Obligation Volksfinance International N.V. 4.625% ( XS1799939027 ) en EUR

Volksfinance International N.V.

100 % ▲

Allemagne

XS1799939027 ( en EUR )

4.625% par an ( paiement annuel )

Perpétuelle

Prospectus brochure de l'obligation Volkswagen International Finance N.V XS1799939027 en EUR 4.625%, échéance Perpétuelle

100 000 EUR

1 500 000 000 EUR

27/06/2026 ( Dans 193 jours )

Volkswagen International Finance N.V. est une société financière basée aux Pays-Bas, filiale du groupe Volkswagen, gérant les activités de financement et de leasing pour le constructeur automobile à l'échelle internationale.

L'Obligation émise par Volksfinance International N.V. ( Allemagne ) , en EUR, avec le code ISIN XS1799939027, paye un coupon de 4.625% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le Perpétuelle

VOLKSWAGEN INTERNATIONAL FINANCE N.V.
(public limited liability corporation (naamloze vennootschap) under the laws of The Netherlands)
EUR 1,250,000,000 Undated Subordinated Notes subject to Interest Rate Reset with a First Call Date in
2024
Issue Price: 100%
EUR 1,500,000,000 Undated Subordinated Notes subject to Interest Rate Reset with a First Call Date in
2028
Issue Price: 100%
guaranteed on a subordinated basis by
VOLKSWAGEN AKTIENGESELLSCHAFT
(a stock corporation (Aktiengesellschaft) incorporated under the laws of the Federal Republic of Germany)

Volkswagen International Finance N.V. (the "Issuer" or "VIF") will issue EUR 1,250,000,000 in aggregate principal amount of
undated subordinated notes subject to interest rate reset with a first call date on June 27, 2024 (the "NC6 Notes") and
EUR 1,500,000,000 in aggregate principal amount of undated subordinated notes subject to interest rate reset with a first call date on
June 27, 2028 (the "NC10 Notes" and, together with the NC6 Notes, the "Notes") in a denomination of EUR 100,000 each on June 27,
2018 (the "Issue Date") at an issue price of 100% of their principal amount in respect of the NC6 Notes and 100% of their principal
amount in respect of the NC10 Notes (the "Offering"). The Notes are unconditionally and irrevocably guaranteed, on a subordinated
basis, by Volkswagen Aktiengesellschaft (the "Guarantor" or "Volkswagen AG" and together with its consolidated subsidiaries, the
"Volkswagen Group" or "Volkswagen").
The NC6 Notes shall bear interest on their principal amount (i) from and including June 27, 2018 (the "NC6 Interest Commencement
Date") to but excluding June 27, 2024 (the "NC6 First Call Date") at a rate of 3.375% per annum; (ii) from and including the NC6
First Call Date to but excluding June 27, 2028 (the "First NC6 Step-up Date") at the relevant 6-year swap rate for the relevant Reset
Period (as defined herein) plus a margin of 297 basis points per annum (no step-up); (iii) from and including the First NC6 Step-up Date
to but excluding June 27, 2044 (the "Second NC6 Step-up Date") at the relevant 6-year swap rate for the relevant Reset Period plus a
margin of 322 basis points per annum (including a 25 basis points step-up); and (iv) from and including the Second NC6 Step-up Date
to but excluding the date on which the Issuer redeems the Notes in whole at the relevant 6-year swap rate for the relevant Reset Period
plus a margin of 397 basis points per annum (including a further 75 basis points step-up). During each such period interest is scheduled
to be paid annually in arrear on June 27 of each year (each an "Interest Payment Date"), commencing on June 27, 2019.
The NC10 Notes shall bear interest on their principal amount (i) from and including June 27, 2018 (the "NC10 Interest
Commencement Date") to but excluding June 27, 2028 (the "NC10 First Call Date") at a rate of 4.625% per annum; (ii) from and
including the NC10 First Call Date to but excluding June 27, 2048 (the "Second NC10 Step-up Date") at the relevant 10-year swap
rate for the relevant Reset Period plus a margin of 398.2 basis points per annum (including a 25 basis points step-up); and (iii) from and
including the Second NC10 Step-up Date to but excluding the date on which the Issuer redeems the Notes in whole at the relevant 10-
year swap rate for the relevant Reset Period plus a margin of 473.2 basis points per annum (including a further 75 basis points step-up).
During each such period interest is scheduled to be paid annually in arrear on June 27 of each year (each an "Interest Payment Date"),
commencing on June 27, 2019.
The Issuer is entitled to defer payments of interest on any Interest Payment Date (as defined in the Terms and Conditions) ("Arrears of
Interest") and may pay such Arrears of Interest voluntarily at any time, but only has to pay such Arrears of Interest under certain
circumstances as laid out in the terms and conditions of the NC6 Notes (the "NC6 Note Terms and Conditions") or the terms and
conditions of the NC10 Notes (the "NC10 Note Terms and Conditions" and, together with the NC6 Note Terms and Conditions, the
"Terms and Conditions"), as applicable.
Each issue of the Notes is redeemable in whole but not in part at the option of the Issuer at their principal amount plus accrued and
unpaid interest and upon payment of any outstanding Arrears of Interest on the NC6 First Call Date for the NC6 Notes and on the
NC10 First Call Date for the NC10 Notes and on any respective Interest Payment Date thereafter. The Issuer may also redeem each
issue separately in whole but not in part at any time before the respective first call dates following a Rating Event, an Accounting Event,
a Tax Deductibility Event or a Gross-up Event at the Early Redemption Amount (each as defined in the applicable Terms and
Conditions). Additionally the Issuer may redeem each issue separately, in whole but not in part, if any of the Issuer, the Guarantor or

