ANNUAL REPORT IFRS 2019 Key Figures VOLKSWAGEN FINANCIAL SERVICES AG € million (as of Dec. 31) 2019 2018 Total assets 112,444 80,462 Loans to and receivables from customers attributable to Retail financing 20,712 16,676 Dealer financing 5,413 4,062 Leasing business 39,951 19,760 Lease assets 22,776 13,083 Equity 12,029 8,016 Operating profit 1,223 844 Profit before tax 1,264 818 in percent (as of Dec. 31) 2019 2018 Cost/income ratio1 54 59 Equity ratio2 10.7 10.0 Return on equity3 12.6 10.5 Number (as of Dec. 31) 2019 2018 Employees 10,773 8,603 Germany 5,763 5,340 International 5,010 3,263 1 General and administrative expenses, adjusted for expenses passed on to other entities in the Volkswagen Group / interest income from lending transactions and marketable securities, net income from leasing transaction, interest expenses, net income from service contracts, net income from insurance business, provision for credit risks and net fee and commission income. 2 Equity/total assets. 3 Profit before tax / average equity. RATING (AS OF DEC. 31) STANDARD & POOR’S MOODY’S INVESTORS SERVICE Short-term Long-term Outlook Short-term Long-term Outlook Volkswagen Financial Services AG A-2 BBB+ stable P-2 A3 stable All figures shown in the report are rounded, so minor discrepancies may arise when amounts are added together. The comparative figures from the previous fiscal year are shown in parentheses directly after the figures for the current fiscal year. COMBINED MANAGEMENT REPORT CONSOLIDATED FINANCIAL STATEMENTS ADDITIONAL INFORMATION 04 Fundamental Information about the 43 Income Statement 159 Independent Auditor’s Report Group 44 Statement of Comprehensive Income 164 Report of the Supervisory Board 09 Report on Economic Position 45 Balance Sheet 19 Volkswagen Financial Services AG 47 Statement of Changes in Equity (Condensed, in accordance with the 48 Cash Flow Statement HGB) 49 Notes to the Consolidated Financial 22 Report on Opportunities and Risks Statements 31 Human Resources Report 158 Responsibility Statement 36 Report on Expected Developments COMBINED MANAGEMENT REPORT 04 Fundamental Information about the Group 09 Report on Economic Position 19 Volkswagen Financial Services AG (Condensed, in accordance with the HGB) 22 Report on Opportunities and Risks 31 Human Resources Report 36 Report on Expected Developments 4 Fundamental Information about the Group Combined Management Report Fundamental Information about the Group Steady international growth continues to confirm the business model of Volkswagen Financial Services AG. BUSINESS MODEL ORGANIZATION OF THE Over the years, the companies in the Volkswagen Financial VOLKSWAGEN FINANCIAL SERVICES AG GROUP Services AG Group have evolved increasingly dynamically into providers of comprehensive mobility services. The key The companies of the Volkswagen Financial Services AG objectives of Volkswagen Financial Services AG are: Group provide financial services to private, corporate and fleet customers. The close integration of marketing, sales and > to promote Group product sales for the benefit of the customer service focused on customers’ needs goes a long Volkswagen Group brands and the partners appointed to way toward keeping the processes lean and implementing the distribute these products; sales strategy efficiently. > to strengthen customer loyalty to Volkswagen Financial The reorganization initiated in 2016, aiming at a system- Services AG and the Volkswagen Group brands along the atic separation of the European lending and deposits busi- automotive value chain (among other things, by targeted ness from the other activities of Volkswagen Financial use of digital products and mobility solutions); Services AG, was completed during the course of the year. > to create synergies for the Group by pooling Group and brand requirements in relation to finance and mobility INTERNAL MANAGEMENT services; The Company’s key performance indicators are determined > to generate and sustain a high level of return on equity for on the basis of IFRSs and are presented as part of the internal the Group. reporting system. The most important non-financial perfor- mance indicators are penetration, current contracts and new contracts. The financial key performance indicators are the volume of business, operating result, return on equity and the cost/income ratio. Volkswagen Financial Services AG | Annual Report 2019 Combined Management Report Fundamental Information about the Group 5 KEY PERFORMANCE INDICATORS Definition Nonfinancial performance indicators Ratio of new contracts for new Group vehicles under retail financing and leasing business to deliveries of Group Penetration vehicles, based on Volkswagen Financial Services AG’s consolidated entities. Current contracts Contracts recognized