliary emission control
devices" ("AECDs") that had not been disclosed adequately in the U.S. approval process. Also on
2 November 2015, and additionally on 25 November 2015, CARB published allegations that legal
requirements for NOx emissions were circumvented through the use of engine management software
under test conditions. Approximately 113,000 3.0 liter TDI diesel engines in vehicles from model years
2009 to 2016 of the Audi, VW Passenger Cars and Porsche brands are affected in the United States
and Canada. Audi has confirmed that at least three AECDs were inadequately disclosed in the course
of the U.S. approval process.
On 4 January 2016, the U.S. Department of Justice (the "DoJ"), on behalf of the EPA, initiated a civil
lawsuit in connection with the diesel issue related to the 2.0 liter and 3.0 liter TDI vehicles against
Volkswagen AG, AUDI AG and certain other Volkswagen Group companies, seeking statutory
penalties under the U.S. Clean Air Act, as well as certain equitable relief.
On 12 January 2016, CARB announced that it intended to seek civil fines for alleged violations by
Volkswagen of the California Health and Safety Code and various CARB regulations. The State of
California, by and through CARB and the California Attorney General, ultimately filed a lawsuit on
27 June 2016.
Following the publication of the EPA's "Notices of Violation" of the U.S. Clean Air Act, Volkswagen AG
and other Volkswagen Group companies have been the subject of intense public and governmental
scrutiny, ongoing investigations (civil and criminal) and civil litigation worldwide.
In the United States and Canada, Volkswagen AG and other Volkswagen Group companies have
received subpoenas and inquiries from state attorneys general and other governmental authorities
and are responding to such investigations and inquiries. The DoJ has also opened a criminal
investigation into whether various U.S. federal criminal offenses were committed. These
investigations resulted and could result in criminal and civil charges as well as further assessments of
monetary penalties and other consequences. The timing of the release of new information on the
investigations and the maximum amount of penalties that could be imposed cannot be reliably
determined at present. New information on these topics may arise at any time, including after the
offer, sale and delivery of the Notes.
In June and December 2016 and January 2017, Volkswagen announced that Volkswagen AG, AUDI
AG, Volkswagen Group of America, Inc. and certain affiliates reached settlement agreements in the
United States with (i) the DoJ on behalf of the EPA, CARB and the California Attorney General, (ii) the
U.S. Federal Trade Commission ("FTC"), and (ii ) private plaintiffs represented by a Plaintiffs' Steering
Committee (the "PSC") in a multi-district litigation in California. The settlement agreements will resolve
certain civil claims made in relation to affected diesel vehicles in the United States: approximately
475,000 vehicles with four-cylinder 2.0 liter TDI diesel engines from the Volkswagen Passenger Cars
and Audi brands and around 83,000 vehicles with six-cylinder 3.0 liter TDI diesel engines from the
Volkswagen Passenger Cars, Audi and Porsche brands. In October 2016, the court finally approved
the settlement agreements in connection with the four-cylinder 2.0 liter TDI diesel engines. A number
of class members have filed appeals to a U.S. appellate court from the order approving the settlement
agreements in connection with the four-cylinder 2.0 liter TDI diesel engines. On 14 February 2017, the
court granted preliminary approval of the settlement agreements in relation to the six-cylinder 3.0 liter
TDI diesel engines, which were lodged with the court on 31 January 2017. A final approval hearing is
scheduled for 11 May 2017. The agreement with the FTC will also be subject to court approval.
The settlement agreements with respect to the four-cylinder 2.0 liter TDI diesel engine vehicles
provide affected customers with the option of a buyback or, for leased vehicles, early lease
termination, or a free emissions modification of the vehicles, provided that EPA and CARB approve
the proposed modification. The settlement agreements with respect to the six-cylinder 3.0 liter TDI
diesel engine vehicles, which remain subject to court approval, provide for: (i) a buyback or, for leased
vehicles, early lease termination program, or a free emissions modification provided that EPA and
CARB approve the modification, for Generation 1 (model years 2009-2012) six-cylinder 3.0 liter TDI
diesel engine vehicles, and (ii) a free emissions recall and modification program (pending EPA and
CARB approval) for Generation 2 (model years 2013-2016) six-cylinder 3.0 liter TDI diesel engine