any of the Guarantor's subsidiaries has, severally or jointly, purchased or redeemed at least 80% of the originally issued aggregate
principal amount of the Notes of such issue.
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Each of the Notes will initially be represented by a temporary global note, without interest coupons, which will be exchangeable in
whole or in part for a permanent global note without interest coupons, not earlier than 40 days after the Issue Date, upon certification as
to non-U.S. beneficial ownership. The Notes are issued in bearer form with a denomination of EUR 100,000 each.
The Notes are rated BBB- by Standard & Poor's Ratings Services ("S&P") and Baa2 by Moody's Investors Service Ltd. ("Moody's"
and, together with S&P, the "Rating Agencies"). A rating is not a recommendation to buy, sell or hold securities and may be subject to
revision, suspension or withdrawal at any time by the assigning rating organization. As of the date of this Prospectus, each of the Rating
Agencies is a credit rating agency established in the European Union and registered under Regulation (EC) No 1060/2009 of the
European Parliament and of the Council of 16 September 2009 on credit rating agencies (as amended) (the "CRA Regulation"). In
general, European regulated investors are restricted from using a credit rating for regulatory purposes if such credit rating is not issued
by a rating agency established in the European Union and registered under the CRA Regulation. A list of credit rating agencies
registered under the CRA Regulation is available for viewing at the ESMA's website.
This prospectus (the "Prospectus") constitutes a prospectus within the meaning of Article 5.3 of 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, any
supplement thereto and all documents incorporated by reference will be published in electronic form on the website of the Luxembourg
Stock Exchange (www.bourse.lu) and will be available free of charge at the specified office of the Issuer.
This Prospectus has been approved by the Commission de Surveillance 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
juillet 2005 relative aux prospectus pour valeurs mobilières the "Luxembourg Prospectus Law"). As provided in Article 7(7) of the
Luxembourg Prospectus Law, by approving this Prospectus, the CSSF does not give any undertaking as to the economic and financial
soundness of the operation or the quality or solvency of the Issuer. The Issuer will prepare and make available an appropriate
supplement to this Prospectus if at any time the Issuer will be required to prepare a prospectus supplement pursuant to Article 13 of the
Luxembourg Prospectus Law.

