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					                                                                                  VWAG-Securities Report 2002
                                                                                               [As filed copy]



Form 8




                                  SECURITIES REPORT
                                (for the year ended December 31, 2002)




                                      VOLKSWAGEN AG
                                                 (0140)


         This document is an English translation of the Securities Report on Form 8 filed by
         VOLKSWAGEN AG on June 3, 2003 with the Director-General of Kanto Local Finance
         Bureau, the Ministry of Finance of Japan. Exhibits pertaining to this Securities Report,
         which were also filed with the Director-General of Kanto Local Finance Bureau, and
         certain related documents are prepared separately.

         This document is for informational purposes only and is not for public inspection.
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]

                                       SECURITIES REPORT
                              (Report pursuant to the provisions of Article 24,
                         Paragraph 1 of the Securities and Exchange Law of Japan)
                               Fiscal Year:       From:     January 1, 2002
                                                  To:       December 31, 2002

                                                                                                   June 3, 2003

To:       Director-General, Kanto Local Finance Bureau

Corporate name:                                   VOLKSWAGEN AKTIENGESELLSCHAFT

Name and Title of Representative:                 Dr. Bernd Pischetsrieder
                                                  Chairman of the Board of Management

Location of the Head Office:                      Berliner Ring 2,
                                                  38436 Wolfsburg
                                                  Federal Republic of Germany

Name and signature of the
Attorney-in-fact:                                       (Signature)             (Seal)
                                                  Mitsuhiro Yasuda
                                                  Attorney-at-Law

Address of the Attorney-in-fact:                  Mitsui, Yasuda, Wani & Maeda
                                                  Akasaka 2.14 Plaza Bldg.
                                                  14-32, Akasaka 2-chome,
                                                  Chiyoda-ku, Tokyo
                                                  Telephone: (03) 3224-0020

Administrative personnel to contact:              Mitsuhiro Yasuda
                                                  Attorney-at-Law

Place to contact:                                 Same as above



               Place at which copies of this Securities Report are offered for public inspection

                             Name                                    Address
                    Tokyo Stock Exchange, Inc.              2-1, Nihombashi Kabutocho
                                                            Chuo-ku, Tokyo




                (This document in Japanese consists of 102 pages including this cover page.)
                                                                                                                    VWAG-Securities Report 2002
                                                                                                                                 [As filed copy]
                                                      TABLE OF CONTENTS

                                                                                                                                                PAGE

PART ONE:              INFORMATION OF THE COMPANY............................................................................1

I.      OUTLINE OF THE LEGAL AND OTHER SYSTEMS IN THE...............................................1
        HOME COUNTRY
        1.    Outline of the Corporate System, etc. .......................................................................................1
        2.    Foreign Exchange Control System ...........................................................................................9
        3.    Tax Treatment .............................................................................................................................9
        4.    Legal Opinion........................................................................................................................... 10

II.     OUTLINE OF THE COMPANY...................................................................................................... 11
        1.    Trend of Significant Business Indicators, etc........................................................................ 11
        2.    Brief History of the Company ................................................................................................ 12
        3.    Substance of Business.............................................................................................................. 16
        4.    Affiliated Companies............................................................................................................... 16
        5.    Employees................................................................................................................................. 17

III.    STATE OF BUSINESS OPERATIONS.......................................................................................... 18
        1.    Outline of Results of Operations, etc. .................................................................................... 18
        2.    Production, Orders Received and Turnover.......................................................................... 29
        3.    Subject Matters to be dealt with.............................................................................................. 33
        4.    Material Business Contracts, etc............................................................................................. 33
        5.    Research and Development Activities................................................................................... 33

IV.     CONDITION OF FACILITIES......................................................................................................... 35
        1.    Outline of Investments in Facilities, etc................................................................................. 35
        2.    Condition of Major Facilities.................................................................................................. 36
        3.    Plans for Installation, Expansion or Removal of Facilities, etc........................................... 36

V.      CONDITION OF THE COMPANY ................................................................................................ 38
        1.    Condition of Shares, etc........................................................................................................... 38
        2.    Dividend Policy........................................................................................................................ 40
        3.    Trend of Share Price ................................................................................................................ 40
        4.    Directors and Executive Officers............................................................................................ 41

VI.     FINANCIAL CONDITION ................................................................................................................ 45
        1.    Financial Statements................................................................................................................ 51
        2.    Substance of Major Assets and Liabilities............................................................................. 52
        3.    Other Matters............................................................................................................................ 52
        4.    Major Differences in Accounting Principles and Practices
              between the Federal Republic of Germany and Japan......................................................... 52

VII.    TREND OF FOREIGN EXCHANGE RATE................................................................................ 61

VIII.   OUTLINE OF SHARE HANDLING, ETC. IN JAPAN ............................................................. 61

IX.     REFERENCE INFORMATION OF THE COMPANY............................................................. 65



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PART TWO:         INFORMATION OF THE GUARANTOR..................................................................65


Notes:

1.       As used in this document, the term "Company", "Corporation", "Volkswagen" or "Volkswagen
         AG" refers to VOLKSWAGEN AKTIENGESELLSCHAFT and the term "Volkswagen Group"
         or "Group" refers to VOLKSWAGEN AKTIENGESELLSCHAFT and its consolidated
         subsidiaries unless otherwise the context requires.

2.       The terms "Euro", "EUR" and "€" in this document, unless otherwise noted, refer to Euro. For the
         convenience of the readers, conversion into Japanese Yen has been made at the exchange rate of
         EUR1.00 = \129.95 (the median of the Telegraphic Transfer Spot Exchange Rates in Tokyo on
         April 16, 2003).

3.       Where figures in tables in this document have been rounded, the totals may not necessarily agree
         with the sum of the figures.




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PART ONE: INFORMATION OF THE COMPANY

I.        OUTLINE OF THE LEGAL AND OTHER SYSTEMS IN THE HOME COUNTRY

1.        Outline of Corporate System, etc.

(1)       Corporate System of the Federal Republic of Germany General

The laws of the Federal Republic of Germany provide for different types of commercial companies:

-         General Partnership (Offene Handelsgesellschaft - "OHG"), governed by Sections 105-160 of the
          Commercial Code; all partners are fully and personally liable for the liabilities of the partnership.

-         Limited Partnership (Kommanditgesellschaft - "KG"), governed by Sections 161-177a of the
          Commercial Code; at least one partner is fully and personally liable (general partner) whereas the
          liability of the other (limited) partners is limited to their capital contribution.

-         GmbH & Co. KG, special type of a limited partnership in which a GmbH acts as general partner
          with full liability for the partnership. This type of company is governed by the provisions
          applicable to a limited partnership.

-         Private limited liability company (Gesellschaft mit beschränkter Haftung - "GmbH"), governed by
          the Private Limited Liability Company Act. A GmbH has its own legal personality. Only the
          assets of the company are liable to satisfy the claims of the creditors of the company; no personal
          liability is incurred on the part of the partners. The GmbH has a fixed share capital of at least Euro
          25,000 which is divided into quotas. The quotas, however, are transferable only by notarial deed.

-         Stock Corporation (Aktiengesellschaft - "AG"), governed by the Stock Corporation Act. Like a
          GmbH a stock corporation has its own legal personality. Shareholders are not liable for the
          corporation’s debt. The corporation has a fixed share capital of at least Euro 50,000. The share
          capital can be divided into shares with par value (Nennbetragsaktien) or non-par value share
          (shares without nominal value – Stückaktien) and can be issued in bearer-form (Inhaberaktie) or as
          registered shares (Namensaktien). Such shares can be transferred without notarization. In general
          the Stock Corporation Act gives much less flexibility to the structure of the corporation than the
          Private Limited Liability Company Act does.

The following description outlines in greater details the characteristics of a stock corporation.

Incorporation
A corporation can be founded by one or more persons. The founders have to subscribe for all shares against
contribution in cash or contribution in kind. Upon incorporation the share capital of a stock corporation must
be at least Euro 50,000.

The Articles of Association have to be executed by notarial deed and registered with the Commercial
Register kept by the District Court (Amtsgericht) of the place of domicile of the corporation. Such Articles
of Association have to state:
-         name and domicile of the corporation,
-         objects of the corporation,
-         amount of share capital,
-         whether the registered capital is divided into shares or par value or non-par value; and (a) in the
          case of shares with par value: the value of the shares and the number of shares of each nominal

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          value; or (b) in the case of non-par value shares: the number of shares,
-         whether the shares are issued in bearer or registered form,
-         number of the Managing Directors (Vorstand) or the rules under which such number is
          determined,
-         form of publications of the corporation.
The stock corporation as such begins to exist as a legal entity upon registration with the Commercial
Register.

Relationship between corporation and shareholders
Shareholders are entitled to equal treatment under equal circumstances. Shareholders are entitled to receive
the distributable profit to the extent that it is not excluded from distribution by law, the Articles of
Association or by a shareholders' resolution, or (up to certain limits) by mutual decision of the Management
Board and the Supervisory Board (Aufsichtsrat), e.g. because it is allocated to the reserves.

The corporation may acquire its own shares only under very limited circumstances set forth in section 71 of
the Stock Corporation Act.

Bearer shares are transferred by agreement between seller and buyer and delivery of the share certificates.
Registered shares are transferred by agreement between seller and buyer and transfer of the endorsed or
assigned share certificates. In case of registered shares only persons who are registered in the corporations
shareholder register shall be deemed to be shareholders vis-à-vis the corporation. Generally shares are
certificated by one or several global share certificates which are deposited with Clearstream Banking AG.
Shareholders do not receive individual share certificates and in the case of the transfer of ownership in shares
the delivery of share certificates from the seller to the buyer is replaced by book entry in the book of the
custodian.

In the case of a listed company any shareholder whose shareholding (directly or indirectly) exceeds 5%,
10%, 25%, 50%, or 75% of the corporation voting rights has to inform the corporation and the Federal
Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) within seven days. The
same rules apply if the shareholding is reduced below these thresholds. As long as corporation is not notified
rights from such shares may not be exercised.



Organization of the corporation
Board of Managing Directors
The Board of Managing Directors has to conduct the business of the corporation under its own
responsibility. The Board of Managing Directors may consist of one or more persons. Only a natural and
legally fully capable person may be a member of the Board of Managing Directors.

The Board of Managing Directors may set up rules for the conduct of its business, unless the Articles of
Association have conferred upon the Supervisory Board the issuing of such rules or unless the Supervisory
Board issues such rules for the Board of Managing Directors.

The Board of Managing Directors represents the corporation in and out of court. If the Board of Managing
Directors consists of several persons, then all members of the Board of Managing Directors are only
authorized to represent the corporation jointly, unless the Articles of Association determine otherwise (which
is usually the case). The Articles of Association may provide that members of the Board of Managing
Directors are authorized to represent the corporation solely or jointly with a holder of procuration (such
procuration being a power of attorney governed by the Commercial Code and entered in the Commercial

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Register). Members of the Board of Managing Directors authorized to represent jointly may authorize
individual members among themselves to transact certain business or kinds of business. Deputy members of
the Board of Managing Directors may be appointed. As to the representation of the corporation vis-a-vis
third parties, they have the same powers as ordinary members.

Each change in the Board of Managing Directors or in the authority to represent the corporation has to be
entered in the Commercial Register.

The members of the Board of Managing Directors are appointed by the Supervisory Board for a maximum
term of 5 years; reappointment or extension of appointment is permitted, in each case for a maximum term
of 5 years.

The Board of Managing Directors shall report regularly to the Supervisory Board on the intended business
policy, the profitability of the corporation, the current business as well as important events.

Supervisory Board

Pursuant to section 95 of the Stock Corporation Act the Supervisory Board consists of a minimum of 3 and a
maximum of 21 members, such number always being divisible by 3.

The Law on industrial Co-determination of May 4, 1976 (Mitbestimmungsgesetz) (“LoC”), which is
applicable to all corporations, having generally more than 2,000 employees, however, provides for a
different composition. (The following description refers to a corporation subject to the Law on Co-
determination.)

Pursuant to the LoC the Supervisory Board has to be composed;

(1)      in case of a corporation having generally not more than 10,000 employees, of 12 members (6
         shareholders' representatives, 6 employees' representatives among which have to be 4 employees
         of the corporation and 2 representatives of trade unions); the Articles of Association may provide,
         however, for 16 or 20 members which are equally divided between shareholders’ representatives
         and employee representatives;

(2)      in case of a corporation having generally more than 10,000 but not more than 20,000 employees of
         16 members (8 shareholders' representatives, 8 employees' representatives among which have to
         be 6 employees of the corporation and 2 representatives of trade unions); the Articles of
         Association may provide, however, for 20 members;

(3)      in case of a corporation having generally more than 20,000 employees of 20 members (10
         members' representatives, 10 employees' representatives among which have to be 7 employees of
         the corporation and 3 representatives of trade unions).

The composition of the Supervisory Board with respect to the shareholders' representatives is not governed
by the LoC. As to the employees' representatives, however, the LoC provides further details.

The representatives of the shareholders are elected in a shareholders' meeting. The election of the
representatives of the employees is governed by section 9 through 24 LoC with further details in 3
regulations issued under the authority of the LoC on June 23, 1977. The election procedure is complicated
and takes, in case of large corporations, at least 31 weeks.

The terms of any member of the Supervisory Board may not exceed the period which ends with the
shareholders' meeting deciding on the discharge from responsibility of such member for the fourth fiscal year


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after the beginning of the term of office, i.e. a period of ca. 5 years. For each member, be it representative of
the shareholders or of the employees, a member of replacement may be elected together with such (ordinary)
member. Such member of replacement becomes member of the Supervisory Board, if the ordinary member
ceases to be a member of the Supervisory Board prior to the end of its term.

Duties and rights of the Supervisory Board

The Supervisory Board has to supervise the management. The Supervisory Board may inspect and examine
the books and records of the corporation as well as its assets. It has to convene a shareholders' meeting, if it
is necessary in the interest of the corporation.

Management functions may not be conferred upon the Supervisory Board; the Articles of Association or the
Supervisory Board may, however, determine that specific types of transactions require the consent of the
Supervisory Board.

The remuneration of the members of the Supervisory Board has to be determined in the Articles of
Association or by resolution of the shareholders' meeting.

Chairman, resolution, committees
The Supervisory Board has to appoint one of its members as chairman and at least one deputy chairman.

The quorum for passing resolutions requires, unless provided otherwise by law, the participation of at least
half of the total number of its members (Section 28 LoC). Submission of a vote in writing through another
member is deemed to be participation in such resolution. A resolution requires, unless otherwise provided,
the majority of the votes cast. In case of a tie, a second voting can be held in which the chairman has the
casting vote, should there be again a tie. The deputy chairman is not entitled to such casting vote (Section 29
LoC).

The Supervisory Board may form one or more committees which can be entrusted with decisions on behalf
of the Supervisory Board, except for certain matters specified in section 107 paragraph 3 of the Stock
Corporation Act.

Appointment of members of the Board of Managing Directors
Pursuant to section 31 LoC a resolution of the Supervisory Board to appoint a member of the Board of
Managing Directors requires a 2/3 majority. If such majority is not reached, a specific committee consisting
of 4 members of the Supervisory Board has to present a proposal for such appointment within one month.
The resolution of the Supervisory Board can then be passed by simple majority whether or not such proposal
is accepted; chairman has a casting vote, should there be a dead lock.

Shareholders' meeting
The shareholders exercise their rights in a shareholders' meeting in which resolutions are passed regarding
matters set forth in the Stock Corporation Act or in the Articles of Association, in particular the following:

(a)       appointment of shareholders' representatives in the Supervisory Board;

(b)       appropriation of distributable profit;

(c)       granting discharge for the members of the Board of Managing Directors and of the Supervisory
          Board;

(d)       appointment of the auditors;


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(e)       amendments of the Articles of Association;

(f)       capital increase and decrease;

(g)       appointment of special auditors;

(h)       dissolution of the corporation.;

(i)       change of legal form, mergers and a split of the corporation.

The shareholders' meeting may decide about business matters only if the Board of Managing Directors so
requests.

The ordinary shareholders' meeting has to take place in the first eight months of the fiscal year. Such
meeting has to well as to pass the resolution on the appropriation of distributable profit and on the discharge
of the Board of Managing Directors and of the Supervisory Board. It has furthermore to appoint the
auditors. In addition a shareholders' meeting has to be convened if this is required in the interest of the
corporation. Shareholders meetings may be convened by the Board of Managing Directors, by the Super-
visory Board, or by shareholders holding at least 5% of the share capital. Such invitation has to be published
in the Federal Gazette. The publication has to state the date and place of the shareholders' meeting as well as
the preconditions for attendance and the agenda. The call has to be published at least 1 month prior to the
day of the shareholders' meeting or prior to the last day on which shares may be deposited if such deposit is
required by the Articles of Association. The Board of Managing Directors and the Supervisory Board have
to make proposals with respect to each item of the agenda on which a resolution has to be passed (only the
Supervisory Board for the appointment of members of the Supervisory Board and of the auditors).

In the shareholders' meeting shareholders may present dissenting motions with respect to any item of the
agenda. If a shareholder mails to the corporation within a period ending two weeks before the shareholders'
meeting a dissenting motion together with reasons therefore and if such shareholder states that he intends to
oppose in the shareholders' meeting a proposal of the Board of Managing Directors and of the Supervisory
Board and to cause the other shareholders to vote for his counter proposal, the corporation is obliged to make
available such dissenting proposal - together with its own comments thereon, if any - to the shareholders
through the corporation's homepage.

Each shareholder is entitled that the Board of Managing Directors gives answers in the shareholders' meeting
on his questions regarding matters of the corporation, if and insofar as the requested information is necessary
to form an appropriate opinion on the subjects of the agenda. Under certain circumstances set forth in
section 131 paragraph 3 of the Stock Corporation Act the Board of Managing Directors is entitled to refuse
the answer, e.g. if such answer might cause not unsubstantial disadvantage to the corporation.

Voting rights resulting from the shares may be exercised personally by the shareholder or by a proxy
authorized in writing. In the Federal Republic of Germany it is customary to authorize banks or
representatives of the corporation to exercise the voting right as directed given by the relevant shareholder
(voting right by proxy).

Resolutions of the shareholders' meeting may be passed with simple majority of the votes cast. The Articles
of Association determine which nominal value of the shares gives the right to one vote. In certain cases a 3/4
majority of the share capital represented in the meeting is required by law (e.g. in case of amendments to the
Articles of Association, capital increase, capital decrease, dissolution); the Article of Association may,
however, increase such 3/4 majority to a higher majority with an only exception of an early termination of a
member of the Supervisory Board in which case the 3/4 majority may be reduced to a simple majority.



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The minutes of a shareholders' meeting have to be taken by a notary public; they have to reflect the results of
the voting. The minutes are to be submitted to the Commercial Register.

Accounting, Appropriation of Distributable Profit
Within the first three months of the fiscal year the Board of Managing Directors has to prepare and to submit
to the auditors the annual balance sheet and the profit and loss statement (annual financial statements) as well
as the report of the management for the past fiscal year. The annual financial statements have to correspond
to the principles of proper accounting. They shall be clear and well set out and give a true view of the
corporation's financial position and of its operating results. Each corporation has to form a Capital Reserve.
Such reserve shall be credited among others with:

(a)       5% of the net profit of the year, decreased by a loss carried forward from the previous year, until
          the reserve equals 10% or a higher percentage of the share capital as set forth in the Articles of
          Association;

(b)       the amount which exceeds the nominal value of shares received upon issue of new shares;

(c)       the amount exceeding the amount of repayment of convertible bonds or bonds with warrants and
          received upon issue of such bonds;

(d)       the premium paid by shareholders in consideration of a preference for their shares.

The application of the legal reserve is restricted and basically limited to compensate losses.

Insofar as a corporation holds its own shares it has to form a special reserve equal to the book value of such
shares.

In addition to the legal reserve other disclosed reserves may be formed. Within the limits of the Stock
Corporation Act and the Articles of Association the net income of the corporation may be allocated, partly or
wholly, to such other disclosed reserves.

The report of the Board of Managing Directors has to set forth the course of the business and the situation of
the corporation. Events of special significance which have occurred after the end of the fiscal year shall also
be reported. Furthermore the annual financial statements have to be explained.