- 2 -

vehicles. If modifications are not approved for Generation 2 six-cylinder 3.0 liter TDI diesel engine
vehicles, the settlement agreements require Volkswagen to offer a buyback or, for leased vehicles,
early lease termination for those vehicles. Volkswagen will also make additional cash payments to
affected current owners or lessees as well as certain former owners or lessees.
In addition, Volkswagen agreed to support environmental programs. Under the settlement
agreements in connection with the four-cylinder 2.0 liter TDI diesel engines, Volkswagen will pay
U.S.$2.7 bil ion over three years. Volkswagen wil also invest in total U.S.$2.0 bil ion over ten years in
zero emissions vehicle infrastructure as well as corresponding access and awareness initiatives in the
United States. In addition, the six-cylinder 3.0 liter TDI diesel engine vehicle settlement agreements, if
approved by the court, calls for an additional U.S.$25 mil ion payment to CARB to support the
availability of zero emissions vehicles in California and Audi will make an additional one-time payment
in the amount of U.S.$225 mil ion into an environmental trust, managed by a trustee appointed by the
court, to offset excess NOx emissions.
In January 2017, Volkswagen AG agreed with the United States government to resolve federal
criminal liability relating to the diesel issue. The Volkswagen Group also agreed with the United States
government to resolve civil penalties and injunctive relief under the Clean Air Act and other civil
claims relating to the diesel issue. The coordinated resolutions involve four settlements, including a
plea agreement between Volkswagen AG and the DoJ. The plea agreement is accompanied by a
published Statement of Facts that lays out relevant facts and has been acknowledged by Volkswagen
AG. As part of its plea agreement, Volkswagen AG pleaded guilty on 10 March 2017 to three felony
counts under United States law: conspiracy to commit fraud, obstruction of justice and using false
statements to import cars into the United States. The court accepted Volkswagen AG's guilty plea to
all three charges and set the sentencing date for 21 April 2017. The plea agreement provides for
payment of a criminal fine of U.S.$2.8 billion following sentencing and the appointment of an
independent monitor for a period of three years. The independent monitor wil assess and oversee the
compliance with the terms of the resolutions. This includes overseeing the implementation of
measures to further strengthen compliance, reporting and monitoring systems, including an enhanced
ethics program. Volkswagen AG, AUDI AG and other Volkswagen Group companies have further
agreed to pay, subject to court approval, a combined penalty of U.S.$1.45 bil ion (plus any accrued
interest) to resolve U.S. federal environmental and customs-related civil claims in the United States.
Furthermore, Volkswagen AG and Volkswagen Group of America, Inc. have agreed to pay a separate
civil penalty of U.S.$50 mil ion (plus any accrued interest) to the Civil Division of the DoJ to settle
potential claims asserted under the Financial Institutions Reform, Recovery and Enforcement Act
("FIRREA"). By their terms, the aforementioned settlement agreements resolve only certain liability
issues under United States law and are not intended to address any liability issues, where such exist,
under the laws or regulations of any jurisdiction outside the United States. Volkswagen continues to
cooperate in full with investigations by the DoJ into the conduct of individuals.
Volkswagen also reached separate settlement agreements with the attorneys general of 44 U.S.
states, the District of Columbia and Puerto Rico, to resolve their existing or potential consumer
protection and unfair trade practices claims in connection with both 2.0 liter TDI and 3.0 liter TDI
vehicles in the United States for a settlement amount of U.S.$603 mil ion. These settlement
agreements do not resolve potential state environmental claims related to the affected vehicles or
certain other claims. Moreover, investigations by various U.S. regulatory and government authorities,
including in areas relating to securities, financing and tax, are ongoing.
On 30 September 2016, Volkswagen announced that it had finalized an agreement to resolve the
claims of Volkswagen-branded franchise dealers in the United States relating to the affected vehicles
and other matters asserted concerning the value of the franchise. The settlement agreement includes
a cash payment of up to U.S.$1.208 bil ion and additional benefits to resolve alleged past, current,
and future claims of losses in franchise value. The court approved the settlement agreement in
January 2017.
In Canada, the NOx emissions limits for vehicles are the same as in the United States. Civil consumer
claims and regulatory investigations have been initiated for vehicles with 2.0 liter and 3.0 liter diesel
engines. In December 2016, Volkswagen AG and other Canadian and U.S. Volkswagen Group
companies reached a class action settlement in Canada with consumers relating to 2.0 liter diesel
vehicles. The settlement provides for cash payments of up to CAD 564 mil ion to eligible owners and