Prospective investors should be aware that an investment in the Notes involves a risk and that, if certain risks, in particular
those described under "Risk Factors" occur, the investors may lose all or a very substantial part of their investment.
This document does not constitute an offer to sell, or the solicitation of an offer to buy Notes in any jurisdiction where such offer or
solicitation is unlawful. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended
(the "Securities Act"), and are subject to U.S. tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or
delivered within the United States or to U.S. persons. For a further description of certain restrictions on the offering and sale of the
Notes and on the distribution of this document, see "Selling Restrictions".
Application has been made to the Luxembourg Stock Exchange for the Notes amounting to EUR 2,750,000,000 to be listed on the
Official List of the Luxembourg Stock Exchange (the "Official List") and to be admitted to trading on the Luxembourg Stock
Exchange's Regulated Market. The Luxembourg Stock Exchange's Regulated Market is a regulated market for the purposes of Directive
2014/65/EU of the European Parliament and of the Council of May 15, 2014 on Markets in Financial Instruments, as amended.
Joint Bookrunners
Barclays
BNP Paribas
BofA Merrill Lynch
UniCredit Bank
The date of this Prospectus is June 21, 2018

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The Issuer and the Guarantor accept responsibility for the information contained in this Prospectus and
relating to the Notes. To the best of the knowledge and belief of the Issuer and the Guarantor (having taken all
reasonable care to ensure that such is the case) the information contained in this Prospectus is in accordance
with the facts and does not omit anything likely to affect the import of such information.
This Prospectus is to be read in conjunction with any supplement hereto and with the documents incorporated
by reference as set forth in "General InformationDocuments Incorporated by Reference". This Prospectus
should be read and construed on the basis that the documents incorporated by reference form part of the
Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than
the Notes and does not constitute an offer to sell or a solicitation of an offer to buy any Notes to any person in
any jurisdiction in which it is unlawful to make any such offer or solicitation to such person.
Barclays Bank PLC, BNP Paribas, Merrill Lynch International and UniCredit Bank AG (together, the "Joint
Bookrunners" or the "Managers") expressly do not undertake to review the financial condition or affairs of
the Issuer or the Guarantor during the term of the Notes or to advise any investor in the Notes of any
information coming to their attention. No Manager accepts any liability or makes any representation or
warranty, expressed or implied, as to the accuracy or completeness of the information contained or
incorporated by reference in this Prospectus or any other information provided by the Issuer in connection
with the Offering, and nothing in this Prospectus is, or shall be relied upon as, a promise or representation by
the Managers.
To the fullest extent permitted by law, the Managers accept no responsibility whatsoever for the contents of
this Prospectus or for any other statement, made or purported to be made by a Manager or on its behalf in
connection with the Issuer, the Guarantor, or the issue and offering of the Notes. Each Manager accordingly
disclaims all and any liability whether arising in tort or contract or otherwise which it might otherwise have in
respect of this Prospectus or any such statement.
Only persons authorized in this Prospectus are entitled to use the Prospectus in connection with the Offering.
The delivery of this Prospectus at any time after the date hereof shall not, under any circumstances, create any
implication that there has been no change in the affairs of the Issuer or the Guarantor since the date hereof or
that the information set out in this Prospectus is correct as at any time since its date. No person is or has been
authorized by the Issuer to give any information or to make any representation not contained in or not
consistent with this Prospectus or any other information supplied in connection with the Offering and, if given
or made, such information or representation must not be relied upon as having been authorized by the Issuer
or any of the Managers.
Neither this Prospectus nor any other information supplied in connection with the Offering (a) is intended to
provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the
Issuer or any of the Managers that any recipient of this Prospectus or any other information supplied in
connection with the Offering should purchase any Notes. 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 the Guarantor.
This Prospectus has been prepared by the Issuer in connection with the Offering solely for the purpose of
enabling a prospective investor to consider the purchase of the Notes and to comply with the listing
requirements of the regulated market of the Luxembourg Stock Exchange. In making an investment decision