The annual financial statements including the balance and the profit and loss statement and the report of the
Board of Managing Directors must be examined by the auditors which have been appointed by the
shareholders' meeting upon proposal of the Supervisory Board. The auditors shall report in writing on the
results of the examination. If no objections are raised on the basis of the final result of such examination, the
auditors shall confirm this fact by an attestation of the annual financial statements the wording of which is
prescribed by law.

Without undue delay after receipt of the examination report the Board of Managing Directors shall submit
the annual financial statements, the report of the Board of Managing Directors and the examination report to
the Supervisory Board. The Supervisory Board has to examine the annual financial statements, the report of
the Board of Managing Directors together with the proposal of the Board of Managing Directors for the
appropriation of the distributable profit. The Supervisory Board shall report in writing on the result of its
examination to the shareholders' meeting. In addition it shall give its opinion on the result of the examination
of the annual financial statements by the auditors. At the end of its report the Supervisory Board has to state
whether or not objections are to be raised on the basis of the final result of its examination and whether or not
it approves the annual financial statements as prepared by the Board of Managing Directors. If the
Supervisory Board approves the annual financial statements, then they are therewith determined, unless the

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Board of Managing Directors and Supervisory Board decide to leave such determination of the annual
financial statements to the shareholders' meeting. It is customary that the Boards do not leave such
determination to the shareholders' meeting.

Appropriation of distributable profit
The shareholders' meeting has to resolve upon the appropriation of distributable profit. It is bound by the
determined annual financial statements.

Publicity
The annual financial statements, the report of the Board of Managing Directors, the report of the Supervisory
Board and the proposal of the Board of Managing Directors for the appropriation of the distributable profit
shall be made available for inspection by shareholders on the premises of the corporation as from the date of
the call of the shareholders' meeting. Upon request a copy of such documents has to be given to any
shareholder. It is customary that such documents are included in the annual report of the corporation and
that such annual report is made available to shareholders and other interested persons.

Without undue delay after the ordinary shareholders' meeting the Board of Managing Directors shall submit
the annual financial statements with auditors certificate auditors and the report of the Board of Managing
Directors together with the report of the Supervisory Board to the Commercial Register. The court in charge
of the Commercial Register shall examine whether or not the annual financial statements are obviously void.
Otherwise it need not examine whether or not the annual financial statements and the report of the Board of
Managing Directors correspond to the provisions of the law and of the Articles of Association except for
certain formal prerequisites.

(2)      Corporate System as provided for in the Company's Articles of Incorporation or Bylaws,
         etc.

The following is a summary of certain provisions of the system set forth in the Volkswagenwerk Law (as
amended and supplemented from time to time) and/or the Articles of Association of the Company.

Shares
The subscribed capital of Volkswagen AG is denominated in Euro. The shares are bearer shares without
nominal value. One share represents a share of 2.56 EUR of the Company's capital. As well as ordinary
shares, there are preferred shares which entitle the bearer to a 0.06 EUR higher dividend than the ordinary
shares but have no voting rights.

The subscribed capital as of the year-end amounts to 1,089,352,243.20 EUR and is composed of
320,289,940 ordinary shares with no nominal value and 105,238,280 preferred shares.

Shareholders
a)          General Meeting of Shareholders
An annual General Meeting shall be held within the first eight months of each fiscal year.

Every shareholder is entitled to take part in the general meeting of shareholders, which is convened by the
Board of Managing Directors or the Supervisory Board. The call shall be published at least one month prior
to the last deposition day complete with agenda.
The general meetings shall be held at the Company's registered office or at the location of a German stock
exchange or at another suitable location in Germany.


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The chairmanship of the general meeting is taken by the chairman of the Supervisory Board or, in the event
of his disability, by another member appointed by the Supervisory Board.

b)        Voting
The right to vote at a general meeting of shareholders is exercised in such a way that each ordinary share
entitles to one vote. If a stockholder holds shares with an aggregate nominal value in excess of one fifth of
the shares in the Company, his voting rights shall be restricted to the number of votes granted by one fifth of
the shares.

In order to vote or make motions in the general meeting, the shareholders must, at the latest, by the close of
business on the seventh day before the general meeting, deposit their shares with either a German notary, or
securities depository bank, or some other place to be designated in the public announcement, and leave them
there until the close of the general meeting. In the event of a deposit with a German notary, the certificate to
be issued by him is to be submitted to the Company at the latest on the third day prior to the date of meeting.

c)        Resolutions
Unless otherwise provided in the Articles of Association or by mandatory provisions of the Stock
Corporation Act, the resolutions of the general meeting shall be passed by a simple majority of the votes cast.
In the event the Stock Corporation Act requires a majority of at least three-fourths of the shares represented
in order to pass a resolution, a majority of more than four-fifths of the shares represented is required for
passing a resolution.

Governing Bodies
a)        Board of Managing Directors (Vorstand)
The Board of Managing Directors consists of three or more members, the number of which is determined by
the Supervisory Board.

The Board of Managing Directors shall conduct the business of the Company in accordance with the law
and the Articles of Association. The Supervisory Board shall decide on the distribution of individual
business spheres among member of the Board of Managing Directors and shall issue rules of procedure after
hearing their opinions.

The Company shall be legally represented by two members of the Board of Managing Directors or by one
member of the Board of Managing Directors acting jointly with a Prokurist (an employee whose
authorization under the Commercial Code to sign for the Company is shown by the Commercial Register of
the District Court).

b)        Supervisory Board (Aufsichtsrat)
The Supervisory Board consists of twenty members. The duties and functions of the Supervisory Board are
provided in the Volkswagenwerk Law, the Stock Corporation Act, the Law on Co-determination and the
Articles of Association of the Company.

The Federal Republic of Germany and the State of Lower Saxony are each entitled to delegate two members
of the Supervisory Board as long as they hold shares in the Company.



2.        Foreign Exchange Control System

The foreign exchange control system of the Federal Republic of Germany is based on the Foreign Trade Act

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(Aussenwirtschaftsgesetz) of 1961 as amended (the 'Act') and on the Foreign Trade Ordinance
(Aussenwirtschaftsverordnung) as presently in force (the 'Ordinance') promulgated under the Act.

As regards foreign investments in the Federal Republic of Germany the Act provides, inter alia, for the
possibility to restrict transactions between persons (natural or legal) 'resident in the Federal Republic of
Germany' (as defined by the Act) and persons 'resident outside the Federal Republic of Germany' (as defined
by the Act) regarding

-        the purchase of enterprises in the Federal Republic of Germany and participations in such
         enterprises by persons resident outside the Federal Republic of Germany,

-        the purchase by a person resident outside the Federal Republic of Germany of securities (which
         expression includes shares) issued in the Federal Republic of Germany,

However, such restrictions may only imposed to effect a balance of payments equilibrium. As of this date no
such restrictions are in force.

However, the Ordinance requires some reporting on investments in the Federal Republic of Germany of
persons resident outside the Federal Republic of Germany. In this connection, section 58a of the Ordinance
establishes reporting requirements regarding investments made with the intention to create long-term place
of operations the formation of branches, or of a participation in an enterprise, and regarding the disposal of
such investments. The mere purchase or sale of shares of a Germany company is not subject to such
reporting requirements provided that the foreign shareholder holds less than 10% of the share capital or
voting rights.

There are also no restrictions in force on the payment of dividends to shareholders resident outside the
Federal Republic of Germany.



3.       Tax Treatment

Tax Treatment in Germany
Dividends paid by Volkswagen AG to a Japanese shareholder are subject to a 20 per cent withholding tax
levied at source (Capital Yields Tax = Kapitalertragsteuer) and a 5.5 per cent solidarity surcharge based on
the withholding tax. In accordance with the Agreement between the Federal Republic of Germany and
Japan for the avoidance of double taxation with respect to taxes on income and to certain other taxes, 5 per
cent withholding tax will be refunded by the German tax authorities. A special application has to be filled
with the Bundesamt für Finanzen, Bonn-Bad Godesberg, for the refund. The remaining withholding tax of
15 per cent may be offset as a tax credit in Japan.

Capital gains realized by a Japanese resident from the sale of shares of Volkswagen AG are not subject to
German income tax.

German inheritance tax (Erbschaftsteuer) with respect to shares of Volkswagen AG owned by a Japanese
resident would only fall due, if the shares held by such Japanese resident would amount to 10 per cent or
more of the share capital of Volkswagen AG. German net worth tax (Vermögensteuer) with respect to
shares owned by a Japanese resident does not fall due (notwithstanding the percentage of the share capital).

Japanese Tax Treatment
Subject to compliance with and the limitations of the Income Tax Law, the Corporation Tax Law, the


                                                      9
                                                                                  VWAG-Securities Report 2002
                                                                                               [As filed copy]
Inheritance Tax Law and other current and pertinent laws and regulations of Japan, credits may be claimed
as offsets to taxes payable in Japan pursuant to applicable tax convention by Japanese persons or Japanese
corporations for German taxes to which the income (and estates, as to individuals) of such persons or
corporations have been subjected as noted above.



4.       Legal Opinion

Dr. Kristian Ehinger, Deputy General Counsel of the Company, has submitted a legal opinion to the effect:

(i)      The Company has been duly incorporated and is validly existing as a corporation in good standing
         under the laws of the Federal Republic of Germany, with full power and authority to conduct its
         business and to own and operate its property as described in this document.

(ii)     To the best of his knowledge and belief, the statements with respect to the matters pertaining to
         laws of Germany contained under Section 1. "Outline of Legal and Other Systems in the Home
         Country" in this document are true and correct in all material respects.




                                                    10
                                                                                          VWAG-Securities Report 2002
                                                                                                       [As filed copy]

II.        OUTLINE OF THE COMPANY

1.         Trend of Significant Business Indicators, etc.

(1) Volkswagen Group in Figures

                                                                           (Million Euro (Hundred Million Yen))
                                                                                                             Change
                                                                                                              2002/
 Fiscal Year            1998         1999                 2000                   2001            2002
                                                                                                              2001
                                                                                                              in %
                        HGB          HGB          HGB            IAS (1)        IAS (1)         IAS (1)
                          68,637       75,167       85,555          83,127         88,540          86,948
 Consolidated sales                                                                                             -1.8
                         (89,194)     (97,680)    (111,179)      (108,024)      (115,058)       (112,989)
 Consolidated cost of     60,111       66,646       74,741          71,130         75,586          74,188
                                                                                                                -1.8
 sales                   (78,114)     (86,606)     (97,126)       (92,433)       (98,224)        (96,407)
 Consolidated profit       3,215        2,522        3,469           3,719          4,409           3,986
                                                                                                                -9.6
 or loss before tax       (4,178)      (3,277)      (4,508)        (4,833)        (5,730)          (5,180)
 Consolidated profit       1,147            844      2,062           2,614          2,926           2,597
                                                                                                               -11.3
 after tax                (1,491)      (1,097)      (2,680)        (3,397)        (3,802)          (3,375)
 Consolidated capital      9,584       10,073       11,521          21,371         23,995          24,634
                                                                                                                 2.7
 and reserves            (12,454)     (13,090)     (14,972)       (27,772)       (31,182)        (32,012)
 Consolidated total       60,002       67,118       81,593          92,565        104,424         108,896
                                                                                                                 4.3
 assets                  (77,973)     (87,220)    (106,030)      (120,288)      (135,699)       (141,510)
 Workforce as at
 December 31             297,916      306,275      324,402        324,402         322,070         324,892        0.9
 (Employees)

(Note)

(1) Volkswagen AG has adopted International Accounting Standards (IAS) for its consolidated financial
    statements for the year ended on December 31, 2001. Figures prepared with IAS for the year 2000 are
    only for the purposes of reference and comparison.




                                                     11
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]

(2) Volkswagen AG in Figures
                                                                         (Million Euro (Hundred Million Yen))
                                                                                                     Change
 Fiscal Year                1998          1999              2000          2001           2002       2002/2001
                                                                                                         in %
 Sales of Volkswagen          38,030        40,094           43,447        44,197           43,087
                                                                                                             -2.5
 AG                         (49,420)      (52,102)          (56,459)      (57,434)        (55,992)
 Results from ordinary         2,271         1,918            2,439         1,713            1,827
 business activities of                                                                                         6.6
 Volkswagen AG                (2,951)      (2,492)           (3,169)       (2,226)          (2,374)

 Net earnings of                   635           652               824        918            1,036
                                                                                                            12.8
 Volkswagen AG                 (825)         (847)           (1,071)       (1,193)          (1,346)
 Subscribed capital of         1,067         1,068            1,071         1,087            1,089
                                                                                                                0.2
 Volkswagen AG                (1,387)      (1,388)           (1,392)       (1,413)          (1,415)
 Total number of the
 issued ordinary shares        311.9         312.0            313.1         319.5            320.3              0.3
 (Million shares)
 Stockholders' equity of       8,483         8,802            9,313         9,900           10,468
                                                                                                                5.7
 Volkswagen AG              (11,024)      (11,438)          (12,102)      (12,865)        (13,603)
 Total assets of              24,474        26,019           31,287        31,115           29,770
                                                                                                             -4.3
 Volkswagen AG              (31,804)      (33,812)          (40,657)      (40,434)        (38,686)
 Dividend per ordinary          0.77          0.77             1.20           1.30             1.30
                                                                                                                 0
 share (Euro (Yen))            (100)         (100)            (156)          (169)            (169)
 Dividend per preferred         0.82          0.83             1.26           1.36             1.36
                                                                                                                 0
 share (Euro (Yen))            (107)         (108)            (164)          (177)            (177)
 Workforce
                             103,792      104,203           104,675       105,561          104,704           -0.8
 (Employees)

(Note)    Prepared in accordance with the German Commercial Code (HGB)



2.        Brief History of the Company

Volkswagen Aktiengesellschaft, dates back to "Gesellschaft zur Vorbereitung des Deutschen Volkswagens
mit beschränkter Haftung" founded in Berlin in 1937. In 1938 this company was named "Volkswagenwerk
Gesellschaft mit beschränkter Haftung".

The legal status and ownership as regards the Company were revised by an agreement concluded on Nov.
11/12, 1959 between the Federal Republic of Germany and the State of Lower Saxony as well as by the
"Gesetz über die Regelung der Rechtsverhältnisse bei der Volkswagenwerk Gesellschaft mit beschränkter
Haftung" (Law on the Regulation of the Legal Position with Regard to Volkswagenwerk Gesellschaft mit
beschränkter Haftung) of May 9, 1960, by the "Gesetz über die Überführung der Anteilsrechte an der
Volkswagenwerk Gesellschaft mit beschränkter Haftung in private Hand" (Law on the Transfer into Private
Ownership of the Shares of Volkswagenwerk Gesellschaft mit beschränkter Haftung) of July 21, 1960
(Volkswagenwerk Law), by the Introductory Law to the Germany Corporation Law of Sept. 6, 1965 as well
as by the Amending Law of Aug. 2, 1966 and the Second Amending Law of July 31, 1970. On Aug. 22,

                                                       12
                                                                                   VWAG-Securities Report 2002
                                                                                                [As filed copy]
1960 the transformation into a joint stock company was entered in the Register of Commerce at the District
Court at Wolfsburg. The name of the Company was changed to "Volkswagen Aktiengesellschaft" by
resolution of the Annual Meeting of July 4, 1985. The Company is listed under HRB 1200 in the Register of
Commerce.

1952     Volkswagen of Canada Inc., a distributing company, was founded.

1953     Volkswagen do Brasil, an assembly subsidiary, was founded.

1955     One millionth VW car was built.
         Volkswagen of America Inc. was founded.

1965     The Company acquired Auto Union GmbH from Daimler-Benz.

1970     Germany's largest rent-a-car enterprise "Selbstfahrer-Union" is taken over by the
         Volkswagenwerk.

1976      The first VW Diesel engined vehicle is produced - the GOLF with transversely mounted engine.
          VW is the first of the mass production car manufacturers in the world to produce a Diesel
          powered saloon car in the lower middle class range.
          30,000,000th Volkswagen produced.

1981      The company concluded an agreement with Japanese manufacturer, Nissan, providing for
          production of the VW model Santana in Japan.

1986      The company took over the Spanish Motor manufacturer SEAT which had been building VW
          models in a cooperation agreement in 1983. The company entered a cooperation with Ford in
          Argentina and Brazil and formed AUTOLATINA.

1987      Fifty millionth car was produced.

1988      The company celebrated its fiftieth anniversary. Ten millionth VW Golf was produced at the
          Wolfsburg plant.

1989      The agreement with IFA was signed as a joint planning venture with the aim of preparing for the
          development, production and sale of competitive automobiles in East Germany. 25 millionth
          Volkswagen came off the production line in Wolfsburg.

1990      Laying of the foundation stone for a new vehicle-manufacturing plant on September 26, 1990 in
          Mosel/ Germany (annual output of 250,000 vehicles in 1994). For the first time ever, the
          Volkswagen Group's vehicle sales topped the three million mark.

1991      Volkswagen acquired a 31% interest in Škoda, automobilová a.s. and assumed management
          responsibility.

          The most extensive investment programme in the Group's history was mainly devoted to new
          models (Golf III, Vento, Audi Convertible, Audi 80, SEAT Toledo) and optimizing
          manufacturing structures.

          A new internal structure was set up to facilitate major strategy decisions of the Group, consisting
          of Volkswagen AG, Audi, SEAT and Škoda.

1992      Despite the stagnation on the major international automobile market the Volkswagen Group

                                                     13
                                                                              VWAG-Securities Report 2002
                                                                                           [As filed copy]
       achieved a new production record with 3.5 million vehicles. Volkswagen takes over distribution
       in Great Britain from Lonrho Plc with effect from January 1, 1993. New projects were the fifty-
       fifty joint venture with Ford Motor Company by the name of AutoEuropa to produce a people-
       carrier in Portugal and a transporter production plant in cooperation with Ching Fong Investment
       Co., Ltd. in Taiwan.

1993   The Chairman of the Board of Management of Volkswagen AG, Dr. rer. pol. Carl H. Hahn,
       retired from his post on December 31, 1992. Dr. Hahn assumed the chairmanship in January
       1982 and over the next eleven years turned Volkswagen into Europe's leading vehicle
       manufacturer. He was also the driving force behind the Group's expansion of its operations on a
       worldwide scale and thereby played a major role in shaping Volkswagen's course for the future.

       The downward trend which had started to make itself felt on major automobile markets during the
       second half of 1992 continued in 1993, with the result that the total of 3,114,880 passenger cars
       and commercial vehicles delivered to customers worldwide by the Volkswagen Group in 1993
       was 11.4% down on the previous year's figure.

       The Volkswagen Group's worldwide output fell as a result by 13.7% to 3,018,650 vehicles; out of
       this total, 1,240,124 were built by Volkswagen AG (-25.2%).

1994   The slight upward trend on major automobile markets in 1994 meant that the number of
       passenger cars and commercial vehicles delivered to customers worldwide by the Volkswagen
       Group rose by 6.4% to 3,294,619. The Volkswagen Group raised production in the course of
       1994 to take account of the improved sales situation. Worldwide output rose by 0.8% to
       3,042,383 vehicles; out of this total, 1,246,392 were built by Volkswagen AG (+0.5%). In
       response to the problem of having around 30,000 employees more than actually required
       Volkswagen AG took steps to adjust total working time accordingly by introducing the four-day
       week (28.8-hour week) for 1994 and 1995.

1995   In the fiscal year 1995 the Volkswagen Group delivered 3,567,259 passenger cars and
       commercial vehicles to customers worldwide. This represented an increase of 8.2% over the
       previous year, against an international background of stagnating overall market volumes,
       worldwide overcapacities and price wars. 2,309,839 vehicles were delivered by Volkswagen
       (+9.0%), 273,839 by Volkswagen Commercial Vehicles (-0.9%), 448,518 by Audi (+19.2%),
       325,656 by Seat (-4.1%) and 209,591 by Škoda (+14.1%).

1996   The Volkswagen Group delivered 11.4% more vehicles in 1996, a total of 3,965,950 units. The
       rise was seen across all product lines: Volkswagen 2,868,321 units (+11.3%); Audi 492,046 units
       (+9.9%); Seat 344,216 units (+5.7%); and Škoda 261,067 units (+24.6%). On the growing
       overall market in Western Europe, the Group further extended its market leadership with sales of
       2,356,453 vehicles (+9.7%) representing a share of 17.2 (16.8)% of the passenger car market. In
       the fiscal year 1996, the Volkswagen Group also improved its position in the North America
       region and increased unit sales by 19.4% to 241,901 vehicles. Deliveries to customers in the
       South America/Africa region totalled 757,541 units (+6.1%). In the Asia-Pacific region a 13.3%
       rise in overall sales to 334,884 units was achieved. In the past fiscal year the Volkswagen Group
       spent 4.0 billion DM (+17.6%) on research and development, the key area of activity in terms of
       safeguarding the future of the Company. Based on healthy unit sales, worldwide production rose
       by 10.6% to 3,976,896 automobiles.

