STRUCTURE OF VOLKSWAGEN FINANCIAL SERVICES

Volkswagen Financial Services’ portfolio of services includes dealer and customer financing, leasing, banking and insurance activities, and fleet management. Volkswagen’s global financial services activities – excluding Scania – are coordinated by Volkswagen Financial Services AG. The principal companies in this division include Volkswagen Bank GmbH and Volkswagen Leasing GmbH in Europe, and VW CREDIT, INC. in North America.

Business Development

Volkswagen Bank GmbH’s mobility packages again met with a good response from our customers in fiscal year 2008. Because of this positive response, the offering – which was originally only designed for Volkswagen Passenger Cars brand vehicles in Germany – was extended internationally to additional Group brands.

The insurance products are a key component of the mobility packages and were expanded by adding new elements during the reporting period. Premium rebates now create incentives to choose innovative safety equipment. The added driver and passenger protection, coupled with falling costs, is true added value for customers. In addition, the new safety features verifiably contribute to reducing the loss ratio and help preserve the vehicles’ value.

After Volkswagen Financial Services AG had been granted a license to operate its own automotive bank in Mexico in 2007, the Mexican banking supervisory authorities issued the necessary licenses to operate as a direct bank in 2008. Volkswagen Bank Mexico started operating on April 1, 2008 and has since provided the private customer segment there with direct bank products, meeting with a positive response.

In November 2008, Volkswagen Leasing GmbH introduced the new “Fleet Competence eCO₂” product and signed a related cooperation agreement with Naturschutzbund Deutschland e.V. (NABU). This cooperation is designed to encourage local environmental projects and make an active contribution to CO₂-optimized vehicle fleets. Volkswagen Leasing GmbH will offer low-emission vehicles at particularly attractive lease terms as well as eco-driver training in the future.

Rating agencies Moody’s Investors Service and Standard & Poor’s carried out their regular update of credit ratings in 2008. In light of the further improvement in the financial data, Moody’s upgraded its outlook for Volkswagen Financial Services AG’s long-term credit rating from stable to positive. Standard & Poor’s also recognized Volkswagen Financial Services AG’s positive trend and retained the existing ratings despite the emerging signs of a weakening in the overall market. Both agencies continue to award Volkswagen Bank GmbH a credit rating one notch higher than Volkswagen Financial Services AG and Volkswagen AG.

2.5 million new finance, leasing and insurance contracts were signed in fiscal year 2008; this was a similar level to that of the previous year. The number of contracts as of December 31, 2008 was 7.1 million. The number of contracts increased by 5.3% year-on-year in the Customer Financing/Leasing area and by 13.1% in the Service/ Insurance area to a total of 2.5 million contracts. The share of vehicles leased or financed as a proportion of total delivery volumes was 32.5% (30.1%) based on unchanged credit criteria. The direct banking business at Volkswagen Bank GmbH also continued its positive development in fiscal year 2008. As of December 31, 2008, Volkswagen Bank direct managed around 1,226,889 accounts, a year-on-year increase of 26.1%.

In our fleet management business, the number of contracts recorded by our LeasePlan joint venture as of December 31, 2008 was 1.4 million, and was thus 5.8% higher than the year before.

SALES REVENUE AND EARNINGS

In the reporting period, Volkswagen Financial Services generated sales revenue of €10.9 billion, representing a year-on-year increase of 7.7%. Despite the impact of the financial crisis and the growing pressure on margins, the operating profit of €893 million (€957 million) was only slightly lower than the previous year. This means that the Volkswagen Financial Services Division was again a major contributor to the Volkswagen Group’s profit.

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VOLKSWAGEN FINANCIAL SERVICES
				2008		2007		%
1 Including allocation of consolidation adjustments between the Automotive and Financial Services divisions. 2 Excluding provisions and deferred tax liabilities. 3 Profit before tax as % of average equity. 4 Liabilities as % of equity.
Number of contracts		thousands		7,120		6,602		+7.9
Customer financing				3,162		3,097		+2.1
Leasing				1,506		1,336		+12.7
Service/insurance				2,452		2,169		+13.1
Receivables1 from		€ million
Customer financing				29,251		28,002		+4.5
Dealer financing				10,952		10,565		+3.7
Leasing agreements				15,064		13,775		+9.4
Direct banking deposits		€ million		12,835		9,620		+33.4
Total equity and liabilities		€ million		74,690		68,603		+8.9
Equity		€ million		7,991		7,136		+12.0
Liabilities2		€ million		63,380		58,630		+8.1
Equity ratio		%		10.7		10.4
Return on equity before tax3		%		12.1		16.1
Leverage4				7.9		8.2
Operating profit		€ million		893		957		–6.7
Profit before tax		€ million		919		1,069		–14.1
Employees at Dec. 31				7,587		7,298		+4.0