regarding the Notes, investors must rely on their own examination of the Issuer and the Guarantor and the
terms of the Offering, including the merits and risks involved. The Offering is being made solely on the basis
of this Prospectus.
Reproduction and distribution of this Prospectus or disclosure or use of the information contained herein for
any purpose other than considering an investment in the Notes is prohibited. The information contained in this
Prospectus has been provided by the Issuer. No representation or warranty, explicit or implied, is made by the
Managers as to the accuracy or completeness of the information set forth herein and nothing contained in this
Prospectus is, or shall be relied upon as a promise or representation, whether as to the past or the future.
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The contents of this Prospectus are not to be construed as legal, business or tax advice. Each prospective
investor should consult its own lawyer, financial adviser or tax adviser for legal, financial or tax advice.
The Issuer, the Guarantor and the Managers do not represent that this Prospectus may be lawfully distributed,
or that the Notes may be lawfully offered, in compliance with any applicable registration or other
requirements in any jurisdiction, or pursuant to an exemption available thereunder, or assume any
responsibility for facilitating any such distribution or offering. In particular, subject to the following
paragraph, no action has been taken by the Issuer or the Managers which is intended to permit a public
offering of the Notes or the distribution of this Prospectus in any jurisdiction where action for that purpose is
required. Subject to the following paragraph, no Notes may be offered or sold, directly or indirectly, and
neither this Prospectus nor any advertisement or other offering material may be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with any applicable laws and
regulations.
Persons into whose possession this Prospectus or any Notes may come must inform themselves about, and
observe, any such restrictions on the distribution of this Prospectus and the offering and sale of Notes. In
particular, there are restrictions on the distribution of this Prospectus and the offer or sale of Notes in the
United States and the European Economic Area -- see "Selling Restrictions".
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 "Risk Factors", "Description of the Issuer", "Description of the Guarantor" and elsewhere
in this Prospectus relating to, among other things, the future financial performance, potential synergies to be
realized 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 assumes any obligation to update such forward-looking statements and to adapt them to future
events or developments.
Where information has been sourced from a third party, the Issuer and the Guarantor confirm that this
information has been accurately reproduced and that as far the Issuer is aware and is able to ascertain from
information published by that third party, no facts have been omitted which would render the reproduced
information inaccurate or misleading. Where such information has been included in this Prospectus, the source
is indicated.
Any websites referred to or included in the Prospectus are for information purposes only and do not form part
of the Prospectus.
The legally binding language of this Prospectus is English, except for the Terms and Conditions in respect of
which German is the legally binding language.
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, all references to "U.S.$" or
"USD" are to United States dollars, and all references to "Can$" or "CAD" are to Canadian dollars.
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IN CONNECTION WITH THE ISSUE OF THE NOTES, MERRILL LYNCH INTERNATIONAL (THE
"STABILIZING MANAGER") (OR ANY PERSON ACTING ON BEHALF OF ANY STABILIZING
MANAGER) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO
SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH
MIGHT OTHERWISE PREVAIL. HOWEVER, STABILIZATION MAY NOT NECESSARILY OCCUR.
ANY STABILIZATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE
PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE NOTES IS MADE AND, IF BEGUN,
MAY CEASE AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30
CALENDAR DAYS AFTER THE ISSUE DATE OF THE NOTES AND 60 CALENDAR DAYS AFTER
THE DATE OF THE ALLOTMENT OF THE NOTES. ANY STABILIZATION ACTION OR OVER-
ALLOTMENT MUST BE CONDUCTED BY THE STABILIZING MANAGER (OR ANY PERSON
ACTING ON BEHALF OF THE STABILIZING MANAGER) IN ACCORDANCE WITH ALL
APPLICABLE LAWS AND RULES.
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) all channels for distribution of the Notes to eligible counterparties and professional clients are
appropriate. 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 (ii) a customer within the meaning of Directive 2002/92/EC ("IMD"), 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.
From the First Call Date, interest amounts payable under the Notes will be calculated by reference to the
applicable swap rate, which is currently provided by ICE Benchmark Administration ("IBA"). As at the date
of this Prospectus, IBA appears 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").