as of the reporting date New contracts Contracts recognized for the first time in the reporting period Financial performance indicators Loans to and receivables from customers arising from retail financing, dealer financing, leasing business and Volume of business lease assets. Interest income from lending transactions and marketable securities, net income from leasing transactions, interest expense, net income from service contracts, net income from insurance business, provision for credit risks, net fee and commission income, net gain or loss on hedges, net gain or loss on financial instruments measured at fair value and on derecognition of financial assets measured at fair value through other Operating profit/loss comprehensive income, general and administrative expenses and net other operating income/expenses Return on equity Return on equity before tax, which is calculated by dividing profit before tax by average equity. General and administrative expenses, adjusted for expenses passed on to other entities in the Volkswagen Group / interest income from lending transactions and marketable securities, net income from leasing transaction, interest expenses, net income from service contracts, net income from insurance business, Cost/income ratio provision for credit risks and net fee and commission income. OTHER NONFINANCIAL PERFORMANCE INDICATORS pean employers in the “Great Place to Work” employer com- Customer satisfaction and external employer ranking are also petition. measured. CHANGES IN EQUITY INVESTMENTS Customer Satisfaction The transfers referred to below were part of the further reor- The satisfaction of Volkswagen Financial Services AG’s cus- ganization of Volkswagen Financial Services’ legal entities. tomers results from a customer-oriented product range and On March 29, 2019, Volkswagen Financial Services AG took the service focus of the staff. over the following entities from Volkswagen Bank GmbH: In the annual assessment, these two aspects serve as suit- able indicators for critically evaluating whether the customer > Volkswagen Financial Services S.p.A., Milan, Italy, satisfaction target of 90% will be attained in 2025. > Volkswagen Financial Services (UK) Ltd., Milton Keynes, In 2019, the satisfaction rate of 83% was within the ex- United Kingdom, incl. its subsidiaries MAN Financial pected range. Services Ltd. and Volkswagen Insurance Service The aspiration of Volkswagen Financial Services AG is to (Great Britain) Ltd., provide customers with total satisfaction. To this end, suita- > Volkswagen Financial Ltd., Milton Keynes, United Kingdom, ble action plans are drawn up at country level. > ŠkoFIN s.r.o., Prague, Czech Republic, and > Volkswagen Serwis Ubezpieczeniowy Sp. z o.o., Warsaw, External Employer Ranking Poland. A strategic key performance indicator has been specified for financial services activities: external employer ranking. On May 31, 2019, Volkswagen Finance 2 S.L.U., Alcobendas This involves Volkswagen Financial Services AG submitting (Madrid), Spain, including its three subsidiaries Volkswagen itself to external benchmarking, generally on a two-year cycle. Renting S.A., Alcobendas (Madrid), Spain, Volkswagen Insur- The Company’s aim is to position itself as an attractive ance Services, Correduria de Seguros, S.L., El Prat de Llobregat employer and determine appropriate measures that will (Barcelona), Spain, and MAN Financial Services España S.L., enable it to become a top-20 employer by 2025, not just in Coslada (Madrid), Spain, were merged into Volkswagen Europe, but globally. For example, Volkswagen Financial Financial Services AG. Services AG was represented in various national and interna- On July 31, 2019, Volkswagen Financial Services AG took tional best-employer rankings the last time it participated in over Volkswagen Finans Sverige AB, Södertälje, Sweden, in- 2019. Coming in eleventh place, it was among the top Euro- cluding its wholly owned subsidiary Volkswagen Service Volkswagen Financial Services AG | Annual Report 2019 6 Fundamental Information about the Group Combined Management Report Sverige AB, Södertälje, Sweden, by way of a spinoff from Mobility Trader UK Ltd., London, United Kingdom, was estab- Volkswagen Bank GmbH. lished as a wholly owned subsidiary of Mobility Trader Hold- In addition, the following further material changes in eq- ing GmbH, Berlin, on May 24, 2019. uity investments have occurred: Effective June 28, 2019, Volkswagen Financial Services AG, Volkswagen Losch Financial Services S.A., whose regis- Braunschweig, acquired 75.1% of the shares in PTV tered office is located in Howald, Luxembourg, commenced Truckparking B.V., Utrecht, Netherlands, from PTV Planung its operating activities on January 2, 2019 as planned. The Transport Verkehr AG,