Volkswagen Financial Services AG

Volkswagen Financial Services AG Klaus-Dieter Schürmann Member of the Board of Management Morgan Stanley 7 th Annual European Automotive Conference 29 June 2004

2 Volkswagen Financial Services AG Introduction Volkswagen Group Automotive Division Financial Services Division Volkswagen Audi Commercial Remaining Financial Europcar Brand group Brand group Vehicles companies Services* *Financial Services consists of VWFS AG plus the financial services activities in North America (NAR) and South America (SAR)

3 Volkswagen Financial Services Worldwide Canada USA Mexico Brazil Argentina NAR Subsidiaries SAR Subsidiaries Netherlands Belgium Great Britain Ireland France Switzerland Portugal Spain Italy VW FS AG Subsidiaries and Branches Sweden Germany Poland Russia Czech Republic Slovakia Austria Turkey China Japan Taiwan Singapore Australia New Zealand Affiliates of Volkswagen Financial Services AG (Austria and Switzerland only insurance agency services) Companies with which service agreements exist

4 Dr. Bernd Pischetsrieder, Chairman of Managing Board Volkswagen AG Volkswagen will accelerate Financial Services activities to increase the profitability of the total Group

5 Importance of Services along the Automotive Profit Chain Distribution + Financial Services Business Manufacturer Systems and modules suppliers 7% 16% 62% 5% 9% 15% 12% New car retailing Leasing/Financing business Insurance business Used car retailing 8% Component specialists 8% 2% 2% Standard parts suppliers 5% 5% 4% 17% Car rental business Service and parts business Raw material providers Source: Company data, CSFB estimates, Automotive News Almost 2/3 of profits on cars is realised post-purchase mainly in financing, insurance and services/parts

VW FS Asia-Pacific 2004 VW FS New Zealand VW Bank Greece VW FS Taiwan 2003 VW PON Financial Services 2002 VWGF Russia VW FS Australia 2001 VW FS Singapore VW FS Portugal 1999 Integration VVD / Volkswagen Dogus Turkey More than 50 years Volkswagen Financial Services Expansion also in Asia 1998 VW FS Beijing Office (to be converted to an operating company in 2004) 1997 Volkswagen Finance Japan & Volkswagen Leasing / Bank Polska 1994 Volkswagen Financial Services AG 1992 SkoFIN Prague 6 1991 Fingerma Italia 1989 Creation of FS division based in Braunschweig 1981 Volkswagen Credit USA 1966 Volkswagen Leasing GmbH Expansion in Europe 1964 Volkswagen Finance France SA 1949 Volkswagen Finanzierungsgesellschaft 1938 Introduction of a savings scheme for the first Beetle

7 Volkswagen Financial Services worldwide steady balance sheet growth Balance sheet FS worldwide (IAS) (Euro billions) 55 50 45 40 35 30 25 20 15 10 5 0 2000 2001 2002 2003 VWFS AG NAR SAR Europcar Balance sheet VW FS worldwide has experienced steady balance sheet growth (45% of VW Group)

8 Financial Services Division: an important component of the VW Group VW Group 31.12.2003 Financial Services Division Assets 52 bn Financial Services South America South Africa Assets 1 bn Financial Services North America Assets 14 bn Europcar Group Assets 2 bn Volkswagen Volkswagen Financial Financial Services Services AG AG (VW (VW FS FS AG) AG) Reporting Reporting Group Group Assets Assets 35 35 bn bn service agreements

9 Volkswagen Financial Services AG - Key Operating Data 2000 2001 2002 2003 Portfolio ( 000) New Contracts 3,210 1,153 3,690 1,289 3,813 1,374 4,006 1,432 Growing customer base Penetration 25% 26% 31% 32% Retail + Leasing receivables ( mn) Wholesale Receivables ( mn) 17,986 4,046 19,700 4,492 21,544 4,862 23,778 4,893 Increasing asset pool Direct-bank deposits ( mn) 3,411 4,546 5,613 6,744 Successful business model Employees 3,616 4,119 4,426 5,055 IAS Profit before tax ( mn) 385 401 501 565 Strong consistent growth Cost-income ratio 53% 55% 55% 57% High efficiency

10 VW FS AG Loss Ratios 0.8 0,8% % 0.6 0,6% % 0.4 0,4% % 0.2 0,2% % 0.0 0,0% % 1999 2000 2001 2002 2003 Retail Wholesale Loss Ratio: (Drawings on provisions + direct write-offs) / Avg. total receivables of the preceding 4 quarters

11 VW FS AG s consistent profitability is reflected by increasing RoE 600 Profit before tax ( million) 500 400 300 200 RoE 2003: 21% 2002: 18% 2001: 15% 2000: 14% 100 0 2000 2001 2002 2003 RoE ranks among top third of captive Financial Services players