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CONTENTS

1. RISK FACTORS ...........................................................................................................................................1
2. TERMS AND CONDITIONS OF THE NC6 NOTES ...............................................................................40
3. TERMS AND CONDITIONS OF THE NC10 NOTES .............................................................................65
4. GUARANTEE OF THE NC6 NOTES .......................................................................................................89
5. GUARANTEE OF THE NC10 NOTES .....................................................................................................95
6. DESCRIPTION OF THE ISSUER ...........................................................................................................101
7. DESCRIPTION OF THE GUARANTOR ................................................................................................106
8. TAXATION ..............................................................................................................................................144
9. DESCRIPTION OF RULES REGARDING RESOLUTIONS OF NOTEHOLDERS ............................153
10.
OFFER, SALE AND SUBSCRIPTION OF THE NOTES ...................................................................155
11.
USE OF PROCEEDS ............................................................................................................................156
12.
SELLING RESTRICTIONS .................................................................................................................157
13.
GENERAL INFORMATION ................................................................................................................160
14.
STATEMENTS PURSUANT TO COMMISSION REGULATION (EC) NO 809/2004 OF 29 APRIL
2004 ...............................................................................................................................................................167

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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 million vehicles worldwide with type EA 189
diesel engines. On November 2, 2015, the EPA issued a "Notice of Violation" alleging that irregularities had
also been discovered in the software installed in U.S. vehicles with type V6 3.0 l diesel engines.
Numerous court and governmental proceedings were subsequently initiated in the United States and the rest of
the world. Volkswagen was able to end most 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.
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") and the California Attorney
General, (ii) the U.S. Federal Trade Commission ("FTC"), and (iii) private plaintiffs represented by a
Plaintiffs' Steering Committee (the "PSC") 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:
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.
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The settlement agreements with respect to the four-cylinder 2.0 liter TDI diesel engine vehicles and the
Generation 1 six-cylinder 3.0 liter TDI diesel engine vehicles provide affected customers with, inter alia, the
option of a buyback, a trade-in (for 3.0 liter vehicles only), a free emissions modification of the vehicles (if the
modification is approved by the EPA and CARB) or for leased vehicles early lease termination. Pursuant
to the settlement agreements, Volkswagen will also make additional cash payments to affected current owners
or lessees as well as certain former owners or lessees. For Generation 2 3.0 liter TDI vehicles, Volkswagen
will provide affected consumers with a free emissions compliant repair of the vehicles plus a cash payment. In
addition, Volkswagen will pay U.S.$2.925 billion over three years to support environmental programs and
offset excess NOx emissions and will also invest in total U.S.$2.0 billion over ten years in zero emissions
vehicle infrastructure in the United States. Volkswagen will make additional payments to support the
availability of zero emissions vehicles in California. 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. A large number of those lawsuits have been filed in
Virginia. The Virginia state court has set trial dates for five trials involving four cylinder vehicles with the
first trial scheduled to begin in October 2018.
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. The coordinated resolutions involve four settlements, including a plea agreement
between Volkswagen AG and the DoJ that is accompanied by a published Statement of Facts, acknowledged
by Volkswagen AG, which lays out relevant facts. 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. The plea agreement provides, inter alia, for payment of a criminal fine of U.S.$2.8 billion and the
appointment of an independent monitor for a period of three years who will assess and oversee the compliance
with the terms of the resolutions. Larry D. Thompson was appointed as the independent monitor in April
2017. Mr. Thompson submitted his initial review report under the plea agreement in March 2018. Volkswagen