1997   In 1997 Volkswagen Group delivered 4,257,365 vehicles to customers. This represented an
       increase of 7.3% over the previous year. All product lines contributed to this positive
       development: 2,971,823 units were delivered by Volkswagen (+3.6%), 546,436 by Audi

                                                 14
                                                                                 VWAG-Securities Report 2002
                                                                                              [As filed copy]
          (+11.1%), 402,772 by Seat (+17.0%) and 336,334 by Škoda (+28.8%). The proportion of sales
          outside Germany increased to 76.4%, from a level of 75.6% in the previous year.

          Volkswagen Group sales in the Asia-Pacific region totalled 371,480 units, 10.9% up on the
          previous year.

1998      With a worldwide total of 4,582,132 vehicles delivered, the Volkswagen Group achieved a new
          sales record. Against an overall fall in market volumes, a 7.5% increase was attained. The
          Company’s share of the world passenger car market increased from 10.4% to 11.5%. The
          respective unit sales of the various divisions were as follows:

          Volkswagen 3,186,633 (+7.1%); Audi 599,509 (+9.7%); Seat 431,550 (+7.2%); and Škoda
          363,500 (+8.1%).

          From July 4th, a total of 940 Rolls-Royce and Bentley automobiles were delivered. 75.9% of the
          Group’s total vehicle sales were outside Germany, as against 76.4% in the previous year.

1999      With a world wide total of 4,869,203 vehicles delivered, the Volkswagen Group achieved a new
          sales record in 1999. In September the Group became the first European manufacturer to attain
          the impressive production figure of 100 million vehicles.

2000     The continuous expansion of the model range of the Volkswagen Group enabled it for the first
         time to break through the five million units barrier in terms of deliveries to customers.
         On March 27, 2000 Volkswagen AG signed a contract with Investor AB concerning the
         acquisition of 18.7% capital share in the Swedish commercial vehicles manufacturer, Scania AB.
         The holding comprises 34.0% of the voting rights. Volkswagen is thereby extending its
         commitment in the commercial vehicles sector and gaining a foothold in the heavy truck market.
         The Autostadt automotive center of excellence in Wolfsburg, opened on June 1, 2000, represents
         for Volkswagen a living symbol of its new service.

2001     Worldwide deliveries to customers of 5,083,547 units exceeded the already high level of the
         previous year. Thanks to the continuous upgrading, renewal and expansion of the model range,
         the Volkswagen Group was able to increase the share of a generally declining world automotive
         market from 12.2 to 12.4%.
2002     In a slightly increased world market, the Volkswagen Group delivered a total of 4,984,030 vehicles
          to customers, just below the 2001 level (-1.9 %). The Group’s share of new passenger car
          registrations worldwide fell slightly to 12.1 (12.4) %. The Volkswagen Group posted a profit
          before tax of 3,986 million € (-9.6 %), the second best result in the history of the Company.
         In November 2002 Volkswagen AG issued the declaration of compliance with the
         recommendations of the "German Corporate Governance Code", in order to reinforce the trust and
         confidence of the shareholders in the Volkswagen Group [Annual Report, page 11].


Activities in Japan

With a 3.5 % increase in registrations, the passenger car market in Japan saw a slight upward trend; the
increase in the import market being 0.7 %. Volkswagen Group deliveries increased by 3.5 % to 70,931
units, and the Group’s share of the import market rose to 28.0 (27.3) %.




                                                    15
                                                                                    VWAG-Securities Report 2002
                                                                                                 [As filed copy]
3.       Substance of Business

The objects of the business comprise the manufacture and sale of vehicles and engines of all kinds,
accessories therefore as well as of all other equipment, machinery, tools and other technical products. The
Company is entitled to do all such things and take all such measures as are connected with the objects of the
business or as appear capable of furthering such objects directly or indirectly. It may, in pursuance thereof,
also establish branches within Germany and abroad, found and acquire other enterprises or participate in
such enterprises.

Volkswagen AG is the controlling company of the Volkswagen Group which manufactures and sells
various types of automobiles and, apart from the parent company, consists of numerous majority and
minority holdings at home and abroad. The most important companies belonging to the Volkswagen Group
are included in the "4. Affiliated Companies" below.

At its meeting on November 23, 2001, the Supervisory Board of Volkswagen AG gave its consent to the
proposal of the Board of Management with regard to the business process oriented enhancement of Group
structures with effect from January 1, 2002.

A key element of this restructuring in the passenger car sector is the merging of the Volkswagen Passenger
Cars, Škoda, Bentley and Bugatti brands to form the Volkswagen brand group and of the Audi, SEAT and
Lamborghini brands to form the Audi brand group. Each brand retains its own independent character, and
operates independently on the market. This will tighten the structures and broaden the foundation base
within the brand group, as well as establishing the organizational preconditions for even broader market
coverage.

The commercial vehicles business of the Volkswagen Group continues to be operated by the Volkswagen
Commercial Vehicles brand. The Volkswagen and Audi passenger car brand groups and the Volkswagen
Commercial Vehicles brand together form the Automotive Division. As previously, the portion of the report
dealing with the Financial Services Division also includes the Europcar group, as previously.

To provide regional control, four geographical areas of responsibility have been created covering the global
activities of the Volkswagen Group: the Europe/Rest of the World Region, the North America Region, the
South America/South Africa Region and the Asia-Pacific Region.



4.       Affiliated Companies

(1)      Parent Company
         The Company has no parent company.




                                                     16
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]

(2)       Consolidated Subsidiaries of the Company

The following table lists significant subsidiaries of the Company in which the Company owned more than
50% of the voting shares as at December 31, 2002 (only direct holding).
                                                                Percentage of
                                                                Capital Stock
 Name                                     Location                Held (%)       Principal Activities
 AUDI AG                                  Ingolstadt               99.13         Producing Company
                                                                                 Leasing, Financing
 Volkswagen Financial Services AG         Braunschweig             100.00
                                                                                 and direct banking
                                                                                 Information Technology
 Gedas Aktiengesellschaft                 Berlin                   100.00
                                                                                 Company
 Volkswagen Transport GmbH & Co. OHG      Wolfsburg                100.00        Transport Company
 Volkswagen Sachsen GmbH                  Mosel                    100.00        Producing Company
                                                                                 Developing, Manufacturing
 VOTEX GmbH                               Dreieich                 100.00
                                                                                 and Dealing Company
 Volkswagen Beteiligungs-Gesellschaft
                                          Wolfsburg                100.00        Holding Company
 mbH
                                          Toyohashi, Aichi,
 VOLKSWAGEN Group Japan K.K.                                       100.00        Distributing Company
                                          Japan
                                          Uitenhage, C.P.,
 Volkswagen of South Africa (Pty.) Ltd.                            100.00        Producing Company
                                          South Africa
                                          Buenos Aires,
 Volkswagen Argentina S.A.                                         100.00        Producing Company
                                          Argentina
                                          Sao Bernardo do
 Volkswagen do Brasil Ltda.                                        100.00        Producing Company
                                          campo
                                          Bratislava,
 VOLKSWAGEN SLOVAKIA, a.s.                                         100.00        Producing Company
                                          Slovak Republic
                                          Mladá Boleslav,
 ŠKODA AUTO a.s.                                                   100.00        Producing Company
                                          Czech Republic
                                          Polkowice,
 Volkswagen Motor Polska Sp.z o.o.                                 100.00        Producing Company
                                          Poland
 Volkswagen Poznan Sp.z o.o               Poznan, Poland           100.00        Producing Company



5.        Employees

The average number of people employed by the Volkswagen Group in 2002 was 323,865 (-0.2 %). Of that
total, 167,557 (+0.4 %) were employed in Germany, representing 51.7 (51.4) %. At December 31, 2002 the
Group employed a total of 324,892 people (+0.9 %) worldwide, of whom 167,005 (+0.4 %) were employed
by the German Volkswagen Group companies. The increase in the workforce resulted primarily from
expanded capacity at VOLKSWAGEN SLOVAKIA, a.s. and at Shanghai-Volkswagen Automotive
Company Ltd., increased activities in the financial services business and additions arising from the first-time
consolidation of Group companies.

With 104,704 employees as at December 31, 2002, the number of people working for Volkswagen AG was
below the prior year level (-0.8 %). The proportion of women in the total workforce increased slightly to
12.8 (12.5) %. The proportion of non-German employees remained virtually constant at 7.4 (7.5) %. The
proportion of skilled technical personnel in the industrial workforce possessing a VW-related qualification
was 56.8 (56.7) %; 10.3 (9.7) % of the workforce were university or technical college graduates.


                                                       17
                                                                                       VWAG-Securities Report 2002
                                                                                                    [As filed copy]

III.      STATE OF BUSINESS OPERATIONS

1.        Outline of Results of Operations, etc.

Global Automobile Business at Prior Year Level

In 2002, worldwide demand for passenger cars again rose slightly compared to the prior year. New
passenger car registrations in 2002 increased by 1.1 % to 38.8 million vehicles. The European and US
markets, however, saw no recovery in the automotive business, though the major market declines forecast at
the beginning of the financial year were avoided by strengthening sales incentives. Worldwide automotive
production rose by 4.3 % to 57.8 million units, of which 40.2 million were passenger cars (+2.9 %).

In North America, strong sales growth in Canada (+7.5 %) and Mexico (+7.8 %) was unable to compensate
for the ongoing decline in demand in the US passenger car sector (-4.0 %). The massive sales incentives
made available by some manufacturers in fourth quarter 2001 resulted in US consumers bringing forward
their buying decisions and so further reduced the 2002 passenger cars total. The key US light truck sector –
including Sports Utility Vehicles and Crossover models – again attained the record level of the prior year.

The downward trend in Latin America persisted over the reporting period. New vehicle registrations in the
Brazilian passenger car market – impacted by high interest rates and a reluctance to buy in the run-up to the
presidential elections in October – fell by 5.8 % to 1.22 million in 2002. Heavier falls were avoided in the
second half of the year by the introduction of tax relief on the purchase of passenger cars. In Argentina,
passenger car demand again fell dramatically, down to just 63 thousand units, halving the already weak level
of new vehicle registrations in the prior year.

The main driver of global automobile demand was the Asia-Pacific region. The total of 9.6 million
passenger cars (+13.6 %) in 2002 surpassed the record 1996 level for the first time since the Asian economic
crisis of 1997/98. A major portion of the growth was contributed by the Chinese market. Strong economic
growth, intensive price competition and new products, generating in particular private consumer demand,
were the principal factors leading to new vehicle registrations in China exceeding one million for the first
time. In Japan, new passenger car registrations increased by 3.5 % in the year to 4.4 million.

In Western Europe, new vehicle registrations totalled 14.4 million, 2.9 % down on the prior year. Even
heavier declines were avoided by the price discounts and favourable financing terms offered by
manufacturers. Further support was provided by sales of diesel vehicles, which represented a new record
market share of 40.1 % in the reporting period. Of the major European volume markets, only Great Britain
saw an increase in registrations (+4.3 %). The passenger car market there was boosted in particular by lower
vehicle prices.

Passenger car demand in Eastern Europe rose only slightly in the past year. Apart from the countries of the
former Soviet Union, especially Russia and the Ukraine, only Hungary and Romania recorded significant
growth rates.

The weak development in the first half of 2002 meant that, on a cumulative basis to the end of July, new
vehicle registrations in Germany were at their lowest level since German reunification. Nor were the stable
levels of registrations in the latter months of the year able to compensate fully for the decline in sales earlier
on. A total of 3.52 million new vehicles were registered, 3.2 % down on 2001. Of the total new vehicle
registrations, 3.25 million (-2.7 %) were of passenger cars and 195 thousand (-6.4 %) of trucks up to 6
tonnes gross vehicle weight. Automotive production in Germany of 5.47 million units was 3.9 % below the
level of the prior year. The number of domestically produced vehicles exported from Germany also fell to
3.88 million units (-1.0 %), but was the second best result after the record year 2001.


                                                       18
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
Europe/Rest of the World

In the Europe/Rest of the World Region, sales of Group vehicles fell as a result of ongoing weak demand to
3,222,655 units (-5.1 %).

There were no signs of a recovery in the German passenger car market in the year under review, with
registrations falling by 2.7 %. In Germany, the Volkswagen Group delivered a total of 940,129 vehicles (-
4.7 %), reaffirming its market leadership with a 30.0 (30.2) % share. The key factors were substantial
increases in sales of the Polo and of the Audi A4, as well as the new Ibiza.

Also in Western Europe (including Germany), new vehicle registrations decreased (-2.9 %) in the reporting
period. Nevertheless, Volkswagen remained ahead of its competitors, with 2,827,472 (-5.1 %) units
delivered and a market share of 18.4 (18.9) %. In Eastern Europe the Volkswagen Group did not reach the
high level of sales achieved in the prior year. In the Rest of World Region, sales were below expectations,
primarily owing to the ongoing market weakness in Turkey and Israel.

North America

The downward trend in the US passenger car market persisted in 2002 (-4.0 %). Some automobile
manufacturers reacted to the weak demand by offering very favourable financing terms and price discounts.
Even though the Volkswagen Group was restrained in taking such measures, it was able to defend its market
share in a difficult competitive environment at 5.2 %. Sales fell by 3.5 % to 424,531 units, slightly down on
the high level of the prior year. Strong growth was recorded by the Audi A4, the Jetta Wagon and the T4
Eurovan.

New vehicle registrations in the Canadian passenger car market were up 7.5 % against the prior year. With
50,224 units sold, the Group delivered 1.5 % more Volkswagen and Audi vehicles to customers, achieving a
market share of 5.4 (5.7) %.

The positive development of the passenger car market in Mexico was sustained in 2002, with a 7.8 %
increase. The Group sold a total of 188,523 vehicles (+4.6 %) in Mexico, and with a market share of 25.1
(25.8) % was again ahead of the competition. Significant increases were recorded by the Pointer and by the
SEAT models launched into the market in 2001.

South America/South Africa

The restrained buying already seen in the Brazilian passenger car market in the second half of 2001 persisted
in 2002. New registrations fell by 5.8 %. The Volkswagen Group registered a 12.5 % decrease, delivering
382,071 vehicles. As a result, its share of new passenger car registrations fell to 26.1 (28.6) %. The Group
figures include a total of 38,885 light trucks (-13.8 %), representing an increased market share of 22.4 (20.2)
%. In the fast-growing segment comprising heavy trucks from 7 to 35 tonnes, the Group increased its
deliveries to 22,685 Volkswagen trucks and buses (+6.8 %), achieving a 26.7 (26.9) % market share.

Persistently poor economic conditions in Argentina saw new passenger car registrations there fall once
again, this time by 51.5 %. Volkswagen sold 10,358 units, down 62.9 %. The Group’s market share fell to
15.0 (18.5) %. With commercial vehicles imported from Brazil, the Volkswagen Group attained a 3.4 (5.5)
% market share in the Argentinian truck segment.

In South Africa, the passenger car market was stable compared to the prior year (+1.1 %). A total of 55,996
(-3.3 %) Volkswagen and Audi models delivered produced a market share of 22.0 (22.9) %, maintaining the
Volkswagen Group’s position as market leader.



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                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
Asia-Pacific

The passenger car market in China continued to expand in 2002. With a 42.8 % increase to 512,548 units
sold, the Volkswagen Group maintained its longstanding market leadership. The newly launched Polo, in
particular, and the ongoing high sales of the Bora, Jetta, Passat, Santana and Audi A6 models boosted this
positive development.

In the remaining markets of the Asia-Pacific Region (including Australia and Taiwan) passenger car demand
rose by 11.2 % over the prior year. With 37,145 vehicles delivered, Volkswagen sales were up by 10.7 %.

Golf Still the Biggest Seller

The Volkswagen Group sold a total of 4,996,179 units (-2.2 %) to the dealer organization worldwide in the
financial year 2002. The persistent lack of consumer confidence in Germany in the first half of the year
resulted in a 6.3 % decrease. On the other hand, unit sales only decreased slightly outside Germany, by 1.2
%. The proportion of sales generated outside Germany increased against the prior year by 0.8 percentage
points to 81.8 %. The Golf, representing 16.1 (17.3) % of sales, remained the biggest seller, followed by the
Passat at 14.1 (14.3) % and the Polo at 10.0 (7.0) %.

Production Volume Stable

In 2002, the Volkswagen Group produced a total of 5,023,264 vehicles (-1.7 %). Production of the Polo,
Audi A4 and Audi Cabriolet models, in particular, increased substantially. Of the total volume, 35.5 (36.9)
% was produced in Germany. The production figure also includes 45,312 Ford Galaxy units (-15.9 %),
which are included in unit sales but not in deliveries to customers. An average of 21,489 units (+1.3 %) per
working day were produced Group-wide.

Inventories at Optimum Level

The Volkswagen Group adjusted its production flexibly according to the unstable and moderately declining
demand in the year. As a consequence, worldwide inventories held by our Group companies and in the
dealer organization as per December 31, 2002 remained stable relative to the end of the prior year. The
inventories remain at an optimum level to supply our customers.

Automotive Division Balance Sheet

Increases in tangible and intangible assets (primarily capitalized development costs) resulted in an increase in
non-current assets in the Automotive Division to 34.2 (32.0) billion €. Current assets decreased slightly by
0.9 billion € to 25.2 billion €.

At the end of the financial year the capital and reserves totalled 20.9 (20.2) billion €, 3.1 % up on the prior
year level. The capital ratio again improved from its existing high level, reaching 35.1 (34.8) %. Provisions
increased slightly. Liabilities totalling 15.4 (15.5) billion € were slightly below the prior year level.

Financial Services Division Balance Sheet

The Financial Services Division further expanded its business operations in 2002. As a consequence, total
assets increased by 6.9 % to 49.4 billion €. Lease vehicle stocks increased, the book value of leasing and
rental assets rising by 16.4 % to 8.3 billion €. At the end of the financial year 2002 current assets totalled
40.7 billion € (+5.0 %). The rise resulted primarily from increased receivables arising from customer
financing.



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                                                                                      VWAG-Securities Report 2002
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At 3.8 billion €, capital and reserves were close to the prior year level. The capital ratio was 7.6 (8.1) %.
The positive development of the business required additional funding, which was financed primarily by the
take-up of outside capital, as is common practice in the industry. Liabilities increased as a result by 7.6 % to
43.9 billion €. Customer deposits held by Volkswagen Bank direct included in this figure increased
substantially to 5,613 million € (+23.5%).

Asset and Capital Structure in the Group

In 2002 the Group’s total assets increased to 108.9 billion € (+4.3%). This is due in particular to the increase
in non-current assets in the Automotive Division and to the expansion of the financial services business.
Current assets totalled 65.9 (64.8) billion €. Group capital and reserves increased to 24.6 (24.0) billion €, in
line with the positive results for the financial year 2002, and after the dividend payment for 2001. The
effects of currency translation, in particular from the accounts of the North and South American Group
companies, had a negative impact on capital and reserves. The expansion of business in the banking and
financing sector was the main reason for a rise in borrowings to 84.3 billion € (+4.8 %). The capital ratio of
22.6 (23.0) % was slightly below the prior year level.

Financial Position in the Automotive Division

The Automotive Division achieved a gross cash flow of 8.3 billion €, reflecting funds generated and
available for long-term investment projects. This figure was only just below the prior year comparative, but
the funding requirement for investments was not fully covered. As a result of a virtually unchanged tie-up of
working capital (-0.1 billion €) in 2002, cash flows from operating activities of 8.2 billion € were a
substantial 0.8 billion € up on the prior year. Additions to tangible assets and to capitalized development
costs increased by 5.5 %. After including direct investments and other financial assets as well as income
from the disposal of assets, the funding requirement from investment activities totalled 9.2 billion €. The net
cash flow of -1.0 billion € is slightly negative owing to high advanced payments for future periods.
Alongside investments in tangible assets, development expenditure also helped to update and expand our
successful product range. Cash and cash equivalents decreased to 2.2 billion € (-1.2 billion € compared to
the prior year) as per December 31, 2002, taking into account the additional inflows and outflows of funds
arising, in particular, from the change in securities investments and from financing activities. After including
securities, which mainly decreased compared to the prior year because of their inclusion at fair value at the
balance sheet date, loan receivables and after deducting borrowings, net liquidity totalled 0.5 billion €. With
this result, the Automotive Division shows a positive net liquidity again in 2002, a year characterized by
substantial levels of upfront expenditure.