- 3 -

lessees, and many of these affected customers will also have the option of a free emissions
modification of their vehicle if approved by regulators, or a buyback or trade-in or for leased vehicles
early lease termination. The class settlement is subject to court approval, the hearings for which are
scheduled for 22 March 2017 and 31 March 2017. Concurrently with the announcement of the class
settlement in December 2016, Volkswagen Group Canada agreed with the Commissioner of
Competition in Canada to a civil resolution of its regulatory inquiry into consumer protection issues as
to 2.0 liter diesel vehicles. This resolution was reached on the basis of the class settlement, and
Volkswagen Group Canada will also pay a CAD 15 mil ion civil administrative monetary penalty. Civil
consumer claims and the Commissioner of Competition's investigation with respect to 3.0 liter diesel
vehicles remain pending. Also, criminal enforcement related investigations by the federal
environmental regulator and quasi-criminal enforcement related investigations by a provincial
environmental regulator are ongoing in Canada in relation to 2.0 liter and 3.0 liter diesel vehicles.
The public prosecutor's office in Braunschweig, Germany, is investigating the core issue of the
criminal investigations. The public prosecutor's office in Braunschweig also initiated investigations
against one current and one former Volkswagen AG Management Board member as wel as one
Volkswagen AG Supervisory Board member regarding their possible involvement in potential market
manipulation in connection with the release of information concerning the diesel issue.
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
continues discussions with the EPA and the CARB concerning technical solutions for the U.S. market.
These discussions could require Volkswagen to repurchase vehicles sold in the United States,
Canada and elsewhere if no technical solution is approved for those vehicles.
In addition to ongoing extensive investigations by governmental authorities in various jurisdictions
worldwide (the most significant being in Europe, the United States and South Korea), further
investigations could be launched in the future and existing investigations could be expanded. Ongoing
and future investigations may result in further legal actions being taken against Volkswagen or some
of its employees. These actions could include substantial criminal and civil fines, as wel as penalties,
sanctions, injunctions against future conduct, the loss of vehicle type certifications, sales stops and
business licenses or other restrictions. In addition to monetary and other penalties, Volkswagen may
be required to modify further its controls processes and compliance programs.
The diesel issue has also led to the commencement of significant third-party litigation against
Volkswagen worldwide. This includes lawsuits by affected customers and dealers seeking substantial
damages. Private and institutional investors from Germany and other jurisdictions are pursuing claims
for damages against Volkswagen AG as well as against Volkswagen International Finance N.V. The
claims allege damages incurred by Volkswagen AG allegedly omitting or delaying the immediate
publication of price sensitive insider information relating to the diesel issue, wrongful financial
reporting, as wel as in some cases tort and prospectus liability claims. The claims relate to
Volkswagen AG's shares, American Depositary Receipts and other securities, including bonds, issued
by Volkswagen Group companies, as well as third-party securities linked to Volkswagen.
Further regulatory proceedings, product-related and investor claims could be raised in the future in
various jurisdictions worldwide. This could include regulatory proceedings and/or customer claims for
damages if the technical solutions implemented by Volkswagen in order to rectify the diesel issue are
not implemented in a timely or effective manner or have a negative effect on the performance, fuel
consumption or resale value of the affected vehicles. Moreover, further investor claims, including
those raised by holders of other Volkswagen Group bonds, may be brought. In addition, there could
be pending or threatened claims against the Volkswagen Group of which Volkswagen's management
is not yet aware. Further regulatory proceedings or proceedings or claims involving or affecting the
Volkswagen Group or the Volkswagen Group's management could result in additional costs or
otherwise adversely affect the Volkswagen Group and the Volkswagen Group's financial position,
results of operations, reputation, the price of its securities and its ability to make payments under its
securities and/or adversely impact the reputation of the Volkswagen Group or its management.