AG, AUDI AG and other Volkswagen Group companies have further agreed to pay a combined civil penalty
of U.S.$1.45 billion to resolve U.S. federal environmental and customs-related claims in the United States.
Furthermore, Volkswagen AG and Volkswagen Group of America, Inc. have agreed to pay a smaller civil
penalty to the DoJ to settle other potential claims arising under Federal statute. 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 still 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 "Commission") 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 emission
standards. In January 2017, the Commission informed Volkswagen that it had issued a formal order of
investigation; the investigation is ongoing. Volkswagen is cooperating with the Commission.
Volkswagen has also resolved the claims of most 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 million and additional benefits. Certain
individual Volkswagen branded franchise dealers have either opted out of the settlement agreement or were
not included in the settlement class definition and are pursuing individual claims in individual actions
currently pending in the federal multidistrict litigation in California. Similarly, a putative class action of
Volkswagen salespersons who work at franchise dealerships filed suit alleging claims for lost income, which
is currently pending in the federal multidistrict litigation in California.
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. In
December 2016, and subject to court approval that was granted in April 2017, Volkswagen AG and other
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Volkswagen Group companies reached a class action settlement in Canada with consumers relating to 2.0 liter
diesel vehicles which, inter alia, provides eligible owners and lessees with cash payments and, if applicable,
the option of: a free emissions modification of their vehicle if approved by U.S. regulators as Canada has the
same NOx limits as the United States, a buyback, a trade-in or for leased vehicles early lease termination.
Concurrently with the announcement of the class settlement in December 2016, Volkswagen Group Canada
also 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. In June 2017, Volkswagen Group Canada reached an
agreement, without court process and on confidential terms, with its Volkswagen-branded franchise dealers to
resolve issues related to the diesel emissions matter. In January 2018, and subject to court approval that was
granted in April 2018, Volkswagen AG and other Volkswagen Group companies reached a consumer
settlement in Canada involving 3.0 liter diesel vehicles. For Generation 1 3.0 liter diesel vehicles, the
settlement provides affected consumers with, inter alia, the option of a buyback, a trade-in, a free emissions
modification of their vehicle as approved by U.S. regulators as Canada has the same NOx limits as the U.S.
or, in the case of leased vehicles, an early lease termination. For Generation 2 3.0 liter diesel vehicles,
consumers who complete a free emissions compliant repair as approved by U.S. regulators for their vehicles,
are entitled to also receive a cash payment under the terms of the settlement. Concurrently with the
announcement of the 3.0 liter class settlement in January 2018, Volkswagen Group Canada and the Canadian
Commissioner of Competition reached a civil resolution related to consumer protection issues relating to 3.0
liter 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 alleging that the company caused or permitted the operation
of model year 2010-2014 Volkswagen and Audi 2.0 liter diesel vehicles that did not comply with prescribed
emission standards. This matter has been put over to September 27, 2018 pending ongoing evidence
disclosure and, at which time, a continuing pretrial court conference is scheduled. No trial date has been set in
the matter. Moreover, putative class action and joinder lawsuits by consumers, and a certified environmental
class action on behalf of residents, remain pending in certain provincial courts in Canada.
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 alleging that defendants concealed the existence of
these "defeat devices" in Audi brand vehicles with automatic transmissions. These putative class actions have
been transferred to the federal multidistrict litigation proceeding in the State of California. On October 12,
2017, plaintiffs filed a consolidated class action complaint, and defendants filed a motion to dismiss on
December 11, 2017, which has been fully briefed. On April 19, 2018, the court approved the stipulation of the
parties to postpone a hearing previously scheduled for May 11, 2018. On December 22, 2017, a 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. This
case was removed to the Northern District of California on January 25, 2018. Plaintiffs have filed a motion to
remand the matter back to state court and all briefing has been completed. A hearing date has not been
scheduled and the matter has been stayed. 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 the Ontario matter, the hearing on the class