Financing of the Growing Financial Services Division

As is common in the industry, the increasing funding requirements of the Financial Services Division could
not be fully met by cash flows from operating activities. Consequently, the residual funding requirement for
the procurement of lease vehicles and the expansion of the customer and dealer financing business, totalling
4.6 billion €, was covered mainly by borrowing on the capital markets. This resulted in a shift from short-
term finance towards long-term borrowings in the form of bonds. Cash and cash equivalents decreased
slightly against the level at the end of the prior year to 0.7 billion €. Net liquidity totalled -39.2 billion €.




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                                                                                       VWAG-Securities Report 2002
                                                                                                    [As filed copy]

Cash and Cash Equivalents in the Group

The Volkswagen Group held cash and cash equivalents totalling 3.0 billion € as per December 31, 2002. As
the ongoing expansion of the financial services business required additional capital, total borrowings in the
Group increased significantly. As a consequence, the net liquidity of the Volkswagen Group totalled -38.8
billion €.

Group Revenues

In the financial year 2002 the Volkswagen Group generated sales revenues of just under 87 billion €. The
1.8 % fall against the prior year stems from the automobile business, and is primarily due to the decline in
unit sales as a result of falling demand. By contrast, the sales revenue of the Financial Services Division
from leasing and rental business rose by more than 10 % to almost 9.5 billion €. The proportion of total
Group sales revenue generated outside Germany rose slightly to 72.5 (72.3) %.

The cost of sales decreased by 1.8 % owing to lower volumes, but also qualitatively as a result of the cost
cutting measures implemented. Consequently, the gross margin of the Automotive Division across the
Group as a whole of 14.7 % was again slightly improved against the prior year comparative (14.6 %), in part
as a result of the growth in operating lease business. The Financial Services Division achieved a gross profit
of 1.5 billion €, 145 million € up on the prior year. This resulted in particular from the expansion of business
in the financing and leasing sector as well as in direct banking.

Distribution costs remained virtually constant in absolute terms in 2002, at 7.6 billion €, though this also
reflected positive effects from the translation of distribution costs of Group companies outside Germany
based on the change in exchange rates, particularly of the US Dollar against the Euro. The tougher
competitive conditions in North America and Western Europe, entailing correspondingly higher expenditure
on sales incentives, are clearly indicated by the analysis of distribution costs as a percentage of sales revenue,
which increased to 8.7 (8.5) %. The administrative expenses, too, were around the prior year level. The
other operating result of approximately 0.5 billion € was positive, though higher value-adjustments on
receivables to take account of reduced volumes and market conditions and higher losses from the disposal of
assets meant the prior year level was not reached. Consequently, the operating profit of the Volkswagen
Group of 4.8 billion € was 12.2 % down on the 2001 level. The financial result improved by 240 million €
to -0.8 billion €. This included higher earnings from investments accounted for using the equity method and
the change in value of derivative financial instruments, partially offset by change in the fair values of
securities and investment funds at the balance sheet date.

Sales Revenue by Market

Over the full year 2002 the sales revenue of the Volkswagen Group fell by 1.8 % compared to the prior year,
based on unit sales down by 2.2 %. In Europe, despite a substantial fall in unit sales, 2002 sales revenue
stabilized at the prior year level. In North America, changes in exchange rates led to a decline in sales
revenue, despite further expansion in the financial services business. In South America/South Africa, the
economic crisis resulted in substantial reductions in unit sales, while devaluations of the major currencies
exacerbated the fall in sales revenue. The Asia-Pacific Region saw a rise in sales revenue, though the
substantial increases in unit sales in China were not fully reflected in the sales revenue and operating result,
as the joint venture companies in that country are valued at equity.

A healthy level of operating profit was returned in all markets except South America/South Africa in 2002.
In Europe, sustained cost and revenue improvement measures meant the operating result was virtually
unchanged, even though unit sales fell against the prior year comparative. The financial services business
also helped to stabilize results. The return on sales of 5.6 % was likewise at the prior year level. In North


                                                       22
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
America, the high earnings level of the prior year could not be repeated. Exchange rate changes and
increased selling and distribution costs were the main reasons for the fall in earnings. The return on sales of
7.4 % was nonetheless at a high level. In South America/South Africa, a significant loss was made due to
the economic crisis and the associated devaluations. Growth in the Asia-Pacific Region brought an
improved operating result, and the return on sales was also up on the prior year.

Major Changes to Investments

With effect from January 1, 2002 Volkswagen AG acquired the shares of Södertälje Bil Invest AB, and as a
result indirectly acquired a further 50 % holding in Svenska Volkswagen AB, Södertälje/Sweden, thereby
increasing its holding in that company to 100 %. Svenska Volkswagen is the Swedish importer for the
Volkswagen, Audi, SEAT and Škoda brands as well as for Porsche.

Likewise with effect from January 1, 2002, Volkswagen AG acquired from SCANIA all the shares in Din
Bil Holding AB, Sweden. That company is the sole shareholder of Din Bil Sverige AB, which operates
dealerships in Sweden for the Volkswagen, Audi, SEAT and Škoda brands as well as for Porsche.

Dependency Report

In accordance with Section 312 of the German Corporation Act (AktG), the Board of Management of
Volkswagen AG has submitted to the Supervisory Board a report on the past financial year, containing the
following concluding declaration:

“We declare that, according to the circumstances known to us at the points in time at which each of the legal
transactions with related companies in the sense of Section 312 AktG were entered into, our Company
received an appropriate consideration for each of the said legal transactions. No legal transactions or
measures were either undertaken or omitted on the instruction of or in the interests of the State of Lower
Saxony and its related companies in the reporting year.”

Rights to the Rolls-Royce Brand Name

The rights of the Volkswagen Group to use the Rolls-Royce brand name ended on December 31, 2002.
Accordingly, from that date no more Rolls-Royce vehicles will be produced by the Volkswagen Group.

Unit Sales and Production of Volkswagen AG

Volkswagen AG sold a total of 2,063,383 vehicles in the year under review, 4.3 % down on the prior year.
The proportion of total units sold outside Germany increased to 68.9 (67.9) %.

Primarily as a result of the continuing decline in demand in Europe in the first half of the year, production at
the German sites of Volkswagen AG decreased by 13.3 % to 956,617 vehicles. Average daily production
was 4,390 units (-6.4 %).

Orders Received by Volkswagen AG

The continued weakness of demand on the German automotive market again experienced in 2002 meant
that domestic orders received by Volkswagen AG fell by 5.0 % against the prior year. In Western Europe
excluding Germany, too, the prior year comparative was not matched (-7.3 %). At December 31, 2002,
Volkswagen AG held orders for 63,476 vehicles (-13.3 %) in Germany and 92,997 (-21.7 %) in Western
Europe excluding Germany.




                                                      23
                                                                                       VWAG-Securities Report 2002
                                                                                                    [As filed copy]

Higher Earnings from Lower Sales Revenue

In 2002 the sales revenue of Volkswagen AG was 2.5 % down on the prior year. The main reason for this
was the market-related fall in domestic sales revenue (-4.6 %). The proportion of total sales revenue
generated outside Germany increased from 66.0 % to 66.7 %. The reduction in cost of sales of -1.8 % was
less than that in sales revenue. As a consequence, the gross profit of 2.7 billion € was 12.6 % down on the
prior year.

Distribution costs rose by 8.0 %, mainly as a result of higher expenditure on sales incentives. The ratios of
administrative expenses and other operating result to sales revenue remained virtually unchanged. By
contrast, the financial result improved by 77.2 %. It had been heavily burdened in the prior year by a loss
arising from the transfer of treasury shares to Volkswagen Beteiligungs-Gesellschaft mbH. Overall, the
result from ordinary business activities of Volkswagen AG was 6.6 % up on the prior year.

Dividend Proposal

The Board of Management and Supervisory Board propose to the Annual General Meeting the payment of
the same dividend per no-nominal-value share as in the prior year. After transferring 518 million € to free
reserves, the payment of a dividend of 1.30 € per ordinary share and 1.36 € per preferred share will be
approved.

Asset and Financial Position

The total assets of Volkswagen AG decreased in the financial year 2002 by 4.3 % to 29.8 billion €. As
opposed to reduced current assets, there were increased non-current assets (+12.5 %) of 19.5 billion €.
Investments in tangible and intangible assets rose by 59.2 % to 2,772 million €. They were directed
primarily into new products, model facelifts and restructuring measures focused on the Wolfsburg and
Hanover plants. Financial investments decreased by 57.0 % to 1,098 million € as a result of lower capital
contributions to subsidiaries.

Current assets decreased by 25.5 % to 10.3 billion €. Increased inventories were set against reductions in
receivables and other assets, particularly arising from the repayment of intra-Group financing from
companies of the Financial Services Division, and in liquid funds.

Capital and reserves (including special items with an equity portion) increased in line with earnings by 5.7 %
to 10.5 billion €. The capital ratio increased from 31.8 % in the prior year to 35.2 % in connection with the
decrease in total assets. Provisions and accruals increased by 6.4 % to 13.9 billion €, while liabilities
decreased by 33.6 % to 5.4 billion €, of which 1.7 billion € (-66.7 %) were interest-bearing.

Volkswagen Share Price Outperforms DAX and DJ Euro STOXX 50

Difficult economic conditions in 2002 meant that the world’s major stock markets fell for the third year in
succession. The leading German and European stock markets suffered substantial losses over the course of
the year. The German share index, the DAX, closed 2002 at 2,893 points, down 43.9 % on the 2001 year-
end. The Volkswagen ordinary share increased in first quarter 2002, reaching its high for the year of 62.15 €
on March 22. Substantial declines in the third quarter meant the price closed the year at 34.74 €, 33.8 %
down on the end of the prior year.

The preferred share price ran virtually parallel to that of the ordinary share, likewise reaching its high for the
year, 40.75 €, on March 22. On December 31, 2002 the preferred share price stood at 25.00 € (-28.3 %).

In the past two years the volatility of the equity markets, and consequently of the Volkswagen share, has

                                                       24
                                                                                    VWAG-Securities Report 2002
                                                                                                 [As filed copy]
increased significantly. In line with other shares in the automotive sector, the Volkswagen ordinary and
preferred shares fell by less than the DAX and the Dow Jones (DJ) Euro STOXX 50 in 2002. In our view
the Volkswagen share represents good value and upside future potential in terms of the standard valuation
ratios used by the financial markets, such as the price/earnings ratio.

Dividend Yield at an Attractive Level

In view of the trend in the capital markets in the past two years, dividend yield has become a key measure in
stock selection. The 3.7 % yield on the Volkswagen AG ordinary share and 5.4 % yield on the preferred
share has been found to represent an attractive investment return by a large number of institutional and
private investors, in particular with regard to the preferred share.

In the current year the rating agencies Standard & Poor’s and Moody’s Investors Service have again
awarded Volkswagen a high credit rating. This provides the Group with a significant potential for raising
external financing at favourable terms.

New Issues

The financing requirements of the Company were covered in particular by the intensive use of so-called tap
issue programs. Also in 2002, alongside successful private placings in Europe and the USA, the Group
issued high-volume bonds (so-called Benchmarks) totalling 3.5 billion € mainly to institutional investors in
Europe.

At the end of February 2002, as part of the financing for Volkswagen Leasing GmbH, an additional Asset
Backed Security structure with a volume of 1 billion € was issued.

In July 2002 Volkswagen AG redefined the approach to assuring permanent liquidity by arranging a 15
billion € syndicated credit facility. This facility represents the liquidity back-up line for the issue of
Commercial Paper required by the rating agencies, as well as providing an available source of future
financing as required. In August 2002 a revolving Asset Backed Security transaction in the amount of 682
million GBP was executed for Volkswagen Financial Services (UK) Ltd.

In January 2002 the Group strengthened its new issue activities in the USA by reactivating a Medium Term
Note program and diversified its existing refinancing sources for the North America Region. Volkswagen
was also successful on the markets in the USA and Canada with debt sales based on Asset Backed Security
structures.

The broader use of all forms of capital market financing will be pursued further in 2003. As an example, in
January 2003 VOLKSWAGEN FINANCIAL SERVICES AG issued an additional 1.5 billion € bond. The
Group is also aiming to acquire further attractive financing sources with the establishment of new tap issue
programs in Mexico and Asia.

Treasury Shares

In 2002 the Board of Management did not make use of the authority granted by the Annual General Meeting
on April 16, 2002 to utilize the treasury shares which were bought back in 2000. The number of treasury
shares held did not change in the reporting period.

Fourth Tranche of Share Option Plan

With the consent of the Supervisory Board, the Board of Management of Volkswagen AG has implemented
a fourth tranche of the share option plan. The subscription period for the convertible bonds on offer ran from


                                                     25
                                                                                    VWAG-Securities Report 2002
                                                                                                 [As filed copy]
May 21 to June 18, 2002. 48.7 % of all those eligible took up the subscription offer.

A total of 404,282 convertible bonds to a value of 1.03 million € were subscribed. They entitle the bearers to
acquire up to 4.04 million ordinary shares in the conversion period from June 19, 2004 to June 11, 2007.

Earnings per Share

In the financial year 2002, despite the difficult economic conditions, the Volkswagen Group achieved the
second highest result in its history, of 3,986 million €.

The undiluted earnings per ordinary share in financial 2002 were 6.72 €. Calculation of the undiluted
earnings per share according to IAS 33 is based on the average number of shares in issue in the financial year
(Please refer to "VI. FINANCIAL CONDITION", "1. Financial Statements", "Note (10) to the Consolidated
Income Statement".).

Shareholder Analysis

Based on a shareholder analysis commissioned by Investor Relations, at December 31, 2002 institutional
investors held 37.9 % of the subscribed capital of Volkswagen AG. Of the total, 8.9 % was held by German
institutions. Outside Germany, the shares were held mainly by institutional investors in the USA, Great
Britain, France and the rest of Europe. Private shareholders hold 38.6 % of the shares in Volkswagen.

The State of Lower Saxony, which only holds ordinary shares, was the largest single shareholder with 13.7
% of the total number of 425,528,220 shares, representing 18.2 % of the voting shares. Volkswagen AG,
through its 100 % subsidiary Volkswagen Beteiligungs-Gesellschaft mbH, holds 41,719,353 ordinary
treasury shares, representing a 9.8 % share of the Company’s total capital. No other investors are known to
hold more than 5 % of the voting capital of Volkswagen AG.

Corporate Governance

Issues of Corporate Governance are gaining in importance on capital markets and beyond. For that reason,
the German Government’s “German Corporate Governance Code” Commission has drawn up and
published a code of practice. The Code lays down key legal requirements for the management and
supervision of German public companies. The Code also sets out internationally and nationally recognized
standards of good, responsible Corporate Governance. In 2002 public companies were for the first time
obliged, in accordance with Section 161 of the German Corporation Act, to disclose the extent of their
compliance with the Code’s recommendations and any recommendations which they do not implement.
The object of this is to boost the confidence of international and national investors, customers, employees
and the general public in the management and supervision of German public companies.

The Boards of Management and Supervisory Boards of the two public companies in the Volkswagen
Group, namely Volkswagen AG and AUDI AG, have paid careful attention to the Code.

The practices implemented by Volkswagen AG and AUDI AG in the past largely conform to the
recommendations and suggestions set out in the Code. For example, there has long been a system of
comprehensive information flow between the Board of Management and Supervisory Board of the
respective companies above and beyond the legal requirements. Likewise, codes of practice governing the
Boards of Management and Supervisory Boards have been in place for many years. A detailed catalogue of
transactions subject to mandatory approval has long formed part of the code of practice for the Board of
Management of Volkswagen AG.

As part of their implementation of the Code, Volkswagen AG and AUDI AG will be further intensifying the


                                                     26
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
provision of company information over the Internet. The key financial publications and information
concerning Annual General Meetings will in future be available on the respective websites
(“www.volkswagen-ir.de” and “www.audi.de”). Furthermore, shareholders in both companies will be
offered a proxy voting facility at Annual General Meetings.

On November 15, 2002 the Board of Management and Supervisory Board of Volkswagen AG issued a
declaration of compliance with the recommendations made by the Government Commission on the
“German Corporate Governance Code”. The declaration includes the reservation that the Board of
Management and Supervisory Board will first propose to the Annual General Meeting on April 24, 2003
that Section 18 subsection 2 of the Articles of Association of Volkswagen AG be supplemented by a
remuneration clause in respect of the chairmanship and membership of Supervisory Board committees. This
no-conformance with the recommendations of the Code is based on the fact that Section 113 subsection 1 of
the German Corporation Act stipulates that the right to set the remuneration of members of the Supervisory
Board lies solely with the Annual General Meeting. Remuneration in respect of the chairmanship and
membership of Supervisory Board committees was not previously included in the provisions on
remuneration set out in the Articles of Association.

On December 9, 2002 the Board of Management and Supervisory Board of AUDI AG likewise drew up
and published their declaration relating to the “German Corporate Governance Code” as required by the
Corporation Act. They likewise declared their compliance with the announced recommendations of the
“German Corporate Governance Code”. A proposal will also be put to the next Annual General Meeting of
AUDI AG that the Articles of Association be amended to include allowance for performance-related
remuneration of the members of the Supervisory Board. No provisions governing such performance-related
remuneration, or remuneration in respect of the chairmanship and membership of Supervisory Board
committees, were previously included in the Articles of Association of AUDI AG.

Value-Based Management

The financial management of the Volkswagen Group aims to ensure long-term enhancement of the value of
the Company. In doing so we work to optimize value contribution, a key performance indicator linked to the
cost of capital which is determined for the Automotive Division. The capital cost rate likewise functions as a
return indicator in respect of investment decisions, primarily for product-related projects. This ensures
efficient allocation of the Group’s financial resources.

The target indicator is the return on investment (ROI). That return is set against the cost of capital
ascertained for the current financial year. If the return on investment is above the cost of capital, additional
value is created. Taking into account general and company-specific risks, Volkswagen has set a long-term
target for the return on investment of the Automotive Division of at least 9 %. In 2002 the effective capital
cost derived from the capital market decreased by 0.4 percentage points to 7.7 %.

The factors determining return on investment are operating profit after tax and the assets (tangible and
intangible assets, inventories and receivables) invested to generate output, less the non-interest bearing
capital (trade payables and payments on account received). As a result of the orientation of return on
investment to operating profit, assets linked to investment in subsidiaries and the investment of liquid funds
are not taken into account.

The return on investment achieved by the Automotive Division in the reporting year was 7.4 %, 0.3
percentage points below the current cost of capital. The value contribution totalled -134 million €. The main
reasons for the fall relative to the prior year were the reduced after-tax operating profit resulting from
deteriorating market conditions as well as higher investments linked to the substantial upfront expenditures
for new products.


                                                      27
                                                                                     VWAG-Securities Report 2002
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Leading Position in Sustainability Indices Maintained

The Volkswagen share is more and more in demand by funds which target socially and ecologically
sustainable investments, helping to build long-term stability of share value. In this context, the Swiss rating
agency SAM for the third time in succession voted Volkswagen as the company with the most sustainable
practices in the automotive industry. As a result, Volkswagen again qualified for inclusion in the Dow Jones
Sustainability Index World (DJSI) and the European DJSI STOXX. The Volkswagen share is also the
sector leader in the Ethibel Sustainability index and in the FTSE4 Good Europe index.

These appraisals are based primarily on innovation and economic performance as well as on social
responsibility and environmental commitment. Analysts highlighted Volkswagen’s fuel strategy and its
innovative labour market concepts.

Prospects for 2003

In 2003 the Volkswagen Group does not expect to see any positive impetus in the global economy. There is
at present no prospect of recovery in particular in Germany, or in the struggling economies of South
America.

We do not expect any substantial rise in demand on automobile markets in the USA, Western Europe or
Germany. We do expect strong growth impetus from China, where we are at present expanding our range
of vehicles to match the rising demand.