- 4 -

Any of the above-described negative developments could have a material adverse effect on
Volkswagen's business, financial position, results of operations, reputation, the price of its securities
and its capability to make payments under its securities.
The Volkswagen Group has recognized expenses directly related to the diesel issue in the total
amount of 16.2 bil ion in operating result in 2015. This primarily entailed recognizing provisions for
field activities (such as service measures and recalls) and for repurchases in the amount of 7.8
billion, as well as 7.0 bil ion for legal risks. Additional expenses of 6.4 billion were recognized in
2016 in connection with the diesel issue. These additions resulted from an increase in expenses
attributable to legal risks amounting to 5.1 billion, higher warranty costs amounting to 0.4 bil ion,
specific sales programs amounting to 0.5 billion, impairment losses on inventories amounting to 0.3
billion and impairment losses on intangible assets and property, plant and equipment amounting to
0.3 bil ion, which are offset by impairment reversals of noncurrent and current lease assets in the
amount of 0.1 bil ion. In addition, in 2016 provisions of 0.3 billion were recognized for the
investments totaling USD 2.0 bil ion over 10 years in zero emissions vehicle infrastructure as well as
corresponding access and awareness initiatives for these technologies to which the Volkswagen
Group had committed under the settlement agreements. The translation at 31 December 2016 of
provisions denominated in foreign currencies resulted in expenses of 0.2 bil ion after hedging.

Evaluating known information and making reliable estimates for provisions is a continuous process.
Due to the ongoing nature of the extensive investigations and proceedings, as wel as the
complexities of the various negotiations and continuing regulatory approval processes with the
relevant authorities, the recognized provisions, contingent liabilities and additional latent legal risks
are subject to significant estimation risk. Furthermore, new information not known to Volkswagen's
Management Board at present may surface, requiring further revaluation of the amounts estimated.
Considerable financial charges may be incurred and further substantial provisions may be necessary
as the issues and legal risks, fines and penalties crystallize.
Moreover, the issues described above have caused or could cause in particular the following effects:

damage Volkswagen's reputation or brand image and impair Volkswagen's relationship with
customers, dealers, suppliers, other important business partners, employees and investors;

lead to lower sales, sales prices and margins and higher marketing and sales expenses for
new and used Volkswagen Group vehicles, require Volkswagen to perform inspections of
vehicles free of charge, and have an adverse impact on Volkswagen's ability to compete, as a
result of which Volkswagen could lose significant sales revenue;

lead to higher product inventories, which could increase working capital requirements;

adversely affect Volkswagen's ability to pursue its strategic goals;

impair Volkswagen's ability to obtain financing required to maintain its operations and render
Volkswagen's funding sources less efficient and more costly. Volkswagen's credit ratings
have been downgraded in the wake of these findings and could be subject to further
downgrades, see "Financial RisksVolkswagen may not succeed in refinancing its capital
requirements in due time and to the extent necessary, or at all. There is also a risk that
Volkswagen may refinance on unfavourable terms and conditions";

lead to an early redemption of asset-backed securities with respect to which Volkswagen
Group vehicles with diesel engines serve as col ateral;

require Volkswagen to dispose of certain assets, brands, subsidiaries or investments at below
their fair market value in order to cover emissions-related financial liabilities, in particular if the
timing of any emissions-related payments leads to constraints on Volkswagen's cash flows;
and

threaten Volkswagen's competitive position due to reduced investments.

- 5 -