certification motion is scheduled for March 29, 2019.
In addition to the above-described procedures with the responsible authorities, in some countries criminal
investigations/misdemeanor proceedings (for example, by the public prosecutor's offices in Braunschweig and
Munich, Germany) have been opened. On June 13, 2018, the Braunschweig public prosecutor issued an
administrative order against Volkswagen AG in the context of the diesel issue. According to the findings of
the investigation, monitoring duties had been breached in the Powertrain Development department in the
context of vehicle tests and these breaches were concurrent causes of 10.7 million vehicles with the diesel
engines of the types EA 288 (Gen3), in the United States and in Canada, and EA 189, world-wide, being
advertised, sold to customers, and placed on the market with an alleged impermissible software function in the
period between mid-2007 and 2015. The administrative order provides for a fine of 1 billion in total,
consisting of the maximum penalty as legally provided for of 5 million and the disgorgement of economic
benefits in the amount of 995 million. Volkswagen AG has accepted the fine and it will not lodge an appeal
against it.
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In November 2015, Volkswagen also reported that internal indicators had caused concerns that there might
have been irregularities in determining carbon dioxide ("CO2") figures for type approval of around 800,000
vehicles and, as a result, the CO2 values and therefore the fuel consumption data published for some vehicle
models might have been stated incorrectly. Subsequent measurements performed in coordination with the
relevant authorities showed that those concerns of possible irregularities in the CO2 figures for type approval
proved to be not correct. Hence, the negative impact on Volkswagen's earnings of EUR 2 billion that had
originally been expected in relation to this aspect of the CO2 issue was not confirmed. However the public
prosecutor's office in Braunschweig is investigation into these circumstances.
In connection with the diesel issue, in September 2015, Volkswagen AG filed a criminal complaint in
Germany against unknown individuals as did AUDI AG. Volkswagen AG and AUDI AG are cooperating with
all responsible authorities in the scope of reviewing the incidents. The public prosecutor's office in
Braunschweig has also initiated investigations against one current and two former Volkswagen AG
Management Board members regarding their possible involvement in potential market manipulation in
connection with the diesel issue. 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 opened a criminal investigation in
connection with the alleged anomalies in the NOx emissions of certain Audi vehicles with diesel engines in
the United States and Europe.
On June 11, 2018, Rupert Stadler, the head of Volkswagen AG's Audi brand was named as a suspect in the
Munich II public prosecutor's investigation together with Bernd Martens, Audi's head of purchasing. Both are
being investigated for, inter alia, fraud relating to sales of diesel cars. Rupert Stadler was arrested on June 18,
2018, and is being held in custody. In addition, in May 2018, 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 well 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 civil proceedings in several jurisdictions worldwide, particularly
in South Korea, but also including Andorra, Argentina, Austria, Australia, Belgium, Brazil, China, Czech
Republic, France, Germany, India, Ireland, Israel, Italy, Mexico, the Netherlands, Norway, Poland, Portugal,
Singapore, Spain, Sweden, Switzerland, Taiwan and the United Kingdom. These proceedings are primarily
product and investor-related and include individual and collective actions. Further claims can be expected.
Customers 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 proceedings against Volkswagen AG and other Volkswagen Group companies are
pending in various countries such as Argentina, Australia, Belgium, Brazil, the Czech Republic, Israel, Italy,
Mexico, the Netherlands, Poland, Portugal, Spain, Switzerland, Taiwan and the United Kingdom. The class
action proceedings are lawsuits aimed among other things at asserting damages or, as is the case in the
Netherlands, at a declaratory judgment that customers are entitled to damages. With the exception of Brazil,
where there has already been a non-binding judgment in the first instance, the amount of these damages
cannot yet be quantified more precisely due to the early stage of the proceedings.
In South Korea various mass proceedings are pending (in some of these individual lawsuits several hundred
litigants have been aggregated). These lawsuits have been filed to assert damages and to rescind the purchase
contract including repayment of the purchase price. Furthermore, individual lawsuits and similar proceedings
are pending against Volkswagen AG and other Volkswagen Group companies in numerous countries,
particularly in Germany and the United States, but also including Italy, Spain, France, Ireland and Austria.
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