In 2003 the Volkswagen Group will maintain its strategy of boarder market coverage. With the launch of
the Touran at the beginning of the year we are moving into a new, fast-growing segment. The focus of our
product-related measures during the year will be on the start of production of the new Golf, which will also
serve as the technical basis for additional models in the coming years. Our strategy of utilizing shared
platforms for longer, and across a broader spread of models, in order to reduce development expense is part
of our ongoing efforts to optimize costs. By contrast, the vehicle design update cycle will be shortened in
future, enabling us to respond even more rapidly to customers’ individual wishes and to market trends.

In the Financial Services sector we will continue to grow our business based on a comprehensive range of
innovative automobile-related products and services.

Based on our model initiative, we again expect to sell more than 5 million vehicles worldwide in the
financial year 2003. However, the crisis in South America and, especially, the uncertain political situation in
the Middle East – which is bringing additional instability to the financial markets – may entail commercial
risk which cannot be predicted at present. These economic and political uncertainties mean it is not possible
at present to make a reliable earnings forecast for financial 2003. We will maintain our successful measures
aimed at cutting costs by increasing productivity and improving processes and quality, and will continue to
drive forward our innovative product policy.




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                                                                                                   VWAG-Securities Report 2002
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2.           Production, Orders Received and Turnover

Key figures by Business Line

                               Production(1)            Vehicle sales(1)           Sales revenue            Operating profit

(‘000               units/
                             2002         2001         2002           2001        2002       2001          2002         2001
million €)

Volkswagen brand
                               3,507           3,534    3,539          3,606      46,711      49,370        2,463        3,004
group

Audi brand group               1,199           1,214    1,191          1,205      25,439      25,044        1,359        1,456

Commercial Vehicles             272             306      267               296     4,884       5,029          156          340

Financial
                                    ---          ---       ---              ---    9,459       8,574          721          552
Services/Europcar

Remaining companies(2)              ---          ---       ---              ---     455            523         62              72

Volkswagen Group             5,023(3)     5,108(3)      4,996          5,107      86,948      88,540        4,761        5,424

(Note)
(1) Each individual figure is rounded, so that minor discrepancies may occur through the addition of these
    amounts.
(2) Primarily Coordination Center Volkswagen S.A., Volkswagen International Finance N.V.,
    Volkswagen Investments Ltd., Volkswagen Transport GmbH & Co. OHG, VW Kraftwerk GmbH,
    VOTEX GmbH, Volkswagen Immobilien, gedas group, VW Versicherungsvermittlungs-GmbH,
    Volkswagen Beteiligungs-Gesellschaft mbH.
(3) Including the not fully consolidated vehicle-producing investments Shanghai-Volkswagen Automotive
    Company Ltd. and FAW-Volkswagen Automotive Company Ltd. as well as 45,312 (53,897) Ford
    Galaxy units.




                                                                 29
                                                                                                 VWAG-Securities Report 2002
                                                                                                              [As filed copy]

Segmental Reporting by Division

                         Automotive               Financial Services            Consolidation             Volkswagen Group

(Million €)            2002         2001          2002             2001        2002           2001          2002          2001

Segment sales          77,973        80,435         9,459           8,574        -484           -469        86,948         88,540

of which:
   Sales to third      77,503        80,072         9,445           8,468          ---           ---        86,948         88,540
   parties

   Inter-segment
                         470               363           14          106         -484           -469             ---             ---
   sales

Operating profit        3,875          4,625         721             552         165            247            4,761        5,424

Cash          flows
from       operating    8,065          8,036        2,235           2,573        160            -571        10,460         10,038
activities

Cash flows from
investing activities
                        9,121          7,763        6,798           7,034         97            394         16,016         15,191
according to cash
flow statement



Segmental Reporting by Market

                                                               Investments in tangible and
                                Sales to third parties                                                  Segment assets
                                                                  other intangible assets

  (Million €)                   2002             2001              2002          2001                2002              2001

  Germany                       23,874           24,484             4,555         3,402              57,657            54,041

  Rest of Europe                36,365           35,863             1,794         2,146              33,073            30,842

  North America                 17,277           17,832               327             466            18,896            18,407

  South America                  3,333            4,565               250             531              3,338            5,339

  Africa                           951            1,060                   62             28             351               306

  Asia/Oceania                   5,148            4,736                   27             44            2,111            2,074

  Consolidation                        0                 0           -188                0           -11,961           -12,010

  Total                         86,948           88,540             6,827         6,617          103,465               98,999




                                                              30
                                                                                    VWAG-Securities Report 2002
                                                                                                 [As filed copy]

The outline of business development by division during the year under review is as follows:

Volkswagen Brand Group

The Volkswagen brand group produced 3,063 thousand Volkswagen passenger cars (-0.3 %), 442 thousand
Škoda (-4.0 %) and 1,210 Bentley and Rolls-Royce (-32.1 %). Across all its brands, the brand group
responded to declining markets with flexible adjustments of production.

In the reporting year Volkswagen Passenger Cars sold 3,056 thousand vehicles (-1.2 %). Sales of the Golf
fell as it approached the end of its life cycle (-9.1 %). By contrast, sales of the new Polo launched in the
Autumn of 2001 increased significantly (+40.9 %). The Bora and Jetta models, especially, continued to
enjoy great popularity in the USA and in China, increasing sales by 7.3 %. Škoda sold 437 thousand units,
4.3 % down on the prior year.

The sales revenue of the Volkswagen brand group of 46,711 million € (-5.4 %) did not attain the high level
of the prior year. The decline in unit sales, the crisis in South America and the changed exchange rate
situation impacted on earnings in the financial year 2002. Positive impulses were drawn from the lasting
effect of price adjustment and cost optimization measures, enabling the brand group to post an operating
profit of 2,463 million €, by far the largest contribution to overall Group earnings.

Audi Brand Group

In the past year the Audi brand group produced 748 thousand Audi (+1.5 %), 451 thousand SEAT (-5.5 %)
and 442 Lamborghini units (+57.9 %). The highest-volume model was the Audi A4, with production
totaling 340 thousand units (+9.8 %). The SEAT brand, in particular, was forced to adjust its production
levels in response to the general market weakness in Europe and as a result of new model start-ups.

Sales of Audi vehicles increased in 2002 against the prior year to 736 thousand (+0.8 %). The brand’s sales
figures were boosted in particular by the increase in sales of the current Audi A4 (+10.5 %) and by the
market launch of the Audi Cabriolet. SEAT sold 455 thousand units in 2002, 4.3 % down on the prior year,
though the relaunched Ibiza increased its sales by 7.3 %.

The sales revenue of the Audi brand group of 25,439 million € was 1.6 % up on the prior year comparative,
despite reduced unit sales. The operating profit of 1,359 million €, representing a 5.3 % return on sales, was
again high, but owing to upfront expenditures for new models, exchange rate changes and the start-up costs
for the SEAT Ibiza fell short of the prior year comparative.

Commercial Vehicles

The Commercial Vehicles brand group produced a total of 272 thousand units in 2002 (-10.9 %). The
mother plant at Hanover produced 141 thousand Transporter, Caravelle, Multivan and LT units as well as 28
thousand kits for Volkswagen Poznan Sp.z o.o. The Poznan facility built 29 thousand Volkswagen
commercial vehicles. The Resende facility in Brazil attained a consistently high production level, with 24
thousand truck and bus chassis.

In the past financial year unit sales totalled 267 thousand light trucks, MPVs, recreational vehicles and
mobile homes (-9.9 %). There was a marked decline in investment in light utility vehicles in the German
and other Western European markets. The Commercial Vehicles brand group was nevertheless able to
maintain its longstanding market positions. In the passenger vehicle segment, the Caravelle and Multivan
models made significant gains in market share. Volkswagen Commercial Vehicles remains the clear market
leader in the sale of such vehicles in Germany. The business in heavy commercial vehicles built at our
Resende plant in Brazil was highly satisfactory in 2002. Despite a decline in overall market conditions, unit

                                                     31
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
sales remained at the prior year level based on substantial gains in market share. In the Brazilian truck
segment up to 40 tonnes, sales totalled 19 thousand units (+1.5 %); sales of buses increased by 10.4 % to 5
thousand units. In both market segments the products of the Commercial Vehicles brand group at times
attained market leadership in 2002.

The economic conditions faced by the Commercial Vehicles Division in its key Western European markets
deteriorated in 2002. This led to a fall in sales revenue by 2.9 % to 4,884 million €. The decrease in unit
sales and the high level of upfront expenditures for new models placed a burden on the operating result. The
earnings of 156 million € were well short of the prior year level.

Financial Services

The Financial Services Division again increased business activity in 2002. In the year under review
outstanding contracts in the financing, leasing and insurance sector increased compared to the prior year to
5,448 thousand (+7.2 %). The proportion of all new vehicles delivered by the Group which were leased or
financed increased to 35.7 (30.7) %, with no change to the fundamental principles of eligibility. Deposits in
Volkswagen Bank direct at December 31, 2002 increased to 5,613 million € (+23.5 %) based on the
sustained expansion of direct banking business. Total assets at the end of the reporting year were 49,380
million €, a substantial increase of 6.9 %. Operating profit improved substantially against the prior year to
721 million € (+30.6 %).

The debt to equity ratio was 11:1. The return on investment based on operating profit is influenced by the
high equity ratio, and amounted to 19.2 (14.8) %.

The Europcar Group, which is part of the Financial Services Division, increased its sales in the short-term
rentals segment by 2.7 % to 1,087 million € in the financial year 2002, against a background of stiff
competition and substantial falls in consumer demand. The pre-tax profit of 51.6 million € almost doubled
compared to the prior year.

This sector-beating performance, accompanied by a recognized customer structure, is based on stringent
orientation to customers’ needs, a clearly targeted pricing strategy and consistent cost reductions, all within
the framework of optimized processes. At the same time, a gain in market share to 16 % again moved the
Europcar Group closer to the current market leader. With this increase, Europcar has taken a further major
step towards its strategic goal of market leadership in Europe.

Europcar successfully drove forward its growth plans in 2002 with the scheduled expansion of its franchise
network in a current total of 116 countries.

Its field of expertise was also expanded significantly by the signing of cooperation agreements with leading
international corporations in the tourism and scheduled air travel sectors. Europcar has also enhanced its
product portfolio with a worldwide chauffeur service.

The close cooperation and utilization of synergies among the individual Group brands – almost one in three
Europcar fleet vehicles was a Group vehicle – was demonstrated particularly clearly by the integration of
Europcar into the after-sales service package for the Phaeton.




                                                      32
                                                                                        VWAG-Securities Report 2002
                                                                                                     [As filed copy]

3.        Subject Matters to be dealt with

Legal Risk

The European End of Life Vehicles Directive was enacted in national law in Germany by the End of Life
Vehicles Act (Altfahrzeuggesetz) with effect from July 1, 2002. As a result, owners are now able to return
their vehicles for disposal at the end of their useful lives free of charge to the collection centres designated by
the manufacturers and importers. This applies initially to vehicles registered prior to the enactment of the
law and will be extended to cover all existing vehicles in January 2007. As other member states of the
European Union have not yet fully implemented the Directive, and the effects of the planned eastward
expansion of the European Union on the collection of end of life vehicles cannot yet be estimated, no clear
forecast can at present be made as to the expected financial burden imposed on the Volkswagen Group in the
EU member states outside Germany. Against that background, existing provisions have been reviewed and
adjusted accordingly. The consequences arising from the material prohibitions applicable with effect from
July 1, 2003 remain open to question, as the necessity to use substitute materials and resultant increases in
production costs have not yet been determined.

The European Commission has issued a new Block Exemption Regulation relating to the sale of
automobiles, which came into force on October 1, 2002. Existing exempt contracts at that date will remain
valid until September 30, 2003. The new Block Exemption Regulation gives dealers the choice to sell
vehicles from different manufactures if they so wish.

Selective distribution based on qualitative or quantitative factors will in future apply only to new vehicles.
Service centres which meet the required standard must be authorized. In this context, Volkswagen will be
reformulating the basis of its contracts with dealers. The Volkswagen Group is of the view that the new
provisions will enable the tried and proven sales and service network to be maintained as before to the
benefit of customers.

In 2003 the German Federal Government plans to increase the tax on company cars also available for private
use. Such a change in the law would pose a risk to the sales of Volkswagen as a volume manufacturer and
distributor of high-quality premium vehicles. A change in buying trends towards lower-cost models with
lower equipment specifications is to be expected. The precise effects on demand for Volkswagen models
cannot be forecast at present, as the legislative process was not yet completed at the time the Annual Report
2002 went to press.



4.        Material Business Contracts, etc.

Not applicable.



5.        Research and Development Activities

Customer-Oriented Product Development

At Volkswagen, product development is targeted at meeting the needs of customers. Aspects such as design
and functionality remain key elements, alongside high safety standards and environmental sustainability.

In the financial year 2002 the Group entered new segments with the Phaeton and the Touareg, and has
continued to pursue its strategy of broader market coverage. In the luxury Sports Utility Vehicle class

                                                        33
                                                                                       VWAG-Securities Report 2002
                                                                                                    [As filed copy]
Volkswagen’s new Touareg V10 TDI 230 KW (313 bhp) unit, delivering 750 Nm of torque, is the top-
performing passenger car diesel engine in the world, and the height-adjustable adaptive air suspension
system also sets new standards in its class. The luxury-class Phaeton model will in future be complemented
by a stretched version.

With the Touran Multi Purpose Vehicle Volkswagen is entering another new market segment. Based on the
A-class, the Touran’s, main technical features are its impressive use of space, an electromechanical power
steering system and a four-link rear axle.

The New Beetle Cabrio, launched in 2002, has an automatically deployed anti-roll bar, which provides
avant-garde design while still conforming to Volkswagen’s high safety standards. The SEAT Cordoba and
the Bentley Coupé, launched at the Paris Motor Show, represented further new developments from the
Group in the past year.

Volkswagen will be maintaining the continuous updating of its model range with successor models to the
Golf and the Transporter. The main focus for the Audi brand, following the launch of the new Audi A8, is
on the successor to the Audi A3.

The focus of engine and gearbox development was on the new 6-speed automatic gearboxes. The new units
will be fitted in the next-generation Golf as well as in the Touareg and the Phaeton, for which they are also
designed to be used in the top-of-the-range diesel engine, the V10 TDI.

In November 2002 Volkswagen presented a world’s first: the sporty, economical six-speed automatic DSG
(Direct Shift Gearbox). Its most impressive feature is its highly dynamic power transmission with no loss of
traction, based on an integral dual clutch. The gearbox is designed for differing engine characteristics and
vehicle models. In comparison with the existing 4- and 5-speed automatics, the new direct shift gearbox
provides improved driveability combined with lower fuel consumption. The gearbox, already fitted in the
Golf R32 as from first quarter 2003, will also be offered for other models in the course of the year.

Volkswagen has continued to pursue its FSI strategy, successively expanding its range with the production
start-up of the 1.4 l/63 KW (86 bhp) and 1.6 l/85 KW (115 bhp) units.

Electrical and electronic components and technology are becoming ever more important in automotive
development. In order to control complexity and cost, Group-wide electronics platforms for hardware and
software have been defined. In response to its growing importance, a strategic realignment of electronic
componentry and a qualitative and quantitative expansion of capacities in that area were required. The first
fruits of that initiative on the product side, received with great acclaim both by the market and the trade press,
were the operator control logic for key vehicle functions in the Audi A8, Phaeton and Touareg, as well as the
personalization of a large number of driver set-up options. These are examples of consistent orientation to
customer needs by Volkswagen, right from the development phase.

The Volkswagen Group will be driving forward its activities intensively in the fields of recycling-friendly
total vehicle solutions, new vehicle concepts and safety systems in the coming years.

The innovative power of Volkswagen was demonstrated by the total of 852 patent applications – 693 in
Germany and 159 abroad – registered by Group employees.

Research and Development Costs

In the financial year 2002 research and development costs were up on the prior year, at 4,371 million €. The
capitalization rate of 56.3 % was around the prior year level. Research and development costs charged to the
income statement in the Automotive Division of the Volkswagen Group totalled 2,891 million € (+8.7 %).


                                                       34
                                                                                        VWAG-Securities Report 2002
                                                                                                     [As filed copy]
They represented 3.7 (3.3) % of the Automotive Division’s sales revenue. Volkswagen AG research and
development costs accounted for in accordance with the German Commercial Code totalled 2.7 billion €
(+0.2 %), virtually the same level as the prior year.

The Research and Development function, including the vehicle producing investments Shanghai-
Volkswagen Automotive Company Ltd. and FAW-Volkswagen Automotive Company Ltd. not fully
consolidated, employed 20,577 people Group-wide (+3.3 %).




IV.         CONDITION OF FACILITIES

1.          Outline of Investments in Facilities, etc.

Please refer to the "VI. FINANCIAL CONDITION", "1. Financial Statements", "Notes to the Balance
Sheet".

Investments in Tangible Assets and Other Intangible Assets by Market

                            Rest of      North       South                     Asia/        Consolida
               Germany                                              Africa                                 Total
(Million €)                 Europe      America     America                   Oceania         tion

     2002          4,555       1,794         327              250        62        27            -188        6,827

     2001          3,402       2,146         466              531        28        44                0       6,617



Expenditure on Environmental Protection

Volkswagen AG invested a total of 32.2 million € (-2.4 %) in environmental protection facilities and
equipment at its six German plants in the financial year 2002. Production-related investments totalled 22.1
million € (-12.3 %). Expenditure on clean air measures forming part of those investments increased against
the prior year, primarily in connection with a number of major projects at the Hanover site. 10.1 million €
(+26.3 %) was invested in product-related environmental protection measures, mostly for preserving clean
air.

The operation of environmental protection equipment and activities incurred costs totalling 186.5 million € (-
2.4 %). This included measures to protect the environment against the damaging effects of the Company’s
manufacturing activities by avoiding, reducing or eliminating emissions.




                                                         35
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]

2.            Condition of Major Facilities

The principal properties relating to the automotive operations of Volkswagen AG and its consolidated
subsidiaries in the Federal Republic of Germany as at December 31, 2002 are summarized in the following
table:

                                                                        Square Meters of Floor Space
                                                                               (square meters)
Manufacturing plants, Assembly plants and Parts depots
     a) Inside and Outside Enclosure                                                            24,591,359
General Offices and Miscellaneous Space                                                             69,056
Undeveloped Estate
     a) Reserve Space for Plant Expansion                                                        5,292,622
     b) Housing Construction Reserves                                                            1,242,608
          Total                                                                                31,195,645
Plants of Volkswagen AG
     Wolfsburg                                                                                 20,388,067
     Hanover                                                                                     1,116,225
     Kassel                                                                                      2,215,404
     Brunswick                                                                                     590,728
     Emden                                                                                       4,117,691
     Salzgitter                                                                                  2,767,530
          Total                                                                                31,195,645



3.         Plans for Installation, Expansion or Removal of Facilities, etc.

Investment and Financial Planning 2003-2007

In the period 2003-2007 the Volkswagen Group will be investing some 33 billion € in tangible assets in the
Automotive Division, with 67 % of capital investments being made in Germany. The main reason for the
high proportion of domestic investment is that updates will be focussed primarily on the models produced in
Germany. The average investment ratio of 6.9 % in the planning period is a clear indication of the
investment strength of the Volkswagen Group.

Some 85 % of investments in fixed assets will be related to product development and manufacturing. Key
areas will be successor products as well as the addition of new models in the Golf class, the B/C class and the
Transporter class. The planning also includes an entry-level model below the Polo. In the component
sector, the migration of production to new engines and gearboxes offering low fuel consumption and
compliance with emissions standards will be driven forward. Production areas, focussing in particular on
press plants, paintshops and assembly shops, will be enhanced and modernized in order to meet our

                                                      36
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
ambitious productivity and quality targets.

Outside of the production sector, plans include the further expansion of the development functions, quality
assurance, supply of genuine parts, and IT.

Capital investment by the Automotive Division over the next five years, including additions for capitalized
development costs and financial assets, will total 46.7 billion €. In this, Volkswagen will be further pursuing
its objective of financing capital investments in the Automotive Division from self-generated funds. For the
period 2003-2007 the expected cash flow will cover capital investments by 14.5 billion €, or 31 %.