12 VW FS AG has achieved strong product diversification Composition of product portfolio ( 000) 1036 1426 1453 1495 Insurance/ Service Contracts Leasing 623 646 699 735 781 813 Retail Financing 1275 1394 1475 1529 1579 1698 1998 1999 2000 2001 2002 2003 *Since 2000 incl. Volkswagen Versicherungsdienst GmbH

13 VW FS AG has established a diverse funding base and decreased reliance on inter-company loans VW FS AG VW AG Funding rationale: Asset-based funding requirements Risk Basis: Customers ability to pay vs Funding requirements covered by cash flow Risk Basis: Automotive Industry Funding of VW FS AG assets: 31 Dec 01 31 Dec 02 31 Dec 03 31 Mar 04 Inter-company loans 24% 10% 12% 11% Liabilities from Direct Banking 16% 18% 19% 20% Drawn bank lines 22% 14% 10% 12% Capital markets 20% 37% 42% 42%

14 Diversified Access to the Capital Markets 12.5bn Multi-Currency CP Programme 18bn Debt Issuance Programme PLN1bn Debt Instrument Issuance Programme Issuers: Volkswagen AG Volkswagen Financial Services AG Volkswagen Bank GmbH Volkswagen Leasing GmbH* Coordination Centre Volkswagen N.V./S.A. Volkswagen Financial Services N.V.* Svenska Finans AB (publ)* JPY60bn Electronic Commercial Paper Programme Issuers: Volkswagen Financial Services AG Volkswagen Bank GmbH Volkswagen Leasing GmbH* Volkswagen Financial Services N.V.* Volkswagen Finance Japan KK* AUD1bn Debt Issuance Programme Issuers: Volkswagen Bank Polska S.A.* Volkswagen Poznan Sp.z o.o.** Volkswagen Motor Polska Sp.z o.o.** Volkswagen Leasing Polska Sp.z o.o.* Coordination Center Volkswagen N.V. / S.A. SGD500m Debt Issuance Programme Issuer: Volkswagen Finance Japan K.K.* Issuer: Volkswagen Financial Services Australia Limited* Issuer: Volkswagen Financial Services Singapore Ltd* * CP and MTNs / Debt Instruments are guaranteed by Volkswagen Financial Services AG ** Debt Instruments are guaranteed by Volkswagen AG

15 Volkswagen Financial Services AG and ADAC From March 2004 Volkswagen Bank has been working together with ADAC to offer financing for private sales of used vehicles. Largest driver club in Germany. We are targeting around 150,000 contracts over the next 5 years, around 1.2bn in receivables. Excellent opportunity to enter a new segment of private to private used car sales.

16 Strategic Outlook Strong focus on safeguarding as well as further developing the core business. Development towards a data-mining company. Extension of direct banking business in Europe taking advantage of VW Bank s European Passport. Multi-brand fleet management business. Geographic expansion. Funding : Targeting increased independence from Volkswagen Group Rating.

17 VW FS China Approval Process Dec 03 May 04 June 04 July 04 August 04 Chinese Financial Supervisory Authority grants Volkswagen Financial Services AG a licence to establish and set up an automobile financing company. Coordination of Application Documents with CBRC Head Office & Beijing Branch. Onsite CBRC Inspection etc. 2nd CBRC* Approval for Business Launch. Approval from State Admin. of Industry & Commerce. Anticipated Business Launch. *CBRC = China Banking Regulatory Commission

18 Overview LeasePlan Corporation Cutting edge worldwide provider of Fleet Management Services. No. 1 in Europe, No. 4 worldwide. Around 1.2 million vehicles under management in 26 countries (about 50% leasing contracts). Market leader in 11 countries, among the TOP 5 in all others. 2003: > 7,000 employees. Total Assets 2003: 10.8 billion, of which 9.7 billion are leasing assets. Equity 2003: 1,026 million. Net profit 2003: 193 million. Own banking and insurance license.

19 Volkswagen Financial Services AG Relationship to VW AG VW AG (A2 / A- Rating) Moody s: neg. outlook & credit watch S&P: negative outlook Control and Profit/Loss-Agreement Volkswagen Financial Services AG (A2 / A- Rating) Moody s: neg. outlook & credit watch S&P: negative outlook Letter of Comfort All affiliated companies of Volkswagen Financial Services AG worldwide Volkswagen Bank GmbH (A2 / A- Rating) Moody s: stable outlook S&P: negative outlook

Volkswagen Financial Services AG Klaus-Dieter Schürmann Member of the Board of Management Morgan Stanley 7 th Annual European Automotive Conference 29 June 2004