A further 2.9 billion € of newly budgeted investment will be committed to new vehicle models in order to
strengthen the joint venture in China. In keeping with the special character of the banking and leasing
business, the rapidly expanding Financial Services Division will not be able to generate all the funds needed
to finance its investments from cash flow. Consequently, the capital requirement of 18.6 billion € for the
vehicle rental business and 13.1 billion € for customer and dealer financing will largely be met by means of
flexible financing instruments on the capital markets. A positive factor in the procurement of this financing
is the high credit rating of the Volkswagen Group, enabling capital to be acquired at favourable terms.




                                                      37
                                                                                    VWAG-Securities Report 2002
                                                                                                 [As filed copy]

V.             CONDITION OF THE COMPANY

1.             Condition of Shares, etc.

(1)            Total Number of Shares, etc. (As at December 31, 2002)

                                              Total Number of                Number of Shares
     Number of Authorized Shares
                                               Issued Shares              Authorized but not Issued
         713,272,580 Shares                  425,528,220 Shares              287,744,360 Shares


                                                Issued Shares
 Registered/
                                Number of     Name of Stock Exchange and/or Securities
 Bearer and         Class of
                                 Issued       Dealers Association on or with which Shares      Remarks
  Non-par           Shares
                                 Shares       are listed and /or registered
   Value
                                              Frankfurt/Main, Federal Republic of Germany
                                              Hamburg, Federal Republic of Germany
                                              Düsseldorf, Federal Republic of Germany
                                              Hanover, Federal Republic of Germany
                                              Stuttgart, Federal Republic of Germany
                                              Munich, Federal Republic of Germany
                                              Berlin, Federal Republic of Germany
                                              Bremen, Federal Republic of Germany
 Bearer and
                    Ordinary   320,289,940    Luxembourg,                     Luxembourg
  Non-Par
                     Shares         Shares    Amsterdam,                       Netherlands
   Value
                                              Swiss         Exchange,          Switzerland
                                              Brussels, Belgium     London, Great Britain
                                              Paris, France                  Tokyo, Japan
                                              Barcelona, Spain               Bilbao, Spain
                                              Valencia, Spain               Madrid, Spain
                                              New York, U.S.A.*                Milan, Italy
                                              * Traded in the form of “sponsored unlisted
                                              American Depositary Receipts” (ADRs).
                                              Frankfurt/Main, Federal Republic of Germany
                                              Hamburg, Federal Republic of Germany
                                              Düsseldorf, Federal Republic of Germany
                                              Hanover, Federal Republic of Germany
                                              Stuttgart, Federal Republic of Germany
                                              Munich, Federal Republic of Germany
     Bearer and
                   Preferred   105,238,280    Berlin, Federal Republic of Germany
      Non-Par
                    Shares          Shares    Bremen, Federal Republic of Germany
       Value
                                              Luxembourg,                     Luxembourg
                                              Amsterdam,                       Netherlands
                                              Swiss         Exchange,          Switzerland
                                              Brussels,                           Belgium
                                              Paris,                                France
                                              London, Great Britain
                               425,528,220
       Total           --                                          --                               --
                                    Shares



                                                       38
                                                                                VWAG-Securities Report 2002
                                                                                             [As filed copy]



(2)      Changes in Total Number of Issued Shares and Stated Capital

Ordinary Shares
                    Total Number of Issued            Stated Capital
                    Shares (Million shares)    (Million Euro (Million Yen))
      Date                                                                            Remarks
                    Increase                     Increase
                                Outstanding                      Outstanding
                   /Decrease                    /Decrease
                                                            8             797 Exercising of
 Dec. 31, 1998            3.0          311.9
                                                      (1,040)       (103,570) options
                                                                              Exercising of
                                                         0.1              799 options and
 Dec. 31, 1999           0.04          312.0
                                                        (13)        (103,830) changeover effect of
                                                                              Euro quotation
                                                           3              801 Exercising of
 Dec. 31, 2000            1.1          313.1
                                                       (390)        (104,090) options
                                                           16             818 Exercising of
 Dec. 31, 2001            6.4          319.5
                                                      (2,079)       (106,299) options
                                                                              Exercising of
                                                           2              820 conversion rights
 Dec. 31, 2002            0.8          320.3                                  from the second
                                                       (260)        (106,559) tranche of the share
                                                                              option plan


Preferred Shares
                    Total Number of Issued            Stated Capital
                    Shares (Million shares)    (Million Euro (Million Yen))
      Date                                                                            Remarks
                    Increase                     Increase
                                Outstanding                      Outstanding
                   /Decrease                    /Decrease
                                                           20             269 Issue to employees
 Dec. 31, 1998            7.9          105.2                                  exercising of
                                                      (2,599)        (34,957) options
                                                                          269
 Dec. 31, 1999             --          105.2                --
                                                                     (34,957)
                                                                          269
 Dec. 31, 2000             --          105.2                --
                                                                     (34,957)
                                                                          269
 Dec. 31, 2001             --          105.2                --
                                                                     (34,957)
                                                                          269
 Dec. 31, 2002             --          105.2                --
                                                                     (34,957)




                                                 39
                                                                                                 VWAG-Securities Report 2002
                                                                                                              [As filed copy]

(3)        Shareholding categorized by Type of Shareholders

Since shares are in bearer form, the information on distribution of shares by holders cannot be obtained.



(4)        Principal Shareholders (As at December 31, 2002)
                                                                            Number of                 Shareholding
                 Name                         Address
                                                                            Shares held                  Ratio
State of Lower Saxony                         Hanover                        58,155,290 Shares                  13.7%
Own shares of Volkswagen AG                  Wolfsburg                       41,719,353 Shares                   9.8%
                 Total                              --                       99,874,643 Shares                  23.5%



2.         Dividend Policy

Volkswagen is following a policy of giving its stockholders an appropriate share in net earnings while at the
same time strengthening the capital basis of the company.



3.         Trend of Share Price

Frankfurt Stock Exchange (1)

                          Yearly High and Low Stock Prices for Each Fiscal Year
                                                                       (2)
                               During the Most Recent Five-year Period
                                  (3)                                          (3)
       Fiscal Year           1998                   1999                2000                   2001             2002
 Date of Settlement
                                Dec. 31              Dec. 31                 Dec. 31            Dec. 31           Dec. 31
       of Accounts
       Highest (EUR)              101.18                78.60                  61.00              62.40              62.15
                (Yen)           (13,148)             (10,214)                (7,927)            (8,109)            (8,076)
        Lowest (EUR)               49.34                   46.48               39.05              32.95              32.96
                (Yen)            (6,412)                 (6,040)             (5,075)            (4,282)            (4,283)
                                     Monthly High and Low Stock Prices
                               for Each of the Last Six Calendar Months of 2002
      Months/2002        July              August          September          October          November       December
 Highest (EUR)              48.50             49.58                 46.65              42.80        40.70            41.00
 (Yen)                    (6,303)           (6,443)               (6,062)            (5,562)      (5,289)          (5,328)
 Lowest (EUR)               39.20             42.93                 36.12              32.96        36.09            33.76
 (Yen)                    (5,094)           (5,579)               (4,694)            (4,283)      (4,690)          (4,387)
(1)     Ordinary Shares
(2)     From 2000 onwards XETRA prices.


                                                             40
                                                                                               VWAG-Securities Report 2002
                                                                                                            [As filed copy]
(3)     Year 1998 adjusted at a ratio of 1:10 as a result of the conversion to no-nominal value shares.

                                 (1)
Tokyo Stock Exchange, Inc.

                              Yearly High and Low Stock Prices for Each Fiscal Year
                                     During the Most Recent Five-year Period
      Fiscal Year             1998                 1999                2000                 2001              2002
 Highest (\)                  185,000 (2)                 9,900             6,000              6,880              7,300
 Lowest (\)                     7,320 (3)                 4,960             3,900              3,970              4,200
                                        Monthly High and Low Stock Prices
                                  for Each of the Last Six Calendar Months of 2002
      Months/2002             July           August           September       October        November       December
 Highest (\)                    5,850             5,600             5,100           4,850          4,910          5,420
 Lowest (\)                     4,400             5,200             4,480           4,400          4,400          4,200

(1) Volkswagen's common stock was listed on the Tokyo Stock Exchange, Inc. on December 2, 1988.
(2) Recorded in June before 1:10 stock split.
(3) Recorded in October after 1:10 stock split.


4.          Directors and Executive Officers

(1)         Resume of Directors and Executive and Number of Shares of Common Stock Owned

(a)         Board of Management (As at the date of filing)

        Name, Date of Birth                  Position and                             Date of Becoming a Member and
                                                                        Address
          and Address                       Responsibility                            Principal Personal History

                                              Chairman                                Chairman of the Board of
 Dr.-Ing. E. H.                             Group Quality                             Management since April 17, 2002
 Bernd Pischetsrieder                                                 Wolfsburg
 (February 15, 1948)                        Research and                              Member of the Board of
                                            Development                               Management since July 1, 2000

 Dr. rer. pol. h. c.                        Controlling and                           Member of the Board of
 Bruno Adelt                                                          Wolfsburg
                                             Accounting                               Management since January 1, 1995
 (July 27, 1939)

 Francisco Javier Garcia Sanz                                                         Member of the Board of
                                             Procurement              Wolfsburg
 (May 6, 1957)                                                                        Management since July 1, 2001

 Dr. rer. pol. h. c.                                                                  Member of the Board of
 Peter Hartz                            Human Resources                Wolfsburg
                                                                                      Management since October 1, 1993
 (August 9, 1941)




                                                               41
                                                                                        VWAG-Securities Report 2002
                                                                                                     [As filed copy]


       Name, Date of Birth            Position and                               Date of Becoming a Member and
                                                                    Address
         and Address                 Responsibility                              Principal Personal History
                                     Group Strategy
 Dr. jur.                               Treasury                                 Member of the Board of
 Jens Neumann                                                      Wolfsburg     Management since January 1,
 (April 17, 1945)                    Legal Matters                               1993
                                      Organization

 Dipl. Wirt-Ing.                                                                 Member of the Board of
 Hans Dieter Pötsch                                                Wolfsburg     Management since January 1,
 (March 28, 1951)                                                                2003

 Dr.-Ing. h.c. mult.                                                             Member of the Board of
 Folker Weißgerber                     Production                  Wolfsburg
                                                                                 Management since March 1, 2001
 (March 25, 1941)

 Dr. rer. nat.                  Chairman of the Board of
                                                                                 Member of the Board of
 Martin Winterkorn               Management of AUDI                Wolfsburg
                                                                                 Management since July 1, 2000
 (May 24, 1947)                          AG

Each member of the Board of Management owns less than 1% of the Company's Ordinary Shares.




(b)        Supervisory Board (As at the date of filing)

                                                                               Date of Becoming Member and
      Name and Date of Birth     Position             Address
                                                                                 Principal Personal History

 Dr. techn. h. c.                                                        April 16, 2002
 Dipl.-Ing. ETH                 Chairman             Wolfsburg           Chairman of the Board of Management
 Ferdinand K. Piëch                                                      from January 1, 1993 to April 16, 2002
 (April 17, 1937)

 Klaus Zwickel                  Deputy                                   October 21, 1993
                                              Frankfurt am Main
 (May 31, 1939)                 Chairman                                 1st Chairman of the Metalworkers Union
                                                                         April 16, 2002
 Andreas Blechner                                     Salzgitter         Chairman of the Works Council of the
 (November 3, 1957)                                                      Volkswagen AG Salzgitter Plant

 Dr. jur.                                                                June 19, 1997
 Gerhard Cromme                                      Düsseldorf          Chairman of the Supervisory Board of
 (February 25, 1943)                                                     ThyssenKrupp AG
                                                                         August 20, 2001
 Elke Eller-Braatz
                                              Frankfurt am Main          Head of the Social Policy Department of
 (August 22, 1962)
                                                                         the Metalworkers Union




                                                        42
                                                                    VWAG-Securities Report 2002
                                                                                 [As filed copy]


                                                          Date of Becoming Member and
   Name and Date of Birth   Position    Address
                                                            Principal Personal History
                                                    June 7, 2001
Dr. jur. Michael Frenzel
                                        Hanover     Chairman of the Board of Management of
(March 2, 1947)
                                                    TUI AG
Dr. jur.                                            June 19, 1997
Hans Michael Gaul                      Düsseldorf   Member of the Board of Management of
(March 2, 1942)                                     E.ON AG

The Lord David Simon of                             April 16, 2002
Highbury, CBE                           London
                                                    Director of Unilever plc.
(July 24, 1939)
                                                    April 8, 2003
Walter Hirche                           Hanover     Minister of the State of Lower Saxony for
(February 13, 1941)                                 Economy, Labour and Traffic
                                                    June 3, 1993
Gerhard Kakalick
                                        Kassel      Chairman of the Works Council of the
(July 24, 1946)
                                                    Volkswagen AG Kassel Plant
                                                    April 16, 2002
Olaf Kunz                                           Head of Corporate and Co-determination
                                       Frankfurt
(February 3, 1960)                                  Policy on the Executive Committee of the
                                                    Metalworkers Union
                                                    July 1, 1999
Günter Lenz
                                        Hanover     Chairman of the Works Council of the
(July 26, 1959)
                                                    Business Line Commercial Vehicles
                                                    July 2, 1987
Dr. jur. Klaus Liesen                    Essen      Chairman of the Supervisory Board (to
(April 15, 1931)                                    April 16, 2002)
                                                    July 1, 1999
Xaver Meier
                                       Ingolstadt   Chairman of the General Works Council of
(February 13, 1945)
                                                    AUDI AG
                                                    June 19, 1997
Roland Oetker                                       President Deutsche Schutzvereinigung für
                                       Düsseldorf
(April 7, 1949)                                     Wertpapierbesitz e.V.
                                                    (German Shareholders’ Association)
Dr. jur. Dr.-Ing. E. h.                             June 27, 1996
Heinrich v. Pierer                      Munich      Chairman of the Board of
(January 26, 1941)                                  Management of Siemens AG
                                                    July 2, 1992
Bernd Sudholt                                       Deputy Chairman of the Group and
                                       Wolfsburg
(June 3, 1946)                                      General Works Councils of Volkswagen
                                                    AG




                                          43
                                                                                  VWAG-Securities Report 2002
                                                                                               [As filed copy]


                                                                        Date of Becoming Member and
      Name and Date of Birth   Position           Address
                                                                          Principal Personal History
 Dr. rer. pol. h. c.                                               July 2, 1990
 Klaus Volkert                                  Wolfsburg          Chairman of the Group and General Works
 (November 24, 1942)                                               Councils of Volkswagen AG
 Dr. rer. pol.
                                                                   June 18, 1996
 Ekkehardt Wesner                               Wolfsburg
                                                                   Senior Executive of Volkswagen AG
 (June 20, 1939)
                                                                   April 8, 2003
 Christian Wulff
                                                 Hanover           Minister President of the State of Lower
 (June 19, 1959)
                                                                   Saxony



(2)        Compensation to Directors and Members of Supervisory Board

The remuneration of the members of the Board of Management for the financial year 2002 totalled
16,469,831 € (approx. 2,140 million Yen) (previous year: 17,615,655 € (approx. 2,289 million Yen)), of
which 11,754,263 € (approx. 1,527 million Yen) was variable. As part of the fourth tranche of the share
option plan, the members of the Board of Management subscribed to a further 4,000 convertible bonds
entailing the right to purchase ordinary shares in Volkswagen AG. In total, the members of the Board of
Management hold rights to purchase 260,000 ordinary shares in Volkswagen AG. The details of the share
option plans are explained in note (23) Capital and reserves.

The remuneration of the members of the Supervisory Board of Volkswagen AG amounted to 2,343,000 €
(approx. 304 million Yen) (previous year: 2,331,669 € (approx. 303 million Yen)).

Loans totaling 70,437 € (approx. 9.2 million Yen) have been granted to members of the Supervisory Board
(amount redeemed in 2002: 34,608 € (approx. 4.5 million Yen)). The loans have an interest rate of 4.0% and
an agreed term of up to 12.5 years.


(3)        Retirement Pension of Board Members

On December 31, 2002 the pension provisions for current members of the Board of Management totalled
20,622,607 € (approx. 2,680 million Yen).
Retired members of the Board of Management and their surviving dependants received 7,190,756 € (approx.
934 milllion Yen)(previous year: 7,024,611 € (approx. 913 million Yen)). Provisions for pensions for this
group of people were recorded totalling 84,958,333 € (approx. 11,040 million Yen)(previous year:
67,164,307 € (approx. 8,728 million Yen)).




                                                   44
                                                                                      VWAG-Securities Report 2002
                                                                                                   [As filed copy]

  VI.       FINANCIAL CONDITION

  (Covering commentaries)

  (1)   The accompanying financial statements of Volkswagen Group and Volkswagen AG are identical to the
        original Annual Report disclosed in Germany. Those consolidated financial statements of Volkswagen
        Group have been prepared in accordance with International Accounting Standards (IAS) based on
        German Commercial Code. The stand-alone financial statements of Volkswagen AG have been
        prepared in conformity with generally accepted accounting principles and legal provisions in Germany.

        Major differences in accounting principles, procedures and presentation between those adopted by
        Volkswagen Group and Volkswagen AG and those generally accepted in Japan are explained in “4.
        Major Differences in Accounting Principles and Practices between the Federal Republic of Germany
        and Japan”.

        The accompanying financial statements of Volkswagen Group and Volkswagen AG are prepared in
        accordance with Article 127-1 of the “Regulation Concerning Terminology, Forms and Methods of
        Preparation of Financial Statements, etc.” (Ministry of Finance (“MOF”) Ordinance No.59 of 1963 -
        hereafter referred to as “Regulation Concerning Financial Statements”).

(2)     The following financial statements have been audited by its independent accountants, PwC Deutsche
        Revision. The reports of the independent accountants and their letters of consent are presented in the
        following pages.

        -   Financial statements of Volkswagen Group
            (hereafter “Consolidated Financial Statements”)
                                                                              -   2002 and 2001
        -   Financial statements of Volkswagen AG
            (hereafter “Parent Company’s Financial Statements”)
                                                                              -   2002 and 2001

        However, these financial statements have not been audited by its independent accountants in accordance
        with Article 193-2 of the Securities and Exchange law because such audit is exempted by Article 1-3 of
        the Ordinance of the Cabinet Office Concerning Audit Certification of Financial Statements” (MOF
        Ordinance No. 12 of 1957) based on Article 35 of “Securities and Exchange Law Enforcement Order”
        (Cabinet Order No.321 of 1965).

  (3)   The original financial statements with reports of independent accountants in German language included
        in this securities report are identical to those disclosed in the Federal Republic of Germany, and the
        Japanese version is a translation of the original financial statements with report of independent
        accountants.

  (4)   The accompanying original financial statements are presented in Euro. The amounts presented in yen
        are translated at the exchange rate of 129.95 yen to one Euro, the telegraphic transfer intermediate rate
        of the Tokyo Foreign Exchange Market on April 16, 2003, in accordance with the provision of Article
        130 of the Regulation Concerning Financial Statements. Fractions are rounded to the nearest million
        yen.
        The amounts presented in yen and matters mentioned in “2. Explanation of Major Assets, Liabilities,
        Revenue and Expenses” through “4. Major Differences in Accounting Principles and Practices between
        the Federal Republic of Germany and Japan” are not included in the original financial statements and,
        except for the references to the financial statements, are not subject to the audit by its independent
        accountants, PwC Deutsche Revision.




                                                       45
                                                                                   VWAG-Securities Report 2002
                                                                                                [As filed copy]



                                              - IN GERMAN -

                                            (Letterhead of PwC)

                             CONSENT OF INDEPENDENT ACCOUNTANTS


May 6, 2003

To the Board of Management
of Volkswagen AG


You have informed us that the financial statements of Volkswagen Group and the financial statements of
Volkswagen AG, as well as notes to the financial statements, as of December 31, 2002 and 2001 and for the
years then ended, together with our reports thereon dated February 20, 2003 and February 20, 2002, are being
included under Section of the Annual Securities Report.

We hereby consent to the inclusion in the Annual Securities Report of our Auditor’s Report and any references
thereto and references to our name in the form and context in which they are included.



PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft




(manual signature)                                    (manual signature)

Prof. Dr. Winkeljohann                                Gadesmann
Wirtschaftsprüfer                                     Wirtschaftsprüfer




                                                     46
                                                                                      VWAG-Securities Report 2002
                                                                                                   [As filed copy]
                                               - IN GERMAN -

                                              (Letterhead of PwC)

                                   INDEPENDENT AUDITORS’ REPORT

To the Board of Management of Volkswagen AG

   “We have audited the consolidated financial statements of VOLKSWAGEN AKTIENGESELLSCHAFT,
Wolfsburg, consisting of the balance sheet, the income statement, the statement of changes in equity, the cash
flow statement as well as the notes to the financial statements for the business year from January 1 to December
31, 2002. The preparation and the content of the consolidated financial statements according to the
International Accounting Standards of the IASB (IAS) are the responsibility of the Company’s Board of
Management. Our responsibility is to express an opinion, based on our audit, as to whether the consolidated
financial statements are in accordance with IAS.
   We conducted our audit of the consolidated financial statements in accordance with German auditing
regulations and generally accepted standards for the audit of financial statements promulgated by the Institut
der Wirtschaftsprüfer in Deutschland e.V. (IDW). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatements. The evidence supporting the amounts and disclosures in the consolidated financial statements
are examined on a test basis within the framework of the audit. The audit includes assessing the accounting
principles used and significant estimates made by the Board of Management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for
our opinion.
   In our opinion, based on our audit, the consolidated financial statements give a true and fair view of the net
assets, financial position, results of operations and cash flows of the Group for the business year 2002 in
accordance with IAS.
   Our audit, which according to German auditing regulations also extends to the group management report,
combined with the management report of the Company, prepared by the Board of Management for the business
year from January 1 to December 31, 2002, has not led to any reservations. In our opinion, on the whole the
combined management report provides a suitable understanding of the Group’s position and suitably presents
the risks of future development. In addition, we confirm that the consolidated financial statements and the
combined management report for the business year from January 1 to December 31, 2002 satisfy the conditions
required for the Company’s exemption from its duty to prepare consolidated financial statements and the Group
management report in accordance with German accounting law.”

Hanover, February 20, 2003

PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

(manual signature)                                      (manual signature)

Prof. Dr. Winkeljohann                                  Gadesmann
Wirtschaftsprüfer                                       Wirtschaftsprüfer




                                                       47
                                                                                        VWAG-Securities Report 2002
                                                                                                     [As filed copy]
                                                - IN GERMAN -

                                              (Letterhead of PwC)

                                    INDEPENDENT AUDITORS’ REPORT

To the Board of Management of Volkswagen AG

   We have audited the financial statements prepared by VOLKSWAGEN AKTIENGESELLSCHAFT,
Wolfsburg, for the financial year ending December 31, 2002, including the bookkeeping and the Management
Report, which forms part of the Group Management Report. Bookkeeping and the preparation of financial
statements and a Management Report in accordance with German commercial law is the responsibility of the
Company’s Board of Management. Our responsibility is to express an opinion on the financial statements,
including the bookkeeping, and the Management Report based on our audit.
   We conducted our audit of the annual financial statements in accordance with Section 317 of the German
Commercial Code and the generally accepted standards for the auditing of financial statements promulgated by
the German Institute of Auditors (IDW). Those standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net assets, financial position and results of operations
in the financial statements in accordance with German principles of proper accounting and in the Management
Report are detected with reasonable assurance. Knowledge of the business activities and the economic and
legal environment of the Company and evaluations of possible misstatements are taken into account in the
determination of audit procedures. The effectiveness of the internal control system and the evidence supporting
the disclosures in the financial statements and the Management Report are examined primarily on a test basis
within the framework of the audit. The audit includes assessment of the accounting principles used and
significant estimates made by the Company’s Board of Management, as well as evaluation of the overall
presentation of the financial statements and the Management Report. We believe that our audit provides a
reasonable basis for our opinion.
   Our audit has not led to any reservations.
   In our opinion, the financial statements give a true and fair view of the net assets, financial position and
results of operations of the Company in accordance with German principles of proper accounting. On the
whole the Management Report provides a suitable understanding of the Company’s position and suitably
presents the risks of future development.

Hanover, February 20, 2003

PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

(manual signature)                                       (manual signature)

Prof. Dr. Winkeljohann                                   Klinnert
Wirtschaftsprüfer                                        Wirtschaftsprüfer




                                                        48
                                                                                      VWAG-Securities Report 2002
                                                                                                   [As filed copy]
                                               - IN GERMAN -

                                              (Letterhead of PwC)

                                   INDEPENDENT AUDITORS’ REPORT

To the Board of Management of Volkswagen AG

   “We have audited the consolidated financial statements of VOLKSWAGEN AKTIENGESELLSCHAFT,
Wolfsburg, consisting of the balance sheet, the income statement and the statements of changes in
shareholders’ equity and cash flows as well as the notes to the financial statements for the business year from
January 1 to December 31, 2001. The preparation and the content of the consolidated financial statements
according to the International Accounting Standards of the IASB (IAS) are the responsibility of the Company’s
Board of Management. Our responsibility is to express an opinion, based on our audit, whether the
consolidated financial statements are in accordance with IAS.
   We conducted our audit of the consolidated financial statements in accordance with German auditing
regulations and generally accepted standards for the audit of financial statements promulgated by the Institut
der Wirtschaftsprüfer in Deutschland e. V. (IDW). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatements. The evidence supporting the amounts and disclosures in the consolidated financial statements
are examined on a test basis within the framework of the audit. The audit includes assessing the accounting
principles used and significant estimates made by the Board of Management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for
our opinion.
   In our opinion, based on our audit the consolidated financial statements give a true and fair view of the net
assets, financial position, results of operations and cash flows of the Group for the business year in accordance
with IAS.
   Our audit, which according to German auditing regulations also extends to the Group management report
prepared by the Board of Management for the business year from January 1 to December 31, 2001, has not led
to any reservations. In our opinion, on the whole the Group management report provides a suitable
understanding of the Group’s position and suitably presents the risks of future development. In addition, we
confirm that the consolidated financial statements and the Group management report for the business year from
January 1 to December 31, 2001 satisfy the conditions required for the Company’s exemption from its duty to
prepare consolidated financial statements and the Group management report in accordance with German
accounting law.”

Hanover, February 20, 2002

PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

(manual signature)                                      (manual signature)

Eichner                                                 Dr. Heine
Wirtschaftsprüfer                                       Wirtschaftsprüfer




                                                       49
                                                                                        VWAG-Securities Report 2002
                                                                                                     [As filed copy]
                                                - IN GERMAN -

                                              (Letterhead of PwC)

                                    INDEPENDENT AUDITORS’ REPORT

To the Board of Management of Volkswagen AG

   “We have audited the financial statements and the Management Report prepared by VOLKSWAGEN AG
for the fiscal year ending December 31, 2001. The preparation of financial statements and a Management
Report in accordance with German commercial law is the responsibility of the Company’s Board of
Management. Our responsibility is to express an opinion on the financial statements and the Management
Report based on our audit.
   We conducted our audit of the annual financial statements in accordance with Section 317 of the German
Commercial Code and the generally accepted standards for the auditing of financial statements promulgated by
the German Institute of Auditors (IDW). Those standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net assets, financial position and results of operations
in the financial statements in accordance with German principles of proper accounting and in the Management
Report are detected with reasonable assurance. Knowledge of the business activities and the economic and
legal environment of the Company and evaluations of possible misstatements are taken into account in the
determination of audit procedures. The effectiveness of the internal control system and the evidence supporting
the disclosures in the financial statements and the Management Report are examined primarily on a test basis
within the framework of the audit. The audit includes assessment of the accounting principles used and
significant estimates made by the Company’s Board of Management, as well as evaluation of the overall
presentation of the financial statements and the Management Report. We believe that our audit provides a
reasonable basis for our opinion.
   Our audit has not led to any reservations.
   In our opinion, the financial statements give a true and fair view of the net assets, financial position and
results of operations of the Company in accordance with German principles of proper accounting. On the
whole the Management Report provides a suitable understanding of the Company’s position and suitably
presents the risks of future development.
   We issue this confirmation pursuant to our statutory audit conducted on February 23, 2001 and our
supplementary audit conducted in respect of the changes to the “other revenue reserves”, the “provisions for tax
purposes” and the “taxes on income”, and in respect of the information presented in the notes to the financial
statements and in the management report. The supplementary audit did not lead to any reservations.”

Hanover, February 20, 2002

PwC Deutsche Revision
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft

(manual signature)                                       (manual signature)

Eichner                                                  Dr. Heine
Wirtschaftsprüfer                                        Wirtschaftsprüfer




                                                        50
                                                                             VWAG-Securities Report 2002
                                                                                          [As filed copy]

1.          Financial Statements

A. Consolidated Financial Statements

      (1) Consolidated Income Statement (2002 and 2001)

      (2) Consolidated Balance Sheet (2002 and 2001)

      (3) Consolidated Development of Shareholders’ Equity (2002 and 2001)

      (4) Consolidated Cash Flow Statement (2002 and 2001)

      (5) Notes to the Consolidated Financial Statements
          for the Fiscal Year ended December 31, 2002

B. Parent Company’s Financial Statements

      (1)      Parent Company’s Balance Sheet (2002 and 2001)

      (2)      Parent Company’s Income Statement (2002 and 2001)

      (3)      Notes to the Parent Company’s Financial Statements
               for the Fiscal Year ended December 31, 2002

(In German)

1.    Financial Statements

      (1) Consolidated Income Statement (2002 and 2001)

      (2) Consolidated Balance Sheet (2002 and 2001)

      (3) Consolidated Development of Shareholders’ Equity (2002 and 2001)

      (4) Consolidated Cash Flow Statement (2002 and 2001)

      (5) Notes to the Consolidated Financial Statements
          for the Fiscal Year ended December 31, 2002

      (6) Parent Company’s Balance Sheet (2002 and 2001)

      (7) Parent Company’s Income Statement (2002 and 2001)

      (8) Notes to the Parent Company’s Financial Statements
            for the Fiscal Year ended December 31, 2002




                                                     51
                                                                                 VWAG-Securities Report 2002
                                                                                              [As filed copy]

2.       Substance of Major Assets and Liabilities

See Notes to the Financial Statements.



3.    Other Matters

(1)   Subsequent Events

The European Commission has opened a treaty violation proceedings against the Federal Republic of
Germany in March 2003, according to which parts of the Volkswagen Act are to be examined with regard to
its compatibility with the Community Law.



(2)   Legal Proceedings

In the dispute regarding investment grants to the plants in Mosel and Chemnitz, no judgment had yet been
passed by the European Court at the time the Annual Report went to press. In 1996 the European
Commission had considered grants totalling some 123 million € as not in compliance with the Common
Market. In February 2000 Volkswagen AG appealed against the judgment of the Court of First Instance in
favour of the European Commission. The action of the Federal Republic of Germany filed with the
European Court of Justice in the same matter is likewise still pending.

The European Court of Justice has not yet passed judgment on the appeal lodged on September 14, 2000 by
Volkswagen AG against the decision of the European Court of First Instance in respect of alleged
obstruction of exports.

Likewise, no judgment has yet been passed in the action filed by Liverpool Limited Partnership, Bermuda at
the Braunschweig Regional Court. The case concerns a lawsuit against the resolutions passed by the Annual
General Meeting on June 7, 2001 relating to ratification of the actions of the members of the Board of
Management and of the Supervisory Board for the financial year 2000 and relating to the authorization to
acquire treasury shares.

On June 29, 2001 the European Commission imposed a fine of 30.96 million € on Volkswagen AG for
alleged influencing of dealer pricing. Volkswagen lodged an appeal to the European Court of First Instance
against this decision on September 10, 2001. No hearing date has yet been scheduled.



4.    Major Differences in Accounting Principles and Practices between the Federal Republic of
      Germany and Japan

The consolidated financial statements of the Volkswagen Group are prepared in accordance with
International Accounting Standards (IAS), which satisfy the conditions required for exemption from its duty
to prepare consolidated financial statements in accordance with German accounting law.

Non-consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in Germany.

The accounting and valuation principles to be applied in Germany under the statutory regulations are


                                                    52
                                                                                       VWAG-Securities Report 2002
                                                                                                    [As filed copy]
basically comparable to those in Japan. Residual differences of principal importance for the financial
statements are explained below considering the relevant standards of IAS as far as the consolidated financial
statements are concerned.

Principles

Accounting and valuation are ruled by the prudence concept in Germany and therefore the following
principles have to be abided.

1) According to the principle of conservatism, losses which have been incurred before the closing date must
   be recognized in the accounts, even if they have not yet been realized.

2) According to the realization principle, profits must not be recognized in the accounts until they are
   realized.

3) The lower of cost or market value implies for intangibles, tangible fixed assets and investments that any
   loss of value which is expected to be permanent must be taken into account in the balance sheet. For
   current assets, a loss of value which is expected to be only temporary must as well be taken into account.

According to IAS, information is material if its omission or misstatement or nondisclosure could influence
the economic decisions of users taken on the basis of the financial statements.

In Japan, the prudence concept largely corresponds to the German understanding. The conservatism and
realization principle are not codified yet, they are a part of the generally accepted accounting principles. The
lower of cost or market principle is incorporated in the Japanese Commercial Code, but only applied to a
limited extent because it is not fully permitted by the tax laws.

Common component of the aforementioned three principles is the materiality principle. It is applicable to
the preparation and presentation of financial statements - in spite of possibly different ranges of application in
individual cases - governed by the objective to present the economic situation of a business enterprise in a
way that will not be misleading to interested parties interpreting the financial position of a company.

Foreign Currency Translation

In Germany, there are until now no special requirements for the translation of financial statements to
consolidate foreign operations in the group accounts whereas the standards of the IAS follow a concept
distinguishing the applicable translation method depending on the degree of integration of the foreign entities
in the operations of the parent company. If the foreign entity is largely integrated in the operations of the
parent company a temporal translation method is applied, whereas for relatively self-contained activities the
closing rate method should normally be used. Resulting exchange differences are charged to income
applying the temporal method, while those of the closing rate method are classified as a component of equity
until the disposal of the net investment.

According to IAS 21, transactions in foreign currency are translated at the rates prevailing on the date when
they occur. Foreign currency monetary items are recorded on the balance sheet applying the middle rate on
the balance sheet date. Translation differences are recognised in the income statement.

The majority of Volkswagen Group foreign subsidiaries are principally autonomous so that the closing rate
method is predominantly applied. Companies belonging to the Volkswagen Group outside the Eurozone are
autonomous entities whose annual financial statements are converted into Euro based on the functional
currency: Asset and liability items are converted at the rate prevailing on the balance sheet date, while capital
and reserves are converted at historical rates. The resultant exchange differences are not recorded in the


                                                       53
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
income statement until disposal of the subsidiary concerned, and are shown as separate items in capital and
reserves.

In Japan, assets and liabilities on foreign currency financial statements are translated at the balance sheet
date, equity items are translated at historical rates. On revenue and expenses, the rate either at the end or
average of the period is applied. The differences arising from translating foreign currency balance sheet
accounts are recorded in translation adjustment account, which is shown under the section of shareholders’
equity.

BALANCE SHEET

Format

The balance sheet format is prescribed by the German Commercial Code and the classification follows the
principle of increasing liquidity, i.e. starting with intangibles, tangible fixed assets and investments. The
equity and liabilities side starts with stockholders’ equity (capital stock, reserves, current year net income),
followed by provisions and other liabilities.

The rules of IAS do not prescribe a special format but only general classification principles as minimum
requirements.

In comparison the format of Japanese financial statements is largely governed by trade custom. As a rule,
the balance sheet items are in the reverse order, i.e. the asset side starts with liquid assets and ends with
intangibles, tangible fixed assets and investments, and the equity and liabilities side begins with short term
liabilities and ends with stockholder’s equity.

Intangible assets

Following the German Commercial Code expenses for incorporation and intangibles which were not
acquired must not be capitalized.

The rules of IAS require the deferral of development costs of a project to future periods, provided that certain
criteria are satisfied. In accordance with IAS 38, research costs are recognised as expenses when incurred.
Development costs for future products and other internally developed intangible assets are capitalized at
purchase or production cost, provided the manufacture of the products is likely to bring the Volkswagen
Group an economic benefit. If the conditions for capitalization are not met, the expenses are charged to the
income statement in the year in which they are incurred.

Purchase or production costs include all costs directly attributable to the development process as well as
appropriate portions of development-related overheads.

The benchmark treatment in IAS 23 of not capitalizing borrowing costs is applied. The optional allowed
alternative treatment in IAS 23 for borrowing costs is not used. In German accounting, only the borrowing
interest associated with manufacturing may be capitalized.

The costs are amortised using the straight line method as from start of production over the scheduled model
life cycle of the developed products - generally between 5 and 10 years.

Goodwill arising from consolidation is amortised using the straight line method over its scheduled useful life
of between 5 and maximum of 15 years (Also covered in Consolidation Particularities).

Expenses for incorporation may not be capitalized under IAS or German accounting.


                                                      54
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
According to Japanese legislation, expenses for incorporation, and amounts specifically expended for new
products or new technology, the adoption of new techniques or new management systems, the exploitation
of resources and market development may be capitalized and, if this is done, must be amortized within five
years.
Tangible assets

In accordance with IAS 17, tangible assets leased under finance leases are capitalized, and the corresponding
liability is recognised under liabilities in the balance sheet, provided the risks and rewards of ownership are
substantially attributable to the companies of the Volkswagen Group. If there is no reasonable certainty that
the lessee will obtain ownership by the end of the lease term, the asset should be fully depreciated over the
shorter of the lease term and useful life (HGB useful life).

In Japan, leased assets under finance lease contracts have to be capitalized in principle. Leased assets other
than those of which the ownership is transferred to the lessee may be accounted for as rental assets in
condition of certain notes. Such notes include acquisition costs, accumulated depreciation, net book value,
minimum lease payment, lease rental payment during the year, depreciation of leased assets, interest portion
of lease rental payment and calculation methods of depreciation and interest portion.

Volkswagen Group applied the cost model in accordance with IAS 40, which means that real estate and
buildings held in order to obtain rental income (investment properties) are recognised at amortised cost, with
useful lives in keeping with those of the tangible assets used by the company itself. The fair value model is
not applied.

In IAS, movable tangible assets are depreciated using the straight line method instead of the declining
balance method; no half-year or multi-shift depreciation is used. Furthermore, useful lives are now based on
commercial substance and no longer on tax law. Special depreciation for tax reasons is not permitted under
IAS.

In accordance with IAS 16 and German accounting, the cost of repairs are recorded as current expenses.
Expenditure can only be added to the carrying amount of the asset when it is probable that future economic
benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the
enterprise. In German accounting, subsequent expenditure may be capitalized, if, for example, a different use
of the asset is possible following major adjustments or improvements.

In Japan, similar accounting treatment is required for real estate and buildings, movable tangible assets and
cost of repairs.

Current assets and financial instruments

In Germany all current assets must be carried in the balance sheet at the lower of cost and market value also
according to tax legislation, while the Japanese Commercial Code specifies that, if the current market prices
are very much lower than the cost of acquisition or production, current assets must be valued at the current
market prices unless these are expected to rise again to the cost of acquisition or production. The application
of this modified lower of cost or market principle is, however, not fully recognized by the tax laws.

Under IAS 39, financial instruments are contracts that give rise to a financial asset in one company and a
financial liability or in an equity instrument in another. The “regular” purchase or sale of financial
instruments is accounted for on the settlement date - that is on the date on which the asset is delivered.

IAS 39 subdivides financial assets into the following categories; “financial asset or liability held for trading
purposes”: “held-to-maturity investments”; “loans and receivables originated by the enterprise”; and


                                                      55
                                                                                            VWAG-Securities Report 2002
                                                                                                         [As filed copy]
“available-for-sale financial assets”. In the Volkswagen Group, financial instruments are generally classified
as “loans and receivables originated by the enterprise” or “available-for-sale financial assets”. Financial
instruments are not treated as held-to-maturity investments in the Volkswagen Group. Financial instruments
are accounted for in the balance sheet at “amortised cost” or at “fair value”. The “amortised cost” of a
financial asset or liability is the amount at which a financial asset or liability is valued when first recognised
minus any repayments, minus any write-down for impairment or uncollectability, plus or minus the
cumulative spread of any difference between the original amount and the amount repayable at maturity
(premium), distributed using the effective interest method rather than the straight line method over the term
of the financial asset or liability.

In relation to short-term receivables and payables, the amortised costs generally correspond to the nominal or
repayment                                                                                                      amount.
“Loans granted and receivables” and liabilities are valued at amortised cost unless connected with hedge
instruments.                     These                     include                   in                     particular:
-                 loans               of                 non-current                 financial                   assets,
-                    receivables                     from                     financing                       business,
-                      trade                     receivables                      and                         payables,
-        short-term         other      receivables          and        assets       and        liabilities,          and
-                short-              and                 long-term                financial                  liabilities.
”Available-for-sale        financial     assets”      are      generally      recognised      at      fair       value.
These represent both non-current and current asset securities. Changes in the fair value are reflected in the
income                                                                                                      statement.
Shares in subsidiaries and other investments are also classified as “available-for-sale financial assets”. They
are, however, generally shown at cost, since for those companies no active market exists and fair values
cannot be reliably ascertained without unreasonable commitment of time and expense. Fair values are
recognised if there are indicators that the fair value is less than cost.

In accordance with IAS 39, in the case of hedging against the risk of change in value of balance sheet items
(fair value hedges), both the hedge transaction and the hedged risk portion of the underlying transaction are
recognised at fair value. Valuation changes are recorded in the income statement. In the case of hedging of
future cash flows (cash flow hedges), the hedge instruments are also valued at fair value. Changes in
valuation are initially recognised in a special reserve and not recorded in the income statement, and are only
recorded in the income statement later when the cash flow occurs.

As a finance lease lessor, leased assets are not capitalized, but the discounted leasing installments are shown
as receivables.

In accordance with IAS 2, inventories must be valued at full cost. They were formerly capitalized only at
direct cost within the Volkswagen Group.

In Japan, securities are classified as trading securities, held-to-maturity bonds, investments in subsidiaries
and associated companies, and other securities. Trading securities are marked to market, of which unrealized
gains and losses are charged or credited to income. Held-to-maturity bonds are stated at amortized cost, and
investments in subsidiaries and associated companies are stated at cost. Other securities are stated at market
value, of which unrealized gains and losses are included, net of related taxes, in stockholders’ equity.

The Japanese Commercial Code specifies that, if the current market prices are very much lower than the cost
of acquisition or production, current assets must be valued at the current market prices unless these are
expected to rise again to the cost of acquisition or production. The application of this modified lower of cost
or market principle is, however, not fully recognized by the tax laws.

In Japan, unrealized gains and losses on hedging transactions are deferred and carried as assets and liabilities

                                                           56
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
until the profit and loss on the hedged items are realized. However, in cases that hedged assets and liabilities
can be valued at market value, it is also permitted to adopt the mark-to-market method rather than a deferral
method, accordingly, unrealized gains and losses on both the hedging transactions and the hedged items are
recognized in current year’s earnings.

Capital and reserves

In accordance with SIC 16, treasury shares are offset against capital and reserves. In German accounting,
own shares are capitalized as current assets and a restricted reserve is formed in equity in the same amount.

In IAS, minority interests of shareholders from outside the Group are shown separately from capital and
reserves.

In Japan, gains and losses on sales of the treasury stock, as well as those relating to other securities, are
immediately charged or credited to income.

Provisions, accruals and liabilities

In accordance with IAS 37, provisions are created where a present obligation exists to third parties as a result
of a past event; where a future outflow of resources is probable; and where a reliable estimate of that outflow
can be made. Provisions are made for warranty claims in accordance with IAS 37 based on losses to date
and estimated future losses in respect of vehicles sold. Other provisions are likewise made in accordance
with IAS 37 corresponding to all discernible risks and uncertain obligations considering the probability of
them occurring, and not offset against claims for recourse. Provisions not resulting in an outflow of resources
in the immediate year following are recognised at their settlement value discounted as per the balance sheet
date.

Under IAS, provisions can be distinguished from other liabilities such as trade payables and accruals because
there is uncertainty about the timing or amount of the future expenditure required in settlement. Although it
is sometimes necessary to estimate the amount or timing of accruals, the uncertainty is generally much less
than for provisions.

In Japan, such provisions are not required and are not allowable against tax so that they are not generally
recorded.

Regarding the valuation of provisions for pensions, the German accounting principles permit different
valuation methods but generally the method complying with the tax regulations is applied.

In the consolidated financial statements, Volkswagen Group has valued the pension obligations of its group
companies on the basis of the internationally accepted projected unit credit method. In the non-consolidated
financial statements an actuarial method that takes tax regulations into consideration have been applied.

While the German Commercial Code and to a larger extent IAS prescribe reporting requirements for
pension commitments, there are no special Japanese rules in this respect.

In Japan, pension expenses represent comparable to IAS requirements service cost, interest cost, actual return
on plan assets and net amortization of prior service cost. Differences between net pension cost and actual
contribution are recorded as accrued or prepaid pension expenses.

In Germany, provisions for impending losses from transactions not yet finalized have to be accrued.
Provisions for sales rebates, warranty payments without legal obligation and guarantees on construction are
required according to the German accounting principles and the rules of IAS.


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                                                                                      VWAG-Securities Report 2002
                                                                                                   [As filed copy]
In Japan, such provisions are not required and are not allowable against tax so that they are not generally
recorded.

Provisions for deferred maintenance may not be created under IAS in contrast to German accounting.

In the Volkswagen Group, short-term liabilities are recognised at their repayment or settlement value. Long-
term liabilities are recorded on the balance sheet at amortised cost.

Differences between historical cost and the repayment amount are taken into account by means of the
effective interest method.

In Germany, at the individual company level, deferred taxes payable resulting from timing differences
between book income and tax income must be set up in the balance sheet, whereas deferred taxes receivable
may be reported. When timing differences arise on consolidation, tax effect accounting is required in
Germany. According to the rules of IAS, the liability method is applied.

In Japan, accounting treatment of deferred tax is applied, and deferred tax assets as well as deferred tax
liabilities have to be recognized.

The German Commercial Code prescribes that liabilities which can only be measured by using a substantial
degree of estimation or whose legal obligation is not evident should be disclosed separately in the balance
sheet as provisions.

In the Japanese balance sheet format, provisions are not set up in a separate item but reported in the current
and long-term liabilities.


INCOME STATEMENT

Cost of sales method

There are no major principle differences concerning preparation and presentation of the income statement
between the regulations of Germany, Japan and IAS. The cost-of-sales method is binding with regard to the
Japanese commercial Code, in accordance with the standards of IAS and optional pursuant to the German
law.

Extraordinary items

There are certain differences about the conception of extraordinary items. The German understanding and
that of the international standards is substantially comparable defining that extraordinary income and
expenses originate from events that are distinct from the ordinary activities of the company and therefore do
not recur frequently or regularly. Prior period items are principally part of the ordinary activities. IAS
prescribes an explanation of the nature and a separate disclosure of the amount of each extraordinary item.

In Japan, the definition of extraordinary items is much more wider and implies also events and transactions
which are expected to recur frequently if they are not by their nature ordinary items. Consequently, gains or
losses on sale of fixed assets, on sale of securities acquired for purposes other than resale and casualty losses
are qualified as extraordinary as well as prior period adjustments.

CASH FLOW STATEMENT

As required by IAS 7, German and Japanese accounting rules publicly listed companies are required to

                                                       58
                                                                                       VWAG-Securities Report 2002
                                                                                                    [As filed copy]
disclose consolidated cash flow statements. This requirement does not exist with regard to individual
financial statements in Germany.

In Japan, preparation of cash flow statement is required, and it is within the scope of audit.

SEGMENT REPORTING

In Germany, the Commercial Code prescribes in connection with the individual financial statements the
disclosure of sales separated according to the main business lines and to regional aspects in the notes while
only listed companies have to prepare a complete segment report on the group level. There are no detailed
requirements of segment reporting regarding Japanese regulations; according to the Security and Exchange
law in Japan, the revenue and expenses should be reported for each industry and geographical segment.

The standards of the IAS require a more extensive reporting. Therefore Volkswagen Group describes,
including an additional reporting in the business report and the notes, the activities of each segment,
distinguishes sales, operating results, operating cash flows and research and development expenses by
segment as well as the segment assets employed.

The internal organizational and management structure and the internal reporting procedures to the Board of
Management and the Supervisory Board form the basis for determining the primary format of segmental
reporting within the Volkswagen Group, with the two divisions: Automotive and Financial Services. The
secondary reporting format is presented from a geographical viewpoint. A reconciliation between the
information disclosed for reportable segments and the aggregated information in the consolidated financial
statements is presented.

CONSOLIDATION PARTICULARITIES

According to the German Law as well as to IAS, the consolidated financial statements should be prepared
using uniform accounting policies.

The uniformity of accounting policies in the consolidated financial statements is also postulated in Japan,
especially, if this is of material impact on the report of the group’s situation, but in practice it is allowed to
consolidate financial statements of foreign companies set up following local accounting rules.

In both countries and according to IAS, Capital consolidation is carried out applying the purchase method,
but the determination and treatment of the consolidation difference may vary.

Following the German rules and those of IAS, the excess of the cost of acquiring a subsidiary over the value
of the net assets is analyzed and based on the fair values of the net assets transferred to the appropriate
account. A remaining difference is reported as goodwill. This principle corresponds principally to the
Japanese rules, but it is also allowed and common practice to set up the excess as consolidation adjustment
which must be amortized over not exceeding twenty years.

Alternatively to an amortization of goodwill, it is optional according to the German legislation and until
December 31 1994, also according to IAS to charge the goodwill directly against the retained earnings.

Goodwill from capital consolidation resulting from acquisition of companies since 1995 is capitalized in
accordance with IAS 22 and amortised over its respective useful life.

In consolidated financial statements, the accounting principles of Germany, Japan, and IAS require to set up
the investment in associated companies applying the equity method. Differences exist with regard to joint
ventures. In these cases the German Law allows also and the IAS recommend, as a benchmark treatment, the


                                                       59
                                                                                  VWAG-Securities Report 2002
                                                                                               [As filed copy]
proportionate consolidation which is not regulated in Japan.

NOTES TO THE FINANCIAL STATEMENTS

The disclosure requirements in Germany and Japan are principally comparable, although there are –
including also the additional attachments and schedules of the Japanese commercial Code and the Securities
and Exchange law – singularly different points of main emphasis. These differences are without material
impact on the presentation of the net worth, financial position and results of the Volkswagen Group.

Considering the additional reporting requirements of IAS and the supplementary voluntary reporting of
Volkswagen Group, the interested parties get more information especially with respect to international
comparability than legally required. This refers for example to an enlarged segment reporting, explanations
to the cash flow statement and disclosures to derivative financial instruments as well as to income taxes.




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                                                                                      VWAG-Securities Report 2002
                                                                                                   [As filed copy]

VII. TREND OF FOREIGN EXCHANGE RATE

As the trend of foreign exchange rate between Euro and Japanese Yen is published in more than two (2)
daily newspapers in Japan, please refer to such trend.




VIII.     OUTLINE OF SHARE HANDLING, ETC. IN JAPAN

1.        Outline of Share Handling, etc. in Japan

(1)       Places for Accepting Applications for Registration of Transfer of Shares and Transfer Agent
          in Japan

Because the Company issues only bearer shares, there is no place for accepting applications for registration
of transfer of shares of the Company nor any transfer agent thereof both in Germany and Japan, except that
the sharehandling vis-a-vis the beneficial holders of the shares of the Company (the "beneficial
stockholders") deposited with a custodian in Germany in the name of Japan Securities Settlement &
Custody, Inc. (the "Clearing Corporation") shall be carried out by Mizuho Trust and Banking Co., Ltd. (the
"Share-Handling Agent') to be designated pursuant to the Standards For Handling of Listed Securities
Adopted by the Tokyo Stock Exchange Inc. (the "Stock Exchange").

The shares of the Company to be listed on the Stock Exchange are, in accordance with the Central
Depositary Clearing Systems of Foreign Shares of the Stock Exchange (the "Clearing System"), deposited
with a custodian (the "Custodian") in Germany designated by the Clearing Corporation, in the name of the
Clearing Corporation. Accordingly, when settling transactions in the shares of the Company on the Stock
Exchange, settlement between the securities companies who are members of the Stock Exchange, for
instance, will be made by transfer between their respective accounts opened at the Clearing Corporation and
settlement between clients of the same member securities company will be made by transfer between their
respective Foreign Securities Transactions Accounts opened at said member pursuant to the Agreement
Concerning Establishment of Account for Foreign Securities Transactions (the "Foreign Securities
Transactions Account Agreement"). As a consequence, a change in the number of the shares of the
Company kept in custody by the Custodian will not occur.

However, when as a result of any transaction in the shares of the Company in Japan there occurs an increase
or a decrease in the balance of the shares kept in custody by the Custodian, steps shall be taken to reflect such
increase or decrease by changing number of shares of the Company kept in custody by the Custodian in the
name of the Clearing Corporation in accordance with the procedures therefor applicable in Germany.

A summary of the matters concerning share-handling, designed for the beneficial stockholders to exercise
their rights such as the right to receive dividends and voting rights indirectly through the Clearing
Corporation is stated hereinbelow based upon, inter alia, a Custody Agreement between the Clearing
Corporation and the Custodian, a Service Agreement among the Clearing Corporation, the Share-Handling
Agent and the Company and a Paying Agreement among the Clearing Corporation, the Dividend Paying
Company and the Bank, all of which are to be entered into pursuant to the Clearing System.




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                                                                                  VWAG-Securities Report 2002
                                                                                               [As filed copy]

(2)      Special Privileges to Stockholders

None.



(3)      Restriction on the Transfer of the Stock

None.



(4)      Other Matters Concerning Handling of Shares

(a)      Close of Accounts:

December 31, each year.

(b)      Annual General Meeting of Stockholders:

To be held at the Company's registered office or at the location of any German stock exchange or at other
suitable location in Germany within the first eight months of the fiscal year.

(c)      Record Dates:

Stockholders entitled to receive dividends from the Company are those in possession of the relevant
dividend coupon on or after the dividend payment date which is, in general, the next bank working day
following the day of the shareholders' meeting resolving on the appropriation of distributable profit; such
payment date may be expressly fixed in the resolution of the shareholders' meeting. The beneficial
stockholders in Japan entitled to receive dividends from the Clearing Corporation are, in general, those
beneficial stockholders recorded in the list of beneficial stockholders prepared by the Share-Handling Agent
as of the same calendar date in Japan as corresponds to the German dividend payment date.

(d)      Denomination of Share Certificate:

The share has no par value.

(e)      Charges Respecting Share Certificate:

The beneficial stockholders of the Company in Japan are required to pay the annual charge for opening and
maintaining a Foreign Securities Transactions Account at a securities company in Japan pursuant to the
Foreign Securities Transaction Account Agreement.

(f)      The Name of Newspaper in which Public Notice shall be Made:

For the benefit of the beneficial stockholders, the Company gives a public notice regarding specific matters
in the Nihon Keizai Shimbun published in Japan.




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                                                                                    VWAG-Securities Report 2002
                                                                                                 [As filed copy]

2.       Method of Exercise of Rights of Beneficial Stockholders in Japan

(1)      Method of Exercise of Voting Rights of Beneficial Stockholders in Japan

The beneficial stockholders in Japan may exercise their voting rights by giving instructions to the Share-
Handling Agent. When the Custodian is prepared to exercise or have exercised voting rights through proxy,
the beneficial stockholders will be notified accordingly in the Public Notice of the General Meeting and
invited to give the necessary voting instructions to the Share-Handling Agent. In the absence of instructions
from the beneficial stockholders, no voting rights shall be exercised with respect to the shares of the
Company.



(2)      Method of Claiming Distribution of Dividends, etc.

Upon receipt from the Company of the notice of dividend rate, the payment date of dividends and other
pertinent information, the Share-Handling Agent will forward the same to the beneficial stockholders on the
basis of the list of beneficial stockholders as of the record date concerned.

The dividends will be received by the Custodian on behalf of the Clearing Corporation from the Company
and turned over to the Dividend Paying Bank, which bank will in turn distribute the same by way of such
means as bank account transfers to the beneficial stockholders based upon the list of beneficiary stockholders
prepared by the Share-Handling Agent.

A free distribution, if any, will be handled in accordance with the Clearing System. In general, such will be
received into the accounts of the beneficial stockholders through the Clearing Corporation and shares
numbering fewer than the number of shares prescribed by the Stock Exchange as a trading unit of the
Company stock will be sold and the proceeds thereof shall be distributed to the beneficial stockholders
through the Share-Handling Agent.

When a capital increase has taken place in such a way that stockholders of the Company have a right, as
stockholders, to subscribe to new shares, the Custodian will sell such rights in Germany on behalf of the
Clearing Corporation which has received such rights, and the proceeds thereof will be paid to those
beneficial stockholders entitled thereto by the Share-Handling Agent in a similar manner as for payment of
dividends.



(3)      Method of Transfer of Shares

In Germany, the transfer of the shares of the Company shall be made by agreement between seller and buyer
and upon surrender of the certificate or certificates for such shares.

In Japan the beneficial stockholder will not hold share certificates of shares of the Company, nor will the
receipts to be issued by the securities companies which are members of the Stock Exchange be transferable
under the Clearing System. Any beneficial stockholder may transfer his rights with respect to the share of
the Company by means of trading on the Stock Exchange. In this case, trading will be cleared by means of a
book transfer between accounts opened with a securities company or between accounts of securities
companies opened with the Clearing Corporation.




                                                     63
                                                                                     VWAG-Securities Report 2002
                                                                                                  [As filed copy]
(4)       Tax Treatment in Japan Concerning Dividends, etc.

(a)       Dividends

The dividends to be paid to the beneficial shareholder are treated as dividend income under the Japanese tax
laws. With respect to dividends received by individuals who are Japanese residents or by Japanese
corporations, the balance of such dividends remaining after collection of the withholding tax, if any, of
Germany, the state or any local public entity thereof from payment of such dividends will be subject to
certain taxes, as follows:

a)        in the case of the dividends to be paid during the period from April 1, 2003 to December 31, 2003,
          10 per cent Japanese income tax will be withheld; or

b)        in the case of the dividends to be paid during the period from January 1, 2004 to March 31, 2008,
          7 per cent Japanese income tax and 3 per cent Japanese local tax for the individuals and 7 per cent
          Japanese income tax for the Japanese corporations will be withheld; or

c)        in the case of dividends to be paid after April 1, 2008, 15 per cent Japanese income tax and 5 per
          cent Japanese local tax for the individuals and 15 per cent Japanese income tax for the Japanese
          corporation will be withheld.

Filing of the final tax return by the individuals for such dividend income shall not be needed.

The tax imposed in Germany, on the dividend paid to the Beneficial Shareholders, may be claimed as a
foreign tax credit in accordance with the Japanese tax laws by filing a final tax return.

(b)       Capital Gain and Loss

The tax treatment of the capital gain or loss arising from the transaction in the stock of the Company in Japan
is the same as that of the capital gain or loss from transactions in the stock of a domestic corporation.

(c)       Inheritance Tax

The beneficial holders of the shares of the Company in Japan who have inherited the shares of the Company
by succession or by will are liable for the inheritance tax in accordance with the Inheritance Tax Law of
Japan. However, they may be entitled to the foreign Tax Law of Japan. However, they may be entitled to
the foreign tax credit under certain circumstances.

(d)       Securities Transaction Tax

Certain securities transaction taxes will be imposed on the transfer of the shares of the Company in Japan.



(5)       Other Notices and Reports

When notice will be given to the beneficial holders of the shares of the Company in Japan respecting such
matters as the General Meeting of Stockholders, the Share-handling Agent will, upon receipt of an adequate
number of copies of such notice from the Custodian, distribute the same to the beneficial stockholders on the
basis of the list of beneficial stockholders as of the record date concerned, or arrange for a public notice
thereof in a prescribed manner.



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                                                                                  VWAG-Securities Report 2002
                                                                                               [As filed copy]



IX.      REFERENCE INFORMATION ON THE COMPANY

Referential Documents

Securities                               Report filed       with        the        Director-General,
(from January 1, 2001 to December 31, 2001)     Kanto Local Finance Bureau on June 28, 2002


Semi-Annual                                Report filed       with        the        Director-General,
(from January 1, 2002 to June 30, 2002)           Kanto Local Finance Bureau on September 30, 2002


As of the date hereof, there is no further documents submitted to the Director-General, Kanto Local Finance
Bureau pursuant to Article 25 of the Securities and Exchange Law of Japan since January 1, 2002.




PART TWO: INFORMATION OF THE GUARANTOR

Not applicable.




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